Document otsegocountymi_gov_doc_9f45719dd5

County of Otsego, Michigan BASIC FINANCIAL STATEMENTS December 31, 2020 ---PAGE BREAK--- OTSEGO COUNTY, MICHIGAN ORGANIZATION MEMBERS OF THE COUNTY COMMISSION CHAIR PERSON KEN BORTON VICE CHAIR PERSON DOUGLAS C. JOHNSON COMMISSIONER JULIE POWERS COMMISSIONER HENRY MASON COMMISSIONER PAUL L. LISS COMMISSIONER DUANE SWITALSKI COMMISSIONER KENNETH R. GLASSER COMMISSIONER ROB PALLARITO COMMISSIONER BRUCE BROWN APPOINTED/ELECTED OFFICIALS COUNTY ADMINISTRATOR RACHEL FRISCH FINANCE DIRECTOR MEL MAIER COUNTY TREASURER DIANN M AXFORD 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 65 Schedule of Employer Contributions 66 Schedule of Changes in OPEB Liability and Related Rations 67 Budgetary Comparison Schedules – Major Funds: General Fund 68 Housing Commission 70 Library 71 ---PAGE BREAK--- ii TABLE OF CONTENTS (Continued) OTHER INFORMATION: Combining Balance Sheet – General Funds 72 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – General Funds 73 Combining Balance Sheet – Nonmajor Governmental Funds 74 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds 79 Combining Statement of Net Position – Internal Service Funds 84 Combining Statement of Revenues, Expenses, and Changes in Net Position – Internal Service Funds 85 Combining Statement of Cash Flows – Internal Service Funds 86 Combining Statement of Net Position – Nonmajor Enterprise Funds 87 Combining Statement of Revenues, Expenses, and Changes in Net Position – Nonmajor Enterprise Funds 88 Combining Statement of Cash Flows – Nonmajor Enterprise Funds 89 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 90 Independent Auditor’s Report on Compliance for each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 92 Schedule of Expenditures of Federal Awards 94 Notes to Schedule of Expenditures of Federal Awards 96 Schedule of Findings and Questioned Costs: Section I – Summary of Auditor’s Results 97 Section II – Financial Statement 98 Section III – Federal Award Findings 99 Summary Schedule of Prior Audit Findings: Section III – Federal Award Findings 100 ---PAGE BREAK--- ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE SUE A. BOWLBY, CPA, PRINCIPAL KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE BOHN, CPA TORI KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MACPA OFFICES IN MICHIGAN & WISCONSIN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 1 INDEPENDENT AUDITOR’S REPORT Members of the Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan, as of and for the year ending December 31, 2020, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Otsego Commission on Aging, which represents 2 percent, 2 percent, and 12 percent, respectively, of the assets, net position, and revenues of the aggregate discretely presented component units. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Otsego Commission on Aging are based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the County Commission on Aging were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. ---PAGE BREAK--- 2 Honorable Chairman and Members of the Board of Commissioners County of Otsego, Michigan An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our report and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan, as of December 31, 2020, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, employee retirement and benefits systems and budgetary comparison schedules on pages 4 through 9, pages 65 through 67, and pages 68 through 71 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We 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. Other 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 combining major and nonmajor fund financial statements and statistical information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. ---PAGE BREAK--- 3 Honorable Chairman and Members of the Board of Commissioners County of Otsego, Michigan The combining major and nonmajor fund financial statements and the schedule of expenditures of federal are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining 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 taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 29, 2021 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 June 29, 2021 ---PAGE BREAK--- Management’s Discussion and Analysis ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2020 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, 2020. 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 $36,129,723 for 2019 and was $37,576,435 for 2020, an increase of 4.0%. For 2020, net position for our business-type activities was $15,460,793 or 41.1% of total net position, while net position in our governmental activities was $22,115,642 or 58.9% of total net position.  At December 31, 2020, Otsego County’s governmental funds report a combined fund balance of $15,639,943 compared to $14,443,927 in 2019.  At December 31, 2020, the fund balance for the general fund was $6,159,950 with $53,458 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) other information. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the County’s assets, deferred outflows and inflows of resources and liabilities, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Both of the government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include Legislative, Judicial, General Government, Public Safety, Public Works, Health and Welfare, and Culture and Recreation. The business-type activities of the County include the Otsego County Bus System, Delinquent Tax Revolving, and Airport. The government-wide financial statements include not only the County itself (known as the primary government), but also legally separate component units for which the County is financially accountable. Component Units include the Otsego County Road Commission, Otsego/Leelanau District Health Department, Otsego Transportation Authority, and Otsego Economic Development Corporation. Financial information for component units are 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, 2020 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, 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 of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 22-64 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2020 6 Required Supplementary Information. Required supplementary information related to the County’s pension and OPEB can be found on pages 65-67 and budgetary comparison information related to the County’s major governmental funds can be found on pages 68-71 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain other information. This includes the combining major and nonmajor fund financial statements. Combining major and nonmajor fund financial statements can be found on pages 72-89 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 $37,576,435 at the close of the most recent fiscal year. Otsego County Net Position 2020 2019 2020 2019 2020 2019 Current Assets 20,984,215 $ 20,634,182 $ 10,311,105 $ 9,730,422 $ 31,295,320 $ 30,364,604 $ Capital Assets 13,431,511 13,895,652 5,627,174 6,288,362 19,058,685 20,184,014 Total Assets 34,415,726 34,529,834 15,938,279 16,018,784 50,354,005 50,548,618 Deferred Outflows of Resources 1,705,709 1,925,948 84,749 216,690 1,790,458 2,142,638 Current Liabilities 1,635,037 1,612,330 280,166 759,319 1,915,203 2,371,649 Noncurrent Liabilities 10,247,156 10,588,166 219,142 648,838 10,466,298 11,237,004 Total Liabilities 11,882,193 12,200,496 499,308 1,408,157 12,381,501 13,608,653 Deferred Inflows of Resources 2,123,600 2,841,532 62,927 111,348 2,186,527 2,952,880 Net Position Net Investment in Capital Assets 12,644,493 12,485,124 5,627,174 6,288,362 18,271,667 18,773,486 Restricted 7,382,558 4,959,069 - - 7,382,558 4,959,069 Unrestricted 2,088,591 3,969,561 9,833,619 8,427,607 11,922,210 12,397,168 Total Net Position 22,115,642 $ 21,413,754 $ 15,460,793 $ 14,715,969 $ 37,576,435 $ 36,129,723 $ 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, 2020 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 $7,382,558. The remaining balance of unrestricted net position of $11,922,210 may be used to meet the government’s ongoing obligations to citizens and creditors. Otsego County Changes in Net Position 2020 2019 2020 2019 2020 2019 Program Revenues Charges for Services 3,481,781 $ 4,052,788 $ 1,484,541 $ 1,821,615 $ 4,966,322 $ 5,874,403 $ Operating Grants and Contributions 2,579,822 2,500,752 858,712 749,122 3,438,534 3,249,874 Capital Grants and Contributions - - - 433,510 - 433,510 General Revenues Property Taxes 8,319,954 8,671,663 782,728 316,488 9,102,682 8,988,151 State Revenue Sharing 565,696 505,934 - - 565,696 505,934 Investment Earnings 262,275 365,247 306,265 444,969 568,540 810,216 Other Revenue 461,988 140,930 400,895 236,823 862,883 377,753 Total Revenues 15,671,516 16,237,314 3,833,141 4,002,527 19,504,657 20,239,841 Program Expenses Legislative 279,851 214,752 - - 279,851 214,752 Judicial 2,768,499 2,753,529 - - 2,768,499 2,753,529 General Government 2,566,783 2,504,971 - - 2,566,783 2,504,971 Public Safety 4,847,703 4,754,551 - - 4,847,703 4,754,551 Public Works 326,483 342,058 - - 326,483 342,058 Health and Welfare 1,064,373 1,229,255 - - 1,064,373 1,229,255 Communtiy and Economic Development 263,439 232,533 - - 263,439 232,533 Recreation and Culture 2,078,757 1,996,987 - - 2,078,757 1,996,987 Interest Expense - Unallocated 21,615 56,450 - - 21,615 56,450 Other Expenses 414,340 386,339 - - 414,340 386,339 Delinquent Tax Collection - - 219,371 201,547 219,371 201,547 Bus System - - 922,834 1,474,473 922,834 1,474,473 Airport - - 1,417,969 1,683,312 1,417,969 1,683,312 Other Expenses - - 366,370 415,718 366,370 415,718 Total Expenses 14,631,843 14,471,425 2,926,544 3,775,050 17,558,387 18,246,475 Excess (Deficiency) Before Transfers 1,039,673 1,765,889 906,597 227,477 1,946,270 1,993,366 Transfers 161,773 491,800 (161,773) (491,800) - - Changes in Net Position 1,201,446 2,257,689 744,824 (264,323) 1,946,270 1,993,366 Net Position - Beginning (As Restated See Note 15) 20,914,196 19,156,065 14,715,969 14,980,292 35,630,165 34,136,357 Net Position - Ending 22,115,642 $ 21,413,754 $ 15,460,793 $ 14,715,969 $ 37,576,435 $ 36,129,723 $ Total Governmental Business-type Activities Activities ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2020 8 Financial Analysis of the Government Funds As noted earlier, Otsego County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds: The focus of the County’s governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is useful in accessing the County’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. The County’s general fund is the chief operating fund of the County. The County’s ending fund balance for the general fund was $6,159,950. General Fund Budgetary Highlights The General Fund realized $148,049 less in revenues than anticipated for the fiscal year. The General Fund operations also expended $769,120 less than appropriated. Operating Transfers In were higher than budgeted and resulted in a net budget variance of $222,053. All of the General Fund services departments expended less than the budgeted amount for departmental operations in 2020. 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, 2020 the County had $19,058,685 invested in a range of assets. This includes a net decrease of $518,704 from last year as depreciation and deletions exceed additions. Otsego County Capital Assets (net of depreciation) 2020 2019 2020 2019 2020 2019 Land 2,801,732 $ 2,801,732 $ 99,998 $ 99,998 $ 2,901,730 $ 2,901,730 $ Construction in Progress 17,470 3,462,609 - - 17,470 3,462,609 Buildings 8,865,568 5,763,792 1,108,012 1,111,845 9,973,580 6,875,637 Furniture & Fixtures 29,135 41,965 - - 29,135 41,965 Equipment 1,368,476 1,487,499 80,753 104,378 1,449,229 1,591,877 Vehicles 334,960 321,888 565,108 682,033 900,068 1,003,921 Infrastructure 14,170 16,167 3,773,303 4,290,108 3,787,473 4,306,275 Total 13,431,511 $ 13,895,652 $ 5,627,174 $ 6,288,362 $ 19,058,685 $ 20,184,014 $ Total Governmental Business-type Activities Activities Additional information on the County’s capital assets can be found in Note 4 on pages 35-38 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2020 9 Debt Administration At the end of fiscal year 2020, the County had outstanding bond debt in the amount of $780,000. This was due to decreasing its bond debt in the amount of $620,000. All bonds are backed by the County’s full faith and credit of the government. The remainder of the County’s debt is comprised of notes payable, vested employee benefits, and net pension liabilities. Debt Administration 2020 2019 2020 2019 2020 2019 Installment and Bond Debt 780,000 1,400,000 - - 780,000 1,400,000 Premium on Bond Issuance 7,018 10,528 - - 7,018 10,528 Compensated Absences 216,490 214,197 - - 216,490 214,197 Total 1,003,508 $ 1,624,725 $ - $ - $ 1,003,508 $ 1,624,725 $ 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 2021 Budget:  Property tax revenues are projected to increase approximately 2.0%. Highlight of the 2020 budget is as follows:  The cost of employee benefits continues to rise and will be monitored throughout the year. Requests for Information This financial report is designed to provide a general overview of the County’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Otsego County, 225 W Main, Gaylord, Michigan, 49735. ---PAGE BREAK--- Basic Financial Statements ---PAGE BREAK--- Governmental Business-type Component Activities Activities Totals Units ASSETS: Cash and Equivalents 11,420,095 $ 3,982,904 $ 15,402,999 $ 7,953,798 $ Investments 4,602,358 5,194,353 9,796,711 400,390 Receivables: Taxes 2,466,489 769,053 3,235,542 2,510,878 Accounts 213,406 141,238 354,644 1,693,579 Interest - 105,526 105,526 - Loans 1,453,031 - 1,453,031 - Due from Governmental Units 397,825 24,956 422,781 - Inventories 18,470 18,930 37,400 976,807 Prepaid Items 138,806 4,145 142,951 124,207 Advance to Component Unit 273,735 70,000 343,735 - Capital Assets Not Depreciated 2,819,202 99,998 2,919,200 12,744,322 Capital Assets (Net of Accumulated Depreciation) 10,612,309 5,527,176 16,139,485 25,849,878 TOTAL ASSETS 34,415,726 15,938,279 50,354,005 52,253,859 DEFERRED OUTFLOWS OF RECOURSES: Pension & OPEB Related Items 1,705,709 84,749 $ 1,790,458 261,966 LIABILITIES: Accounts Payable 478,693 267,178 745,871 508,740 Accrued Liabilities 270,559 12,988 283,547 107,223 Advance from Government Units - - - 524,641 Due to Governmental Units 25,953 - 25,953 220,171 Unearned Revenue 469,632 - 469,632 59,781 Interest Payable 5,200 - 5,200 - Advance from Primary Government - - - 343,735 Vested Employee Benefits - Due in more than one year 216,490 - 216,490 223,514 Bonds Payable - Due within one year 385,000 - 385,000 - Bonds Payable - Due in more than one year 402,018 - 402,018 - Net OPEB Liability - Due in more than one year 1,339,595 - 1,339,595 2,364,160 Net Pension Liability - Due in more than one year 8,289,053 219,142 8,508,195 3,451,083 Note Payable - Due within one year - - - 276,971 Note Payable - Due in more than one year - - - 303,976 TOTAL LIABILITIES 11,882,193 499,308 12,381,501 8,383,995 DEFERRED INFLOWS OF RESOURCES: Pension & OPEB Related Items 21,591 62,927 84,518 704,997 Taxes Levied for a Subsequent Period 2,102,009 - 2,102,009 2,510,878 TOTAL DEFERRED OUTFLOWS 2,123,600 62,927 2,186,527 3,215,875 NET POSITION: Net Investment in Capital Assets 12,644,493 5,627,174 18,271,667 38,259,553 Restricted 7,382,558 - 7,382,558 1,525,170 Unrestricted 2,088,591 9,833,619 11,922,210 1,131,232 TOTAL NET POSITION 22,115,642 $ 15,460,793 $ 37,576,435 $ 40,915,955 $ County of Otsego, Michigan Statement of Net Position December 31, 2020 Primary Government See accompanying notes to financial statements. 