Document otsegocountymi_gov_doc_cb6ab7c26e

County of Otsego, Michigan BASIC FINANCIAL STATEMENTS December 31, 2021 ---PAGE BREAK--- OTSEGO COUNTY, MICHIGAN ORGANIZATION MEMBERS OF THE COUNTY COMMISSION CHAIR PERSON KENNETH R. GLASSER VICE CHAIR PERSON DOUGLAS C. JOHNSON COMMISSIONER JULIE POWERS COMMISSIONER HENRY MASON COMMISSIONER PAUL L. LISS COMMISSIONER BRETT MCVANNEL COMMISSIONER JASON CAVERSON 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 64 Schedule of Employer Contributions 65 Schedule of Changes in OPEB Liability and Related Rations 66 Budgetary Comparison Schedules – Major Funds: General Fund 67 Housing Commission 69 Library 70 ARPA 71 ---PAGE BREAK--- ii TABLE OF CONTENTS (Continued) SUPPLEMENTARY 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 95 Notes to Schedule of Expenditures of Federal Awards 97 Schedule of Findings and Questioned Costs: Section I – Summary of Auditor’s Results 98 Section II – Financial Statement 99 Section III – Federal Award Findings 100 Summary Schedule of Prior Audit Findings: Section III – Federal Award Findings 101 ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE A. BOHN, CPA TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 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 Audit of the Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information, of Otsego County, Michigan, as of and for the year ending December 31, 2021, and the related notes to the financial statements, which collectively comprise the County of Otsego, Michigan’s basic financial statements as listed in the table of contents. In our opinion, based on our audit and the report of the 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 Otsego County, Michigan, as of December 31, 2021, and the respective changes in financial position, and where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of the Otsego Commission on Aging, which represents 7 percent, 3 percent, and 13 percent, respectively, of the assets, net position, and revenue of the discretely presented component unit as of December 31, 2021, and the respective changes in financial position thereof for the year then ended. 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 reports of the other auditors. The financial statements of the Otsego Commission on Aging were not audited in accordance with Government Auditing Standards. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Otsego County, Michigan and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. ---PAGE BREAK--- 2 Honorable Chairman and Members of the Board of Commissioners County of Otsego, Michigan Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Otsego County, Michigan’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgement and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedure that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Otsego County, Michigan’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Otsego County, Michigan’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. ---PAGE BREAK--- 3 Honorable Chairman and Members of the Board of Commissioners County of Otsego, Michigan Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, employee retirement and benefit systems, and budgetary comparison information on pages 4 through 9, pages 64 through 66 and pages 67 through 71 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We 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 inquires of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquires, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Otsego County, Michigan’s basic financial statements. The combining major and nonmajor fund financial statements, and scheduled of expenditures of federal awards, as required by Title 2 U.S Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the 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 standard generally accepted in the United States of America by us and other auditors. In our opinion, the combining major and nonmajor fund financial statements, and scheduled of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standard, we have also issued our report dated June 27, 2022, on our consideration of Otsego County, 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 Otsego County, 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 Otsego County, Michigan’s internal control over financial reporting and compliance. Anderson, Tackman & Company, PLC Certified Public Accountants Kincheloe, Michigan June 27, 2022 ---PAGE BREAK--- Management’s Discussion and Analysis ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2021 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, 2021. 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 $37,576,435 for 2020 and was $39,824,449 for 2021, an increase of 6.1%. For 2021, net position for our business-type activities was $15,128,496 or 38.2% of total net position, while net position in our governmental activities was $24,695,953 or 61.8% of total net position.  At December 31, 2021, Otsego County’s governmental funds report a combined fund balance of $16,741,810 compared to $15,639,943 in 2020.  At December 31, 2021, the fund balance for the general fund was $6,427,835 with $51,685 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 Ambulance Corporation, Otsego Commission on Aging, and Otsego County 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, 2021 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 22-63 of this report. Required Supplementary Information. Required supplementary information related to the County’s pension and OPEB can be found on pages 64-66 and budgetary comparison information related to the County’s major governmental funds can be found on pages 67-71 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2021 6 Supplementary 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 $39,824,449 at the close of the most recent fiscal year. Otsego County Net Position 2021 2020 2021 2020 2021 2020 Current Assets 24,462,873 $ 20,984,215 $ 10,489,693 $ 10,311,105 $ 34,952,566 $ 31,295,320 $ Capital Assets 13,881,384 13,431,511 4,999,884 5,627,174 18,881,268 19,058,685 Total Assets 38,344,257 34,415,726 15,489,577 15,938,279 53,833,834 50,354,005 Deferred Outflows of Resources 2,513,606 1,705,709 197,328 84,749 2,710,934 1,790,458 Current Liabilities 1,842,613 1,635,037 210,772 280,166 2,053,385 1,915,203 Noncurrent Liabilities 9,178,817 10,247,156 230,034 219,142 9,408,851 10,466,298 Total Liabilities 11,021,430 11,882,193 440,806 499,308 11,462,236 12,381,501 Deferred Inflows of Resources 5,140,480 2,123,600 117,603 62,927 5,258,083 2,186,527 Net Position Net Investment in Capital Assets 13,482,876 12,644,493 4,999,884 5,627,174 18,482,760 18,271,667 Restricted 7,796,835 7,382,558 - - 7,796,835 7,382,558 Unrestricted 3,416,242 2,088,591 10,128,612 9,833,619 13,544,854 11,922,210 Total Net Position 24,695,953 $ 22,115,642 $ 15,128,496 $ 15,460,793 $ 39,824,449 $ 37,576,435 $ 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. 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 $7,796,835. The remaining balance of unrestricted net position of $13,544,854 may be used to meet the government’s ongoing obligations to citizens and creditors. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2021 7 Otsego County Changes in Net Position 2021 2020 2021 2020 2021 2020 Program Revenues Charges for Services 2,663,003 $ 3,481,781 $ 1,790,954 $ 1,484,541 $ 4,453,957 $ 4,966,322 $ Operating Grants and Contributions 2,453,110 2,579,822 1,047,332 858,712 3,500,442 3,438,534 Capital Grants and Contributions 153,118 - - - 153,118 - General Revenues Property Taxes 7,656,518 8,319,954 806,333 782,728 8,462,851 9,102,682 State Revenue Sharing 516,280 565,696 - - 516,280 565,696 Investment Earnings 194,091 262,275 (459,366) 306,265 (265,275) 568,540 Other Revenue 1,832,029 461,988 128,638 400,895 1,960,667 862,883 Total Revenues 15,468,149 15,671,516 3,313,891 3,833,141 18,782,040 19,504,657 Program Expenses Legislative 206,570 279,851 - - 206,570 279,851 Judicial 1,947,336 2,768,499 - - 1,947,336 2,768,499 General Government 3,180,430 2,566,783 - - 3,180,430 2,566,783 Public Safety 4,503,686 4,847,703 - - 4,503,686 4,847,703 Public Works 323,484 326,483 - - 323,484 326,483 Health and Welfare 895,483 1,064,373 - - 895,483 1,064,373 Communtiy and Economic Development 321,644 263,439 - - 321,644 263,439 Recreation and Culture 1,703,088 2,078,757 - - 1,703,088 2,078,757 Interest Expense - Unallocated (142,013) 21,615 - - (142,013) 21,615 Other Expenses - 414,340 - - - 414,340 Delinquent Tax Collection - - 199,656 219,371 199,656 219,371 Bus System - - 1,292,243 922,834 1,292,243 922,834 Airport - - 1,831,124 1,417,969 1,831,124 1,417,969 Other Expenses - - 271,295 366,370 271,295 366,370 Total Expenses 12,939,708 14,631,843 3,594,318 2,926,544 16,534,026 17,558,387 Excess (Deficiency) Before Transfers 2,528,441 1,039,673 (280,427) 906,597 2,248,014 1,946,270 Transfers 51,870 161,773 (51,870) (161,773) - - Changes in Net Position 2,580,311 1,201,446 (332,297) 744,824 2,248,014 1,946,270 Net Position - Beginning 22,115,642 20,914,196 15,460,793 14,715,969 37,576,435 35,630,165 Net Position - Ending 24,695,953 $ 22,115,642 $ 15,128,496 $ 15,460,793 $ 39,824,449 $ 37,576,435 $ Total Governmental Business-type Activities Activities ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2021 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 $6,427,835. General Fund Budgetary Highlights The General Fund realized $248,222 less in revenues than anticipated for the fiscal year. The General Fund operations also expended $514,497 less than appropriated and resulted in a net budget variance of $267,885. All of the General Fund services departments expended less than the budgeted amount for departmental operations in 2021. 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, 2021 the County had $18,881,268 invested in a range of assets. This includes a net decrease of $177,417 from last year as depreciation and deletions exceed additions. Otsego County Capital Assets (net of depreciation) 2021 2020 2021 2020 2021 2020 Land 2,810,482 $ 2,801,732 $ 99,998 $ 99,998 $ 2,910,480 $ 2,901,730 $ Construction in Progress 32,092 17,470 - - 32,092 17,470 Buildings 9,128,515 8,865,568 997,297 1,108,012 10,125,812 9,973,580 Furniture & Fixtures 1,242 29,135 - - 1,242 29,135 Equipment 1,464,453 1,368,476 57,128 80,753 1,521,581 1,449,229 Vehicles 418,747 334,960 588,963 565,108 1,007,710 900,068 Infrastructure 25,853 14,170 3,256,498 3,773,303 3,282,351 3,787,473 Total 13,881,384 $ 13,431,511 $ 4,999,884 $ 5,627,174 $ 18,881,268 $ 19,058,685 $ 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, 2021 9 Debt Administration At the end of fiscal year 2021, the County had outstanding bond debt in the amount of $395,000. This was due to decreasing its bond debt in the amount of $385,000. 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 2021 2020 2021 2020 2021 2020 Installment and Bond Debt 395,000 780,000 - - 395,000 780,000 Premium on Bond Issuance 3,508 7,018 - - 3,508 7,018 Compensated Absences 235,607 216,490 - - 235,607 216,490 Total 634,115 $ 1,003,508 $ - $ - $ 634,115 $ 1,003,508 $ 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 2022 Budget:  Property tax revenues are projected to increase approximately Highlight of the 2021 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 11,275,353 $ 3,848,637 $ 15,123,990 $ 10,990,562 $ Investments 8,421,874 5,709,085 14,130,959 686,971 Receivables: Taxes 1,420,104 665,810 2,085,914 2,567,870 Accounts 2,990,242 146,923 3,137,165 2,688,260 Interest - 86,430 86,430 - Internal Loans (7,000) 7,000 - - Inventories 11,984 22,988 34,972 788,213 Prepaid Items 160,444 2,820 163,264 102,648 Advance to Component Unit 189,872 - 189,872 - Capital Assets Not Depreciated 2,842,574 99,998 2,942,572 13,523,841 Capital Assets (Net of Accumulated Depreciation) 11,038,810 4,899,886 15,938,696 27,835,765 TOTAL ASSETS 38,344,257 15,489,577 53,833,834 59,184,130 DEFERRED OUTFLOWS OF RECOURSES: Pension & OPEB Related Items 2,513,606 197,328 2,710,934 381,184 LIABILITIES: Accounts Payable 525,946 158,585 684,531 350,373 Accrued Liabilities 273,999 52,187 326,186 109,666 Advance from Government Units - - - 494,747 Due to Governmental Units - - - 648,048 Unearned Revenue 408,553 - 408,553 91,323 Advance from Primary Government - - - 182,936 Vested Employee Benefits - Due in more than one year 235,607 - 235,607 224,969 Bonds Payable - Due within one year 398,508 - 398,508 - Net OPEB Liability - Due in more than one year 1,011,280 - 1,011,280 787,852 Net Pension Liability - Due in more than one year 8,167,537 230,034 8,397,571 2,766,309 Note Payable - Due within one year - - - 210,084 Note Payable - Due in more than one year - - - 3,068,419 TOTAL LIABILITIES 11,021,430 440,806 11,462,236 8,934,726 DEFERRED INFLOWS OF RESOURCES: Pension & OPEB Related Items 548,323 117,603 665,926 1,043,975 Taxes Levied for a Subsequent Period 4,592,157 - 4,592,157 2,567,870 TOTAL DEFERRED INFLOWS 5,140,480 117,603 5,258,083 3,611,845 NET POSITION: Net Investment in Capital Assets 13,482,876 4,999,884 18,482,760 38,305,629 Restricted 7,796,835 - 7,796,835 2,390,363 Unrestricted 3,416,242 10,128,612 13,544,854 6,322,751 TOTAL NET POSITION 24,695,953 $ 15,128,496 $ 39,824,449 $ 47,018,743 $ County of Otsego, Michigan Statement of Net Position December 31, 2021 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 206,570 $ - $ - $ - $ (206,570) $ - $ (206,570) $ - $ Judicial 1,947,336 528,863 939,461 - (479,012) - (479,012) - General Government 3,180,430 742,834 484,516 117,532 (1,835,548) - (1,835,548) - Public Safety 4,503,686 