Document otsegocountymi_gov_doc_cfa19ccc42

County of Otsego, Michigan BASIC FINANCIAL STATEMENTS December 31, 2019 ---PAGE BREAK--- OTSEGO COUNTY, MICHIGAN ORGANIZATION MEMBERS OF THE COUNTY COMMISSION CHAIR PERSON KEN BORTON VICE CHAIR PERSON DOUGLAS C. JOHNSON COMMISSIONER JULIE POWERS COMMISSIONER HENRY MASON COMMISSIONER PAUL L LISS COMMISSIONER DUANE SWITALSKI COMMISSIONER ROB PALLARITO COMMISSIONER KENNETH R GLASSER 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 COMPONENT UNIT FINANCIAL STATEMENTS: Statement of Net Position 19 Statement of Activities 20 NOTES TO FINANCIAL STATEMENTS 21 ---PAGE BREAK--- ii TABLE OF CONTENTS (Continued) REQUIRED SUPPLEMENTARY INFORMATION: Employee Retirement and Benefit Systems: Schedule of Changes in Pension Liability 66 Schedule of Employer Contributions 67 Schedule of Changes in OPEB Liability and Related Rations 68 Budgetary Comparison Schedules – Major Funds: General Fund 69 Housing Commission 71 Public 72 Park & Recreation 73 OTHER INFORMATION: Combining Balance Sheet – General Funds 74 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – General Funds 75 Combining Balance Sheet – Nonmajor Governmental Funds 76 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds 81 Combining Statement of Net Position – Internal Service Funds 86 Combining Statement of Revenues, Expenses, and Changes in Net Position – Internal Service Funds 87 Combining Statement of Cash Flows – Internal Service Funds 88 Combining Statement of Net Position – Nonmajor Enterprise Funds 89 Combining Statement of Revenues, Expenses, and Changes in Net Position – Nonmajor Enterprise Funds 90 Combining Statement of Cash Flows – Nonmajor Enterprise Funds 91 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 92 ---PAGE BREAK--- ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE SUE A. BOWLBY, CPA, PRINCIPAL KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE BOHN, CPA TORI KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MACPA OFFICES IN MICHIGAN & WISCONSIN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 1 INDEPENDENT AUDITOR’S REPORT Members of the Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information, of the County of Otsego, Michigan, as of and for the year ending December 31, 2019, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Otsego Commission on Aging, which represents 2 percent, 2 percent, and 12 percent, respectively, of the assets, net position, and revenues of the aggregate discretely presented component units. We also did not audit the financial statements of the Otsego County Bus System, which represents 11 percent, 3 percent, and 37 percent, respectively, of the assets, net position, and revenues of the business-type activities. 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 and the County Bus System are based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of the County Commission on Aging were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. ---PAGE BREAK--- 2 Honorable Chairman and Members of the Board of Commissioners County of Otsego, Michigan An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our report and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business- type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan, as of December 31, 2019, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, employee retirement and benefits systems and budgetary comparison schedules on pages 4 through 9, pages 66 through 68, and pages 69 through 73 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We and other auditors have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County of Otsego, Michigan’s basic financial statements. The combining major and nonmajor fund financial statements and statistical information are presented for purposes of additional analysis and are not a required part of the basic financial statements. ---PAGE BREAK--- 3 Honorable Chairman and Members of the Board of Commissioners County of Otsego, Michigan The combining major and nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 30, 2020 on our consideration of the County of Otsego, Michigan's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the County of Otsego, Michigan's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County of Otsego, Michigan's internal control over financial reporting and compliance. Anderson, Tackman & Company, PLC Certified Public Accountants Kincheloe, Michigan June 30, 2020 ---PAGE BREAK--- Management’s Discussion and Analysis ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2019 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, 2019. 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 $34,136,357 for 2018 and was $36,129,723 for 2019, an increase of 5.8%. For 2019, net position for our business-type activities was $14,715,969 or 40.7% of total net position, while net position in our governmental activities was $21,413,754 or 59.3% of total net position.  