10 ---PAGE BREAK--- Operating Capital Charges for Grants and Grants and Governmental Business-type Component Functions/Programs Expenses Services Contributions Contributions Activities Activities Totals Units Primary Government: Governmental Activities: Legislative 279,851 $ - $ - $ - $ (279,851) $ - $ (279,851) $ - $ Judicial 2,768,499 503,170 1,347,946 - (917,383) - (917,383) - General Government 2,566,783 575,260 287,316 - (1,704,207) - (1,704,207) - Public Safety 4,847,703 1,547,985 559,330 - (2,740,388) - (2,740,388) - Public Works 326,483 2,281 - - (324,202) - (324,202) - Health and Welfare 1,064,373 41,115 281,857 - (741,401) - (741,401) - Community/Economic Development 263,439 721 - - (262,718) - (262,718) - Recreation and Culture 2,078,757 811,249 103,373 - (1,164,135) - (1,164,135) - Other 414,340 - - - (414,340) - (414,340) - Interest - Unallocated 21,615 - - - (21,615) - (21,615) - Total Governmental Activities 14,631,843 3,481,781 2,579,822 - (8,570,240) - (8,570,240) - Business-type Activities: Delinquent Tax Collection 219,371 314,770 56 - - 95,455 95,455 - Tax Foreclosure 218,373 121,727 56 - - (96,590) (96,590) - Airport 1,417,969 715,838 30,056 - - (672,075) (672,075) - Public Transit 922,834 193,956 828,461 - - 99,583 99,583 - Non-Major Enterprise Funds 147,997 138,250 83 - - (9,664) (9,664) - Total Business-type Activities 2,926,544 1,484,541 858,712 - - (583,291) (583,291) - Total Primary Government 17,558,387 $ 4,966,322 $ 3,438,534 $ - $ (8,570,240) (583,291) (9,153,531) - Component Units: Road Commission 6,124,753 $ 2,285,263 $ 5,013,263 $ 2,065,256 $ 3,239,029 Ambulance 2,763,586 2,084,988 123,241 - (555,357) Commission on Aging 9/30/2019 1,960,618 64,223 517,671 - (1,378,724) 835,460 423,400 - - (412,060) Total Component Units 11,684,417 4,857,874 5,654,175 2,065,256 892,888 Total 29,242,804 $ 9,824,196 $ 9,092,709 $ 2,065,256 $ General Revenues and Transfers: Taxes 8,319,954 782,728 9,102,682 3,784,729 State Revenue Sharing 565,696 - 565,696 Investment Earnings 262,275 306,265 568,540 21,382 Transfers 161,773 (161,773) - - Other 461,988 400,895 862,883 221,747 Total General Revenues and Transfers 9,771,686 1,328,115 11,099,801 4,027,858 Changes in Net Position 1,201,446 744,824 1,946,270 4,920,746 Net Position - Beginning (As Restated See Note 15) 20,914,196 14,715,969 35,630,165 35,995,209 Net Position - Ending 22,115,642 $ 15,460,793 $ 37,576,435 $ 40,915,955 $ Program Revenues Primary Government County of Otsego, Michigan Statement of Activities For the Year Ended December 31, 2020 Net (Expense) Revenue and Changes in Net Position See accompanying notes to financial statements. 11 ---PAGE BREAK--- ` Library Construction Total Housing Millage Capital Nonmajor Governmental General Commission Library Project Fund Governmental Funds ASSETS: Cash and Equivalents - Unrestricted 5,146,245 $ 129,636 $ 92,116 $ 6,621 $ 5,717,505 $ 11,092,123 $ Investments - Unrestricted 835,298 - 717,394 - 2,889,927 4,442,619 Receivables: Taxes 364,480 - 532,894 498,226 1,070,889 2,466,489 Accounts 28,165 56 - - 172,771 200,992 Loans - 1,453,031 - - - 1,453,031 Advance to Other Funds - - - - 273,735 273,735 Due from Governmental Units 302,811 - - - 95,014 397,825 Inventories 16,176 - - - - 16,176 Prepaid Items 37,282 97 - 32,626 70,005 TOTAL ASSETS 6,730,457 $ 1,582,820 $ 1,342,404 $ 504,847 $ 10,252,467 $ 20,412,995 $ LIABILITIES: Accounts Payable 295,696 $ 14,834 $ 13,755 $ - $ 131,924 $ 456,209 $ Due to Other Governmental Units - - - - 25,953 25,953 Accrued Liabilities 202,624 213 - - 63,381 266,218 Unearned Revenue 72,187 - - - 397,445 469,632 TOTAL LIABILITIES 570,507 15,047 13,755 - 618,703 1,218,012 DEFERRED INFLOWS OF RESOURCES: Unavailable Resources - 1,453,031 - - 1,453,031 Taxes Levied for a Subsequent Period - - 532,894 498,226 1,070,889 2,102,009 TOTAL DEFERRED INFLOW OF RESOURCES - 1,453,031 532,894 498,226 1,070,889 3,555,040 FUND BALANCES: Nonspendable 53,458 97 - - 32,626 86,181 Restricted - 114,645 795,755 - 6,472,158 7,382,558 Committed - - - 6,621 2,058,091 2,064,712 Assigned 1,046,706 - - - - 1,046,706 Unassigned 5,059,786 - - - - 5,059,786 TOTAL FUND BALANCES 6,159,950 114,742 795,755 6,621 8,562,875 15,639,943 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 6,730,457 $ 1,582,820 $ 1,342,404 $ 504,847 $ 10,252,467 $ Reconciliation to amounts reported for governmental activities in the statement of net position: Capital Assets used by Governmental Activities 13,431,511 Long-term Debt Payable for Governmental Activities (787,018) Accrued Interest Payable (5,200) Vested Employee Benefits (216,490) Pension Liability and Deferred Items (6,604,935) OPEB Liability and Deferred Items (1,339,595) Deferred Revenue Recognized as Current Revenue 1,453,031 Internal Service Funds 544,395 Net position of governmental activities 22,115,642 $ December 31, 2020 Governmental Funds Balance Sheet County of Otsego, Michigan See accompanying notes to financial statements. 12 ---PAGE BREAK--- Library Construction Total Housing Millage Capital Nonmajor Governmental General Commission Library Project Fund Governmental Funds REVENUES: Taxes 5,444,915 $ - $ 511,683 $ 486,072 $ 1,877,284 $ 8,319,954 $ Licenses and Permits 43,727 - - - - 43,727 Federal Sources 567,797 138,611 13,250 - 452,308 1,171,966 State Sources 1,232,044 - 44,901 - 627,152 1,904,097 Local Sources 36,068 1,436 - - 35,000 72,504 Charges for Services 999,707 - - - 1,528,885 2,528,592 Fines and Forfeits 12,260 - 152,140 - 345 164,745 Interest and Rentals 158,288 44 15,923 707 85,434 260,396 Other Revenue 622,000 14,241 49,072 - 519,892 1,205,205 TOTAL REVENUES 9,116,806 154,332 786,969 486,779 5,126,300 15,671,186 EXPENDITURES: Legislative 279,851 - - - - 279,851 Judicial 1,925,594 - - - 787,898 2,713,492 General Government 1,654,506 - - - 574,071 2,228,577 Public Safety 2,725,884 - - - 1,882,222 4,608,106 Public Works 4,512 - - - 321,971 326,483 Health and Welfare 646,640 - - - 409,013 1,055,653 Community/Economic Development 116,501 143,557 - - - 260,058 Recreation and Culture - - 711,857 - 1,059,369 1,771,226 Other Expenditures 414,340 - - - - 414,340 Capital Outlay - - - - 334,107 334,107 Debt Service - - - - 647,550 647,550 TOTAL EXPENDITURES 7,767,828 143,557 711,857 - 6,016,201 14,639,443 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,348,978 10,775 75,112 486,779 (889,901) 1,031,743 OTHER FINANCING SOURCES (USES): Transfers In 250,460 97,462 - - 1,768,956 2,116,878 Transfers Out (730,563) (98,008) - (486,750) (637,284) (1,952,605) Total Other Financing Sources (Uses) (480,103) (546) - (486,750) 1,131,672 164,273 NET CHANGE IN FUND BALANCE 868,875 10,229 75,112 29 241,771 1,196,016 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 15) 5,291,075 104,513 720,643 6,592 8,321,104 14,443,927 FUND BALANCES END OF YEAR 6,159,950 $ 114,742 $ 795,755 $ 6,621 $ 8,562,875 $ 15,639,943 $ For the Year Ended December 31, 2020 Changes in Fund Balance - Governmental Funds Statement of Revenues, Expenditures, and County of Otsego, Michigan See accompanying notes to financial statements. 13 ---PAGE BREAK--- Net changes in fund balances - total governmental funds 1,196,016 $ The change in net position reported for governmental activities in the statement of activities is different because: Governmental funds reported capital outlays as expenditures. However, in the statement of activities the cost of those assets is capitalized and the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation and loss on disposal, ($798,248) exceeded by capital outlay, $334,107. (464,141) Repayment of principal is an expenditure in the governmental funds but reduces the liability in the statement of net position. Principal repayments: Recognition of Bond Premium 3,510 Bonds Payable 620,000 Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds, but rather are deferred until the following year. Change in unavailable revenue (7,016) 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 (2,293) Accrued Interest Payable 2,425 OPEB Liability & Related Deferred Items (124,646) Pension Liability & Related Deferred Items (89,063) Internal service fund activity 66,654 Changes in net position of governmental activities 1,201,446 $ For the Year Ended December 31, 2020 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 9/30/2020 Funds Funds Funds ASSETS: Current Assets: Cash and Equivalents 2,078,760 $ 1,361,158 $ 13,381 $ 237,234 $ 292,371 $ 3,982,904 $ 327,972 $ Investments 3,812,990 937,292 - 444,071 - 5,194,353 159,739 Taxes Receivable 769,053 - - - - 769,053 - Interest Receivable 105,526 - - - - 105,526 - Accounts Receivable 118 56 53,533 64,800 22,731 141,238 12,414 Due from Governmental Units - - - 24,956 - 24,956 - Advances to Component Units 70,000 - - - - 70,000 - Prepaid Items 194 194 194 - 3,563 4,145 68,801 Inventory - - 18,930 - - 18,930 2,294 Total Current Assets 6,836,641 2,298,700 86,038 771,061 318,665 10,311,105 571,220 Noncurrent Assets: Capital Assets (Not Depreciated) - - - 99,998 - 99,998 - Capital Assets (Net of Accumulated Depreciation) - - 4,689,559 800,737 36,880 5,527,176 - Total Noncurrent Assets - - 4,689,559 900,735 36,880 5,627,174 - TOTAL ASSETS 6,836,641 2,298,700 4,775,597 1,671,796 355,545 15,938,279 571,220 DEFERRED OUTFLOWS OF RESOURCES: Pension Related Items - - - 84,749 - 84,749 - LIABILITIES: Current Liabilities: Accounts Payable 4,494 113,617 29,409 102,811 16,847 267,178 22,484 Accrued Liabilities 4,054 4,092 4,842 - - 12,988 4,341 Total Current Liabilities 8,548 117,709 34,251 102,811 16,847 280,166 26,825 Noncurrent Liabilities: Net Pension Liability - - - 219,142 - 219,142 - TOTAL LIABILITIES 8,548 117,709 34,251 321,953 16,847 499,308 26,825 Deferred Inflow of Resources Pension Related Items - - - 62,927 - 62,927 - NET POSITION: Net Investment in Capital Assets - - 4,689,559 900,735 36,880 5,627,174 - Unrestricted 6,828,093 2,180,991 51,787 470,930 301,818 9,833,619 544,395 TOTAL NET POSITION 6,828,093 $ 2,180,991 $ 4,741,346 $ 1,371,665 $ 338,698 $ 15,460,793 $ 544,395 $ Major Business-type Activities - Enterprise Funds County of Otsego, Michigan Statement of Net Position Proprietary Funds December 31, 2020 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 9/30/2020 Funds Funds Funds OPERATING REVENUES: Charges for Services 36,537 $ 121,727 $ 715,838 $ 193,956 $ 138,250 $ 1,206,308 $ 2,394,074 $ Interest on Delinquent Taxes 278,233 - - - - 278,233 - Other Revenues - - 23,656 - - 23,656 - TOTAL REVENUES 314,770 121,727 739,494 193,956 138,250 1,508,197 2,394,074 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 87,668 88,943 151,734 505,451 - 833,796 1,830,743 Contractual Services 84,858 - 170,342 - - 255,200 273,702 Materials and Supplies 7,305 3,541 358,712 - 63,895 433,453 12,035 Equipment Repair and Maintenance - - - - - - 4,218 Utilities - - - - - - 199,441 Depreciation - - 592,221 160,942 12,301 765,464 - Other Expenses 39,540 125,889 144,960 256,441 71,801 638,631 12,127 TOTAL EXPENSES 219,371 218,373 1,417,969 922,834 147,997 2,926,544 2,332,266 OPERATING INCOME (LOSS) 95,399 (96,646) (678,475) (728,878) (9,747) (1,418,347) 61,808 NON-OPERATING REVENUES (EXPENSES): State Grants - - - 386,235 - 386,235 - Federal Grants 56 56 30,056 442,226 83 472,477 3,967 Interest Earned on Investments 226,477 78,132 1,568 - 88 306,265 1,879 Property Taxes Levied - - - 782,728 - 782,728 - Other - 352,327 - 27,912 (3,000) 377,239 1,500 TOTAL NONOPERATING REVENUES (EXPENSES) 226,533 430,515 31,624 1,639,101 (2,829) 2,324,944 7,346 INCOME (LOSS) BEFORE INTERFUND TRANSFERS 321,932 333,869 (646,851) 910,223 (12,576) 906,597 69,154 INTERFUND TRANSFERS: Transfers In - - 90,000 - 17,000 107,000 - Transfers Out (268,773) - - - - (268,773) (2,500) CHANGES IN NET POSITION 53,159 333,869 (556,851) 910,223 4,424 744,824 66,654 NET POSITION, BEGINNING OF YEAR 6,774,934 1,847,122 5,298,197 461,442 334,274 14,715,969 477,741 NET POSITION, END OF YEAR 6,828,093 $ 2,180,991 $ 4,741,346 $ 1,371,665 $ 338,698 $ 15,460,793 $ 544,395 $ 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, 2020 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 9/30/2020 Funds Funds Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 39,100 $ 132,976 $ 732,967 $ 135,242 $ 129,513 $ 1,169,798 $ 2,390,993 $ Interest on Delinquent Taxes 318,033 - - - - 318,033 - Net Delinquent Taxes Collected (Purchased) 187,872 - - - - 187,872 - Payments to Suppliers (61,101) (29,480) (712,252) (256,441) (126,397) (1,185,671) (500,958) Payments to Employees for Services and Benefits (85,205) (86,443) (151,082) (1,267,913) - (1,590,643) (1,820,277) Net Cash Provided (Used) by Operating Activities 398,699 17,053 (130,367) (1,389,112) 3,116 (1,100,611) 69,758 CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: State Grants - - 30,056 259,450 - 289,506 - Federal Grants 56 56 - 405,995 - 406,107 - Property Tax - - - 782,060 - 782,060 - Other - 352,327 - 27,912 (2,917) 377,322 5,467 Transfers In - - 90,000 - 17,000 107,000 - Transfers Out (268,773) - - - - (268,773) (2,500) Net Cash Provided (Used) by Noncapital and Related Financing Activities (268,717) 352,383 120,056 1,475,417 14,083 1,693,222 2,967 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of Capital Assets - - - (104,276) - (104,276) - Federal Capital Grant - - - 104,276 - 104,276 - Net Cash Provided (Used) by Capital and Related Financing Activities - - - - - - - CASH FLOWS FROM INVESTING ACTIVITIES: Net Sale or (Purchase) of Investments 360,246 656,061 - (444,071) - 572,236 (21,845) Interest Earnings 226,477 78,132 1,568 - 88 306,265 1,879 Net Cash Provided (Used) by Investing Activities 586,723 734,193 1,568 (444,071) 88 878,501 (19,966) Net Increase (Decrease) in Cash and Equivalents 716,705 1,103,629 (8,743) (357,766) 17,287 1,471,112 52,759 Balances - Beginning of the Year 1,362,055 257,529 22,124 595,000 275,084 2,511,792 275,213 Balances - End of the Year 2,078,760 $ 1,361,158 $ 13,381 $ 237,234 $ 292,371 $ 3,982,904 $ 327,972 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) 95,399 $ (96,646) $ (678,475) $ (728,878) $ (9,747) $ (1,418,347) $ 61,808 $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - - 592,221 160,942 12,301 765,464 - Change in Assets and Liabilities: Taxes Receivable 187,872 - - - - 187,872 - Interest Receivable 39,800 - - - 39,800 - Accounts Receivable 2,563 11,249 (6,527) (58,714) (8,543) (59,972) (3,081) Interfund Advances, Payables, & Receivables 85,000 - (9,111) - - 75,889 - Prepaid Items (194) (194) (194) - (1,726) (2,308) 9,767 Inventory - - 9,535 - - 9,535 (1,969) Accounts Payable (14,204) 100,144 (38,468) (416,286) 10,831 (357,983) 1,543 Accrued Liabilities 2,463 2,500 652 - - 5,615 1,690 Change in Pension Liability and Deferred Amounts - - - (346,176) - (346,176) - Net Cash Provided (Used) by Operating Activities 398,699 $ 17,053 $ (130,367) $ (1,389,112) $ 3,116 $ (1,100,611) $ 69,758 $ Business-type Activities - Enterprise Funds Major County of Otsego, Michigan Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2020 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 1,313,012 $ 99,992 $ 395,668 $ 1,808,672 $ Taxes for Other Governments 1,296,182 - - 1,296,182 TOTAL ASSETS 2,609,194 $ 99,992 $ 395,668 $ 3,104,854 $ LIABILITIES: Undistributed Tax Collections 2,133,477 $ - $ - $ 2,133,477 $ Due to Other Governments 329,216 - - 329,216 Bonds, Restitutions and Payables to Others 146,501 99,992 - 246,493 TOTAL LIABILITIES 2,609,194 99,992 - 2,709,186 Net Position Restricted - $ - $ 395,668 $ 395,668 $ Statement of Fiduciary Net Position Fiduciary Funds December 31, 2020 See accompanying notes to financial statements. 18 ---PAGE BREAK--- Michigan General Library Municipal Risk Agency Penal Management ADDITIONS: Fund Fines Authority Total Contributions Members - $ - $ 50,000 $ 50,000 $ Interest - - 9,253 9,253 Taxes Collected for Other Governments 24,743,928 - - 24,743,928 Fees and Fines Collected on behalf of Other Governments 2,442,362 145,244 - 2,587,606 Fees and Fines Collected on behalf of Other Agencies 82,757 - - 82,757 Collections from or On Behalf of Inmates 218,976 - - 218,976 Gifts and Bequests 20,964 - - 20,964 TOTAL ADDITIONS 27,508,987 145,244 59,253 27,713,484 DEDUCTIONS: Payment of Taxes to Other Governments 24,724,127 - - 24,724,127 Payments to Other Agencies 50,647 - - 50,647 Fees and Fines Remitted to Other Units of Government 2,441,732 - - 2,441,732 Fees and Fines Remitted to Other Agencies 76,587 145,244 - 221,831 Payments on Behalf of Inmates 201,805 - - 201,805 Bonds, Restitutions, and Payables to Others - - 47,022 47,022 Beneficiary Payments to Individuals 14,089 - - 14,089 TOTAL DEDUCTIONS 27,508,987 145,244 47,022 27,701,253 Change in Net Position - - 12,231 12,231 Net Position, Beginning of Year - - 383,437 383,437 Net Position, End of Year - $ - $ 395,668 $ 395,668 $ County of Otsego, Michigan Statement of Changes of Fiduciary Net Position Fiduciary Funds December 31, 2020 19 ---PAGE BREAK--- Component Units ---PAGE BREAK--- Commission Road Ambulance on Aging Commission Corporation 9/30/2020 Totals ASSETS: Cash and Equivalents 6,573,397 $ 190,717 $ 1,175,401 $ 14,283 $ 7,953,798 $ Investments - 337,191 - 63,199 400,390 Receivables: Taxes 1,139,922 1,037,690 - 333,266 2,510,878 Accounts (Net of Allowance) 1,242,429 389,848 16,950 44,352 1,693,579 Inventories 967,874 - 1,469 7,464 976,807 Prepaid Items 124,207 - - - 124,207 Capital Assets (Not Depreciated) 12,744,322 - - - 12,744,322 Capital Assets (Net of Accumulated Depreciation) 24,359,503 1,490,375 - - 25,849,878 TOTAL ASSETS 47,151,654 3,445,821 1,193,820 462,564 52,253,859 DEFERRED OUTFLOWS OF RESOURCES Pension & OPEB Related Items 261,966 - - - 261,966 LIABILITIES: Accounts Payable 488,154 3,696 15,153 1,737 508,740 Accrued Liabilities 61,921 5,305 38,037 1,960 107,223 Due to Governmental Units 220,171 - - - 220,171 Advance from Governmental Units 524,641 - - - 524,641 Unearned Revenues - - 43,076 16,705 59,781 Installment Notes Payable - Due within one year 30,671 - 246,300 - 276,971 Installment Notes Payable - Due in more than one year 303,976 - - - 303,976 Advance from Primary Government - 343,735 - - 343,735 Net Pension Liabilities- Due in more than one year 3,451,083 - - - 3,451,083 (OPEB) Labilities - Due in more than one year 2,364,160 - - - 2,364,160 Vested Employee Benefits - Due in more than one year 223,514 - - - 223,514 TOTAL LIABILITIES 7,668,291 352,736 342,566 20,402 8,383,995 DEFERRED INFLOWS OF RESOURCES: Pension & OPEB Related Items 704,997 - - - 704,997 Taxes Levied for a Subsequent Period 1,139,922 1,037,690 - 333,266 2,510,878 Total Deferred Inflows of Resources 1,844,919 1,037,690 - 333,266 3,215,875 NET POSITION: Net Investment in Capital Assets 36,769,178 1,490,375 - - 38,259,553 Restricted for Ambulance and Emergency Services - 565,020 - - 565,020 Restricted for - - - 108,896 108,896 Restricted for Commission on Aging - - 851,254 - 851,254 Unrestricted 1,131,232 - - - 1,131,232 TOTAL NET POSITION 37,900,410 $ 2,055,395 $ 851,254 $ 108,896 $ 40,915,955 $ County of Otsego, Michigan Statement of Net Position Component Units December 31, 2020 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 9/30/2020 Total Road Commission: Public Works 6,124,753 $ 2,285,263 $ 5,013,263 $ 2,065,256 $ 3,239,029 $ - $ - $ - $ 3,239,029 $ Ambulance Corporation: Health and Welfare 2,763,586 2,084,988 123,241 - - (555,357) - - (555,357) Commission on Aging 9/30/2020: Health and Welfare 1,960,618 64,223 517,671 - - - (1,378,724) - (1,378,724) Recreation and Culture 835,460 423,400 - - - - - (412,060) (412,060) Total Component Units 11,684,417 $ 4,857,874 $ 5,654,175 $ 2,065,256 $ 3,239,029 (555,357) (1,378,724) (412,060) 892,888 General Revenues: Property Tax 1,126,797 1,014,181 1,318,744 325,007 3,784,729 Investment Earnings - 9,844 6,131 5,407 21,382 Other 95,279 13,525 110,658 2,285 221,747 Total General Revenues 1,222,076 1,037,550 1,435,533 332,699 4,027,858 Changes in Net Position 4,461,105 482,193 56,809 (79,361) 4,920,746 Net Position - Beginning 33,439,305 1,573,202 794,445 188,257 35,995,209 Net Position - Ending 37,900,410 $ 2,055,395 $ 851,254 $ 108,896 $ 40,915,955 $ Net (Expense) Revenue and Changes in Net Position County of Otsego, Michigan Statement of Activities Component Units For the Year Ended December 31, 2020 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, 2020 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, 2020 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 consist 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, crated 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 2020 was $245,083. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 24 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Joint Ventures (Continued) Financial information as of September 30, 2020 (the most recent audited financial statements) is as follows: Assets $ 8,008,244 Deferred outflows of resources 390,033 Liabilities 4,430,593 Deferred inflows of resources 22,858 Net position 3,944,826 Change in net position 822,287 Participant payments Total participant payments 1,091,994 County of Otsego 245,083 County of Otsego percentage of total 22% 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 2020 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, 2020 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, 2020, except for the following component unit and enterprise fund: Fund Fund Presentation Fiscal Year End Commission on Aging Component Unit September 30, 2020 Bus System Enterprise Fund September 30, 2020 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, 2020 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 term 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 2020 taxable valuation of the County of Otsego totaled $1,328,134,092, on which ad valorem taxes levied consisted of 4.0502 mills for General Operations, 0.3000 mills for Animal Control Operations, 1.0000 mills for Commission on Aging, 0.7800 mills for EMS Operations, 0.6000 mills for Transportation authority, 0.2500 mills for Park and Recreation Operations, 1.0000 mills for County Roads, 0.4000 & 0.3750 mills for the Library Operations and Construction, 0.2500 mills for County Recycling Operations, 0.2500 mills for Operations, and 0.9800 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, 2020 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 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 home 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, 2020 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 $407,000. 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, 2020 29 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital Assets – Capital assets, which include property, plant and equipment, are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined by the government as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Property, plant, and equipment are depreciated using the straight-line method over the following useful lives: Buildings 40 years Bus Operating Facility 12 - 20 years Shop Equipment & Furniture 3 - 10 years Vehicles 3 - 7 years Equipment 3 - 10 years Infrastructure 20 years Vested Employee Benefits Payable – County General Employees - It is the County's policy to permit employees to accumulate earned but unused sick pay for the library employees and vacation pay benefits for all of the employees with certain limitations which vary among employee classification. Vacation and sick pay are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee retirements. Long-Term Obligations – In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums and discounts, are deferred and amortized over the life of the bonds using the straight-line basis. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as expense when incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Deferred Outflows of Resources – In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The government has pension and OPEB items that qualify for reporting in this category. Deferred Inflows of Resources – In addition to liabilities, the statement of net position and governmental funds balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has pension and OPEB items and taxes levied for a subsequent period that qualify for reporting in this category. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 30 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 as being Nonspendable as these items are not expected to be converted to cash within the next year. The County has $86,181 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 $7,382,558 for fund and/or debt specific purposes.  Committed: This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the County. These amounts cannot be used for any other purpose unless the County removes or changes the specified use by taking the same type of action that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. The County has committed $2,064,712 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, 2020 31 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 $1,018,170 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, 2020 32 NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) e. The budget and approved appropriations lapse at the end of the fiscal year. f. The County does not record encumbrances in the accounting records during the year as normal practice and, therefore, no outstanding encumbrances exist at year end. Budgeted amounts are as originally adopted or amended by the Board of Commissioners during the year. Individual amendments were not material in relation to the original appropriations which were amended. The modified accrual basis of accounting is used for budgetary purposes. The General Fund revenue budget was adopted on the basis of activities or programs financed by the General Fund. Michigan Public Act 621 of 1978 (the Budgeting Act) requires that budgets be adopted for Governmental Funds. U.S. generally accepted accounting principles require that the financial statements present budgetary comparisons for the Governmental Fund Types for which budgets were legally adopted. The original budget adopted for the General fund was modified throughout the year through various budget amendments. The budget document presents information by fund, function, department and line items. The legal level of budgetary control adopted by the governing body is the department level. NOTE 3 - DEPOSITS AND INVESTMENTS At year end, the County’s deposits and investments were reported in the basic financial statements in the following categories: Governmental Business-type Total Primary Fiduciary Component Activities Activities Government Funds Units Cash Equivalents - Unrestricted $ 11,420,095 $ 3,982,904 $ 15,402,999 $ 1,808,672 $ 7,953,798 Investments 4,602,358 5,914,353 9,796,711 - 400,390 Total $ 16,022,453 $ 9,177,257 $ 25,199,710 $ 1,808,672 $ 8,354,188 The breakdown between deposits and investments is as follows: Primary Fiduciary Component Government Funds Units Bank Deposits (checking and savings accounts, and money markets) $ 11,406,123 $ 1,808,672 $ 7,951,406 Investments 9,796,711 - 400,390 Petty Cash and Cash on Hand 13,972 - 2,392 Total $ 25,199,710 $ 1,808,672 $ 8,354,188 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 33 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) Maturities in Years Fair Value Less Than 1 1 – 5 6 – 10 More Than 10 Investments: CD’s* $ 1,225,0000 $ 1,225,000 $ - $ - $ - Governmental Fixed Income 8,528,016 - 249,949 800,382 7,477,685 Money Market* 43,695 43,695 - - - Total Investments $ 9,796,711 $ 1,268,695 $ 249,949 $ 800,382 $ 7,477,685 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, 2020: Fund Name Ticker/CUSIP S&P Rating Governmental Fixed Income multiple AAA+ CD’s N/A N/A Custodial credit risk. Investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the County will not be able to recover the value of its investments or securities that are in the possession of an outside party. Custodial deposit credit risk. Custodial deposit credit risk is the risk that in the event of a bank failure, the County’s deposits may not be returned. State law does not require and the County does not have a policy for deposit custodial credit risk. As of year-end, $16,069,890 of the County’s bank balance of $17,696,345 was exposed to credit risk because it was uninsured and uncollateralized. Money market accounts are not rated investments and are not subject to custodial credit risk. Fair value measurement. The County categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Investments that are measured at fair value using the net asset value per share (or equivalent) as a practical expedient are not classified in the fair value hierarchy below. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the measurements required judgement and considers factors specific to each asset or liability. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 34 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) The County has the following fair value measurements as of December 31, 2020: Total Level 1 Level 2 Level 3 Governmental Fixed Income $ 8,528,016 $ - $ 8,528,016 $ - Total $ 8,528,016 $ - $ 8,528,016 $ - *CD’s, and Money Market accounts 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, 2020 35 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 - 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 $ 2,801,732 $ - $ - $ 2,801,732 Construction in Progress 3,462,609 17,470 (3,462,609 ) 17,470 Subtotal 6,264,341 17,470 (3,462,609 ) 2,819,202 Capital assets being depreciated: Buildings 17,950,009 135,441 3,462,609 21,548,059 Leasehold Improvements 24,854 - - 24,854 Furniture & Fixtures 895,452 - - 895,452 Equipment: Data Handling 2,026,681 - - 2,026,681 Other Equipment 2,637,503 36,149 - 2,673,652 Vehicles 1,939,829 145,047 - 2,084,876 Infrastructure 37,130 - - 37,130 Subtotal 25,511,458 316,637 3,462,609 29,290,704 Less accumulated depreciation for: Buildings (12,186,217 ) (496,275 ) - (12,682,492 ) Leasehold improvements (24,854 ) - - (24,854 ) Furniture & Fixtures (853,487 ) (12,830 ) - (866,317 ) Equipment: Data Handling (1,843,515 ) (52,146 ) - (1,895,661 ) Other Equipment (1,333,170 ) (103,026 ) - (1,436,196 ) Vehicles (1,617,941 ) (131,974 ) - (1,749,915 ) Infrastructure (20,963 ) (1,997 ) - (22,960 ) Subtotal (17,880,147 ) (798,248 ) - (18,678,395 ) Net Capital Assets Being Depreciated 7,631,311 (481,611 ) 3,462,609 10,612,309 Capital Assets – Net $ 13,895,652 $ (464,141 ) $ - $ 13,431,511 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 36 NOTE 4 - CAPITAL ASSETS (Continued) Depreciation expense was charged to programs of the primary government as follows: Governmental Activities: General Government $ 313,817 Judicial 14,688 Public Safety 153,067 Recreation and Culture 316,676 Total Governmental Activities $ 798,248 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 2,641,858 104,276 - 2,746,134 Furniture & Fixtures 6,000 - - 6,000 Vehicles 2,436,955 - - 2,436,955 Equipment 392,227 - - 392,227 Infrastructure 12,779,602 - - 12,779,602 Subtotal 18,256,642 104,276 - 18,360,918 Less accumulated depreciation for: Buildings (1,530,013 ) (108,109 ) - (1,638,122 ) Furniture & Fixtures (6,000 ) - - (6,000 ) Vehicles (1,754,922 ) (116,925 ) - (1,871,847 ) Equipment (287,849 ) (23,625 ) - (311,474 ) Infrastructure (8,489,494 ) (516,805 ) - (9,006,299 ) Subtotal (12,068,278 ) (765,464 ) - (12,833,742 ) Net Capital Assets Being Depreciated 6,188,364 (661,188 ) - 5,527,176 Capital Assets – Net $ 6,288,362 $ (661,188 ) $ - $ 5,627,174 Depreciation expense was charged to the business-type activities as follows: Business-type Activities: Bus System 9/30/2020 $ 160,942 Airport 592,221 University Center Metropolitan Area Network 12,301 Total Business-Type Activities $ 765,464 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 37 NOTE 4 - 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 698,745 - - 698,745 Vehicles 2,467,381 205,600 - 2,672,981 Subtotal 4,766,670 205,600 - 4,972,270 Less Accumulated Depreciation: Buildings (807,088 ) (64,022 ) - (871,110 ) Other Equipment (635,645 ) (14,330 ) - (649,975 ) Vehicles (1,791,176 ) (169,635 ) - (1,960,811 ) Subtotal (3,233,909 ) (247,987 ) - (3,481,896 ) Net Capital Assets Being Depreciated 1,532,761 (42,387 ) - 1,490,374 Total Net Capital Assets $ 1,532,761 $ (42,387 ) $ - $ 1,490,374 OTSEGO COUNTY ROAD COMMISSION Capital asset activity of the Otsego County Road Commission for the current year was as follows: Beginning Ending Balances Adjustments/ Balances 01/01/20 Additions Deductions 12/31/20 Capital Assets Not Being Depreciated Land $ 125,501 $ - $ - $ 125,501 Land Improvements – Infrastructure 12,333,272 285,549 - 12,618,821 Subtotal 12,458,773 285,549 - 12,744,322 Capital Assets Being Depreciated Buildings 3,936,130 - - 3,936,130 Road Equipment 8,064,358 538,691 245,199 8,357,850 Shop Equipment 106,679 - - 106,679 Office Equipment 46,846 - - 46,846 Engineers’ Equipment 13,562 - - 13,562 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 49,557 - - 49,557 Infrastructure – Bridges 1,112,301 175,252 - 1,287,553 Infrastructure – Roads 35,947,697 1,604,455 2,123,962 35,428,190 Subtotal 49,278,930 2,318,398 2,369,161 49,228,167 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 38 NOTE 4 - CAPITAL ASSETS (Continued) Beginning Ending Balances Adjustments/ Balances 01/01/20 Additions Deductions 12/31/20 Less Accumulated Depreciation Buildings 2,065,550 87,241 - 2,152,791 Road Equipment 6,661,717 610,876 203,483 7,069,110 Shop Equipment 105,667 885 - 106,552 Office Equipment 37,951 3,286 - 41,237 Engineers’ Equipment 13,562 - - 13,562 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 46,036 320 - 46,356 Infrastructure – Bridges 360,648 24,558 - 385,206 Infrastructure – Roads 15,455,942 1,720,070 2,123,962 15,052,050 Subtotal 24,748,873 2,447,236 2,327,445 24,868,664 Net Capital Assets Being Depreciated 24,530,057 (128,838 ) (41,716 ) 24,359,503 Capital Assets - Net $ 36,988,830 $ 156,711 $ (41,716 ) $ 37,103,825 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 $ 140,189 $ - $ - $ 140,189 Less accumulated depreciation (140,189 ) - - (140,189 ) Net Capital Assets $ - $ - $ - $ - NOTE 5 - RECEIVABLES Governmental Business-type Component Activities Activities Units Accounts $ 213,406 $ 141,238 $ 2,100,579 Less: Allowance for uncollectible accounts - - (407,000) Property taxes 2,466,489 769,053 2,510,878 Due from other governments 397,825 - - Loans 1,453,031 - - Interest - 105,526 - Totals $ 4,530,751 $ 1,015,817 $ 4,204,457 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 39 NOTE 6 - INTERFUND RECEIVABLES, PAYABLES, & TRANSFERS The composition of interfund balances as of December 31, 2020, 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 Public Improvement Capital Project Fund $ 273,735 $ - Delinquent Tax Revolving Fund 70,000 - Ambulance - 343,735 $ 343,735 $ 343,735 For the year ended December 31, 2020, interfund transfers consisted of the following: Transfers In Transfers Out General Fund $ 250,460 $ 730,563 Housing Commission 97,462 98,008 Library Construction Mill. - 486,750 Nonmajor Governmental Funds 1,768,956 637,284 Delinquent Tax Fund - 268,773 Internal Service Funds - 2,500 Airport 90,000 - Nonmajor Enterprise Funds 17,000 - $ 2,223,878 $ 2,223,878 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, 2020 40 NOTE 7 - LONG-TERM DEBT Changes in Long-term Debt. Long-term liability activity for the year ended December 31, 2020, was as follows: Due Interest Principal Beginning Ending Within Rate Matures Balance Increases Decreases Balance One Year Governmental Activities: Otsego County Building Authority Series 2017 Bonds, maturing serially in annual installments ranging from $360,000 to $395,000. 