1,073,474 150,725 - (3,279,487) - (3,279,487) - Public Works 323,484 - - 35,586 (287,898) - (287,898) - Health and Welfare 895,483 - 94,330 - (801,153) - (801,153) - Community/Economic Development 321,644 36,965 58,808 - (225,871) - (225,871) - Recreation and Culture 1,703,088 280,867 725,270 - (696,951) - (696,951) - Other - - - - - - - - Interest - Unallocated (142,013) - - - 142,013 - 142,013 - Total Governmental Activities 12,939,708 2,663,003 2,453,110 153,118 (7,670,477) - (7,670,477) - Business-type Activities: Delinquent Tax Collection 199,656 252,138 - - - 52,482 52,482 - Tax Foreclosure 98,967 79,844 - - - (19,123) (19,123) - Airport 1,831,124 1,131,368 13,000 - - (686,756) (686,756) - Public Transit 1,292,243 195,427 1,034,332 - - (62,484) (62,484) - Non-Major Enterprise Funds 172,328 132,177 - - - (40,151) (40,151) - Total Business-type Activities 3,594,318 1,790,954 1,047,332 - - (756,032) (756,032) - Total Primary Government 16,534,026 $ 4,453,957 $ 3,500,442 $ 153,118 $ (7,670,477) (756,032) (8,426,509) - Component Units: Road Commission 7,946,848 $ 3,791,556 $ 6,419,836 $ 1,856,526 $ 4,121,070 Ambulance 2,989,465 1,809,127 124,571 - (1,055,767) Commission on Aging 9/30/2021 1,797,010 - 1,021,088 - (775,922) 895,983 692,777 - - (203,206) Total Component Units 13,629,306 6,293,460 7,565,495 1,856,526 2,086,175 Total 30,163,332 $ 10,747,417 $ 11,065,937 $ 2,009,644 $ General Revenues and Transfers: Taxes 7,656,518 806,333 8,462,851 3,876,766 State Revenue Sharing 516,280 - 516,280 Investment Earnings 194,091 (459,366) (265,275) 23,685 Transfers 51,870 (51,870) - - Other 1,832,029 128,638 1,960,667 116,164 Total General Revenues and Transfers 10,250,788 423,735 10,674,523 4,016,615 Changes in Net Position 2,580,311 (332,297) 2,248,014 6,102,790 Net Position - Beginning 22,115,642 15,460,793 37,576,435 40,915,953 Net Position - Ending 24,695,953 $ 15,128,496 $ 39,824,449 $ 47,018,743 $ Program Revenues Primary Government County of Otsego, Michigan Statement of Activities For the Year Ended December 31, 2021 Net (Expense) Revenue and Changes in Net Position See accompanying notes to financial statements. 11 ---PAGE BREAK--- Capital Project ` American Library Total Housing Rescue Plan Contruction Nonmajor Governmental General Commission Library Act Millage Governmental Funds ASSETS: Cash and Equivalents - Unrestricted 2,744,303 $ 214,774 $ 333,422 $ 455,043 $ 20,506 $ 7,122,861 $ 10,890,909 $ Investments - Unrestricted 3,618,615 - 600,285 1,949,749 - 2,082,964 8,251,613 Receivables: Taxes 319,915 - 547,663 - 512,203 1,100,189 2,479,970 Accounts 25,566 - - - - 295,189 320,755 Loans - 1,324,248 - - - - 1,324,248 Due from Other Funds - - - - - - - Advance to Other Funds - - - - - 189,872 189,872 Due from Governmental Units 180,508 - - - - 94,946 275,454 Inventories 11,984 - - - - - 11,984 Prepaid Items 39,701 104 - 38,696 78,501 TOTAL ASSETS 6,940,592 $ 1,539,126 $ 1,481,370 $ 2,404,792 $ 532,709 $ 10,924,717 $ 23,823,306 $ LIABILITIES: Accounts Payable 226,081 $ 30 $ 4,501 $ - $ - $ 244,822 $ 475,434 $ Due to Other Funds - - - - - 7,000 7,000 Accrued Liabilities 217,348 105 - - - 56,651 274,104 Unearned Revenue 69,328 24,801 - 2,395,735 - 349,491 2,839,355 TOTAL LIABILITIES 512,757 24,936 4,501 2,395,735 - 657,964 3,595,893 DEFERRED INFLOWS OF RESOURCES: Unavailable Resources - 1,324,248 - - - - 1,324,248 Taxes Levied for a Subsequent Period - - 547,663 - 512,203 1,101,489 2,161,355 TOTAL DEFERRED INFLOW OF RESOURCES - 1,324,248 547,663 - 512,203 1,101,489 3,485,603 FUND BALANCES: Nonspendable 51,685 104 - - - 38,696 90,485 Restricted - 189,838 929,206 9,057 - 6,668,734 7,796,835 Committed - - - - 20,506 2,457,834 2,478,340 Assigned 1,055,924 - - - - - 1,055,924 Unassigned 5,320,226 - - - - - 5,320,226 TOTAL FUND BALANCES 6,427,835 189,942 929,206 9,057 20,506 9,165,264 16,741,810 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 6,940,592 $ 1,539,126 $ 1,481,370 $ 2,404,792 $ 532,709 $ 10,924,717 $ Reconciliation to amounts reported for governmental activities in the statement of net position: Capital Assets used by Governmental Activities 13,881,384 Long-term Debt Payable for Governmental Activities (398,508) Accrued Interest Payable (1,975) Vested Employee Benefits (235,607) Pension Liability and Deferred Items (6,202,254) OPEB Liability and Deferred Items (1,011,280) Deferred Revenue Recognized as Current Revenue 1,324,248 Internal Service Funds 598,135 Net position of governmental activities 24,695,953 $ December 31, 2021 Governmental Funds Balance Sheet County of Otsego, Michigan Special Revenue Funds See accompanying notes to financial statements. 12 ---PAGE BREAK--- Capital Project American Library Total Housing Rescue Plan Contruction Nonmajor Governmental General Commission Library Act Millage Governmental Funds REVENUES: Taxes 5,554,856 $ - $ 525,731 $ - $ 496,771 $ 1,065,910 $ 7,643,268 $ Licenses and Permits 48,988 - - - - - 48,988 Federal Sources 90,452 54,801 13,250 - - 817,581 976,084 State Sources 1,361,676 - 35,171 - - 357,604 1,754,451 Local Sources 36,134 4,007 - - - 15,000 55,141 Charges for Services 1,194,857 - - - - 1,786,155 2,981,012 Fines and Forfeits 13,640 - 175,722 - - 95 189,457 Interest and Rentals 95,218 23 12,287 12,857 1,315 71,809 193,509 Other Revenue 568,154 114,826 44,262 - - 898,505 1,625,747 TOTAL REVENUES 8,963,975 173,657 806,423 12,857 498,086 5,012,659 15,467,657 EXPENDITURES: Legislative 206,570 - - - - - 206,570 Judicial 1,892,285 - - - - 883,526 2,775,811 General Government 1,702,331 - - 3,800 - 283,728 1,989,859 Public Safety 2,882,973 - - - - 1,749,730 4,632,703 Public Works 4,390 - - - - 357,940 362,330 Health and Welfare 667,929 - - - - 244,218 912,147 Community/Economic Development 118,340 98,457 - - - - 216,797 Recreation and Culture - - 672,972 - - 1,133,921 1,806,893 Other Expenditures 532,121 - - - - - 532,121 Capital Outlay - - - - - 583,829 583,829 Debt Service - - - - - 401,100 401,100 TOTAL EXPENDITURES 8,006,939 98,457 672,972 3,800 - 5,637,992 14,420,160 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 957,036 75,200 133,451 9,057 498,086 (625,333) 1,047,497 OTHER FINANCING SOURCES (USES): Transfers In 72,300 163,953 - - - 1,246,022 1,482,275 Transfers Out (761,451) (163,953) - - (484,201) (18,300) (1,427,905) Total Other Financing Sources (Uses) (689,151) - - - (484,201) 1,227,722 54,370 NET CHANGE IN FUND BALANCE 267,885 75,200 133,451 9,057 13,885 602,389 1,101,867 FUND BALANCES BEGINNING OF YEAR 6,159,950 114,742 795,755 - 6,621 8,562,875 15,639,943 FUND BALANCES END OF YEAR 6,427,835 $ 189,942 $ 929,206 $ 9,057 $ 20,506 $ 9,165,264 $ 16,741,810 $ For the Year Ended December 31, 2021 Changes in Fund Balance - Governmental Funds Statement of Revenues, Expenditures, and County of Otsego, Michigan Special Revenue Funds See accompanying notes to financial statements. 13 ---PAGE BREAK--- Net changes in fund balances - total governmental funds 1,101,867 $ 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, ($899,404) exceeded by capital outlay, $1,349,276. 449,872 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 385,000 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 (135,799) 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 (19,117) Accrued Interest Payable (1,925) OPEB Liability & Related Deferred Items 328,315 Pension Liability & Related Deferred Items 414,848 Internal service fund activity 53,740 Changes in net position of governmental activities 2,580,311 $ For the Year Ended December 31, 2021 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 9/30/2021 Funds Funds Funds ASSETS: Current Assets: Cash and Equivalents 2,139,809 $ 695,919 $ 4,314 $ 699,654 $ 308,941 $ 3,848,637 $ 384,444 $ Investments 3,318,711 1,588,115 - 802,259 - 5,709,085 170,261 Taxes Receivable 665,810 - - - - 665,810 - Interest Receivable 86,430 - - - - 86,430 - Accounts Receivable 571 - 97,205 36,005 13,142 146,923 9,919 Due from Other Funds 7,000 - - - - 7,000 - Prepaid Items 208 208 208 - 2,196 2,820 81,943 Inventory - - 22,988 - - 22,988 - Total Current Assets 6,218,539 2,284,242 124,715 1,537,918 324,279 10,489,693 646,567 Noncurrent Assets: Capital Assets (Not Depreciated) - - - 99,998 - 99,998 - Capital Assets (Net of Accumulated Depreciation) - - 4,097,338 777,969 24,579 4,899,886 - Total Noncurrent Assets - - 4,097,338 877,967 24,579 4,999,884 - TOTAL ASSETS 6,218,539 2,284,242 4,222,053 2,415,885 348,858 15,489,577 646,567 DEFERRED OUTFLOWS OF RESOURCES: Pension Related Items - - - 197,328 - 197,328 - LIABILITIES: Current Liabilities: Accounts Payable 5,233 361 51,896 68,744 32,351 158,585 38,935 Accrued Liabilities 4,481 2,663 10,323 34,720 - 52,187 9,497 Total Current Liabilities 9,714 3,024 62,219 103,464 32,351 210,772 48,432 Noncurrent Liabilities: Net Pension Liability - - - 230,034 - 230,034 - TOTAL LIABILITIES 9,714 3,024 62,219 333,498 32,351 440,806 48,432 Deferred Inflow of Resources Pension Related Items - - - 117,603 - 117,603 - NET POSITION: Net Investment in Capital Assets - - 4,097,338 877,967 24,579 4,999,884 - Unrestricted 6,208,825 2,281,218 62,496 1,284,145 291,928 10,128,612 598,135 TOTAL NET POSITION 6,208,825 $ 2,281,218 $ 4,159,834 $ 2,162,112 $ 316,507 $ 15,128,496 $ 598,135 $ Major Business-type Activities - Enterprise Funds County of Otsego, Michigan Statement of Net Position Proprietary Funds December 31, 2021 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 9/30/2021 Funds Funds Funds OPERATING REVENUES: Charges for Services 13,724 $ 79,844 $ 1,131,368 $ 195,427 $ 132,177 $ 1,552,540 $ 2,366,676 $ Interest on Delinquent Taxes 238,414 - - - - 238,414 - Other Revenues - - 14,136 - - 14,136 - Local Sources - - - - 5,232 5,232 - TOTAL REVENUES 252,138 79,844 1,145,504 195,427 137,409 1,805,090 2,366,676 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 89,349 86,647 288,393 843,584 - 1,307,973 1,951,333 Contractual Services 64,865 - 22,512 - 21,482 108,859 64,040 Materials and Supplies 8,675 4,502 771,498 - 64,335 849,010 30,659 Equipment Repair and Maintenance - - - - - - 39,424 Utilities - - - - - - 213,670 Depreciation - - 592,221 174,372 12,301 778,894 - Other Expenses 36,767 7,818 156,500 274,287 74,210 549,582 19,433 TOTAL EXPENSES 199,656 98,967 1,831,124 1,292,243 172,328 3,594,318 2,318,559 OPERATING INCOME (LOSS) 52,482 (19,123) (685,620) (1,096,816) (34,919) (1,789,228) 48,117 NON-OPERATING REVENUES (EXPENSES): State Grants - - - 529,708 - 529,708 - Federal Grants - - 13,000 504,624 - 517,624 7,500 Interest Earned on Investments (523,086) 59,417 3,575 - 728 (459,366) 582 Property Taxes Levied - - - 806,333 - 806,333 - Other 2,739 59,933 - 46,598 - 109,270 41 TOTAL NONOPERATING REVENUES (EXPENSES) (520,347) 119,350 16,575 1,887,263 728 1,503,569 8,123 INCOME (LOSS) BEFORE INTERFUND TRANSFERS (467,865) 100,227 (669,045) 790,447 (34,191) (280,427) 56,240 INTERFUND TRANSFERS: Transfers In - - 87,533 - 12,000 99,533 - Transfers Out (151,403) - - - - (151,403) (2,500) CHANGES IN NET POSITION (619,268) 100,227 (581,512) 790,447 (22,191) (332,297) 53,740 NET POSITION, BEGINNING OF YEAR 6,828,093 2,180,991 4,741,346 1,371,665 338,698 15,460,793 544,395 NET POSITION, END OF YEAR 6,208,825 $ 2,281,218 $ 4,159,834 $ 2,162,112 $ 316,507 $ 15,128,496 $ 598,135 $ 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, 2021 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 9/30/2021 Funds Funds Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 437,010 $ 79,886 $ 1,101,832 $ 224,827 $ 146,984 $ 1,990,539 $ 2,369,171 $ Interest on Delinquent Taxes - - - - - - - Net Delinquent Taxes Collected (Purchased) - - - - - - - Payments to Suppliers (109,568) (125,576) (932,095) (274,285) (143,142) (1,584,666) (346,994) Payments to Employees for Services and Benefits (88,922) (88,076) (282,912) (912,711) - (1,372,621) (1,960,806) Net Cash Provided (Used) by Operating Activities 238,520 (133,766) (113,175) (962,169) 3,842 (966,748) 61,371 CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: State Grants - - - 386,264 - 386,264 - Federal Grants - - 13,000 546,482 - 559,482 - Property Tax - - - 805,726 - 805,726 - Other 2,739 59,933 - 44,305 - 106,977 7,541 Transfers In - - 87,533 - 12,000 99,533 - Transfers Out (151,403) - - - - (151,403) (2,500) Net Cash Provided (Used) by Noncapital and Related Financing Activities (148,664) 59,933 100,533 1,782,777 12,000 1,806,579 5,041 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of Capital Assets - - - (151,604) - (151,604) - State Capital Grant - - - 151,604 - 151,604 - Net Cash Provided (Used) by Capital and Related Financing Activities - - - - - - - CASH FLOWS FROM INVESTING ACTIVITIES: Net Sale or (Purchase) of Investments 494,273 (650,823) - - - (156,550) (10,522) Interest Earnings (523,086) 59,417 3,575 - 728 (459,366) 582 Net Cash Provided (Used) by Investing Activities (28,813) (591,406) 3,575 - 728 (615,916) (9,940) Net Increase (Decrease) in Cash and Equivalents 61,043 (665,239) (9,067) 820,608 16,570 223,915 56,472 Balances - Beginning of the Year 2,078,760 1,361,158 13,381 681,305 292,371 4,426,975 327,972 Balances - End of the Year 2,139,803 $ 695,919 $ 4,314 $ 1,501,913 $ 308,941 $ 4,650,890 $ 384,444 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) 52,482 $ (19,123) $ (685,620) $ (1,096,816) $ (34,919) $ (1,783,996) $ 48,117 $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - - 592,221 174,372 12,301 778,894 - Change in Assets and Liabilities: Taxes Receivable 103,243 - - - - 103,243 - Interest Receivable 19,096 - - - 19,096 - Accounts Receivable (453) 56 (43,672) 29,402 9,575 (5,092) 2,495 Interfund Advances, Payables, & Receivables 63,000 - - - - 63,000 - Prepaid Items (14) (14) (14) - 