At December 31, 2019, Otsego County’s governmental funds report a combined fund balance of $14,943,485 compared to $14,508,358 in 2018.  At December 31, 2019, the fund balance for the general fund was $5,791,133 with $44,091 nonspendable for prepaid and inventory items. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the County’s basic financial statements. The County’s basic financial statements are comprised of five components: 1) government-wide financial statements, 2) fund financial statements, 3) notes to the financial statements, 4) required supplementary information and 5) other information. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the County’s assets, deferred outflows and inflows of resources and liabilities, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Both of the government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include Legislative, Judicial, General Government, Public Safety, Public Works, Health and Welfare, and Culture and Recreation. The business-type activities of the County include the Otsego County Bus System, Delinquent Tax Revolving, and Airport. The government-wide financial statements include not only the County itself (known as the primary government), but also legally separate component units for which the County is financially accountable. Component Units include the Otsego County Road Commission, Otsego/Leelanau District Health Department, Otsego Transportation Authority, and Otsego Economic Development Corporation. Financial information for component units are reported separately from the financial information presented for the primary government itself. The government-wide financial statements can be found on pages 10-11 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2019 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, Public Improvement Capital Project, and Park & Recreation, 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 page 18 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 21-65 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2019 6 Required Supplementary Information. Required supplementary information related to the County’s pension and OPEB can be found on pages 66-68 and budgetary comparison information related to the County’s major governmental funds can be found on pages 69-73 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain other information. This includes the combining major and nonmajor fund financial statements. Combining major and nonmajor fund financial statements can be found on pages 74-91 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 $36,129,723 at the close of the most recent fiscal year. Otsego County Net Position 2019 2018 2019 2018 2019 2018 Current Assets 20,634,182 $ 21,996,842 $ 9,730,422 $ 9,248,169 $ 30,364,604 $ 31,245,011 $ Capital Assets 13,895,652 12,742,238 6,288,362 6,573,459 20,184,014 19,315,697 Total Assets 34,529,834 34,739,080 16,018,784 15,821,628 50,548,618 50,560,708 Deferred Outflows of Resources 1,925,948 1,507,396 216,690 140,229 2,142,638 1,647,625 Current Liabilities 1,612,330 1,119,406 759,319 361,811 2,371,649 1,481,217 Noncurrent Liabilities 10,588,166 11,746,296 648,838 414,904 11,237,004 12,161,200 Total Liabilities 12,200,496 12,865,702 1,408,157 776,715 13,608,653 13,642,417 Deferred Inflows of Resources 2,841,532 4,280,209 111,348 204,850 2,952,880 4,485,059 Net Position Net Investment in Capital Assets 12,485,124 11,194,681 6,288,362 6,573,459 18,773,486 17,768,140 Restricted 4,959,069 9,159,700 - - 4,959,069 9,159,700 Unrestricted 3,969,561 (1,253,816) 8,427,607 8,406,833 12,397,168 7,153,017 Total Net Position 21,413,754 $ 19,100,565 $ 14,715,969 $ 14,980,292 $ 36,129,723 $ 34,080,857 $ Total Governmental Business-type Activities Activities A large portion of the County’s net position reflects its investment in capital assets land, buildings, equipment and construction in progress); less any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay the debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2019 7 In addition to the net position invested in capital assets, certain other restrictions on use of net position apply due primarily to legal guidelines. The restricted net position total was $4,959,069. The remaining balance of unrestricted net position of $12,397,168 may be used to meet the government’s ongoing obligations to citizens and creditors. Otsego County Changes in Net Position 2019 2018 2019 2018 2019 2018 Program Revenues Charges for Services 4,052,788 $ 2,166,057 $ 1,821,615 $ 1,666,509 $ 5,874,403 $ 3,832,566 $ Operating Grants and Contributions 2,500,752 2,650,211 749,122 804,969 3,249,874 3,455,180 Capital Grants and Contributions - 69,299 433,510 373,081 433,510 442,380 General Revenues Property Taxes 8,671,663 8,300,297 316,488 315,663 