1.75-2.0% 2022 $ 1,160,000 $ - $ (380,000 ) $ 780,000 $ 385,000 . Otsego County Building Authority Series 2010 Bonds, maturing serially in annual installments ranging from $20,000 to $240,000. 2.0-4.0% 2020 240,000 - (240,000 ) - - Total Installment Debt 1,400,000 - (620,000 ) 780,000 385,000 Premium on Bond Issuance 10,528 - (3,510 ) 7,018 3,510 Accrued Compensated Absences 214,197 444,769 (442,476 ) 216,490 - Total Governmental Activities Debt $ 1,624,725 $ 444,769 $ (1,065,986 ) $ 1,003,508 $ 388,510 Annual debt service requirements to maturity for the above obligations are as follows: Bonds Payable Year End December 31 Principal Interest 2020 $ 385,000 $ 15,600 2021 395,000 7,900 Total $ 780,000 $ 23,500 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 benefit1s for all governmental fund types are reported as long-term debt. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 41 NOTE 7 - LONG-TERM DEBT (Continued) OTSEGO COUNTY ROAD COMMISSION The long-term debt of the Road Commission is summarized as follows: Due Balance Balance Within 01/01/20 Additions Reductions 12/31/20 One Year Installment payable secured by equipment, payable in installments of $28,859 including interest of 3.32%, due 2025. $ - $ 232,990 $ 28,859 $ 204,131 $ 22,082 Installment payable secured by equipment, payable in installments of $1,748 including interest of 2.19%, due 2020. 167,545 - 167,545 - - Installment payable secured by equipment, payable in installments of $113 including interest of 2.69%, due 2020. 94,713 - 94,713 - - Installment payable secured by equipment, payable in annual installments of $14,122 including interest of 4.18%, due 2023. 140,551 10,035 130,516 8,589 Subtotal 402,809 232,990 301,152 334,647 $ 30,671 Vested Employee Benefits 254,330 - 30,816 223,514 TOTAL LONG-TERM DEBT $ 657,139 $ 232,990 $ 331,968 $ 558,161 Net increase. Installments Payable Year End December 31 Principal Interest 2021 $ 30,671 $ 12,311 2022 144,743 11,214 2023 23,573 5,286 2024 135,660 4,504 Total $ 334,647 $ 33,315 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 42 NOTE 8 - RISK MANAGEMENT Primary Government The County is exposed to risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The government manages its risk exposures and provides certain employee benefits through a combination of self-insurance programs, risk management pools and commercial insurance and excess coverage policies. The following is a summary of these self-insurance programs and risk management pool participation. The County participates in the Michigan Municipal Risk Management Authority (MMRMA) for general and automobile liability, motor vehicle physical damage, and property damage coverages. The MMRMA was established in January 1980, pursuant to laws of the State of Michigan, which authorize local units of government to jointly exercise any power, privilege or authority which each might exercise separately. The purpose of the Authority is to provide cooperative and comprehensive risk financing and risk control services. The MMRMA provides risk management, underwriting, reinsurance and claim review and processing services for all member governments pursuant to its charter. The County makes annual contributions to MMRMA based on actuarial studies using historical data and insurance industry statistics. These contributions are paid from the General Fund using premiums paid into it by other funds of the government. Such contributions that are received by MMRMA are allocated between its general and member retention funds. Economic resources in the MMRMA's General Fund are expended for reinsurance coverage, claim payments and certain general and administrative costs, whereas resources in the member retention funds are used for loss payments and defense costs up to the members' self-insurance retention limits along with certain other member-specific costs. Accordingly, because contributions to the member retention fund are essentially recognized as revenue by MMRMA to the extent of expenditures, the government records an asset and a related liability, equal to the loss reserves estimated by MMRMA, for its portion of the unexpended member retention fund in the Michigan Municipal Risk Agency Fund. At December 31, 2020, the balance of the County's member retention was $395,668. Changes in the balances of claims liabilities are as follows: Fiscal Year Ended December 31, 2020 2019 Estimated liability, beginning of year $ 30,526 $ 17,188 Receipts 60,019 61,019 Estimated claims incurred (44,369) (44,501) Claim payments (2,653) (3,180) Estimated liability, end of year $ 43,523 $ 30,256 Coverage Self-Insured Retention Liability $75,000 Vehicle Physical Damage $15,000 per vehicle $1,000 Member Deductible $30,000 per occurrence Property and crime $1,000 deductible per occurrence 10% of the next $100,000 Employee Benefits Commercial Insurance Provider ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 43 NOTE 8 - RISK MANAGEMENT (Continued) Workers' Compensation The County is a member of the Michigan Counties Workers' Compensation Fund. Full statutory coverage for workers' disability compensation and employers' liability is guaranteed by the fund for Michigan operations through authority granted by the State of Michigan under Chapter 6, Section 418.611, Paragraph of the Workers' Disability Compensation Act of 1969, as amended. At December 31, 2020 there were no claims that exceeded insurance coverage. The County had no significant reduction in insurance coverage from previous years. Component Unit - Road Commission The Road Commission is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Road Commission was unable to obtain general liability insurance at a cost it considered to be economically justifiable. The Road Commission joined together with other Road Commissions and created a public entity risk pool currently operating as a common risk management and insurance program. The Road Commission pays an annual premium to the pool for its general insurance coverage. The agreement provides that the pool will be self-sustaining through member premiums and will reinsure through commercial companies for claims in excess of $1,000 ($2,000 for errors and omissions) for each insured event. The maximum limit of liability for each occurrence is $10,500,000. The pooling agreement allows for the pool to make additional assessments to make the pool self-sustaining. The Road Commission is unable to provide an estimate of the amounts of additional assessments. The Road Commission from time to time is named as a defendant in accident claims and lawsuits requesting damages of various amounts, the majority of which do not state a specific maximum. Insurance coverage related to these claims and lawsuits, if any, is categorized under the general liability insurance program. It is the opinion of management and legal counsel that reasonable estimates of the Road Commission's current liability for these matters, if any, have been recorded. There are non-accident liability and condemnation lawsuits sometimes pending against the Road Commission claiming amounts for damages and relief without stated limitations. It is the opinion of management and legal counsel that reasonable estimates of the Road Commission's current liability for these matters, if any, have been recorded. Component Unit - Ambulance Corporation The Ambulance Corporation is exposed to risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Ambulance Corporation's general liability, property, and vehicle insurance is included in the County's plan. Additional vehicle insurance, health insurance, and workers' compensation is obtained through commercial insurance providers. At December 31, 2020, there were no claims that exceeded insurance coverage. The Ambulance Corporation did not have any significant reduction in insurance coverage from previous years. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 44 NOTE 8 - RISK MANAGEMENT (Continued) Component Unit - Commission on Aging The Commission on Aging has insurance coverage provided by independent insurance companies for property, general liability, fire, workers' compensation and employee bond coverage. The Commission on Aging liability is normally limited to the deductible. Component Unit - The is exposed to risks of loss related to theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. Health insurance and workers' compensation is obtained through commercial insurance providers. At December 31, 2020, there were no claims that exceeded insurance coverage. The did not have any significant reduction in insurance coverage from previous years. NOTE 9 - TAX ABATEMENTS Industrial Facilities Exemption Municipalities within the County's boundaries entered into property tax abatement agreements with local businesses under the Plant Rehabilitation and Industrial Development Districts Act, known as the Industrial Facilities Exemption (IFT) PA 198 of 1974, as amended. The purpose of the exemption is to provide a tax incentive to manufacturers to enable renovation and expansion of aging facilities, assist in the building of new facilities, and to promote the establishment of high-tech facilities. IFT on such properties have resulted in an abatement of property taxes which reduced the property taxes collected by Otsego County and its component units as follows: City of Gaylord Tax Abatements: For the year ended December 31, 2020, Otsego County property taxes were reduced by $11,317 under this program. Bagley Township Tax Abatements: For the year ended December 31, 2020, Otsego County property taxes were reduced by $7,257 under this program. Corwith Township Tax Abatements: For the year ended December 31, 2020, Otsego County property taxes were reduced by $1,494 under this program. Livingston Township Tax Abatements: For the year ended December 31, 2020, Otsego County property taxes were reduced by $1,204 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, 2020, Otsego County property taxes were reduced by $3,234 under this program. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 45 NOTE 9 - TAX ABATEMENTS (Continued) Brownfield Redevelopment Financing Municipalities within the County's boundaries entered into property tax abatement agreements with local businesses under the Brownfield Redevelopment Financing Act, PA 381 of 1996, as amended. The purpose of the exemption is to provide a tax incentive to businesses to establish themselves in a Brownfield Redevelopment Zone to promote the revitalization, redevelopment, and reuse of certain property that had been deemed obsolete due to blight, environmental matters, or being tax reverted. The cost to clean up the property to make it usable was initially paid for by the State of Michigan under the Brownfield provisions, creating a loan to be repaid over a 20-year period. Once the property sold, the owner's taxes were abated to be used toward loan repayment, which reduced the property taxes collected by Otsego County and its component units as follows: City of Gaylord Tax Abatements: For the year ended December 31, 2020, Otsego County property taxes were reduced by $700 under this program. NOTE 10 - CONTINGENT LIABILITIES Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the Federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the County expects such amounts, if any, to be immaterial. NOTE 11 - OPERATING LEASES Lease Commitments - Commission on Aging Discretely Presented Component Unit The Commission on Aging leases office and activity space from Alpine Alten Zimmer. The future rent payments will approximate $28,000 per year, with a rent increase not to exceed 1% per year through December 31, 2029. The Commission on Aging has entered into a sublease with Northwest Michigan Community Health Agency to rent the space commonly known as "Otsego Haus". The sublease terms require payments of $1,620, or $19,440 annually, and is renewable on a month-to-month basis. 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. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 46 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 01 – Gnrl Non Union: Closed to new hires 2019 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 – Library NonUnion: Open Division 2019 Valuation Benefit Multiplier: 2.00% Multiplier (no max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 0.00% Act 88: No 10 – Gnrl Local 214 Bus: Closed to new hires 2019 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: DC Plan for New Hires: 1.00% 1/1/2020 Act 88: No 11 – POAM: Closed to new hires, linked to Division HC 2019 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): - Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 2.00% Act 88: No ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 47 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 13 – Elected/Appt Spvs: Closed to new hires 2019 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 2019 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 2019 Valuation Benefit Multiplier: 2.25% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): 55/30 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions: DC Plan for New Hires: 2.00% 1/1/2020 Act 88: No 17 – 87-A Judge/FOC pre 9/1/14: Closed to new hires 2019 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 8 Years Early Retirement (Unreduced): 55/30 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 0.00% Act 88: No ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 48 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 20 – Sheriff Union: Closed to new hires, linked to Division HG 2019 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 2019 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 10 Years Early Retirement (Unreduced): 55/15 Early Retirement (Reduced): 50/25 Final Average Compensation: 5 years Employee Contributions 4.00% Act 88: No 70 – Library Director: Open Division 2019 Valuation Benefit Multiplier: 2.50% Multiplier (80% max) Normal Retirement Age: 60 Vesting: 8 Years Early Retirement (Unreduced): 55/30 Early Retirement (Reduced): 50/25 55/15 Final Average Compensation: 5 years Employee Contributions 0.00% Act 88: No HA – Elected Apptd Spvs af 1/1/09: Closed to new hires 2019 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, 2020 49 HB – General Non Union after 1/1/09: Closed to new hires 2019 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 2019 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 2019 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 2019 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, 2020 50 HF – Bus hired af 1/1/2011: Closed to new hires 2019 Valuation Benefit Multiplier: 1.25% Multiplier (no max) Normal Retirement Age: 60 Vesting: 6 Years Early Retirement (Unreduced): - Early Retirement (Reduced): - Final Average Compensation: 3 years Employee Contributions: DC Plan for New Hires: 0.00% 1/1/2020 Act 88: No HG – All FT POLC on/aftr 1/1/16: Open Division, linked to Divisions 20, 21 2019 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, 2019, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 110 Inactive employees entitled to but not yet receiving benefits 56 Active employees 108 274 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 $ 8,983 21 $ 853 07 $ 1,627 70 $ 365 10 $ 5,611 HA $ 3,402 11 $ 3,413 HB $ 3,402 13 $ 25,641 HC $ 1,257 14 $ 9,590 HD $ 1,670 16 $ 4,264 HE $ 785 17 $ 2,340 HF $ 1,312 20 $ 10,374 HG $ 780 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 51 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Net Pension Liability The County’s net pension liability was measured as of December 31, 2019, 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, 2019 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50% Salary increases 3.50% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of 2009-2013. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Global Equity 60.00% 6.15% Global Fixed Income 20.00% 1.26% Private Investment 20.00% 6.56% Discount Rate. The discount rate used to measure the total pension liability is 7.60%. 