1,381 1,339 (13,142) Inventory - - (4,058) - - (4,058) 2,294 Accounts Payable 739 (113,256) 22,487 (22,116) 15,504 (96,642) 16,451 Accrued Liabilities 427 (1,429) 5,481 - - 4,479 5,156 Change in Pension Liability and Deferred Amounts - - - (47,011) - (47,011) - Net Cash Provided (Used) by Operating Activities 238,520 $ (133,766) $ (113,175) $ (962,169) $ 3,842 $ (966,748) $ 61,371 $ Business-type Activities - Enterprise Funds Major County of Otsego, Michigan Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2021 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 1,537,585 $ 94,331 $ 382,829 $ 2,014,745 $ Taxes for Other Governments 1,341,554 - - 1,341,554 TOTAL ASSETS 2,879,139 $ 94,331 $ 382,829 $ 3,356,299 $ LIABILITIES: Undistributed Tax Collections 2,248,418 $ - $ - $ 2,248,418 $ Due to Other Governments 357,166 - - 357,166 Bonds, Restitutions and Payables to Others 273,555 94,331 - 367,886 TOTAL LIABILITIES 2,879,139 94,331 - 2,973,470 Net Position Restricted - $ - $ 382,829 $ 382,829 $ Statement of Fiduciary Net Position Fiduciary Funds December 31, 2021 Custodial Funds 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 - - 8,700 8,700 Taxes Collected for Other Governments 25,221,539 - - 25,221,539 Fees and Fines Collected on behalf of Other Governments 2,011,444 163,546 - 2,174,990 Fees and Fines Collected on behalf of Other Agencies 3,137,515 - - 3,137,515 Collections from or On Behalf of Inmates 215,187 - - 215,187 Gifts and Bequests 12,769 - - 12,769 TOTAL ADDITIONS 30,598,455 163,546 58,700 30,820,701 DEDUCTIONS: Payment of Taxes to Other Governments 25,119,289 - - 25,119,289 Fees and Fines Remitted to Other Units of Government 2,093,955 - - 2,093,955 Fees and Fines Remitted to Other Agencies 3,186,809 163,546 - 3,350,355 Payments on Behalf of Inmates 187,612 - - 187,612 Bonds, Restitutions, and Payables to Others - - 71,539 71,539 Beneficiary Payments to Individuals 10,790 - - 10,790 TOTAL DEDUCTIONS 30,598,455 163,546 71,539 30,833,540 Change in Net Position - - (12,839) (12,839) Net Position, Beginning of Year - - 395,668 395,668 Net Position, End of Year - $ - $ 382,829 $ 382,829 $ County of Otsego, Michigan Statement of Changes of Fiduciary Net Position Fiduciary Funds December 31, 2021 Custodial Funds 19 ---PAGE BREAK--- Component Units ---PAGE BREAK--- Commission Road Ambulance on Aging Commission Corporation 9/30/2021 Totals ASSETS: Cash and Equivalents 9,181,118 $ 153,330 $ 1,629,482 $ 26,632 $ 10,990,562 $ Investments - 458,622 1,737 226,612 686,971 Receivables: Taxes 1,158,739 1,066,631 - 342,500 2,567,870 Accounts (Net of Allowance) 2,235,975 428,000 9,398 14,887 2,688,260 Inventories 782,195 - - 6,018 788,213 Prepaid Items 102,648 - - - 102,648 Capital Assets (Not Depreciated) 13,523,841 - - - 13,523,841 Capital Assets (Net of Accumulated Depreciation) 23,644,075 1,441,690 2,750,000 - 27,835,765 TOTAL ASSETS 50,628,591 3,548,273 4,390,617 616,649 59,184,130 DEFERRED OUTFLOWS OF RESOURCES Pension & OPEB Related Items 381,184 - - - 381,184 LIABILITIES: Accounts Payable 305,641 11,477 2,716 30,539 350,373 Accrued Liabilities 88,828 5,308 15,530 - 109,666 Due to Governmental Units 648,048 - - - 648,048 Advance from Governmental Units 494,747 - - - 494,747 Unearned Revenues - - 90,973 350 91,323 Installment Notes Payable - Due within one year 144,743 49,896 15,445 - 210,084 Installment Notes Payable - Due in more than one year 159,234 174,630 2,734,555 - 3,068,419 Advance from Primary Government - 182,936 - - 182,936 Net Pension Liabilities- Due in more than one year 2,766,309 - - - 2,766,309 (OPEB) Labilities - Due in more than one year 787,852 - - - 787,852 Vested Employee Benefits - Due in more than one year 224,969 - - - 224,969 TOTAL LIABILITIES 5,620,371 424,247 2,859,219 30,889 8,934,726 DEFERRED INFLOWS OF RESOURCES: Pension & OPEB Related Items 1,043,975 - - - 1,043,975 Taxes Levied for a Subsequent Period 1,158,739 1,066,631 - 342,500 2,567,870 Total Deferred Inflows of Resources 2,202,714 1,066,631 - 342,500 3,611,845 NET POSITION: Net Investment in Capital Assets 36,863,939 1,441,690 - - 38,305,629 Restricted for Ambulance and Emergency Services - 615,705 - - 615,705 Restricted for - - - 243,260 243,260 Restricted for Commission on Aging - - 1,531,398 - 1,531,398 Unrestricted 6,322,751 - - - 6,322,751 TOTAL NET POSITION 43,186,690 $ 2,057,395 $ 1,531,398 $ 243,260 $ 47,018,743 $ County of Otsego, Michigan Statement of Net Position Component Units December 31, 2021 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 9/30/2021 Total Road Commission: Public Works 7,946,848 $ 3,791,556 $ 6,419,836 $ 1,856,526 $ 4,121,070 $ - $ - $ - $ 4,121,070 $ Ambulance Corporation: Health and Welfare 2,989,465 1,809,127 124,571 - - (1,055,767) - - (1,055,767) Commission on Aging 9/30/2021: Health and Welfare 1,797,010 - 1,021,088 - - - (775,922) - (775,922) Recreation and Culture 895,983 692,777 - - - - - (203,206) (203,206) Total Component Units 13,629,306 $ 6,293,460 $ 7,565,495 $ 1,856,526 $ 4,121,070 (1,055,767) (775,922) (203,206) 2,086,175 General Revenues: Property Tax 1,156,210 1,044,812 1,343,528 332,216 3,876,766 Investment Earnings - 12,957 8,026 2,702 23,685 Other 9,000 - 104,512 2,652 116,164 Total General Revenues 1,165,210 1,057,769 1,456,066 337,570 4,016,615 Changes in Net Position 5,286,280 2,002 680,144 134,364 6,102,790 Net Position - Beginning 37,900,410 2,055,393 851,254 108,896 40,915,953 Net Position - Ending 43,186,690 $ 2,057,395 $ 1,531,398 $ 243,260 $ 47,018,743 $ Net (Expense) Revenue and Changes in Net Position County of Otsego, Michigan Statement of Activities Component Units For the Year Ended December 31, 2021 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, 2021 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, 2021 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 2021 was $251,102. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 24 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Joint Ventures (Continued) Financial information as of September 30, 2021 (the most recent audited financial statements) is as follows: Assets $ 8,469,204 Deferred outflows of resources 122,067 Liabilities 4,188,569 Deferred inflows of resources 203,781 Net position 4,198,921 Change in net position 254,095 Participant payments Total participant payments 1,094,575 County of Otsego 251,102 County of Otsego percentage of total 23% Michigan Technical Education Center - Kirtland Community College, a community college district established pursuant to the provisions of Public Act 331 of 1996, obtained funding through the Michigan Economic Development Corporation ("MEDC") to construct and equip Michigan Technical Education Center ("M-TEC"), an educational facility in Otsego County. On December 7, 1999, the electors of the County authorized a tax levy not to exceed .6464 mills for a period of twenty years for the purpose of generating funds to operate the facility. The facility provides vocational, technical, job skills, or workforce development programs and services. Pursuant to the operating agreement, Kirtland established an advisory board (which includes representatives of the County) and is to report its preliminary, final, and amended M-TEC budgets to the County's board. Financial records for M-TEC are recorded and maintained by the Kirtland Community College and are audited separately. M-TEC is used in conjunction with and occupied by the University Center established and operated by the University Center of Gaylord, a non-profit corporation. North Country Community Mental Health Authority (the "CMH Authority") - The CMH Authority consists of the counties of Antrim, Charlevoix, Cheboygan, Emmet, Kalkaska, and Otsego. Financial records for the CMH Authority are recorded and maintained by the Authority and audited separately. The funding formula for the community mental health operations and services is in accordance with an agreement approved by each county. The current agreement provides that each county will pay at an agreed upon rate. The Otsego County 2021 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, 2021 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, 2021, except for the following component unit and enterprise fund: Fund Fund Presentation Fiscal Year End Commission on Aging Component Unit September 30, 2021 Bus System Enterprise Fund September 30, 2021 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, 2021 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 2021 taxable valuation of the County of Otsego totaled $1,365,881,861, 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. 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. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 27 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The American Rescue Plan Act Fund The fund accounts for fund received from the American Rescue Plan Act. 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, 2021 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 Cash, Equivalents, and Investments – Cash, equivalents 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 $427,000. 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, 2021 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, 2021 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 $90,485 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 $7,796,835 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 $2,478,340 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, 2021 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, 2021 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 $ 11,275,353 $ 3,848,637 $ 15,123,990 $ 2,014,745 $ 10,990,562 Investments 8,421,874 5,709,085 14,130,959 - 686,971 Total $ 19,697,227 $ 9,557,722 $ 29,254,949 $ 2,014,745 $ 11,677,533 The breakdown between deposits and investments is as follows: Primary Fiduciary Component Government Funds Units Bank Deposits (checking and savings accounts, and money markets) $ 15,110,018 $ 2,014,745 $ 10,988,170 Investments 14,130,959 - 686,971 Petty Cash and Cash on Hand 13,972 - 2,392 Total $ 29,254,949 $ 2,014,745 $ 11,677,533 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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* $ 200,076 $ 200,076 $ - $ - $ - Governmental Fixed Income 13,881,706 - 250,400 799,500 12,831,806 Money Market* 49,177 49,177 - - - Total Investments $ 14,130,959 $ 249,253 $ 250,400 $ 799,500 $ 12,831,806 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, 2021: 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, 2021 34 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) The County has the following fair value measurements as of December 31, 2021: Total Level 1 Level 2 Level 3 Governmental Fixed Income $13,881,706 $ - $13,881,706 $ - Total $13,881,706 $ - $13,881,706 $ - *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, 2021 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 $ 8,750 $ - $ 2,810,482 Construction in Progress 17,470 32,092 (17,470 ) 32,092 Subtotal 2,819,202 40,842 (17,470 ) 2,842,574 Capital assets being depreciated: Buildings 21,548,059 829,623 17,470 22,395,152 Leasehold Improvements 24,854 - - 24,854 Furniture & Fixtures 895,452 - - 895,452 Equipment: Data Handling 2,026,681 180,609 - 2,207,290 Other Equipment 2,673,652 39,040 - 2,712,692 Vehicles 2,084,876 244,762 - 2,329,638 Infrastructure 37,130 14,400 - 51,530 Subtotal 29,290,704 1,308,434 17,470 30,616,608 Less accumulated depreciation for: Buildings (12,682,492 ) (576,272 ) (7,873 ) (13,266,637 ) Leasehold improvements (24,854 ) - (9,325 ) (34,179 ) Furniture & Fixtures (866,317 ) (18,568 ) - (884,885 ) Equipment: Data Handling (1,895,661 ) (67,865 ) - (1,963,526 ) Other Equipment (1,436,196) (55,810 ) - (1,492,006) Vehicles (1,749,915 ) (160,973 ) - (1,910,888 ) Infrastructure (22,960 ) (2,717 ) - (25,677 ) Subtotal (18,678,395 ) (882,205 ) (17,198 ) (19,577,798 ) Net Capital Assets Being Depreciated 10,612,309 426,229 272 11,038,810 Capital Assets – Net $ 13,431,511 $ 467,071 $ (17,198 ) $ 13,881,384 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 36 NOTE 4 - CAPITAL ASSETS (Continued) Depreciation expense was charged to programs of the primary government as follows: Governmental Activities: General Government $ 348,060 Judicial 14,688 Public Safety 186,862 Recreation and Culture 332,595 Total Governmental Activities $ 882,205 Beginning Adjustments/ Ending Balances Additions Deductions Balances Business-type Activities: Capital assets not being depreciated: Land $ 99,998 $ - $ - $ 99,998 Capital assets being depreciated: Buildings 2,746,134 - - 2,746,134 Furniture & Fixtures 6,000 - - 6,000 Vehicles 2,436,955 151,604 (231,362 ) 2,357,197 Equipment 392,227 - - 392,227 Infrastructure 12,779,602 - - 12,779,602 Subtotal 18,360,918 151,604 (231,362 ) 18,281,160 Less accumulated depreciation for: Buildings (1,638,122 ) (110,715 ) - (1,748,837 ) Furniture & Fixtures (6,000 ) - - (6,000 ) Vehicles (1,871,847 ) (127,749 ) 231,362 (1,768,234 ) Equipment (311,474 ) (23,625 ) - (335,099 ) Infrastructure (9,006,299 ) (516,805 ) - (9,523,104 ) Subtotal (12,833,742 ) (778,894 ) 231,362 (13,381,274 ) Net Capital Assets Being Depreciated 5,527,176 (627,290 ) - 4,899,886 Capital Assets – Net $ 5,627,174 $ (627,290 ) $ - $ 4,999,884 Depreciation expense was charged to the business-type activities as follows: Business-type Activities: Bus System 9/30/2021 $ 174,372 Airport 592,221 University Center Metropolitan Area Network 12,301 Total Business-Type Activities $ 778,894 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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 698,745 249,128 - 947,873 Vehicles 2,672,981 - - 2,672,981 