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, 2020 52 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, 2018 23,380,803 $ 14,365,948 $ 9,014,855 $ Service cost 388,399 - 388,399 Interest on total pension liability 1,749,783 - 1,749,783 Changes in benefits (386,275) - (386,275) Difference between expected and actual experience (65,132) - (65,132) Changes in assumptions 746,482 - 746,482 Employer contributions - 1,062,073 (1,062,073) Employee contributions - 49,203 (49,203) Net investment income - 1,942,926 (1,942,926) Benefit payments, including employee refunds (1,384,939) (1,384,939) - Other 80,821 - 80,821 Administrative expense - (33,464) 33,464 Net changes 1,129,139 1,635,799 (506,660) Balances as of December 31, 2019 24,509,942 $ 16,001,747 $ 8,508,195 $ Sensitivity of the net pension liability to changes in the discount rate. The following presents the net pension liability of the County, calculated using the discount rate of 7.60%, as well as what the County’s net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.60%) or 1- percentage-point higher (8.60%) than the current rate: 1% Decrease Current Discount Rate 1% Increase (6.60%) (7.60%) (8.60%) County’s net pension liability $11,227,927 $8,495,904 $(2,089,623) 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, 2020 53 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, 2020, the County recognized pension expense of $1,413,208. At December 31, 2020, 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 9,448 $ 84,518 $ Changes in assumptions 559,861 - Net difference between projected and actual earnings on pension plan investments 11,925 - Contributions subsequent to the measurement date 1,209,224 - Total 1,790,458 $ 84,518 $ 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: 2021 $ 96,654 2022 215,657 2023 357,980 2024 (173,575 ) 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, 2019. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 54 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 2019 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 2019 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 2019 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, 2020 55 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Employees Covered by Benefit Terms At December 31, 2020, 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 9 Active employees 31 89 Funding Policy The obligation to contribute to and maintain the system for these employees was established by negotiation with the Road Commission’s competitive bargaining unit and personnel policy, which require employees to contribute to the plan. The Road Commission is required to contribute at an actuarially determined fixed rate for 2020 of $15,456 of nonunion payroll and $30,606 of general employees. Net Pension Liability The Road Commission’s net pension liability was measured as of December 31, 2020, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50 % Salary increases 3.50 % Investment rate of return 7.75 net of interest and administrative expense including inflation Mortality rates used were based on the RP-2014 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 January 1, 2009, through December 31, 2013. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Global Equity 60.00% 6.15% Global Fixed Income 20.00% 1.26% Private Investments 20.00% 6.56% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 56 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Discount Rate. The discount rate used to measure the total pension liability is 7.60%. 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 December 31, 2019 12,916,236 $ 8,521,841 $ 4,394,395 $ Service cost 190,564 - 190,564 Interest on total pension liability 957,184 - 957,184 Changes in benefits (19,628) - (19,628) Difference between expected and actual experience 16,447 - 16,447 Changes in assumptions 382,467 - 382,467 Employer contributions - 1,152,526 (1,152,526) Employee contributions - 205,038 (205,038) Net investment income - 1,161,479 (1,161,479) Benefit payments, including employee refunds (883,983) (883,983) - Administrative expense - (17,891) 17,891 Other changes 30,806 - 30,806 Net changes 673,857 1,617,169 (943,312) Balances as of December 31, 2020 13,590,093 $ 10,139,010 $ 3,451,083 $ 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 8.00%, 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 (7.00%) or 1-percentage-point higher (9.00%) than the current rate: 1% Decrease Current Discount Rate 1% Increase (6.60%) (7.60%) (8.60 Road Commission’s net pension liability $4,888,087 $3,451,083 $2,224,861 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, 2020 57 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, 2020, the Road Commission recognized pension expense of $434,003. At December 31, 2020, 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 - $ 13,085 $ Difference between expected and actual experience - 51,417 Changes in assumptions 254,798 - Net difference between projected and actual earnings on pension plan investments - 462,306 Total 254,798 $ 526,808 $ 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: 2021 $ (92,277 ) 2022 113,703 2023 (189,580 ) 2024 (103,676 ) 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, 2020 58 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, 2019, the date of the last plan valuation, the County’s healthcare plan covered 20 members of which 2 were active plan members and 18 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 2020, the County contributed $74,500 to the plan. Employees Covered by Benefit Terms As of December 31, 2020, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 18 Inactive employees entitled to but not yet receiving benefits - Active employees 2 Total participants covered by OPEB Plan 20 Total OPEB Liability and Trust Assets - The County’s total OPEB liability of $1,339,595 was measured as of December 31, 2019, and was determined by an actuarial valuation as of that date. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 59 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) As of December 31, 2020, 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, 2019 and the following actuarial assumptions, applies to all periods included in the measurement: Inflation Included in investment rate Salary Increases 2.0% Investment rate of return NA 20-year Aa Municipal bond rate 3.26% Mortality Public General and Police, Headcount-weighted 2010 Employee and Healthy Retiree with MP-2019 Mortality Improvement Scale Discount Rate - The discount rate used to measure the total OPEB liability was 3.26%. 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, 2019 was 3.16%. Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Balances at December 31, 2019 1,220,934 $ - $ 1,220,934 $ Service cost 4,303 - 4,303 Interest 38,728 - 38,728 Change in plan term - - - Difference between expected and actual experience (10,186) - (10,186) Assumptions 160,316 - 160,316 Employer contributions - 74,500 (74,500) Net investment income - - - Benfit Payments (74,500) (74,500) - Administrative expense - - - Net changes 118,661 - 118,661 Balances as of December 31, 2020 1,339,595 $ - $ 1,339,595 $ Increases (Decreases) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 60 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 $1,487,465 $1,339,595 $1,215,533 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $1,204,829 $1,339,595 $1,497,748 OPEB Expense - Components of County’s OPEB Expense for the fiscal year ending December 31, 2020 are as follows: 12/31/2020 Service Cost $ 4,303 Interest on Total OPEB Liability 38,728 Experience (Gains)/Losses (10,186 ) Changes of Assumptions 166,301 Changes in Plan Terms - Other Changes in Fiduciary Net Position - Total OPEB Expense $ 199,146 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: 2021 $ - 2022 - 2023 - 2024 - 2025 - ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 61 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. Funding Policy - Contribution requirements also are negotiated between the Commission and employees. The Commission contributes 100% of the cost for eligible plan members. For fiscal year 2020, the Commission contributed $1,056,959 to the plan. Employees Covered by Benefit Terms As of December 31, 2020, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 34 Inactive employees entitled to but not yet receiving benefits - Active employees 15 Total participants covered by OPEB Plan 49 Total OPEB Liability and Trust Assets - The Road Commission’s total OPEB liability of $4,516,347 was measured as of December 31, 2020, and was determined by an actuarial valuation as of that date. As of December 31, 2020, there was $2,152,187 in assets in the Road Commission’s OPEB trust. Actuarial assumptions and other inputs - The total OPEB liability was determined by an actuarial valuation as of December 31, 2020 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, with MP-209 mortality improvement. 20 year Aa Municipality Bond rate 1.93% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 62 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) The long-term expected rate of return on plan investments was determined using a building-block method in which best-estimate ranges of expected future rates of return (expected returns, net of retirement plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic rates of return for each major asset class included in the retirement plan’s target asset allocation are summarized in the following table: Long-Term Expected Asset Class Target Allocation Rate of Return Global Equity 64.00% 8.00% Global Fixed Income 26.00% 5.50% Real Assets 5.00% 6.20% Diversifying Strategies 5.00% 2.75% The sum of each target allocation times its long-term expected rate is 7.0%. Discount Rate - The discount rate used to measure the total OPEB liability was 3.87%. The projection of cash flows used to determine the discount rate assumed that Employer contributions of $400,000 will be made until 40% funded. Based on those assumptions, the retirement plan’s fiduciary net position was not projected to be sufficient to make all projected future benefit payments of current plan members. For projected benefits that are covered by projected assets, the long-term expected rate was used to discount the projected benefits. From the year that benefit payments were not projected to be covered by the projected assets (the “depletion date”), projected benefits were discounted at a discount rate reflecting the 20-year AA/Aa tax-exempt bond yield. A single equivalent discount rate that yields the same present value of benefits is calculated. This discount rate is used to determine the Total OPEB Liability. Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balances at December 31, 2019 5,650,645 $ 1,117,717 $ 4,532,928 $ Change in assumptions 73,071 - 73,071 Service cost 250,107 - 250,107 Interest (1,440,437) - (1,440,437) Experience (Gains)/Losses 239,912 - 239,912 Contributions to OPEB Trust - 800,008 (800,008) Contributions paid from operations - 256,951 (256,951) Net investment income - 242,288 (242,288) Benefit payments (256,951) (256,951) - Administrative expense - (7,826) 7,826 Net changes (1,134,298) 1,034,470 (2,168,768) Balances as December 31, 2020 4,516,347 $ 2,152,187 $ 2,364,160 $ ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 63 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 $ 2,754,927 $ 2,364,160 $ 2,025,257 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $ 2,024,839 $ 2,364,160 $ 2,749,338 OPEB Expense – Components of Road Commission’s OPEB Expense for the fiscal year ending December 31, 2020 are as follows: Changes in Assumptions $ 73,071 Service Cost 250,107 Interest on Total OPEB Liability (1,398,483) Experience Losses 232,924 Projected Earnings on OPEB Plan Investments (105,966) Investment Earnings (Gains)/Losses (33,162) Administrative Expenses 7,826 Total OPEB Expense $ (973,683 ) Deferred Outflows and Inflows of Resources Related to OPEB Plan Deferred Outflows Deferred Inflows of Resources of Resources Experience (Gains)/Losses $ - $ 41,954 Changes of Assumptions 6,988 - Investment Earnings (Gains)/Losses - 136,235 Total $ 6,988 $ 178,189 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: 2021 (68,128) $ 2022 (33,163) 2023 (42,644) 2024 (27,266) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2020 64 NOTE 15- RESTATEMENT Budge Governmental Stabilization Net Position Fund Beginning net position as previously stated at January 1, 2020 $ 21,413,754 $ 1,503,077 To recognize accumulated MERS payments (499,558 ) (449,558 ) Beginning net position as restated at January 1, 2020 $ 20,914,196 $ 1,003,519 ---PAGE BREAK--- Required Supplementary Information ---PAGE BREAK--- 2019 2018 2017 2016 2015 2014 Total pension liability Service cost 388,399 $ 370,158 $ 336,412 $ 349,718 $ 348,000 $ 338,932 $ Interest 1,749,783 1,767,809 1,719,681 1,696,843 1,543,901 1,479,439 Changes in benefits (386,275) 391 (91,145) (10,695) - - Difference between expected and actual experience (65,132) 11,745 (48,394) (503,144) 724,207 - Changes in assumptions 746,482 - - - 1,036,885 - Benefit payments, including refund of member contributions (1,384,939) (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Other changes 80,821 14,309 (54) - - - Net change in total pension liability 1,129,139 772,162 645,120 322,971 2,548,216 840,003 Total pension liability - beginning 23,380,803 22,608,641 21,963,521 21,640,550 19,092,334 18,252,331 Total pension liability - ending 24,509,942 $ 23,380,803 $ 22,608,641 $ 21,963,521 $ 21,640,550 $ 19,092,334 $ Plan fiduciary net position Contributions - employer 1,062,073 $ 1,128,063 $ 1,096,794 $ 865,641 $ 693,476 $ 640,433 $ Contributions - employee 49,203 46,517 30,679 7,937 5,905 3,630 Net investment income 1,942,926 (598,116) 1,806,557 1,422,497 (195,083) 800,044 Benefit payments, including refunds of member contributions (1,384,939) (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Administrative expense (33,464) (29,330) (28,580) (28,053) (28,591) (29,357) Other changes - (12,290) (57) - - - Net change in plan fiduciary net position 1,635,799 (857,406) 1,634,013 1,058,271 (629,070) 436,382 Plan fiduciary net position - beginning 14,365,948 15,223,354 13,589,341 12,531,070 13,160,140 12,723,758 Plan fiduciary net position - ending 16,001,747 $ 14,365,948 $ 15,223,354 $ 13,589,341 $ 12,531,070 $ 13,160,140 $ County's net pension liability - ending 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 65.3% 61.4% 67.3% 61.9% 57.9% 68.9% Covered - employee payroll 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 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. County of Otsego, Michigan Required Supplementary Information Schedule of Changes in Pension Liability Year Ended December 31, 2020 For MERS Years Ending 12/31 Employee Retirement and Benefit Systems See accompanying notes to financial statements 65 ---PAGE BREAK--- 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Actuarially determined contribution 959,573 $ 878,063 $ 934,199 $ 856,396 $ 715,641 $ 693,477 $ 640,433 $ 727,962 $ 705,702 $ 565,476 $ Contributions in relation to the actuarially determined contribution (1,062,073) (1,128,063) (1,184,199) (1,106,396) (865,641) (693,477) (640,433) (727,962) (705,702) (565,476) Contribution deficiency (excess) (102,500) $ (250,000) $ (250,000) $ (250,000) $ (150,000) $ - $ - $ - $ - $ - $ Covered - employee payroll 5,065,928 $ 4,741,881 $ 4,401,566 $ 4,575,021 $ 4,547,735 $ 4,390,047 $ 4,188,926 $ 4,080,889 $ 4,014,917 $ 4,400,424 $ Contributions as a percentage of covered-employee payroll 21% 24% 27% 24% 19% 16% 15% 18% 18% 13% Notes to Schedule: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality 3.00% in the long-term 7.35%, net of investment and administrative expense 60 years Assumptions were based on the RP-2014 Group Annuity Mortality Table - Blended 50% Male / 50% Female For MERS Years Ending 12/31 Methods and assumptions used to determine contribution rates Entry age Level percentage of payroll, closed 19 years 10-years smoothed market 2.50% County of Otsego, Michigan Required Supplementary Information Schedule of Employer Contributions For the Year Ended December 31, 2020 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. Employee Retirement and Benefit Systems See accompanying notes to financial statements. 66 ---PAGE BREAK--- 2020 2019 2018 Total OPEB Liability - Beginning of Year 1,220,934 $ 1,930,701 $ 1,848,952 $ Service cost 4,303 48,184 46,710 Interest 38,728 60,282 58,758 Change in Plan Term - (510,178) - Assumption changes and differences between actual and expected experience 150,130 (236,836) 48,727 Benefit payments (74,500) (71,219) (72,446) OPEB Liability - End of Year 1,339,595 1,220,934 1,930,701 Plan fiduciary net position Contributions - employer 74,500 71,219 72,446 Net investment income - - - Benefits payments, including refunds of member contributions (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 1,339,595 $ 1,220,934 $ 1,930,701 $ Plan fiduciary net position as a percentage of the total OPEB liability 42.9% 42.9% 42.9% Covered Payroll 59,734 $ 1,259,742 $ 4,401,556 $ Net OPEB liability as a percentage of covered payroll 2242.6% 33.1% 33.1% Schedule of Employer Contributions Actuarially determined employer contribution 88,495 155,657 155,520 Employer contribution (74,500) (71,219) (72,446) Contribution deficiency/(excess) 13,995 84,438 83,074 Covered Payroll 59,734 $ 4,401,556 $ 4,401,556 $ ADC as percentage of covered payroll 148.1% 11.2% 11.2% Notes to Schedule: Actuarial cost method Entry age normal Discount rate 1.93%, 20 year Aa Municipal Band Rate Salary increases 2.0%, average Investment rate of return NA (pay-as-you-go plan) Healthcare cost trend rate 8.25% in 2020 graded down .25% per year to 4.5% Mortality rate Police: PublicSafety 2010 Employee and Heathly Retiree, Headcount weighted with RP-2019 Improvement Scale County of Otsego, Michigan Required Supplementary Information Schedule of Changes in OPEB Liability and Related Ratios Year Ended December 31, 2020 Actuarially determined contribution rates are calculated as of December 31, 2020 Methods and assumptions used to determine contribution rates: Employee Retirement and Benefit Systems See accompanying notes to financial statements. 67 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 5,479,681 $ 5,479,681 $ 5,444,915 $ (34,766) $ Licenses and Permits 52,200 53,745 43,727 (10,018) Federal Sources 170,493 307,313 567,797 260,484 State Sources 1,471,915 1,487,599 1,232,044 (255,555) Local Contributions 25,500 25,500 36,068 10,568 Charges for Services 1,051,465 1,067,425 999,707 (67,718) Fines and Forfeits 12,050 12,050 12,260 210 Interest and Rentals 202,000 202,000 158,288 (43,712) Other Revenues 570,533 629,542 622,000 (7,542) TOTAL REVENUES 9,035,837 9,264,855 9,116,806 (148,049) EXPENDITURES: Legislative: Board of Commissioners 224,487 296,205 279,851 16,354 Judicial: Circuit Court 1,163,757 1,192,792 936,758 256,034 Lien Fees 15,500 15,500 15,119 381 Drug Court 198,376 197,445 104,034 93,411 RDSS Transport 15,000 15,000 234 14,766 District Court 5,000 5,263 3,863 1,400 Jury Commission 59,500 59,500 20,264 39,236 Probate Court 196,970 196,970 192,168 4,802 Probation/Parole 1,500 1,500 1,118 382 Prosecuting Attorney 688,764 699,306 651,310 47,996 Family Counseling 4,000 4,000 726 3,274 Total Judicial 2,348,367 2,387,276 1,925,594 461,682 General Government: Administrative Services 262,823 253,253 251,214 2,039 Building and Grounds 368,522 368,522 368,522 - Clerk and Register of Deeds 366,467 384,947 336,537 48,410 Audit Services 15,000 15,000 14,112 888 IT Department 105,548 105,548 91,304 14,244 Equalization 215,233 215,233 183,263 31,970 Treasurer 118,943 118,943 118,746 197 Cooperative Extension 62,058 62,118 61,980 138 Elections 33,200 48,540 48,161 379 Legal Defense 30,000 50,000 49,446 554 Human Resources 86,544 86,544 86,544 - Surveyor 200 200 200 - Soil Conservation - 4,000 4,000 - Survey and Remonumentation 40,477 40,477 40,477 - Total General Government 1,705,015 1,753,325 1,654,506 98,819 Public Safety: Sheriff 1,244,728 1,255,226 1,213,633 41,593 Civil Division 89,105 89,105 86,208 2,897 Justice Training 3,000 3,000 - 3,000 Marine Safety 8,960 8,960 6,703 2,257 Safety Education 52,000 52,000 36,706 15,294 Snowmobile 10,970 10,970 10,477 493 Secondary Road Patrol 102,941 103,941 100,275 3,666 ORV 9,470 14,407 14,407 - School Resource Officer 71,100 40,790 33,270 7,520 Jail 1,113,694 1,196,636 1,194,205 2,431 Emergency Services 30,000 30,000 30,000 - Total Public Safety 2,735,968 2,805,035 2,725,884 79,151 For the Year Ended December 31, 2020 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund 68 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) For the Year Ended December 31, 2020 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund Public Works: Drains 6,000 6,122 4,512 1,610 Health And Welfare: Communicable Diseases 500 500 500 - Medical Examiner 89,954 89,954 64,133 25,821 District Health 245,083 245,083 245,083 - Mental Health 108,003 108,003 94,003 14,000 Soldiers and Sailors Relief 5,000 5,000 2,077 2,923 Veterans' Burial 6,650 6,650 5,180 1,470 Veterans' Affairs 144,291 158,782 149,364 9,418 Substance Abuse 85,107 86,300 86,300 - Total Health and Welfare 684,588 700,272 646,640 53,632 Community and Economic Development: Planning and Zoning 114,091 116,503 116,501 2 Capital Outlay 14,000 14,000 - 14,000 Other Expenditures: Appropriations 23,500 23,500 23,500 - Bonds and Insurance 221,755 230,546 230,546 - Retiree Insurance 57,060 57,351 57,351 - Additional Pension Contribution 56,609 56,609 56,609 - Other 125,600 91,814 46,334 45,480 Total Other Expenditures 484,524 459,820 414,340 45,480 TOTAL EXPENDITURES 8,317,040 8,538,558 7,767,828 769,120 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 718,797 726,297 1,348,978 622,681 OTHER FINANCING SOURCES (USES): Transfers In 42,300 62,300 250,460 188,160 Transfers Out (710,617) (764,456) (730,563) 33,893 Total Other Financing Sources (Uses) (668,317) (702,156) (480,103) 222,053 NET CHANGE IN FUND BALANCES 50,480 $ 24,141 $ 868,875 844,734 $ FUND BALANCES BEGINNING OF YEAR (As Restated See Note 15) 5,291,075 FUND BALANCES END OF YEAR 6,159,950 $ 69 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Federal Sources 123,500 $ 138,500 $ 138,611 $ 111 $ Local Sources 35,000 35,000 1,436 (33,564) Interest and Rentals 200 200 44 (156) Other Revenues 8,550 8,550 14,241 5,691 TOTAL REVENUES 167,250 182,250 154,332 (27,918) EXPENDITURES: Community and Economic Development 177,250 160,050 143,557 16,493 TOTAL EXPENDITURES 177,250 160,050 143,557 16,493 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (10,000) 22,200 10,775 (11,425) OTHER FINANCING SOURCES (USES): Transfers In 71,300 71,300 97,462 26,162 Transfers Out (71,300) (103,500) (98,008) 5,492 Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES (10,000) $ (10,000) $ 10,229 20,229 $ FUND BALANCES BEGINNING OF YEAR 104,513 FUND BALANCES END OF YEAR 114,742 $ For the Year Ended December 31, 2020 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Housing Commission Fund 70 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 516,644 $ 516,644 $ 511,683 $ (4,961) $ Federal Sources 9,006 9,006 13,250 4,244 State Sources 33,469 33,469 44,901 11,432 Fines and Forfeits 163,500 163,500 152,140 (11,360) Interest and Rentals 18,000 18,000 15,923 (2,077) Other Revenues 25,350 25,350 49,072 23,722 TOTAL REVENUES 765,969 765,969 786,969 21,000 EXPENDITURES: Recreation & Culture 791,144 791,144 711,857 79,287 TOTAL EXPENDITURES 791,144 791,144 711,857 79,287 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (25,175) (25,175) 75,112 100,287 OTHER FINANCING SOURCES (USES): Transfers In 25,175 25,175 - (25,175) Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES - $ - $ 75,112 75,112 $ FUND BALANCES BEGINNING OF YEAR 720,643 FUND BALANCES END OF YEAR 795,755 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Library For the Year Ended December 31, 2020 71 ---PAGE BREAK--- Other Information ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals ASSETS: Cash and Equivalents 4,522,668 $ 589,316 $ 26,578 $ 7,683 $ 5,146,245 $ Investments 406,444 428,854 - - 835,298 Receivables: Taxes 364,480 - - - 364,480 Accounts 28,165 - - - 28,165 Due from Other Governmental Units 302,811 - - - 302,811 Inventories 16,176 - - - 16,176 Prepaid Expense 37,282 - - - 37,282 TOTAL ASSETS 5,678,026 $ 1,018,170 $ 26,578 $ 7,683 $ 6,730,457 $ LIABILITIES: Accounts Payable 289,971 $ - $ 5,725 $ - $ 295,696 $ Accrued Liabilities 202,624 - - - 202,624 Unearned Revenue 72,187 - - - 72,187 TOTAL LIABILITIES 564,782 - 5,725 - 570,507 FUND BALANCES: Nonspendable 53,458 - - - 53,458 Assigned - 1,018,170 20,853 7,683 1,046,706 Unassigned 5,059,786 - - - 5,059,786 TOTAL FUND BALANCES 5,113,244 1,018,170 20,853 7,683 6,159,950 TOTAL LIABILITIES AND FUND BALANCES 5,678,026 $ 1,018,170 $ 26,578 $ 7,683 $ 6,730,457 $ County of Otsego, Michigan Combining Balance Sheet General Fund December 31, 2020 72 ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals REVENUES: Taxes and Penalties 5,444,915 $ - $ - $ - $ 5,444,915 $ Licenses and Permits 43,727 - - - 43,727 Federal Sources 567,797 - - - 567,797 State Sources 1,232,044 - - - 1,232,044 Local Sources 36,068 - - - 36,068 Charges for Services 999,707 - - - 999,707 Interest and Rentals 143,578 14,651 59 - 158,288 Fines and Forfeitures 12,260 - - - 12,260 Other Revenue 622,000 - - - 622,000 TOTAL REVENUES 9,102,096 14,651 59 - 9,116,806 EXPENDITURES: Legislative 279,851 - - - 279,851 Judicial 1,925,594 - - - 1,925,594 General Government 1,605,060 - 49,446 - 1,654,506 Public Safety 2,725,884 - - - 2,725,884 Public Works 4,512 - - - 4,512 Health and Welfare 644,563 - - 2,077 646,640 Community/Economic Development 116,501 - - - 116,501 Debt Service - - - - - Other Expenditures 414,340 - - - 414,340 TOTAL EXPENDITURES 7,716,305 - 49,446 2,077 7,767,828 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,385,791 14,651 (49,387) (2,077) 1,348,978 OTHER FINANCING SOURCES (USES): Transfers In 200,460 - 50,000 - 250,460 Transfers Out (730,563) - - - (730,563) Total Other Financing Sources (Uses) (530,103) - 50,000 - (480,103) NET CHANGE IN FUND BALANCES 855,688 14,651 613 (2,077) 868,875 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 15) 4,257,556 1,003,519 20,240 9,760 5,291,075 FUND BALANCES END OF YEAR 5,113,244 $ 1,018,170 $ 20,853 $ 7,683 $ 6,159,950 $ See note 16 for explanation of the General Fund's fund balance restatement as the combined beginning balance is restated. County of Otsego, Michigan Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - General Fund For the Year Ended December 31, 2020 73 ---PAGE BREAK--- Animal Groen Friend Control Work Nature University of the Animal Forfeited Moth Camp Preserve Center Court Control Funds Recycling Control ASSETS: Cash and Equivalents 9,565 $ 372,341 $ 168,553 $ 362,153 $ 17,144 $ 8,209 $ 123,027 $ 115,080 $ Investments - - - - 405,029 - 178,404 - Taxes Receivable - - 4,689 - 399,711 - 332,639 - Accounts Receivable - 83 - 80 - - - - Advance to Component Units - - - - - - - - Due from Other Governmental Units 14,708 - - 58,340 932 - - - Prepaid Items 97 - - 9,392 290 - - - TOTAL ASSETS 24,370 $ 372,424 $ 173,242 $ 429,965 $ 823,106 $ 8,209 $ 634,070 $ 115,080 $ LIABILITIES: Accounts Payable 2,788 $ 12,662 $ - $ 17,211 $ 8,576 $ - $ 19,162 $ - $ Due to Other Governmental Units - - - - - - - - Accrued Liabilities 2,481 2,747 - 29,572 9,677 - - - Unearned Revenues - 240,000 - - - - - - TOTAL LIABILITIES 5,269 255,409 - 46,783 18,253 - 19,162 - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - 4,689 - 399,711 - 332,639 - TOTAL DEFERRED INFLOWS OF RESOURCES - - 4,689 - 399,711 - 332,639 - FUND BALANCES: Nonspendable 97 - - 9,392 290 - - - Restricted - 117,015 168,553 - 404,852 8,209 282,269 115,080 Committed 19,004 - - 373,790 - - - - TOTAL FUND BALANCES 19,101 117,015 168,553 383,182 405,142 8,209 282,269 115,080 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 24,370 $ 372,424 $ 173,242 $ 429,965 $ 823,106 $ 8,209 $ 634,070 $ 115,080 $ County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds December 31, 2020 Special Revenue Funds 74 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Redevelopment Building Automation 911 Pistol Officers Law Authority Department Fund Funds Licensing Training Library ASSETS: Cash and Equivalents 253,042 $ 659,613 $ 123,559 $ 117,523 $ 49,089 $ 30,881 $ 21,368 $ Investments 95,603 325,346 - - - - - Taxes Receivable - - - - - - - Accounts Receivable - 8,322 - 118,799 52 - - Advance to Component Units - - - - - - - Due from Other Governmental Units - - - - - - - Prepaid Items - 774 - 97 - - - TOTAL ASSETS 348,645 $ 994,055 $ 123,559 $ 236,419 $ 49,141 $ 30,881 $ 21,368 $ LIABILITIES: Accounts Payable - $ 7,160 $ 2,545 $ 4,391 $ - $ 1,640 $ 965 $ Due to Other Governmental Units - - - - - - - Accrued Liabilities - 7,289 - - - - - Unearned Revenues - - - - - - - TOTAL LIABILITIES - 14,449 2,545 4,391 - 1,640 965 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - - FUND BALANCES: Nonspendable - 774 - 97 - - - Restricted 348,645 978,832 121,014 231,931 49,141 29,241 20,403 Committed - - - - - - - TOTAL FUND BALANCES 348,645 979,606 121,014 232,028 49,141 29,241 20,403 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 348,645 $ 994,055 $ 123,559 $ 236,419 $ 49,141 $ 30,881 $ 21,368 $ County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds December 31, 2020 Special Revenue Funds 75 ---PAGE BREAK--- Debt Service Fund Department Child Iron Belle Michigan Bradford of Human Care Trail Indigent Equipment Lake Park & Debt Services Probate Maintenance Defense Revolving Dam Recreation Service ASSETS: Cash and Equivalents 5,696 $ 42,364 $ 5,051 $ 152,978 $ 62,576 $ 20,339 $ 34,349 $ - $ Investments 5,000 - - - - - 403,347 - Taxes Receivable - - - - - - 332,961 - Accounts Receivable - - - - - - 685 - Advance to Component Units - - - - - - - - Due from Other Governmental Units - 7,230 - - - - - - Prepaid Items - 1,542 - 12,156 7,988 - 290 - TOTAL ASSETS 10,696 $ 51,136 $ 5,051 $ 165,134 $ 70,564 $ 20,339 $ 771,632 $ - $ LIABILITIES: Accounts Payable - $ 2,656 $ - $ 7,898 $ 27,323 $ - $ 9,408 $ - $ Due to Other Governmental Units - 25,953 - - - - - - Accrued Liabilities - 8,174 - - - - 3,441 - Unearned Revenues - - 2,500 - - - 110,620 - TOTAL LIABILITIES - 36,783 2,500 7,898 27,323 - 123,469 - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - 332,961 - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - 332,961 - FUND BALANCES: Nonspendable - 1,542 - 12,156 7,988 - 290 - Restricted 10,696 - 2,551 145,080 - 20,339 - - Committed - 12,811 - - 35,253 - 314,912 - TOTAL FUND BALANCES 10,696 14,353 2,551 157,236 43,241 20,339 315,202 - TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 10,696 $ 51,136 $ 5,051 $ 165,134 $ 70,564 $ 20,339 $ 771,632 $ - $ December 31, 2020 Special Revenue Funds County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds 76 ---PAGE BREAK--- Groen Nature Public Court Greon Preserve University Library Improvements Restoration Airport Capital Capital Building Center Capital Building Capital Project Building Construction Projects II Projects Maintenance Projects Fund ASSETS: Cash and Equivalents 19,632 $ 685,964 $ 80,934 $ 241,108 $ 66,178 $ 227 $ 87,426 $ 772,078 $ Investments - 865,135 - - - - 552,485 59,578 Taxes Receivable - - - - - - 776 - Accounts Receivable - 44,750 - - - - - Advance to Component Units - 273,735 - - - - - - Due from Other Governmental Units - - 8,491 - - - - - Prepaid Items - - - - - - - - TOTAL ASSETS 19,632 $ 1,869,584 $ 89,425 $ 241,108 $ 66,178 $ 227 $ 640,687 $ 831,656 $ LIABILITIES: Accounts Payable - $ - $ - $ - $ 675 $ - $ - $ - $ Due to Other Governmental Units - - - - - - - - Accrued Liabilities - - - - - - - - Unearned Revenues - - - - 44,325 - - - TOTAL LIABILITIES - - - - 45,000 - - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - 776 - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - 776 - FUND BALANCES: Nonspendable - - - - - - - Restricted - 1,869,584 - - - - 639,911 831,656 Committed 19,632 - 89,425 241,108 21,178 227 - TOTAL FUND BALANCES 19,632 1,869,584 89,425 241,108 21,178 227 639,911 831,656 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 19,632 $ 1,869,584 $ 89,425 $ 241,108 $ 66,178 $ 227 $ 640,687 $ 831,656 $ Capital Project Funds Combining Balance Sheet Nonmajor Governmental Funds December 31, 2020 County of Otsego, Michigan 77 ---PAGE BREAK--- EMS Building Library Capital Capital Projects Iron Belle Trail Trail Head Capital Facilities Project Facilities Bond Fund Capital Project Capital Project Projects Planning Fund Fund Planning Fund Total ASSETS: Cash and Equivalents 5,751 $ - $ 77,156 $ 716,936 $ 1,852 $ 3,833 $ 203,930 $ 5,717,505 $ Investments - - - - - - - 2,889,927 Taxes Receivable - - - - - 113 - 1,070,889 Accounts Receivable - - - - - - - 172,771 Advance to Component Units - - - - - - - 273,735 Due from Other Governmental Units - - - 5,313 - - - 95,014 Prepaid Items - - - - - - - 32,626 TOTAL ASSETS 5,751 $ - $ 77,156 $ 722,249 $ 1,852 $ 3,946 $ 203,930 $ 10,252,467 $ LIABILITIES: Accounts Payable 5,750 $ - $ - $ 1,114 $ - $ - $ - $ 131,924 $ Due to Other Governmental Units - - - - - - - 25,953 Accrued Liabilities - - - - - - - 63,381 Unearned Revenues - - - - - - - 397,445 TOTAL LIABILITIES 5,750 - - 1,114 - - - 618,703 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - 113 - 1,070,889 TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - 113 - 1,070,889 FUND BALANCES: Nonspendable - - - - - - - 32,626 Restricted - - 77,156 - - - - 6,472,158 Committed 1 - - 721,135 1,852 3,833 203,930 2,058,091 TOTAL FUND BALANCES 1 - 77,156 721,135 1,852 3,833 203,930 8,562,875 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 5,751 $ - $ 77,156 $ 722,249 $ 1,852 $ 3,946 $ 203,930 $ 10,252,467 $ Capital Project Funds Combining