Subtotal 4,972,270 249,128 - 5,221,398 Less Accumulated Depreciation: Buildings (871,110 ) (64,022 ) - (935,132 ) Other Equipment (649,975 ) (64,155 ) - (714,130 ) Vehicles (1,960,811 ) (169,635 ) - (2,130,446) Subtotal (3,481,896 ) (297,812 ) - (3,779,708 ) Net Capital Assets Being Depreciated 1,490,374 (48,684 ) - 1,441,690 Total Net Capital Assets $ 1,490,374 $ (48,684 ) $ - $ 1,441,690 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 01/01/21 Additions Deductions 12/31/21 Capital Assets Not Being Depreciated Land $ 125,501 $ - $ - $ 125,501 Land Improvements – Infrastructure 12,618,821 779,519 - 13,398,340 Subtotal 12,744,322 779,519 - 13,523,841 Capital Assets Being Depreciated Buildings 3,936,130 - - 3,936,130 Road Equipment 8,357,850 642,321 15,173 8,984,998 Shop Equipment 106,679 - 12,413 94,266 Office Equipment 46,846 - - 46,846 Engineers’ Equipment 13,562 - 4,979 8,583 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 49,557 - - 49,557 Infrastructure – Bridges 1,287,553 159,281 - 1,446,834 Infrastructure – Roads 35,428,190 917,726 1,110,789 35,235,127 Subtotal 49,228,167 1,719,328 1,143,354 49,804,141 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 38 NOTE 4 - CAPITAL ASSETS (Continued) Beginning Ending Balances Adjustments/ Balances 01/01/21 Additions Deductions 12/31/21 Less Accumulated Depreciation Buildings 2,152,791 87,241 - 2,240,032 Road Equipment 7,069,110 601,996 15,173 7,655,933 Shop Equipment 106,552 127 12,413 94,266 Office Equipment 41,237 2,413 - 43,650 Engineers’ Equipment 13,562 - 4,979 8,583 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 46,356 320 - 46,676 Infrastructure – Bridges 385,206 31,568 - 416,774 Infrastructure – Roads 15,052,050 1,711,091 1,110,789 15,652,352 Subtotal 24,868,664 2,434,756 1,143,354 26,160,066 Net Capital Assets Being Depreciated 24,359,503 (715,428 ) - 23,644,075 Capital Assets - Net $ 37,103,825 $ 64,091 $ - $ 37,167,916 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 $ 2,750,000 $ - $ 2,890,189 Less accumulated depreciation (140,189 ) - - (140,189 ) Net Capital Assets $ - $ 2,750,000 $ - $ 2,750,000 NOTE 5 - RECEIVABLES Governmental Business-type Component Activities Activities Units Accounts $ 2,990,242 $ 146,923 $ 3,115,260 Less: Allowance for uncollectible accounts - - (427,000 ) Due from other governments - - - Loans - - - Interest - 86,430 - Totals $ 2,990,242 $ 233,353 $ 2,688,260 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 39 NOTE 6 - INTERFUND RECEIVABLES, PAYABLES, & TRANSFERS The composition of interfund balances as of December 31, 2021, was as follows: These balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. Advances to and from component units Advance to Component Unit Advance From Primary Government Primary Government $ 182,936 $ - Ambulance - 189,872 $ 182,936 $ 189,872 Advances differ because of the timing of a principal payment of $6,936 between the Ambulance and the County. All balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payment between funds are made. Transfers In Transfers Out General Fund $ 72,300 $ 761,451 Housing Commission 163,953 163,953 Library Millage - 484,201 Nonmajor governmental funds 1,246,022 18,300 Delinquent Tax Fund - 151,403 Airport 87,533 - Nonmajor enterprise funds 12,000 - Internal service funds - 2,500 $ 1,581,808 $ 1,581,808 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, 2021 40 NOTE 7 - LONG-TERM DEBT Changes in Long-term Debt. Long-term liability activity for the year ended December 31, 2021, 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 $ 780,000 $ - $ (385,000 ) $ 395,000 $ 395,000 . Total Installment Debt 780,000 - (385,000 ) 395,000 395,000 Premium on Bond Issuance 7,018 - (3,510 ) 3,508 3,508 Accrued Compensated Absences 216,490 533,110 (513,993 ) 235,607 - Total Governmental Activities Debt $ 1,003,508 $ 533,110 $ (902,503 ) $ 634,115 $ 398,508 Annual debt service requirements to maturity for the above obligations are as follows: Bonds Payable Year End December 31 Principal Interest 2022 $ 395,000 $ 7,900 Total $ 395,000 $ 7,9000 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, 2021 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 01/01/21 Additions Reductions 12/31/21 One Year Installment payable secured by equipment, payable in installments of $28,859 including interest of 3.32%, due 2025. $ 204,131 $ - $ 22,082 $ 182,049 $ 22,815 equipment, payable in annual installments of $14,122 including interest of 4.18%, due 2023. 130,516 8,588 121,928 121,928 Subtotal 334,647 - 30,670 303,977 $ 144,743 Vested Employee Benefits 223,514 1,455 - 224,969 TOTAL LONG-TERM DEBT $ 558,161 $ 1,455 $ 30,670 $ 528,946 Net increase. Installments Payable Year End December 31 Principal Interest 2022 $ 144,743 $ 11,214 2023 23,573 5,286 2024 135,661 4,504 Total $ 303,977 $ 21,004 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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, 2021, 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, 2021 2020 Estimated liability, beginning of year $ 43,253 $ 30,256 Receipts 58,700 60,019 Estimated claims incurred (65,608) (44,369) Claim payments (20,113) (2,653) Estimated liability, end of year $ 16,232 $ 43,523 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, 2021 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, 2021 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, 2021, 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, 2021 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, 2021, 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, 2021, Otsego County property taxes were reduced by $11,317 under this program. Bagley Township Tax Abatements: For the year ended December 31, 2021, Otsego County property taxes were reduced by $7,294 under this program. Corwith Township Tax Abatements: For the year ended December 31, 2021, Otsego County property taxes were reduced by $1,422 under this program. Livingston Township Tax Abatements: For the year ended December 31, 2021, Otsego County property taxes were reduced by $1,221 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, 2021, Otsego County property taxes were reduced by $3,234 under this program. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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, 2021, 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, 2021 46 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 01 – Gnrl Non Union: Closed to new hires 2020 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 2020 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 2020 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 2020 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, 2021 47 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 13 – Elected/Appt Spvs: Closed to new hires 2020 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 2020 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 2020 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 2020 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, 2021 48 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 20 – Sheriff Union: Closed to new hires, linked to Division HG 20120 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 2020 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 2020 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 2020 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, 2021 49 HB – General Non Union after 1/1/09: Closed to new hires 2020 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 2020 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 2020 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 2020 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, 2021 50 HF – Bus hired af 1/1/2011: Closed to new hires 2020 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 2020 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, 2020, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 113 Inactive employees entitled to but not yet receiving benefits 61 Active employees 93 267 Funding Policy The obligation to contribute to and maintain the system for these employees was established by negotiation with the County’s competitive bargaining unit and personnel policy, which require employees to contribute to the plan. The County is required to contribute on a basis at an actuarially determined rate for each division follows: 01 $ 10,975 21 $ 1,482 07 $ 291 70 $ 0 10 $ 2,178 HA $ 0 11 $ 5,113 HB $ 2,178 13 $ 30,256 HC $ 4,242 14 $ 14,487 HD $ 1,670 16 $ 4,740 HE $ 633 17 $ 1,437 HF $ 0 20 $ 10,705 HG $ 1,437 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 51 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Net Pension Liability The County’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 3.00% Salary increases 3.50% in the long-term Investment rate of return 7.35%, 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% 5.25% Global Fixed Income 20.00% 1.25% Private Investment 20.00% 7.25% 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, 2021 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, 2019 24,509,942 $ 16,001,747 $ 8,508,195 $ Service cost 313,918 - 313,918 Interest on total pension liability 1,819,682 - 1,819,682 Changes in benefits (196,491) - (196,491) Difference between expected and actual experience 378,255 - 378,255 Changes in assumptions 1,002,405 - 1,002,405 Employer contributions - 1,329,086 (1,329,086) Employee contributions - 45,526 (45,526) Net investment income - 2,073,805 (2,073,805) Benefit payments, including employee refunds (1,447,430) (1,447,430) - Other (12,291) - (12,291) Administrative expense - (32,315) 32,315 Net changes 1,858,048 1,968,672 (110,624) Balances as of December 31, 2020 26,367,990 $ 17,970,419 $ 8,397,571 $ 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 $11,199,094 $8,397,571 $5,616,579 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, 2021 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, 2021, the County recognized pension expense of $969,874. At December 31, 2021, 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 256,893 $ 34,355 $ Changes in assumptions 1,117,326 - Net difference between projected and actual earnings on pension plan investments - 631,571 Contributions subsequent to the measurement date 1,336,715 - Total 2,710,934 $ 665,926 $ 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: 2022 $ 428,101 2023 570,424 2024 (118,086) 2025 (172,146) 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, 2021 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 2020 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 2020 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 2020 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, 2021 55 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Employees Covered by Benefit Terms At December 31, 2021, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 48 Inactive employees entitled to but not yet receiving benefits 10 Active employees 32 90 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 2021 of $17,893 of nonunion payroll and $30,622 of general employees. Net Pension Liability The Road Commission’s net pension liability was measured as of December 31, 2021, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2020 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50 % Salary increases 3.50 % Investment rate of return 7.35 net of interest and administrative expense including inflation Mortality rates used were based on the Pub 2010 General employees and health retirees, head-count weighted, with MP-2019 improvement scale. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of January 1, 2014, through December 31, 2018. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Global Equity 60.00% 5.25% Global Fixed Income 20.00% 1.25% Private Investments 20.00% 7.25% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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, 2020 13,590,093 $ 10,139,010 $ 3,451,083 $ Service cost 205,702 - 205,702 Interest on total pension liability 1,008,462 - 1,008,462 Changes in benefits (13,367) - (13,367) Difference between expected and actual experience 94,043 - 94,043 Changes in assumptions 278,276 - 278,276 Employer contributions - 676,103 (676,103) Employee contributions - 121,826 (121,826) Net investment income - 1,425,633 (1,425,633) Benefit payments, including employee refunds (847,422) (847,422) - Administrative expense - (16,377) 16,377 Other changes (50,705) - (50,705) Net changes 674,989 1,359,763 (684,774) Balances as of December 31, 2021 14,265,082 $ 11,498,773 $ 2,766,309 $ 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 $4,321,476 $2,766,309 $1,448,058 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, 2021 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, 2021, the Road Commission recognized pension expense of $206,020. At December 31, 2021, 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 - $ 15,453 $ Difference between expected and actual experience 68,178 - Changes in assumptions 313,006 - Net difference between projected and actual earnings on pension plan investments - 852,252 Total 381,184 $ 867,705 $ 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: 2022 $ 96,788 2023 (206,498) 2024 (240,243 ) 2025 (136,568 ) 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, 2021 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 2021, the County contributed $67,380 to the plan. Employees Covered by Benefit Terms As of December 31, 2020, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 13 Inactive employees entitled to but not yet receiving benefits - Active employees 2 Total participants covered by OPEB Plan 15 Total OPEB Liability and Trust Assets - The County’s total OPEB liability of $1,011,280 was measured as of December 31, 2021, and was determined by an actuarial valuation as of that date. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 59 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) As of December 31, 2021, there was $0 in assets in the County’s OPEB trust as the County is treating this a pay-as- you-go plan. Actuarial assumptions and other inputs - The total OPEB liability was determined by an actuarial valuation as of December 31, 2021 and the following actuarial assumptions, applies to all periods included in the measurement: Inflation Included in investment rate Salary Increases 3.0% Investment rate of return NA 20-year Aa Municipal bond rate 2.25% Mortality Public General and Police, Headcount-weighted 2010 Employee and Healthy Retiree with MP-2021 Mortality Improvement Scale Discount Rate - The discount rate used to measure the total OPEB liability was 2.25%. 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, 2021 was 1.93%. Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Balances at December 31, 2020 1,339,595 $ - $ 1,339,595 $ Service cost 5,020 - 5,020 Interest 25,301 - 25,301 Change in plan term - - - Difference between expected and actual experience (232,040) - (232,040) Assumptions (59,216) - (59,216) Employer contributions - 67,380 (67,380) Net investment income - - - Benfit Payments (67,380) (67,380) - Administrative expense - - - Net changes (328,315) - (328,315) Balances as of December 31, 2021 1,011,280 $ - $ 1,011,280 $ Increases (Decreases) ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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 $1,116,739 $1,011,280 $921,910 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $921,504 $1,011,280 $1,115,409 OPEB Expense - Components of County’s OPEB Expense for the fiscal year ending December 31, 2021 are as follows: 12/31/2021 Service Cost $ 5,020 Interest on Total OPEB Liability 25,301 Experience (Gains)/Losses (232,040 ) Changes of Assumptions (59,216) Changes in Plan Terms - Other Changes in Fiduciary Net Position - Total OPEB Expense $ (260,935) 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: 2022 $ - 2023 - 2024 - 2025 - 2026 - ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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 2021, the Commission contributed $534,715 to the plan. Employees Covered by Benefit Terms As of December 31, 2021, 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 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, head with MP-2021 mortality improvement. 20 year Aa Municipality Bond rate 2.25% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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 7.0%. The projection of cash flows used to determine the discount rate assumed that Employer contributions of $800,000 will be made to the trust. Based on those assumptions, the retirement plan’s fiduciary net position was not projected to be sufficient to make all projected future benefit payments of current plan members. For projected benefits that are covered by projected assets, the long-term expected rate was used to discount the projected benefits. From the year that benefit payments were not projected to be covered by the projected assets (the “depletion date”), projected benefits were discounted at a discount rate reflecting the 20-year AA/Aa tax-exempt bond yield. A single equivalent discount rate that yields the same present value of benefits is calculated. This discount rate is used to determine the Total OPEB Liability. Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balances at December 31, 2020 4,516,347 $ 2,152,187 $ 2,364,160 $ Change in assumptions 64,745 - 64,745 Service cost 173,392 - 173,392 Interest (69,503) - (69,503) Experience (Gains)/Losses (969,366) - (969,366) Contributions to OPEB Trust - 333,340 (333,340) Contributions paid from operations - 201,375 (201,375) Net investment income - 253,378 (253,378) Benefit payments (201,375) (201,375) - Administrative expense - (12,517) 12,517 Net changes (1,002,107) 574,201 (1,576,308) Balances as December 31, 2021 3,514,240 $ 2,726,388 $ 787,852 $ ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2021 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 $ 1,023,385 $ 787,852 $ 578,277 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $ 543,872 $ 787,852 $ 1,059,814 OPEB Expense – Components of Road Commission’s OPEB Expense for the fiscal year ending December 31, 2021 are as follows: Changes in Assumptions $ 64,745 Service Cost 173,392 Interest on Total OPEB Liability (111,457) Experience Losses (962,378) Projected Earnings on OPEB Plan Investments (161,882) Investment Earnings (Gains)/Losses (51,461) Administrative Expenses 12,517 Total OPEB Expense $ (1,036,524) Deferred Outflows and Inflows of Resources Related to OPEB Plan Deferred Outflows Deferred Inflows of Resources of Resources Investment Earnings (Gains)/Losses $ - $ 176,270 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: 2022 (51,462) $ 2023 (60,943) 2024 (45,565) 2025 (18,300) ---PAGE BREAK--- Required Supplementary Information ---PAGE BREAK--- 2020 2019 2018 2017 2016 2015 2014 Total pension liability Service cost 313,918 $ 388,399 $ 370,158 $ 336,412 $ 349,718 $ 348,000 $ 338,932 $ Interest 1,819,682 1,749,783 1,767,809 1,719,681 1,696,843 1,543,901 1,479,439 Changes in benefits (196,491) (386,275) 391 (91,145) (10,695) - - Difference between expected and actual experience 378,255 (65,132) 11,745 (48,394) (503,144) 724,207 - Changes in assumptions 1,002,405 746,482 - - - 1,036,885 - Benefit payments, including refund of member contributions (1,447,430) (1,384,939) (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Other changes (12,291) 80,821 14,309 (54) - - - Net change in total pension liability 1,858,048 1,129,139 772,162 645,120 322,971 2,548,216 840,003 Total pension liability - beginning 24,509,942 23,380,803 22,608,641 21,963,521 21,640,550 19,092,334 18,252,331 Total pension liability - ending 26,367,990 $ 24,509,942 $ 23,380,803 $ 22,608,641 $ 21,963,521 $ 21,640,550 $ 19,092,334 $ Plan fiduciary net position Contributions - employer 1,329,086 $ 1,062,073 $ 1,128,063 $ 1,096,794 $ 865,641 $ 693,476 $ 640,433 $ Contributions - employee 45,526 49,203 46,517 30,679 7,937 5,905 3,630 Net investment income 2,073,805 1,942,926 (598,116) 1,806,557 1,422,497 (195,083) 800,044 Benefit payments, including refunds of member contributions (1,447,430) (1,384,939) (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Administrative expense (32,315) (33,464) (29,330) (28,580) (28,053) (28,591) (29,357) Other changes - - (12,290) (57) - - - Net change in plan fiduciary net position 1,968,672 1,635,799 (857,406) 1,634,013 1,058,271 (629,070) 436,382 Plan fiduciary net position - beginning 16,001,747 14,365,948 15,223,354 13,589,341 12,531,070 13,160,140 12,723,758 Plan fiduciary net position - ending 17,970,419 $ 16,001,747 $ 14,365,948 $ 15,223,354 $ 13,589,341 $ 12,531,070 $ 13,160,140 $ County's net pension liability - ending 8,397,571 $ 8,508,195 $ 9,014,855 $ 7,385,287 $ 8,374,180 $ 9,109,480 $ 5,932,194 $ Plan fiduciary net position as a percentage of the total pension liability 68.2% 65.3% 61.4% 67.3% 61.9% 57.9% 68.9% Covered - employee payroll 5,065,928 $ 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 165.8% 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, 2021 For MERS Years Ending 12/31 Employee Retirement and Benefit Systems 64 ---PAGE BREAK--- 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011 Actuarially determined contribution 1,047,430 $ 959,573 $ 878,063 $ 934,199 $ 856,396 $ 715,641 $ 693,477 $ 640,433 $ 727,962 $ 705,702 $ Contributions in relation to the actuarially determined contribution (1,447,430) (1,062,073) (1,128,063) (1,184,199) (1,106,396) (865,641) (693,477) (640,433) (727,962) (705,702) Contribution deficiency (excess) (400,000) $ (102,500) $ (250,000) $ (250,000) $ (250,000) $ (150,000) $ - $ - $ - $ - $ Covered - employee payroll 5,146,779 $ 5,065,928 $ 4,741,881 $ 4,401,566 $ 4,575,021 $ 4,547,735 $ 4,390,047 $ 4,188,926 $ 4,080,889 $ 4,014,917 $ Contributions as a percentage of covered-employee payroll 28% 21% 24% 27% 24% 19% 16% 15% 18% 18% Notes to Schedule: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality 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 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, 2021 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 For MERS Years Ending 12/31 65 ---PAGE BREAK--- 2021 2020 2019 2018 Total OPEB Liability - Beginning of Year 1,339,595 $ 1,220,934 $ 1,930,701 $ 1,848,952 $ Service cost 5,020 4,303 48,184 46,710 Interest 25,301 38,728 60,282 58,758 Change in Plan Term - - (510,178) - Assumption changes and differences between actual and expected experience (291,256) 150,130 (236,836) 48,727 Benefit payments (67,380) (74,500) (71,219) (72,446) OPEB Liability - End of Year 1,011,280 1,339,595 1,220,934 1,930,701 Plan fiduciary net position Contributions - employer 67,380 74,500 71,219 72,446 Net investment income - - - - Benefits payments, including refunds of member contributions (67,380) (74,500) (71,219) (72,446) Administrative expense - - - - Net change in plan fiduciary net position - - - - Plan fiduciary net position - Beginning of Year - - - - Plan fiduciary net position - End of Year - - - - Net OPEB liability - End of Year 1,011,280 $ 1,339,595 $ 1,220,934 $ 1,930,701 $ Plan fiduciary net position as a percentage of the total OPEB liability 42.9% 42.9% 42.9% 42.9% Covered Payroll 81,566 $ 59,734 $ 1,259,742 $ 4,401,556 $ Net OPEB liability as a percentage of covered payroll 1239.8% 2242.6% 33.1% 33.1% Schedule of Employer Contributions Actuarially determined employer contribution 90,008 88,495 155,657 155,520 Employer contribution (67,380) (74,500) (71,219) (72,446) Contribution deficiency/(excess) 22,628 13,995 84,438 83,074 Covered Payroll 81,566 $ 59,734 $ 4,401,556 $ 4,401,556 $ ADC as percentage of covered payroll 110.3% 148.1% 11.2% 11.2% Notes to Schedule: Actuarial cost method Entry age normal Discount rate 2.25%, 20 year Aa Municipal Band Rate Salary increases 3.0%, average Investment rate of return NA (pay-as-you-go plan) Healthcare cost trend rate 8.25% in 2020 graded down .25% per year to 4.5% Mortality rate Police: PublicSafety 2010 Employee and Heathly Retiree, Headcount weighted with MP-2021 Improvement Scale County of Otsego, Michigan Required Supplementary Information Schedule of Changes in OPEB Liability and Related Ratios Year Ended December 31, 2021 Actuarially determined contribution rates are calculated as of December 31, 2021 Methods and assumptions used to determine contribution rates: Employee Retirement and Benefit Systems 66 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 5,545,293 $ 5,545,293 $ 5,554,856 $ 9,563 $ Licenses and Permits 47,200 47,200 48,988 1,788 Federal Sources 101,894 111,794 90,452 (21,342) State Sources 1,551,905 1,551,905 1,361,676 (190,229) Local Contributions 20,500 28,600 36,134 7,534 Charges for Services 1,048,055 1,153,665 1,194,857 41,192 Fines and Forfeits 12,025 12,025 13,640 1,615 Interest and Rentals 169,833 169,833 95,218 (74,615) Other Revenues 597,053 591,882 568,154 (23,728) TOTAL REVENUES 9,093,758 9,212,197 8,963,975 (248,222) EXPENDITURES: Legislative: Board of Commissioners 222,942 218,242 206,570 11,672 Judicial: Circuit Court 1,123,128 1,133,028 1,006,271 126,757 Lien Fees 10,500 18,600 16,133 2,467 Drug Court 181,874 153,741 117,898 35,843 RDSS Transport 15,000 15,000 1,523 13,477 District Court 5,000 14,876 14,376 500 Jury Commission 43,900 18,718 18,716 2 Probate Court 204,587 204,587 200,489 4,098 Probation/Parole 1,500 1,500 1,142 358 Prosecuting Attorney 597,918 532,264 514,769 17,495 Family Counseling 3,500 3,500 968 2,532 Total Judicial 2,186,907 2,095,814 1,892,285 203,529 General Government: Administrative Services 261,245 261,245 261,245 - Building and Grounds 324,240 324,240 324,240 - Clerk and Register of Deeds 387,342 400,127 370,428 29,699 Audit Services 15,000 15,000 14,385 615 IT Department 100,850 95,895 90,576 5,319 Equalization 197,496 197,496 190,262 7,234 Treasurer 140,888 143,431 142,083 1,348 Cooperative Extension 62,695 60,195 59,233 962 Elections 20,300 47,119 47,119 - Legal Defense 40,000 60,000 56,055 3,945 Human Resources 106,919 106,919 106,919 - Surveyor 200 200 200 - Soil Conservation 4,000 4,000 4,000 - Survey and Remonumentation 35,586 35,586 35,586 - Total General Government 1,696,761 1,751,453 1,702,331 49,122 Public Safety: Sheriff 1,331,379 1,421,933 1,316,065 105,868 Civil Division 95,448 95,448 87,882 7,566 Justice Training 3,000 3,000 1,200 1,800 Marine Safety 8,190 8,190 7,232 958 Safety Education 52,000 57,792 51,807 5,985 Snowmobile 10,200 10,200 5,927 4,273 Secondary Road Patrol 91,712 91,712 77,993 13,719 ORV 9,104 9,104 8,246 858 Jail 1,229,433 1,289,428 1,286,621 2,807 Emergency Services 40,000 40,000 40,000 - Total Public Safety 2,870,466 3,026,807 2,882,973 143,834 For the Year Ended December 31, 2021 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund 67 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) For the Year Ended December 31, 2021 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund Public Works: Drains 6,000 6,000 4,390 1,610 Health And Welfare: Communicable Diseases 500 500 500 - Medical Examiner 87,000 85,000 56,568 28,432 District Health 251,102 251,102 251,102 - Mental Health 94,003 94,003 94,003 - Soldiers and Sailors Relief 5,000 6,000 2,659 3,341 Veterans' Burial 6,550 6,550 4,135 2,415 Veterans' Affairs 176,064 176,064 172,053 