Balance Sheet Nonmajor Governmental Funds December 31, 2020 County of Otsego, Michigan 78 ---PAGE BREAK--- Animal Groen Friend Control Work Nature University of the Animal Forfeited Moth Camp Preserve Center Court Control Funds Recycling Control REVENUES: Taxes and Penalties - $ - $ 724,145 $ - $ 390,055 $ - $ 326,305 $ - $ Federal Sources 31,451 83 - 342,638 139 - - - State Sources 50 - - 41,879 - - - - Local Sources - - - - - - - - Charges for Services 80,458 - - 40,565 36,785 - - - Fines and Forfeits - - - - 345 - - - Interest and Rentals - - - - 13,532 8 1,648 248 Other Revenues 141 334,400 5,062 - 22,776 - 2,281 - TOTAL REVENUES 112,100 334,483 729,207 425,082 463,632 8 330,234 248 EXPENDITURES: Judicial - - - 478,938 - - - - General Government - - 475,781 - - - - - Public Safety 166,579 - - - 437,907 - - - Public Works - - - - - - 306,081 - Health And Welfare - - - - - - - - Recreation and Culture - 246,714 - - - - - - Capital Outlay - 28,234 - - - - - - Debt Service - - - - - - - - TOTAL EXPENDITURES 166,579 274,948 475,781 478,938 437,907 - 306,081 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (54,479) 59,535 253,426 (53,856) 25,725 8 24,153 248 OTHER FINANCING SOURCES (USES): Transfers In 56,470 - - 38,981 - - - - Transfers Out - - (244,800) - - - - - TOTAL OTHER FINANCING SOURCES (USES) 56,470 - (244,800) 38,981 - - - - NET CHANGE IN FUND BALANCES 1,991 59,535 8,626 (14,875) 25,725 8 24,153 248 FUND BALANCES BEGINNING OF YEAR 17,110 57,480 159,927 398,057 379,417 8,201 258,116 114,832 FUND BALANCES END OF YEAR 19,101 $ 117,015 $ 168,553 $ 383,182 $ 405,142 $ 8,209 $ 282,269 $ 115,080 $ County of Otsego, Michigan and Changes in Fund Balance Nonmajor Governmental Funds Special Revenue Funds For the Year Ended December 31, 2020 Combining Statement of Revenues, Expenditures, 79 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Redevelopment Building Automation 911 Pistol Officers Law Authority Department Fund Funds Licensing Training Library REVENUES: Taxes and Penalties 109,250 $ - $ - $ - $ - $ - $ - $ Federal Sources - 139 5,145 - - - - State Sources - - - 151,536 - - - Local Sources - - - - - - - Charges for Services - 566,399 41,790 499,338 12,352 2,132 - Fines and Forfeits - - - - - - - Interest and Rentals 475 10,921 - 232 - - - Other Revenues - - - 65,958 - - 3,499 TOTAL REVENUES 109,725 577,459 46,935 717,064 12,352 2,132 3,499 EXPENDITURES: Judicial - - - - - - 4,111 General Government - - 30,704 - - - - Public Safety - 551,960 - 710,413 11,224 4,139 - Public Works - - - - - - - Health And Welfare - - - - - - - Recreation and Culture - - - - - - - Capital Outlay - - - - - - - Debt Service - - - - - - - TOTAL EXPENDITURES - 551,960 30,704 710,413 11,224 4,139 4,111 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 109,725 25,499 16,231 6,651 1,128 (2,007) (612) OTHER FINANCING SOURCES (USES): Transfers In - - - - - - - Transfers Out - (6,000) - (17,300) - - - TOTAL OTHER FINANCING SOURCES (USES) - (6,000) - (17,300) - - - NET CHANGE IN FUND BALANCES 109,725 19,499 16,231 (10,649) 1,128 (2,007) (612) FUND BALANCES BEGINNING OF YEAR 238,920 960,107 104,783 242,677 48,013 31,248 21,015 FUND BALANCES END OF YEAR 348,645 $ 979,606 $ 121,014 $ 232,028 $ 49,141 $ 29,241 $ 20,403 $ County of Otsego, Michigan Nonmajor Governmental Funds and Changes in Fund Balance For the Year Ended December 31, 2020 Special Revenue Funds Combining Statement of Revenues, Expenditures, 80 ---PAGE BREAK--- Debt Service Fund Department Child Iron Belle Michigan Bradford of Human Care Trail Indigent Equipment Lake Park & Debt Services Probate Maintenance Defense Revolving Dam Recreation Service REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ 325,015 $ - $ Federal Sources - 93 - - 47,536 - 139 - State Sources - 48,936 - 384,751 - - - - Local Sources - - - - - - - - Charges for Services - - - - - - 216,508 - Fines and Forfeits - - - - - - - - Interest and Rentals 76 - - 94 65 66 12,650 - Other Revenues - 26,646 5,000 - - - 19,548 - TOTAL REVENUES 76 75,675 5,000 384,845 47,601 66 573,860 - EXPENDITURES: Judicial - - - 262,720 - - - - General Government - - - - 49,460 - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare 3,452 405,561 - - - - - - Recreation and Culture - - 4,949 - - - 435,566 - Capital Outlay - - - - 145,046 - 97,404 - Debt Service - - - - - - 647,550 TOTAL EXPENDITURES 3,452 405,561 4,949 262,720 194,506 - 532,970 647,550 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (3,376) (329,886) 51 122,125 (146,905) 66 40,890 (647,550) OTHER FINANCING SOURCES (USES): Transfers In - 330,000 2,500 81,773 115,273 - 647,550 Transfers Out - - - (58,114) - - - - TOTAL OTHER FINANCING SOURCES (USES) - 330,000 2,500 23,659 115,273 - - 647,550 NET CHANGE IN FUND BALANCES (3,376) 114 2,551 145,784 (31,632) 66 40,890 - FUND BALANCES BEGINNING OF YEAR 14,072 14,239 - 11,452 74,873 20,273 274,312 - FUND BALANCES END OF YEAR 10,696 $ 14,353 $ 2,551 $ 157,236 $ 43,241 $ 20,339 $ 315,202 $ - $ County of Otsego, Michigan Combining Statement of Revenues, Expenditures, Nonmajor Governmental Funds For the Year Ended December 31, 2020 and Changes in Fund Balance Special Revenue Funds 81 ---PAGE BREAK--- Groen Nature Public Court Geron 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 - $ - $ - $ - $ - $ - $ 2,456 $ 58 $ Federal Sources - - 8,491 - - - - - State Sources - - - - - - - - Local Sources - - - - - - - - Charges for Services - - 32,558 - - - - - Fines and Forfeits - - - - - - - - Interest and Rentals 15 23,412 - - 126 2 16,193 4,994 Other Revenues - - - - 34,581 - - - TOTAL REVENUES 15 23,412 41,049 - 34,707 2 18,649 5,052 EXPENDITURES: Judicial - - 42,129 - - - - - General Government - - 12,042 - - - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare - - - - - - - - Recreation and Culture - - - - 5,546 - 15,246 - Capital Outlay - - - - 23,840 - - - Debt Service - - - - - - - - TOTAL EXPENDITURES - - 54,171 - 29,386 - 15,246 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 15 23,412 (13,122) - 5,321 2 3,403 5,052 OTHER FINANCING SOURCES (USES): Transfers In - - - 50,000 - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) - - - 50,000 - - - - NET CHANGE IN FUND BALANCES 15 23,412 (13,122) 50,000 5,321 2 3,403 5,052 FUND BALANCES BEGINNING OF YEAR 19,617 1,846,172 102,547 191,108 15,857 225 636,508 826,604 FUND BALANCES END OF YEAR 19,632 $ 1,869,584 $ 89,425 $ 241,108 $ 21,178 $ 227 $ 639,911 $ 831,656 $ County of Otsego, Michigan and Changes in Fund Balance Nonmajor Governmental Funds Capital Project Funds For the Year Ended December 31, 2020 Combining Statement of Revenues, Expenditures, 82 ---PAGE BREAK--- EMS Building Library Capital Capital Capital Projects Iron Belle Trail Trail Head Capital Facilities Project Project Bond Fund Capital Project Capital Projects Projects Planning Fund Fund Sinking Fund Total REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ - $ 1,877,284 $ Federal Sources - - 10,000 6,454 - - - 452,308 State Sources - - - - - - - 627,152 Local Sources - - 35,000 - - - - 35,000 Charges for Services - - - - - - - 1,528,885 Fines and Forfeits - - - - - - - 345 Interest and Rentals - 650 3 - - 3 21 85,434 Other Revenues - - - - - - - 519,892 TOTAL REVENUES - 650 45,003 6,454 - 3 21 5,126,300 EXPENDITURES: Judicial - - - - - - - 787,898 General Government - - - 6,084 - - - 574,071 Public Safety - - - - - - - 1,882,222 Public Works - - - 2,282 13,608 - - 321,971 Health And Welfare - - - - - - - 409,013 Recreation and Culture - 349,948 1,400 - - - - 1,059,369 Capital Outlay 24,565 - - 15,018 - - - 334,107 Debt Service - - - - - - - 647,550 TOTAL EXPENDITURES 24,565 349,948 1,400 23,384 13,608 - - 6,016,201 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (24,565) (349,298) 43,603 (16,930) (13,608) 3 21 (889,901) OTHER FINANCING SOURCES (USES): Transfers In 154,000 - - 88,500 - - 203,909 1,768,956 Transfers Out (129,500) (181,570) - - - - - (637,284) TOTAL OTHER FINANCING SOURCES (USES) 24,500 (181,570) - 88,500 - - 203,909 1,131,672 NET CHANGE IN FUND BALANCES (65) (530,868) 43,603 71,570 (13,608) 3 203,930 241,771 FUND BALANCES BEGINNING OF YEAR 66 530,868 33,553 649,565 15,460 3,830 - 8,321,104 FUND BALANCES END OF YEAR 1 $ - $ 77,156 $ 721,135 $ 1,852 $ 3,833 $ 203,930 $ 8,562,875 $ County of Otsego, Michigan Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2020 Capital Project Funds 83 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total ASSETS: Cash and Equivalents 73,988 $ 148,701 $ 105,283 $ 327,972 $ Investments - - 159,739 159,739 Accounts Receivable 10,159 298 1,957 12,414 Prepaid Items 97 767 67,937 68,801 Inventory 2,294 - - 2,294 TOTAL ASSETS 86,538 $ 149,766 $ 334,916 $ 571,220 $ LIABILITIES: Accounts Payable 21,840 $ 604 $ 40 $ 22,484 $ Accrued Liabilities - 4,341 - 4,341 TOTAL LIABILITIES 21,840 4,945 40 26,825 NET POSITION: Unrestricted 64,698 144,821 334,876 544,395 TOTAL NET POSITION 64,698 144,821 334,876 544,395 TOTAL LIABILITIES AND NET POSITION 86,538 $ 149,766 $ 334,916 $ 571,220 $ County of Otsego, Michigan Combining Statement of Net Position Internal Service Funds December 31, 2020 84 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total OPERATING REVENUES: Charges for Services 520,545 $ 663,178 $ 1,210,351 $ 2,394,074 $ TOTAL OPERATING REVENUES 520,545 663,178 1,210,351 2,394,074 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 16,856 640,198 1,173,689 1,830,743 Contractual Services 273,702 - - 273,702 Materials and Supplies 4,244 7,663 128 12,035 Equipment Repair and Maintenance 3,568 650 - 4,218 Utilities 198,541 900 - 199,441 Other 4,139 7,988 - 12,127 TOTAL OPERATING EXPENSES 501,050 657,399 1,173,817 2,332,266 OPERATING INCOME (LOSS) 19,495 5,779 36,534 61,808 Non Operating Revenues (Expenses): Interest Earnings - - 1,879 1,879 Federal 2,452 1,515 - 3,967 Other - 1,500 - 1,500 Total Non Operating Revenues (Expenses): 2,452 3,015 1,879 7,346 INCOME (LOSS) BEFORE TRANSFERS 21,947 8,794 38,413 69,154 Operating Transfers In(Out) (2,500) - - (2,500) Changes in Net Position 19,447 8,794 38,413 66,654 Net Position Beginning of Year 45,251 136,027 296,463 477,741 Net Position End of Year 64,698 $ 144,821 $ 334,876 $ 544,395 $ County of Otsego, Michigan Combining Statement of Revenues, Expenses, and Changes in Net Position - Internal Service Funds For the Year Ended December 31, 2020 85 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Totals CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 514,887 $ 666,139 $ 1,209,967 $ 2,390,993 $ Payments to Suppliers (478,867) (22,091) - (500,958) Payments to Employees for Services and Benefits (16,856) (638,508) (1,164,913) (1,820,277) Net Cash Provided (Used) by Operating Activities 19,164 5,540 45,054 69,758 CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Other Receipts 2,452 3,015 - 5,467 Operating Transfers In(Out) (2,500) - - (2,500) Net Cash Provided (Used) by Noncapital and Related Financing Activities (48) 3,015 - 2,967 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - 1,879 1,879 Net Sale or (Purchase) of Investments - - (21,845) (21,845) Net Cash Provided (Used) by Investing Activities - - (19,966) (19,966) Net Increase (Decrease) in Cash and Equivalents 19,116 8,555 25,088 52,759 Balances - Beginning of the Year 54,872 140,146 80,195 275,213 Balances - End of the Year 73,988 $ 148,701 $ 105,283 $ 327,972 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) 19,495 $ 5,779 $ 36,534 $ 61,808 $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Change in Assets and Liabilities: Accounts Receivable (5,658) 2,961 (384) (3,081) Due from Governmental Units - - - - Prepaid Expense (97) (387) 10,251 9,767 Inventory (2,294) 325 - (1,969) Accounts Payable 7,718 (4,828) (1,347) 1,543 Accrued Liabilities - 1,690 - 1,690 Net Cash Provided (Used) by Operating Activities 19,164 $ 5,540 $ 45,054 $ 69,758 $ County of Otsego, Michigan Combining Statement of Cash Flows Internal Service Funds For the Year Ended December 31, 2020 86 ---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 86,644 $ 138,706 $ 52,280 $ 1,827 $ 1,617 $ 11,297 $ 292,371 $ Accounts Receivable 83 3,462 - - 19,186 - 22,731 Prepaid Expense 194 3,369 - - - - 3,563 Total Current Assets 86,921 145,537 52,280 1,827 20,803 11,297 318,665 Noncurrent Assets Capital Assets (Net of Accumulated Depreciation) - 36,880 - - - - 36,880 TOTAL ASSETS 86,921 $ 182,417 $ 52,280 $ 1,827 $ 20,803 $ 11,297 $ 355,545 $ LIABILITIES: Accounts Payable 8,000 $ 689 $ 2,250 $ - $ 5,908 $ - $ 16,847 $ TOTAL LIABILITIES 8,000 689 2,250 - 5,908 - 16,847 NET POSITION: Net Investment in Capital Assets - 36,880 - - - - 36,880 Unrestricted 78,921 144,848 50,030 1,827 14,895 11,297 301,818 TOTAL NET POSITION 78,921 $ 181,728 $ 50,030 $ 1,827 $ 14,895 $ 11,297 $ 338,698 $ County of Otsego, Michigan Combining Statement of Net Position Nonmajor Enterprise Funds December 31, 2020 87 ---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 6,100 $ 87,324 $ 574 $ - $ 43,994 $ 258 $ 138,250 $ TOTAL OPERATING REVENUES 6,100 87,324 574 - 43,994 258 138,250 OPERATING EXPENSES: Materials and Supplies 25,182 - 9,086 - 29,627 - 63,895 Depreciation - 12,301 - - - - 12,301 Other Expenses - 69,389 - 812 - 1,600 71,801 TOTAL OPERATING EXPENSES 25,182 81,690 9,086 812 29,627 1,600 147,997 OPERATING INCOME (LOSS) (19,082) 5,634 (8,512) (812) 14,367 (1,342) (9,747) NON OPERATING REVENUES (EXPENSES): Federal 83 - - - - - 83 Other - - (3,000) - - - (3,000) Interest Earnings - - - - - 88 88 TOTAL NONOPERATING REVENUES (ESPENSES): 83 - (3,000) - - 88 (2,829) INCOME (LOSS) BEFORE TRANSFERS (18,999) 5,634 (11,512) (812) 14,367 (1,254) (12,576) Transfers In 17,000 - - - - - 17,000 Changes in Net Position (1,999) 5,634 (11,512) (812) 14,367 (1,254) 4,424 NET POSITION BEGINNING OF YEAR 80,920 176,094 61,542 2,639 528 12,551 334,274 NET POSITION END OF YEAR 78,921 $ 181,728 $ 50,030 $ 1,827 $ 14,895 $ 11,297 $ 338,698 $ County of Otsego, Michigan Combining Statement of Revenues, Expenses, and Changes in Net Position - Nonmajor Enterprise Funds For the Year Ended December 31, 2020 88 ---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 14,186 $ 86,687 $ 3,574 $ - $ 24,808 $ 258 $ 129,513 $ Payments to Suppliers (21,182) (70,741) (7,410) (812) (24,652) (1,600) (126,397) Net Cash Provided (Used) by Operating Activities (6,996) 15,946 (3,836) (812) 156 (1,342) 3,116 CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Other 83 - (3,000) - - - (2,917) Transfers In 17,000 - - - - - 17,000 Net Cash Provided (Used) by Noncapital and Related Financing Activities 17,083 - (3,000) - - - 14,083 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - - - - 88 88 Net Cash Provided (Used) by Investing Activities - - - - - 88 88 Net Increase (Decrease) in Cash and Equivalents 10,087 15,946 (6,836) (812) 156 (1,254) 17,287 Balances - Beginning of the Year 76,557 122,760 59,116 2,639 1,461 12,551 275,084 Balances - End of the Year 86,644 $ 138,706 $ 52,280 $ 1,827 $ 1,617 $ 11,297 $ 292,371 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (19,082) $ 5,634 $ (8,512) $ (812) $ 14,367 $ (1,342) $ (9,747) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - 12,301 - - - - 12,301 Change in Assets and Liabilities: Accounts Receivable 8,280 (637) 3,000 - (19,186) - (8,543) Prepaid Expenses (194) (1,532) - - - - (1,726) Accounts Payable 4,000 180 1,676 - 4,975 - 10,831 Net Cash Provided (Used) by Operating Activities (6,996) $ 15,946 $ (3,836) $ (812) $ 156 $ (1,342) $ 3,116 $ County of Otsego, Michigan Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2020 89 ---PAGE BREAK--- Reports on Compliance ---PAGE BREAK--- ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE SUE A. BOWLBY, CPA, PRINCIPAL KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE BOHN, CPA TORI KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MACPA OFFICES IN MICHIGAN & WISCONSIN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 90 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, 2020, 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 June 29, 2021. Our report includes a reference to other auditors who audited the financial statements of the Otsego County Commission on Aging as described in our report on the County of Otsego, Michigan’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. The financial statements of the Otsego Commission on Aging were not audited in accordance with Governmental Auditing Standards. 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) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County of Otsego, Michigan’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County of Otsego, Michigan’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. ---PAGE BREAK--- 91 To Chairman Root and 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. and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify a certain deficiency in internal control, described in the accompany schedule of findings and questioned costs as items 2020-001 that we consider to be material weaknesses. 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 determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instance of noncompliance or other matters that is required to be reported under Government Auditing Standards. County of Otsego, Michigan’s Response to Findings The County of Otsego, Michigan’s responses to the findings identified in our audit are 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 them. 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 result 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 June 29, 2021 ---PAGE BREAK--- ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE SUE A. BOWLBY, CPA, PRINCIPAL KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE BOHN, CPA TORI KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MACPA OFFICES IN MICHIGAN & WISCONSIN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 92 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 We have audited the County of Otsego, Michigan’s compliance with the types of compliance requirements described 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, 2020. 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 Commission on Aging, which received $216,781 in federal awards, which are not included in the County of Otsego, Michigan’s schedule of expenditures of federal awards during the year ended December 31, 2020. Our audit, described below, did not include the operations of 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. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on the compliance for each of the County of Otsego, Michigan’s major federal programs based on our audit of the types of compliance requirements referred to above. 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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the County of Otsego, Michigan’s compliance with those requirements and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the County of Otsego, Michigan’s compliance. ---PAGE BREAK--- 93 To Chairman Root and the Board of Commissioners County of Otsego Opinion on Each Major Federal Program 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, 2020. Report on Internal Control Over Compliance Management of the County of Otsego, Michigan is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County of Otsego, Michigan’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program 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 internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County of Otsego, Michigan’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, 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. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 June 29, 2021 ---PAGE BREAK--- Federal Agency or Federal Grantor/Pass-through CFDA Pass-through Federal Grantor/Program Title Number Number Expenditures U.S. DEPARTMENT OF AGRICULTURE: Direct Awards: Community Facility Loans and Grants 10.766 50,000 $ 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 14.228 PI 2019 MEDC 26,464 14.228 M-2017-0812 67,897 14.228 CARES Act 106,854 14.228 HPG PI 375 14.228 PI 2020 43,820 Total U.S. Department of Housing and Urban Development 245,410 U.S. Department of Justice: Pass-through Michigan State Police Bulletproof Vest Partnership Prorgrom 16.607 N/A 2,831 Coronavirus Emergency Supplemental Funding Program 16.034 CESF-0244-2020 52,044 Total U.S. Department of Justice 54,875 U.S. Department of Transportation: Direct Awards: Airport Improvement Program 20.106 3-26-SBGP-117-2020 30,000 Pass-through the Michigan Department of Transportation Formula Grants for Rural Areas and Tribal Transit Programs 20.509 N/A 176,226 Formula Grants for Rural Areas and Tribal Transit Programs 20.509 CARES Act 159,955 Buses and Bus Facilities Formula, Competitive, and Low or No Emissions Programs 20.526 N/A 104,276 Subtotal MDOT 440,457 Pass-through the Michigan State Police Interagency Hazardous Materials Public Sector Training and Planning Grants 20.703 2,351 Total U.S. Department of Transportation 472,808 U.S. DEPARTMENT OF TREASURY: Pass-through from the Michigan Department of Treasury Public Safety and Public Health Payroll Reimbusement Program 21.019 N/A 323,240 First Responder Hazard Pay Premiums Program 21.019 N/A 55,000 Coronavirus Relief Local Governemnt Grants Program 21.019 N/A 186,724 Subtotal - MDT 564,964 Pass-through from the Michigan Occupational Safety Coronavirus Relief Fund 21.019 N/A 7,083 Total U.S. Department of Treasury 572,047 FEDERAL COMMUNICATION COMMISSION: Pass-through from the Michigna Department of Education Universal Service Fund 32.004 N/A 9,250 NATION ENDOWMENT FOR THE ARTS: Pass-through from the Michigna Department of Education Grants to States 45.310 N/A 4,000 County of Otsego, Michigan Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2020 See accompanying notes to scheduled of expenditures of federal awards. 94 ---PAGE BREAK--- Federal Agency or Federal Grantor/Pass-through CFDA Pass-through Federal Grantor/Program Title Number Number Expenditures County of Otsego, Michigan Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2020 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES: Direct Awards: PRF - General Distribution 93.498 N/A 47,533 Pass-through from the State of Michigan Department of Health and Human Services Child Support Enforcement 93.563 CSPA-13-69002 52,474 Child Support Enforcement 93.563 CSFOC13-69001 47,543 Child Support Enforcement 93.563 CSFOC17-69001 286,350 Subtotal - 386,367 Pass-through NW Michigan Health Department Preventitive Health and Health Services Block Grant 93.991 N/A 10,000 Total U.S. Department of Health and Human Services 443,900 U.S. DEPARTMENT OF HOMELAND SECURITY: Pass-through from the Michigan Department of Natural Resources Boating Safety Financial Assistence 97.012 N/A 5,100 Pass-through from the Michigan State Police Pre-Disaster Mitigation Program 97.042 N/A 12,191 Total U.S. Department of Homeland Security 17,291 TOTAL EXPENDITURES OF FEDERAL AWARDS 1,869,581 $ See accompanying notes to scheduled of expenditures of federal awards. 95 ---PAGE BREAK--- County of Otsego, Michigan Notes to Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2020 96 NOTE A - BASIS OF PRESENTATION: The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the County of Shiawassee, Michigan under programs of the federal government for the year ended December 31, 2020. 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 Shiawassee, Michigan, it is not intended to and does not present the financial position, changes in net position, or cash flows of the County of Shiawassee, Michigan. NOTE B - COGNIZANT AGENCY: The County has not been assigned a cognizant agency. Therefore, the County is under the general oversight of the U.S. Department of Health and Human Services which provided the greatest amount of direct federal funding to the County during 2020. 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. ---PAGE BREAK--- County of Otsego, Michigan Schedule of Findings and Questioned Costs For the Year Ended December 31, 2020 97 Section I – Summary of Auditor’s Results Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: ꞏ Material weaknesses identified? Yes ꞏ Significant deficiencies identified that are not considered to be material weaknesses? No Noncompliance material to financial statements noted? No Federal Awards Internal control over major programs: ꞏ Material weaknesses identified? No ꞏ Significant deficiencies identified that are not considered to be material weaknesses? No Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Title 2 (CFR) part 200, Uniform Guidance? No Identification of Major Programs CFDA Numbers Name of Federal Program or Cluster 21.019 Coronavirus Relief Programs 93.563 Child Support Enforcement Programs 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, 2020 98 Section II – Financial Statement Findings Material Weakness Bank Reconciliation Process Finding 2020-001 Condition: The County is required to perform reconciliations between the general ledger, and bank records as prescribed by the Michigan Department of Treasury Uniform Accounting Procedures Manual for Local Governments. Criteria: Reconciliation of the cash balances recorded by the Treasurer were incomplete and had outstanding transactions related to cash accounts that were included in the reconciliation, though were not being recorded in the general ledger. Effect: Noncompliance with applicable state requirements. Cause: The current process of reconciling the cash accounts did not recognize the identified transactions in the general ledger. Recommendation: The Otsego County Treasurer and the County must take steps to produce a complete bank reconciliation on a basis for the identified transactions. Management’s Response – Corrective Action Plan: The County has already corrected the identified transactions and is in in the process of implementing the necessary reconciliation procedures.  Contact Person(s) Responsible for Correction: Diann Axford, Otsego County Treasurer Rachel Frisch, Otsego County Administrator ---PAGE BREAK--- County of Otsego, Michigan Schedule of Findings and Questioned Costs For the Year Ended December 31, 2020 99 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, 2020 100 Section III – Federal Award Findings and Questioned Costs NONE. ---PAGE BREAK--- ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE SUE A. BOWLBY, CPA, PRINCIPAL KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE BOHN, CPA TORI KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MACPA OFFICES IN MICHIGAN & WISCONSIN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE Members of the Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan for the year ended December 31, 2020, and have issued our report thereon dated June 29, 2021. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated March 10, 2021, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. As part of our audit, we considered the internal control of County of Otsego, Michigan. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the County of Otsego, Michigan’s compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. Generally accepted accounting principles provide for certain required supplementary information (RSI) to supplement the basic financial statements. Our responsibility with respect to the management’s discussion and analysis, employee retirement and benefit systems, and budgetary comparison schedules, which supplement the basic financial statements, is to apply certain limited procedures in accordance with generally accepted auditing standards. However, the RSI will not be audited and, because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance, we will not express an opinion or provide any assurance on the RSI. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 2 We have been engaged to report on the combining fund financial statements and schedule of expenditures of federal awards, which accompany the financial statements but are not RSI. Our responsibility for this other information, as described by professional standards, is to evaluate the presentation of the other information in relation to the financial statements as a whole and to report on whether the other information is fairly stated, in all material respects, in relation to the financial statements as a whole. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our letter about planning matters dated on March 10, 2021. 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. One new accounting presentation change was apodted related to the presentation of fiduciary funds in relation to the adoption of GASB 84 and the application of existing policies were not changed during the year. We noted no transactions entered into by the governmental unit 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:  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 $407,000.  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. 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. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 3 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. Disagreement with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 29, 2021. 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. 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 Cash Recording (Prior Year) It was noted in our review of the county component unit cash balances that in one occurrence cash was recorded into the ledger as received, but they had not yet been distributed out of the agency fund per county practice until the following calendar year resulting in an over statement of year end cash balances. We recommend that cash only be recorded as received after distributions have been received, to ensure that the county does not overstate cash balances. Status: Corrected ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 4 Cash Reconciliations (Prior Year) In our review of cash balances, we noted that there were a few immaterial cash balances held at component unit balances that appeared to be stale accounts or lacked support. We recommend that the county perform a review of the cash held at component unit balances and adjust the accounts based on their findings. Status: Correted Outstanding Checks (Prior Year) We noted in our review of cash reconciliations that a few long outstanding checks were on the county books in relation to cash accounts held by the library and the We recommend that the county review the Michigan Unclaimed Property Manual and follow it guidance to escheat or absorb these checks to clear them from the outstanding item listing. Status: Corrected 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 the 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. Staus: In the process of being corrected Cash Receipts (Prior Year) It was noted in our review of cash that in one occurrence when a transfer was made from the pooled cash account to component unit bank account the transfer was noted recorded by the component unit 2020 as the transfer was for payroll to be paid in 2020. This caused a large unreconciled difference in cash balance as of 12/31/2019. We recommend that cash deposits and transfers be recorded into the ledger when they are received regardless of the timing of the related transaction to ensure accurate cash reconciliations. Status: Corrected Single Approach for Reporting Leases The Governmental Accounting Standards Board (GASB) issued guidance that establishes a single approach to accounting for and reporting leases by state and local governments. The single approach is based on the principle that leases are financing of the right to use an underlying asset. GASB Statement No. 87, Leases, provides guidance for lease contracts for nonfinancial assets – including vehicles heavy equipment, and buildings – but excludes nonexchange transactions, including donated assets, and leases of intangible assets. Under the new Statement, a lessee government is required to recognize a lease liability and an intangible asset representing the lessee’s right to use the leased asset. A lessor government is required to recognize a lease receivable and a deferred inflow of resources. A lessor will continue to report the leased asset in its financial statements. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 5 A lease also will report the following in its financial statements:  Amortization expense for using the lease asset (similar to depreciation) over the shorter of the term of the lease or the useful life of the underlying asset.  Interest expense on the lease liability.  Note disclosures about the lease, including a general description of the leasing arrangement, the amount of the lease assets recognized, and a schedule of future lease payments to be made. Limited exceptions to the single-approach guidance are provided for:  Short-term leases, defined as lasting a maximum of 12 months at inception, including any options to extend.  Financial purchases.  Certain regulated leases, such as between municipal airports and air carriers. The full text of Statement 87 is available on the GASB website, www.gasb.org. 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 fund financial statements and schedule of federal awards, which accompany the financial statements but are not RSI. With respect to this other 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 other information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. 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. This information is intended solely for the use of the Board of Commissioners, management, federal awarding agencies, pass-through entities and others within the organization and is not intended to be and should not be used by anyone other than these specified parties. Anderson, Tackman & Company, PLC Certified Public Accountants Kincheloe, Michigan June 29, 2021