4,011 Substance Abuse 91,039 91,039 86,909 4,130 Total Health and Welfare 711,258 710,258 667,929 42,329 Community and Economic Development: Planning and Zoning 117,686 118,841 118,340 501 Capital Outlay 14,000 7,624 - 7,624 Other Expenditures: Appropriations 21,500 21,500 21,500 - Bonds and Insurance 229,780 229,780 229,407 373 Retiree Insurance 59,800 59,800 53,979 5,821 Additional Pension Contribution 184,691 184,691 184,691 - Other 125,600 92,236 42,544 49,692 Total Other Expenditures 621,371 588,007 532,121 55,886 TOTAL EXPENDITURES 8,447,391 8,523,046 8,006,939 514,497 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 646,367 689,151 957,036 267,885 OTHER FINANCING SOURCES (USES): Transfers In 52,300 72,300 72,300 - Transfers Out (698,667) (761,451) (761,451) - Total Other Financing Sources (Uses) (646,367) (689,151) (689,151) - NET CHANGE IN FUND BALANCES - $ - $ 267,885 267,885 $ FUND BALANCES BEGINNING OF YEAR 6,159,950 FUND BALANCES END OF YEAR 6,427,835 $ 68 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Federal Sources 97,500 $ 165,927 $ 54,801 $ (111,126) $ Local Sources 30,000 30,000 4,007 (25,993) Interest and Rentals 100 100 23 (77) Other Revenues 8,470 10,470 114,826 104,356 TOTAL REVENUES 136,070 206,497 173,657 (32,840) EXPENDITURES: Community and Economic Development 137,570 136,662 98,457 38,205 TOTAL EXPENDITURES 137,570 136,662 98,457 38,205 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (1,500) 69,835 75,200 5,365 OTHER FINANCING SOURCES (USES): Transfers In 99,780 99,780 163,953 64,173 Transfers Out (98,280) (169,615) (163,953) 5,662 Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES - $ - $ 75,200 75,200 $ FUND BALANCES BEGINNING OF YEAR 114,742 FUND BALANCES END OF YEAR 189,942 $ For the Year Ended December 31, 2021 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Housing Commission Fund 69 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 536,452 $ 536,452 $ 525,731 $ (10,721) $ Federal Sources 9,250 9,250 13,250 4,000 State Sources 23,805 23,805 35,171 11,366 Fines and Forfeits 133,424 133,424 175,722 42,298 Interest and Rentals 16,200 16,200 12,287 (3,913) Other Revenues 19,000 19,000 44,262 25,262 TOTAL REVENUES 738,131 738,131 806,423 68,292 EXPENDITURES: Recreation & Culture 776,780 776,780 672,972 103,808 TOTAL EXPENDITURES 776,780 776,780 672,972 103,808 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (38,649) (38,649) 133,451 172,100 OTHER FINANCING SOURCES (USES): Transfers In 38,649 38,649 - (38,649) Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES - $ - $ 133,451 133,451 $ FUND BALANCES BEGINNING OF YEAR 795,755 FUND BALANCES END OF YEAR 929,206 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Library For the Year Ended December 31, 2021 70 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Interest and Rentals - 3,800 12,857 9,057 TOTAL REVENUES - 3,800 12,857 9,057 EXPENDITURES: General Government - 3,800 3,800 - TOTAL EXPENDITURES - 3,800 3,800 - NET CHANGE IN FUND BALANCES - $ - $ 9,057 9,057 $ FUND BALANCES BEGINNING OF YEAR - FUND BALANCES END OF YEAR 9,057 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule American Rescue Plan Act (ARPA ) Fund For the Year Ended December 31, 2021 71 ---PAGE BREAK--- Supplementary Information ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals ASSETS: Cash and Equivalents 1,997,719 $ 710,569 $ 29,991 $ 6,024 $ 2,744,303 $ Investments 3,304,102 314,513 - - 3,618,615 Receivables: Taxes 319,915 - - - 319,915 Accounts 25,566 - - - 25,566 Due from Other Governmental Units 180,508 - - - 180,508 Inventories 11,984 - - - 11,984 Prepaid Expense 39,701 - - - 39,701 TOTAL ASSETS 5,879,495 $ 1,025,082 $ 29,991 $ 6,024 $ 6,940,592 $ LIABILITIES: Accounts Payable 220,908 $ - $ 5,173 $ - $ 226,081 $ Accrued Liabilities 217,348 - - - 217,348 Unearned Revenue 69,328 - - - 69,328 TOTAL LIABILITIES 507,584 - 5,173 - 512,757 FUND BALANCES: Nonspendable 51,685 - - - 51,685 Assigned - 1,025,082 24,818 6,024 1,055,924 Unassigned 5,320,226 - - - 5,320,226 TOTAL FUND BALANCES 5,371,911 1,025,082 24,818 6,024 6,427,835 TOTAL LIABILITIES AND FUND BALANCES 5,879,495 $ 1,025,082 $ 29,991 $ 6,024 $ 6,940,592 $ County of Otsego, Michigan Combining Balance Sheet General Fund December 31, 2021 72 ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals REVENUES: Taxes and Penalties 5,554,856 $ - $ - $ - $ 5,554,856 $ Licenses and Permits 48,988 - - - 48,988 Federal Sources 90,452 - - - 90,452 State Sources 1,361,676 - - - 1,361,676 Local Sources 36,134 - - - 36,134 Charges for Services 1,194,857 - - - 1,194,857 Interest and Rentals 88,287 6,912 19 - 95,218 Fines and Forfeitures 13,640 - - - 13,640 Other Revenue 567,154 - - 1,000 568,154 TOTAL REVENUES 8,956,044 6,912 19 1,000 8,963,975 EXPENDITURES: Legislative 206,570 - - - 206,570 Judicial 1,892,285 - - - 1,892,285 General Government 1,646,277 - 56,054 - 1,702,331 Public Safety 2,882,973 - - - 2,882,973 Public Works 4,390 - - - 4,390 Health and Welfare 665,270 - - 2,659 667,929 Community/Economic Development 118,340 - - - 118,340 Other Expenditures 532,121 - - - 532,121 TOTAL EXPENDITURES 7,948,226 - 56,054 2,659 8,006,939 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,007,818 6,912 (56,035) (1,659) 957,036 OTHER FINANCING SOURCES (USES): Transfers In 12,300 - 60,000 - 72,300 Transfers Out (761,451) - - - (761,451) Total Other Financing Sources (Uses) (749,151) - 60,000 - (689,151) NET CHANGE IN FUND BALANCES 258,667 6,912 3,965 (1,659) 267,885 FUND BALANCES BEGINNING OF YEAR 5,113,244 1,018,170 20,853 7,683 6,159,950 FUND BALANCES END OF YEAR 5,371,911 $ 1,025,082 $ 24,818 $ 6,024 $ 6,427,835 $ County of Otsego, Michigan Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - General Fund For the Year Ended December 31, 2021 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 3,950 $ 321,771 $ 168,743 $ 346,466 $ 99,391 $ 8,213 $ 103,096 $ 112,323 $ Investments - - - - 300,000 - 187,058 - Taxes Receivable - - 4,383 - 410,830 - 341,899 - Accounts Receivable - - - 80 - - 350 - Advance to Component Units - - - - - - - - Due from Other Governmental Units 9,425 - - 68,548 6,513 - - - Prepaid Items 104 - - 10,584 311 - - - TOTAL ASSETS 13,479 $ 321,771 $ 173,126 $ 425,678 $ 817,045 $ 8,213 $ 632,403 $ 112,323 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ - $ - $ Accounts Payable 3,092 8,180 - 6,531 7,958 - 23,712 - Accrued Liabilities 3,000 2,151 - 25,992 6,175 - - - Unearned Revenues - 210,000 - - - - - - TOTAL LIABILITIES 6,092 220,331 - 32,523 14,133 - 23,712 - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - 4,383 - 410,830 - 341,899 - TOTAL DEFERRED INFLOWS OF RESOURCES - - 4,383 - 410,830 - 341,899 - FUND BALANCES: Nonspendable 104 - - 10,584 311 - - - Restricted - 101,440 168,743 - 391,771 8,213 266,792 112,323 Committed 7,283 - - 382,571 - - - - TOTAL FUND BALANCES 7,387 101,440 168,743 393,155 392,082 8,213 266,792 112,323 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 13,479 $ 321,771 $ 173,126 $ 425,678 $ 817,045 $ 8,213 $ 632,403 $ 112,323 $ Special Revenue Funds County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds December 31, 2021 74 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Department Redevelopment Building Automation 911 Pistol Officers Law of Human Authority Department Fund Funds Licensing Training Library Services ASSETS: Cash and Equivalents 289,160 $ 858,723 $ 140,075 $ 196,914 $ 46,164 $ 37,127 $ 20,740 $ 12,527 $ Investments 60,735 304,359 - - - - - 5,000 Taxes Receivable - - - - - - - - Accounts Receivable - 2,944 - 121,506 504 - - - Advance to Component Units - - - - - - - - Due from Other Governmental Units - - - - - - - - Prepaid Items - 830 - 11,286 - - - - TOTAL ASSETS 349,895 $ 1,166,856 $ 140,075 $ 329,706 $ 46,668 $ 37,127 $ 20,740 $ 17,527 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ - $ - $ Accounts Payable - 12,234 4,929 1,763 - - 322 99 Accrued Liabilities - 3,363 - - - - - - Unearned Revenues - - - - - - - - TOTAL LIABILITIES - 15,597 4,929 1,763 - - 322 99 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - - - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - - - FUND BALANCES: Nonspendable - 830 - 11,286 - - - - Restricted 349,895 1,150,429 135,146 316,657 46,668 37,127 20,418 17,428 Committed - - - - - - - - TOTAL FUND BALANCES 349,895 1,151,259 135,146 327,943 46,668 37,127 20,418 17,428 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 349,895 $ 1,166,856 $ 140,075 $ 329,706 $ 46,668 $ 37,127 $ 20,740 $ 17,527 $ County of Otsego, Michigan Special Revenue Funds Combining Balance Sheet Nonmajor Governmental Funds December 31, 2021 75 ---PAGE BREAK--- Debt Service Fund Child Iron Belle Michigan Bradford Care Trail Indigent Equipment Lake Park & Technology Debt Probate Maintenance Defense Revolving Dam Recreation Funds Service ASSETS: Cash and Equivalents 142,685 $ 11,051 $ 93,112 $ 970 $ 20,351 $ 113,183 $ 1,475 $ - $ Investments - - - - - 510,774 - - Taxes Receivable - - - - - 342,234 - - Accounts Receivable - - - 43,000 - 392 - - Advance to Component Units - - - - - - - - Due from Other Governmental Units 7,960 2,500 - - - - - - Prepaid Items 2,263 - 13,007 - - 311 - - TOTAL ASSETS 152,908 $ 13,551 $ 106,119 $ 43,970 $ 20,351 $ 966,894 $ 1,475 $ - $ LIABILITIES: Due to Other Funds - $ - $ - $ 7,000 $ - $ - $ - $ - $ Accounts Payable 6,666 6,770 7,856 26,619 2,100 18,493 - - Accrued Liabilities 9,965 - - - - 6,005 - - Unearned Revenues - - - - - 139,491 - - TOTAL LIABILITIES 16,631 6,770 7,856 33,619 2,100 163,989 - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - 343,534 - - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - 343,534 - - FUND BALANCES: Nonspendable 2,263 - 13,007 - - 311 - - Restricted - 6,781 85,256 - 18,251 - - - Committed 134,014 - - 10,351 - 459,060 1,475 - TOTAL FUND BALANCES 136,277 6,781 98,263 10,351 18,251 459,371 1,475 - TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 152,908 $ 13,551 $ 106,119 $ 43,970 $ 20,351 $ 966,894 $ 1,475 $ - $ December 31, 2021 County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds Special Revenue 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 19,633 $ 1,485,083 $ 130,153 $ 264,933 $ 21,193 $ 227 $ 130,064 $ 806,464 $ Investments - 188,032 - - - - 498,176 25,951 Taxes Receivable - - - - - - 750 - Accounts Receivable - 25,358 - 101,055 - - - Advance to Component Units - 189,872 - - - - - - Due from Other Governmental Units - - - - - - - - Prepaid Items - - - - - - - - TOTAL ASSETS 19,633 $ 1,888,345 $ 130,153 $ 264,933 $ 122,248 $ 227 $ 628,990 $ 832,415 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ - $ - $ Accounts Payable - - - - 101,055 - - - Accrued Liabilities - - - - - - - - Unearned Revenues - - - - - - - - TOTAL LIABILITIES - - - - 101,055 - - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - 750 - TOTAL DEFERRED INFLOWS OF RESOURCES - - - - - - 750 - FUND BALANCES: Nonspendable - - - - - - - Restricted - 1,888,345 - - - - 628,240 832,415 Committed 19,633 - 130,153 264,933 21,193 227 - TOTAL FUND BALANCES 19,633 1,888,345 130,153 264,933 21,193 227 628,240 832,415 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 19,633 $ 1,888,345 $ 130,153 $ 264,933 $ 122,248 $ 227 $ 628,990 $ 832,415 $ Capital Project Funds Combining Balance Sheet Nonmajor Governmental Funds December 31, 2021 County of Otsego, Michigan 77 ---PAGE BREAK--- EMS Building Library Capital Capital Capital Project Projects Trail Head Capital Facilities Project Sinking Bond Fund Capital Project Projects Planning Fund Fund Fund Total ASSETS: Cash and Equivalents 13,102 $ 86,846 $ 669,199 $ 1 $ 1,015 $ 346,738 $ 7,122,861 $ Investments - - - - 2,879 - 2,082,964 Taxes Receivable - - - - 93 - 1,100,189 Accounts Receivable - - - - - - 295,189 Advance to Component Units - - - - - - 189,872 Due from Other Governmental Units - - - - - - 94,946 Prepaid Items - - - - - - 38,696 TOTAL ASSETS 13,102 $ 86,846 $ 669,199 $ 1 $ 3,987 $ 346,738 $ 10,924,717 $ LIABILITIES: Due to Other Funds - $ - $ - $ - $ - $ - $ 7,000 $ Accounts Payable - 450 5,993 - - - 244,822 Accrued Liabilities - - - - - - 56,651 Unearned Revenues - - - - - - 349,491 TOTAL LIABILITIES - 450 5,993 - - - 657,964 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - 93 - 1,101,489 TOTAL DEFERRED INFLOWS OF RESOURCES - - - - 93 - 1,101,489 FUND BALANCES: Nonspendable - - - - - - 38,696 Restricted - 86,396 - - - - 6,668,734 Committed 13,102 - 663,206 1 3,894 346,738 2,457,834 TOTAL FUND BALANCES 13,102 86,396 663,206 1 3,894 346,738 9,165,264 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 13,102 $ 86,846 $ 669,199 $ 1 $ 3,987 $ 346,738 $ 10,924,717 $ Capital Project Funds County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds December 31, 2021 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 - $ - $ 191 $ - $ 399,398 $ - $ 332,819 $ - $ Federal Sources 5,188 - - 287,697 - - - - State Sources - - - 42,410 9,600 - - - Local Sources - - - - - - - - Charges for Services 120,855 - - 37,972 39,435 - - - Fines and Forfeits - - - - 95 - - - Interest and Rentals - - - - 13,748 5 2,788 47 Other Revenues 91 265,916 - - 31,809 - 3,102 - TOTAL REVENUES 126,134 265,916 191 368,079 494,085 5 338,709 47 EXPENDITURES: Judicial - - - 454,567 - - - - General Government - - 1 - - - - - Public Safety 189,848 - - - 476,923 1 - - Public Works - - - - - - 354,186 - Health And Welfare - - - - - - - 2,804 Recreation and Culture - 281,491 - - - - - - Capital Outlay - - - - 30,222 - - - Debt Service - - - - - - - - TOTAL EXPENDITURES 189,848 281,491 1 454,567 507,145 1 354,186 2,804 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (63,714) (15,575) 190 (86,488) (13,060) 4 (15,477) (2,757) OTHER FINANCING SOURCES (USES): Transfers In 52,000 - - 96,461 - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) 52,000 - - 96,461 - - - - NET CHANGE IN FUND BALANCES (11,714) (15,575) 190 9,973 (13,060) 4 (15,477) (2,757) FUND BALANCES BEGINNING OF YEAR 19,101 117,015 168,553 383,182 405,142 8,209 282,269 115,080 FUND BALANCES END OF YEAR 7,387 $ 101,440 $ 168,743 $ 393,155 $ 392,082 $ 8,213 $ 266,792 $ 112,323 $ County of Otsego, Michigan and Changes in Fund Balance Nonmajor Governmental Funds Special Revenue Funds For the Year Ended December 31, 2021 Combining Statement of Revenues, Expenditures, 79 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Department Redevelopment Building Automation 911 Pistol Officers Law of Human Authority Department Fund Funds Licensing Training Library Services REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ - $ - $ Federal Sources - - - - - - - - State Sources - - - 151,198 - - - - Local Sources - - - - - - - - Charges for Services - 678,971 47,310 518,195 11,896 8,451 - - Fines and Forfeits - - - - - - - - Interest and Rentals 1,250 5,486 - 42 - - - 35 Other Revenues - - - - - - 3,501 500 TOTAL REVENUES 1,250 684,457 47,310 669,435 11,896 8,451 3,501 535 EXPENDITURES: Judicial - - - - - - 3,486 - General Government - - 33,178 - - - - - Public Safety - 506,804 - 561,220 14,369 565 - - Public Works - - - - - - - - Health And Welfare - - - - - - - 3,283 Recreation and Culture - - - - - - - - Capital Outlay - - - - - - - - Debt Service - - - - - - - - TOTAL EXPENDITURES - 506,804 33,178 561,220 14,369 565 3,486 3,283 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,250 177,653 14,132 108,215 (2,473) 7,886 15 (2,748) OTHER FINANCING SOURCES (USES): Transfers In - - - - - - - 9,480 Transfers Out - (6,000) - (12,300) - - - - TOTAL OTHER FINANCING SOURCES (USES) - (6,000) - (12,300) - - - 9,480 NET CHANGE IN FUND BALANCES 1,250 171,653 14,132 95,915 (2,473) 7,886 15 6,732 FUND BALANCES BEGINNING OF YEAR 348,645 979,606 121,014 232,028 49,141 29,241 20,403 10,696 FUND BALANCES END OF YEAR 349,895 $ 1,151,259 $ 135,146 $ 327,943 $ 46,668 $ 37,127 $ 20,418 $ 17,428 $ Special Revenue Funds County of Otsego, Michigan Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2021 80 ---PAGE BREAK--- Debt Service Fund Child Iron Belle Michigan Bradford Care Trail Indigent Equipment Lake Park & Technology Debt Probate Maintenance Defense Revolving Dam Recreation Funds Service REVENUES: Taxes and Penalties - $ - $ - $ - $ 332,789 $ - $ - $ Federal Sources - - - 108,847 - - - - State Sources 39,381 - 115,015 - - - - - Local Sources - - - - - - - - Charges for Services - - - - - 280,867 1,475 - Fines and Forfeits - - - - - - - - Interest and Rentals - - 47 27 12 14,314 - - Other Revenues 20,674 10,000 - - - 27,411 - - TOTAL REVENUES 60,055 10,000 115,062 108,874 12 655,381 1,475 - EXPENDITURES: Judicial - - 256,228 - - - - - General Government - - - 224,374 - - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare 238,131 - - - - - - - Recreation and Culture - 8,270 - - 2,100 511,212 - - Capital Outlay - - - 6,890 - - - - Debt Service - - - - - - - 401,100 TOTAL EXPENDITURES 238,131 8,270 256,228 231,264 2,100 511,212 - 401,100 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (178,076) 1,730 (141,166) (122,390) (2,088) 144,169 1,475 (401,100) OTHER FINANCING SOURCES (USES): Transfers In 300,000 2,500 82,193 89,500 - 401,100 Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) 300,000 2,500 82,193 89,500 - - - 401,100 NET CHANGE IN FUND BALANCES 121,924 4,230 (58,973) (32,890) (2,088) 144,169 1,475 - FUND BALANCES BEGINNING OF YEAR 14,353 2,551 157,236 43,241 20,339 315,202 - - FUND BALANCES END OF YEAR 136,277 $ 6,781 $ 98,263 $ 10,351 $ 18,251 $ 459,371 $ 1,475 $ - $ For the Year Ended December 31, 2021 and Changes in Fund Balance County of Otsego, Michigan Combining Statement of Revenues, Expenditures, Nonmajor Governmental Funds Special Revenue Funds 81 ---PAGE BREAK--- Groen Nature Public Court Groen Preserve University Library Improvements Restoration Airport Capital Capital Building Center Capital Building Capital Project Building Construction Projects II Projects Maintenance Projects Fund REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ 678 $ - $ Federal Sources - - - - - - - - State Sources - - - - - - - - Local Sources - - - - - - - - Charges for Services - - 40,728 - - - - - Fines and Forfeits - - - - - - - - Interest and Rentals 1 18,761 - - 14 - 14,376 759 Other Revenues - - - - 535,501 - - - TOTAL REVENUES 1 18,761 40,728 - 535,515 - 15,054 759 EXPENDITURES: Judicial - - - - - - - - General Government - - - 26,175 - - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare - - - - - - - - Recreation and Culture - - - - - - 26,725 - Capital Outlay - - - - 535,500 - - - Debt Service - - - - - - - - TOTAL EXPENDITURES - - - 26,175 535,500 - 26,725 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1 18,761 40,728 (26,175) 15 - (11,671) 759 OTHER FINANCING SOURCES (USES): Transfers In - - - 50,000 - - - - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) - - - 50,000 - - - - NET CHANGE IN FUND BALANCES 1 18,761 40,728 23,825 15 - (11,671) 759 FUND BALANCES BEGINNING OF YEAR 19,632 1,869,584 89,425 241,108 21,178 227 639,911 831,656 FUND BALANCES END OF YEAR 19,633 $ 1,888,345 $ 130,153 $ 264,933 $ 21,193 $ 227 $ 628,240 $ 832,415 $ Capital Project Funds County of Otsego, Michigan Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2021 82 ---PAGE BREAK--- EMS Building Library Capital Capital Capital Projects Trail Head Capital Facilities Project Project Bond Fund Capital Projects Projects Planning Fund Fund Sinking Fund Total REVENUES: Taxes and Penalties - $ - $ - $ - $ 35 $ - $ 1,065,910 $ Federal Sources - 298,317 117,532 - - - 817,581 State Sources - - - - - - 357,604 Local Sources - 15,000 - - - - 15,000 Charges for Services - - - - - - 1,786,155 Fines and Forfeits - - - - - - 95 Interest and Rentals - 46 - - 26 25 71,809 Other Revenues - - - - - - 898,505 TOTAL REVENUES - 313,363 117,532 - 61 25 5,012,659 EXPENDITURES: Judicial - - 169,245 - - - 883,526 General Government - - - - - - 283,728 Public Safety - - - - - - 1,749,730 Public Works - - - 3,754 - - 357,940 Health And Welfare - - - - - - 244,218 Recreation and Culture - 304,123 - - - - 1,133,921 Capital Outlay - - 11,216 - - 1 583,829 Debt Service - - - - - - 401,100 TOTAL EXPENDITURES - 304,123 180,461 3,754 - 1 5,637,992 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) - 9,240 (62,929) (3,754) 61 24 (625,333) OTHER FINANCING SOURCES (USES): Transfers In 13,101 - 5,000 1,903 - 142,784 1,246,022 Transfers Out - - - - - - (18,300) TOTAL OTHER FINANCING SOURCES (USES) 13,101 - 5,000 1,903 - 142,784 1,227,722 NET CHANGE IN FUND BALANCES 13,101 9,240 (57,929) (1,851) 61 142,808 602,389 FUND BALANCES BEGINNING OF YEAR 1 77,156 721,135 1,852 3,833 203,930 8,562,875 FUND BALANCES END OF YEAR 13,102 $ 86,396 $ 663,206 $ 1 $ 3,894 $ 346,738 $ 9,165,264 $ Capital Project Funds County of Otsego, Michigan Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2021 83 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total ASSETS: Cash and Equivalents 81,118 $ 187,873 $ 115,453 $ 384,444 $ Investments - - 170,261 170,261 Accounts Receivable 8,294 41 1,584 9,919 Prepaid Items 104 605 81,234 81,943 TOTAL ASSETS 89,516 $ 188,519 $ 368,532 $ 646,567 $ LIABILITIES: Accounts Payable 37,178 $ 313 $ 1,444 $ 38,935 $ Accrued Liabilities - 9,497 - 9,497 TOTAL LIABILITIES 37,178 9,810 1,444 48,432 NET POSITION: Unrestricted 52,338 178,709 367,088 598,135 TOTAL NET POSITION 52,338 178,709 367,088 598,135 TOTAL LIABILITIES AND NET POSITION 89,516 $ 188,519 $ 368,532 $ 646,567 $ County of Otsego, Michigan Combining Statement of Net Position Internal Service Funds December 31, 2021 84 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total OPERATING REVENUES: Charges for Services 478,001 $ 681,529 $ 1,207,146 $ 2,366,676 $ TOTAL OPERATING REVENUES 478,001 681,529 1,207,146 2,366,676 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 145,593 632,960 1,172,780 1,951,333 Contractual Services 64,040 - - 64,040 Materials and Supplies 22,426 5,497 2,736 30,659 Equipment Repair and Maintenance 38,774 650 - 39,424 Utilities 212,737 933 - 213,670 Other 4,291 15,142 - 19,433 TOTAL OPERATING EXPENSES 487,861 655,182 1,175,516 2,318,559 OPERATING INCOME (LOSS) (9,860) 26,347 31,630 48,117 Non Operating Revenues (Expenses): Interest Earnings - - 582 582 Federal - 7,500 - 7,500 Other - 41 - 41 Total Non Operating Revenues (Expenses): - 7,541 582 8,123 INCOME (LOSS) BEFORE TRANSFERS (9,860) 33,888 32,212 56,240 Operating Transfers In(Out) (2,500) - - (2,500) Changes in Net Position (12,360) 33,888 32,212 53,740 Net Position Beginning of Year 64,698 144,821 334,876 544,395 Net Position End of Year 52,338 $ 178,709 $ 367,088 $ 598,135 $ County of Otsego, Michigan Combining Statement of Revenues, Expenses, and Changes in Net Position - Internal Service Funds For the Year Ended December 31, 2021 85 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Totals CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 479,866 $ 681,786 $ 1,207,519 $ 2,369,171 $ Payments to Suppliers (324,643) (22,351) - (346,994) Payments to Employees for Services and Benefits (145,593) (627,804) (1,187,409) (1,960,806) Net Cash Provided (Used) by Operating Activities 9,630 31,631 20,110 61,371 CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Other Receipts - 7,541 - 7,541 Operating Transfers In(Out) (2,500) - - (2,500) Net Cash Provided (Used) by Noncapital and Related Financing Activities (2,500) 7,541 - 5,041 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - 582 582 Net Sale or (Purchase) of Investments - - (10,522) (10,522) Net Cash Provided (Used) by Investing Activities - - (9,940) (9,940) Net Increase (Decrease) in Cash and Equivalents 7,130 39,172 10,170 56,472 Balances - Beginning of the Year 73,988 148,701 105,283 327,972 Balances - End of the Year 81,118 $ 187,873 $ 115,453 $ 384,444 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (9,860) $ 26,347 $ 31,630 $ 48,117 $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Change in Assets and Liabilities: Accounts Receivable 1,865 257 373 2,495 Due from Governmental Units - - - - Prepaid Expense 162 (13,297) (13,142) Inventory 2,294 - - 2,294 Accounts Payable 15,338 (291) 1,404 16,451 Accrued Liabilities - 5,156 - 5,156 Net Cash Provided (Used) by Operating Activities 9,630 $ 31,631 $ 20,110 $ 61,371 $ County of Otsego, Michigan Combining Statement of Cash Flows Internal Service Funds For the Year Ended December 31, 2021 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 77,441 $ 151,579 $ 45,545 $ 1,575 $ 17,749 $ 15,052 $ 308,941 $ Accounts Receivable 3,924 3,024 - - 6,194 - 13,142 Prepaid Expense 208 1,988 - - - - 2,196 Total Current Assets 81,573 156,591 45,545 1,575 23,943 15,052 324,279 Noncurrent Assets Capital Assets (Net of Accumulated Depreciation) - 24,579 - - - - 24,579 TOTAL ASSETS 81,573 $ 181,170 $ 45,545 $ 1,575 $ 23,943 $ 15,052 $ 348,858 $ LIABILITIES: Accounts Payable 24,112 $ 164 $ 365 $ - $ 7,710 $ - $ 32,351 $ TOTAL LIABILITIES 24,112 164 365 - 7,710 - 32,351 NET POSITION: Net Investment in Capital Assets - 24,579 - - - - 24,579 Unrestricted 57,461 156,427 45,180 1,575 16,233 15,052 291,928 TOTAL NET POSITION 57,461 $ 181,006 $ 45,180 $ 1,575 $ 16,233 $ 15,052 $ 316,507 $ County of Otsego, Michigan Combining Statement of Net Position Nonmajor Enterprise Funds December 31, 2021 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 7,200 $ 84,670 $ - $ - $ 36,413 $ 3,894 $ 132,177 $ Local Sources 5,232 - - - - - 5,232 TOTAL OPERATING REVENUES 12,432 84,670 - - 36,413 3,894 137,409 OPERATING EXPENSES: Contractual Services 21,482 - - - - - 21,482 Materials and Supplies 24,410 - 4,850 - 35,075 - 64,335 Depreciation - 12,301 - - - - 12,301 Other Expenses - 73,091 - 252 - 867 74,210 TOTAL OPERATING EXPENSES 45,892 85,392 4,850 252 35,075 867 172,328 OPERATING INCOME (LOSS) (33,460) (722) (4,850) (252) 1,338 3,027 (34,919) NON OPERATING REVENUES (EXPENSES): Interest Earnings - - - - - 728 728 TOTAL NONOPERATING REVENUES (ESPENSES): - - - - - 728 728 INCOME (LOSS) BEFORE TRANSFERS (33,460) (722) (4,850) (252) 1,338 3,755 (34,191) Transfers In 12,000 - - - - - 12,000 Changes in Net Position (21,460) (722) (4,850) (252) 1,338 3,755 (22,191) NET POSITION BEGINNING OF YEAR 78,921 181,728 50,030 1,827 14,895 11,297 338,698 NET POSITION END OF YEAR 57,461 $ 181,006 $ 45,180 $ 1,575 $ 16,233 $ 15,052 $ 316,507 $ County of Otsego, Michigan Combining Statement of Revenues, Expenses, and Changes in Net Position - Nonmajor Enterprise Funds For the Year Ended December 31, 2021 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 8,577 $ 85,108 $ - $ - $ 49,405 $ 3,894 $ 146,984 $ Payments to Suppliers (29,780) (72,235) (6,735) (252) (33,273) (867) (143,142) Net Cash Provided (Used) by Operating Activities (21,203) 12,873 (6,735) (252) 16,132 3,027 3,842 CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Transfers In 12,000 - - - - - 12,000 Net Cash Provided (Used) by Noncapital and Related Financing Activities 12,000 - - - - - 12,000 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - - - - 728 728 Net Cash Provided (Used) by Investing Activities - - - - - 728 728 Net Increase (Decrease) in Cash and Equivalents (9,203) 12,873 (6,735) (252) 16,132 3,755 16,570 Balances - Beginning of the Year 86,644 138,706 52,280 1,827 1,617 11,297 292,371 Balances - End of the Year 77,441 $ 151,579 $ 45,545 $ 1,575 $ 17,749 $ 15,052 $ 308,941 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (33,460) $ (722) $ (4,850) $ (252) $ 1,338 $ 3,027 $ (34,919) $ 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 (3,855) 438 - - 12,992 - 9,575 Prepaid Expenses - 1,381 - - - - 1,381 Accounts Payable 16,112 (525) (1,885) - 1,802 - 15,504 Net Cash Provided (Used) by Operating Activities (21,203) $ 12,873 $ (6,735) $ (252) $ 16,132 $ 3,027 $ 3,842 $ County of Otsego, Michigan Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2021 89 ---PAGE BREAK--- Reports on Compliance ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE A. BOHN, CPA TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 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, 2021, 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 27, 2022. 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. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the County of Otsego, Michigan’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County of Otsego, Michigan’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County of Otsego, Michigan’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. ---PAGE BREAK--- 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 identified a certain deficiency in internal control, described in the accompany schedule of findings and questioned costs as item 2021-001 that we consider to be a material weakness. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the County of Otsego, Michigan's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instance of noncompliance or other matters that is required to be reported under Government Auditing Standards. County of Otsego, Michigan’s Response to Findings Government Auditing Standards requires the auditor to perform limited procedures on the County of Otsego, Michigan’s response to the finding identified in our audit and described in the accompanying schedule of findings and questioned costs. The County of Otsego, Michigan’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. 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 28, 2022 ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE A. BOHN, CPA TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 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 Opinion on Each Major Federal Program We have audited the County of Otsego, Michigan’s, compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the County of Otsego, Michigan’s major federal programs for the year ended December 31, 2021. 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. Otsego County, Michigan’s basic financial statements include the operations of the Otsego Commission on Aging which expended $167,950, in federal awards which is not included in Otsego County’s Michigan schedule of expenditures of federal awards during the year ended December 31, 2021. Our audit, described below, did not include the operations of the Otsego Commission on Aging because the component unit engaged other auditors to perform a separate financial audit and it did not meet the compliance requirements for a single audit in accordance with the Uniform Guidance. 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, 2021. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and 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). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the County of Otsego, Michigan and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the County of Otsego, Michigan’s compliance with the compliance requirements referred to above. ---PAGE BREAK--- 93 To the Board of Commissioners County of Otsego, Michigan Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the County of Otsego, Michigan’s federal programs. Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the County of Otsego, Michigan’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Unform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the County of Otsego, Michigan’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the County of Otsego, Michigan’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.  Obtain an understanding of the County of Otsego, Michigan’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the County of Otsego, Michigan’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control Over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. ---PAGE BREAK--- 94 To the Board of Commissioners County of Otsego, Michigan Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Anderson, Tackman and Company, PLC Certified Public Accountants Kincheloe, Michigan June 27, 2022 ---PAGE BREAK--- Federal Agency or Federal Grantor/Pass-through CFDA Pass-through Federal Grantor/Program Title COVID-19 Number Number Expenditures U.S. DEPARTMENT OF AGRICULTURE: Direct Award: Community Facility Loans and Grants - Cluster No 10.766 N/A 43,000 $ 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 No 14.228 MSC 218013-CPF 298,317 Non-Entitlement Grants in Hawaii No 14.228 PI 2019 MEDC 53,626 Non-Entitlement Grants in Hawaii Yes 14.228 CARES Act 152,912 Non-Entitlement Grants in Hawaii No 14.228 PI 2020 1,176 Total U.S. Department of Housing and Urban Development 506,031 U.S. Department of Justice: Pass-through Michigan State Police Coronavirus Emergency Supplemental Funding Program Yes 16.034 CESF-0244-2020 57,847 Total U.S. Department of Justice 57,847 U.S. Department of Transportation: Direct Award: Airport Improvement Program Yes 20.106 3-26-SBGP-117-2020 13,000 Pass-through the Michigan Department of Transportation Formula Grants for Rural Areas and Tribal Transit Programs No 20.509 N/A 219,006 Formula Grants for Rural Areas and Tribal Transit Programs Yes 20.509 CARES Act 285,618 Subtotal MDOT 504,624 Pass-through the Michigan State Police Interagency Hazardous Materials Public Sector Training and Planning Grants No 20.616 N/A 5,549 Interagency Hazardous Materials Public Sector Training and Planning Grants No 20.703 N/A 3,745 Total U.S. Department of Transportation 526,918 County of Otsego, Michigan Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2021 See accompanying notes to scheduled of expenditures of federal awards. 95 ---PAGE BREAK--- Federal Agency or Federal Grantor/Pass-through CFDA Pass-through Federal Grantor/Program Title COVID-19 Number Number Expenditures County of Otsego, Michigan Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2021 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES: Direct Award: PRF - General Distribution Yes 93.498 N/A 121,723 Pass-through from the State of Michigan Department of Health and Human Services Child Support Enforcement No 93.563 CSPA-13-69002 47,211 Child Support Enforcement No 93.563 CSFOC13-69001 34,046 Child Support Enforcement No 93.563 CSFOC17-69001 253,651 Subtotal - 334,908 Total U.S. Department of Health and Human Services 456,631 U.S. DEPARTMENT OF HOMELAND SECURITY: Pass-through from the Michigan Department of Natural Resources Boating Safety Financial Assistence No 97.012 N/A 5,549 Pass-through from the Michigan State Police Pre-Disaster Mitigation Program No 97.042 N/A 18,846 Pre-Disaster Mitigation Program No 97.067 2019--SS-00013 21,206 Subtotal - MSP 40,052 Total U.S. Department of Homeland Security 45,601 TOTAL EXPENDITURES OF FEDERAL AWARDS 1,636,028 $ See accompanying notes to scheduled of expenditures of federal awards. 96 ---PAGE BREAK--- County of Otsego, Michigan Notes to Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2021 97 NOTE A - BASIS OF PRESENTATION: The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal award activity of the County of Otsego, Michigan under programs of the federal government for the year ended December 31, 2021. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the County of Otsego, Michigan, it is not intended to and does not present the financial position, changes in net position, or cash flows of the County of Otsego, Michigan. NOTE B - 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 2021. 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, 2021 98 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 14.228 Community Development Block Grant 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, 2021 99 Section II – Financial Statement Findings Material Weakness Bank Reconciliation Process Finding 2021-001 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, 2021 100 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, 2021 101 Section III – Federal Award Findings and Questioned Costs NONE. ---PAGE BREAK--- JIil..- ANDERSON, TACKMAN & COMPANY, PLC . CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE A. BOHN, CPA TORI N. KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIOAN 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, 2021, and have issued our report thereon dated June 27, 2022. 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 Standard and the Uniform Guidance As stated in our engagement letter dated May 16, 2022 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. In planning and performing our audit, we will consider the County of Otsego, Michigan’s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. We will also consider internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with the Uniform Guidance. As part of obtaining reasonable assurance about whether the County of Otsego, Michigan’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants. However, providing an opinion on compliance with those provisions is not an objective of our audit. Also, in accordance with the Uniform Guidance, we will examine, on a test basis, evidence about the County of Otsego, Michigan’s compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement applicable to each of its major federal programs for the purpose of expressing an opinion on the County of Otsego, Michigan’s compliance with those requirements. While our audit will provide a reasonable basis for our opinion, it does not provide a legal determination on the County of Otsego, Michigan’s compliance with those requirements. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 2 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. 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 May 16, 2022. 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. No new accounting policies were apodted 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 $427,000.  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. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 3 Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole. 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 27, 2022. 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 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 ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 4 Uniform Chart of Accounts Effective for fiscal years ending October 21, 2022 In April 2017, the State released an updated Uniform Chart of Accounts. On April 20, 2020, the Michigan Department of Treasury issued a memo that established an implementation date for fiscal years ending on October 31, 2022 and thereafter. A final release of the chart of accounts was issued in November 2020 and is available at this link: http://www.michigan.gov/documents/uniformchart 24524_7.pdf. This final version follows statutory changes and reformats the document to make it more user-friendly. Treasury will provide alerts for any guidance and resources, and local units can sign up for alerts at this link: 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. 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. GASB 83 – Certain Asset Retirement Obligations Effective 06/15/2020 (your FY 2020) This statement addresses accounting and financial reporting for certain asset retirement obligations--legally enforceable liabilities associated with the retirement of tangible capital assets. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 5 GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period Effective for fiscal years beginning after December 15, 2021 (County’s fiscal year 2022). This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that was previously accounted for in accordance with the requirements of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statement prepared using the economic resources measurement focus. GASB Statement No. 96, Subscription-based Information Technology Arrangements In May 2020, the GASB issued Statement No. 96, Subscription-based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for governments. The statement: 1. Defines a SBITA 2. Establishes that a SBITA results in a right-to-use subscription asset/liability 3. Provides capitalization criteria for outlays other than subscription payments/implementation costs 4. Requires note disclosures The standards for SBITAs are based on similar standards established in GASB Statement No. 87, Leases. The County should evaluate the impact of this standard will have on its operations. The adoption date will be during the fiscal 2022 year. GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans This standard has certain aspects impacting defined contribution pension and OPEB plans and other employee benefit plans that were effective immediately. It also clarifies when a Section 457 plan should be considered a pension plan or another employee benefit plan to assist in the application of GASB Statement No. 84 to these types of plans. The County is currently evaluating the impact this standard will have on the financial statements when adopted. The provisions of the statement that relate to 457 plans are effective for the County’s financial statements for the year ending March 31, 2023. 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. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 6 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 27, 2022