8,988,151 8,615,960 State Revenue Sharing 505,934 - - - 505,934 - Investment Earnings 365,247 355,688 444,969 259,535 810,216 615,223 Other Revenue 140,930 1,775,590 236,823 284,388 377,753 2,059,978 Total Revenues 16,237,314 15,317,142 4,002,527 3,704,145 20,239,841 19,021,287 Program Expenses Legislative 214,752 225,294 - - 214,752 225,294 Judicial 2,753,529 1,890,595 - - 2,753,529 1,890,595 General Government 2,504,971 4,003,061 - - 2,504,971 4,003,061 Public Safety 4,754,551 4,412,678 - - 4,754,551 4,412,678 Public Works 342,058 167,639 - - 342,058 167,639 Health and Welfare 1,229,255 1,445,356 - - 1,229,255 1,445,356 Communtiy and Economic Development 232,533 409,862 - - 232,533 409,862 Recreation and Culture 1,996,987 2,026,823 - - 1,996,987 2,026,823 Interest Expense - Unallocated 56,450 86,457 - - 56,450 86,457 Other Expenses 386,339 - - - 386,339 - Delinquent Tax Collection - - 201,547 199,345 201,547 199,345 Bus System - - 1,474,473 1,673,970 1,474,473 1,673,970 Airport - - 1,683,312 1,713,366 1,683,312 1,713,366 Other Expenses - - 415,718 546,238 415,718 546,238 Total Expenses 14,471,425 14,667,765 3,775,050 4,132,919 18,246,475 18,800,684 Excess (Deficiency) Before Transfers 1,765,889 649,377 227,477 (428,774) 1,993,366 220,603 Transfers 491,800 189,109 (491,800) (172,949) - 16,160 Changes in Net Position 2,257,689 838,486 (264,323) (601,723) 1,993,366 220,603 Net Position - Beginning (As Restated See Note 16) 19,156,065 18,262,079 14,980,292 15,582,015 34,136,357 33,844,094 Net Position - Ending 21,413,754 $ 19,100,565 $ 14,715,969 $ 14,980,292 $ 36,129,723 $ 34,064,697 $ Total Governmental Business-type Activities Activities ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2019 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 $5,791,133. General Fund Budgetary Highlights The General Fund realized $91,366 less in revenues than anticipated for the fiscal year. The General Fund operations also expended $513,149 less than appropriated. Operating Transfers In were higher than budgeted and resulted in a net budget variance of $40,510. All of the General Fund services departments expended less than the budgeted amount for departmental operations in 2019. 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, 2019 the County had $18,592,137 invested in a range of assets. This includes a net decrease of $723,560 from last year as depreciation and deletions exceed additions. Otsego County Capital Assets (net of depreciation) 2019 2018 2019 2018 2019 2018 Land 2,801,732 $ 2,436,427 $ 99,998 $ 99,998 $ 2,901,730 $ 2,536,425 $ Construction in Progress 3,462,609 2,771,224 - - 3,462,609 2,771,224 Buildings 5,763,792 5,592,458 1,111,845 1,217,348 6,875,637 6,809,806 Furniture & Fixtures 41,965 87,081 - - 41,965 87,081 Equipment 1,487,499 1,658,028 104,378 111,655 1,591,877 1,769,683 Vehicles 321,888 178,856 682,033 337,545 1,003,921 516,401 Infrastructure 16,167 18,164 4,290,108 4,806,913 4,306,275 4,825,077 Total 13,895,652 $ 12,742,238 $ 6,288,362 $ 6,573,459 $ 20,184,014 $ 19,315,697 $ Total Governmental Business-type Activities Activities Additional information on the County’s capital assets can be found in Note 4 on pages 34-37 of this report. ---PAGE BREAK--- County of Otsego, Michigan Management’s Discussion and Analysis December 31, 2019 9 Debt Administration At the end of fiscal year 2019, the County had outstanding bond debt in the amount of $1,400,000. This was due to decreasing its bond debt in the amount of $1,356,563. 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 2019 2018 2019 2018 2019 2018 Installment and Bond Debt 1,400,000 2,756,563 - - 1,400,000 2,756,563 Premium on Bond Issuance 10,528 14,038 - - 10,528 14,038 Compensated Absences 214,197 195,707 - - 214,197 195,707 Total 1,624,725 $ 2,966,308 $ - $ - $ 1,624,725 $ 2,966,308 $ Total Governmental Business-type Activities Activities Additional information on the County’s long-term debt can be found in Note 7 on pages 39-41 of this report. Economic Factors and Next Year’s Budgets and Rates The following factors were considered in preparing the County’s 2020 Budget:  Property tax revenues are projected to increase approximately 2.5%. Highlight of the 2020 budget is as follows:  The cost of employee benefits continues to rise and will be monitored throughout the year. Requests for Information This financial report is designed to provide a general overview of the County’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Otsego County, 225 W Main, Gaylord, Michigan, 49735. ---PAGE BREAK--- Basic Financial Statements ---PAGE BREAK--- Governmental Business-type Component Activities Activities Totals Units ASSETS: Cash and Equivalents 8,552,274 $ 2,511,792 $ 11,064,066 $ 5,779,866 $ Investments 6,036,563 5,766,589 11,803,152 180,994 Receivables: Taxes 3,109,756 958,770 4,068,526 2,449,077 Accounts 376,100 78,753 454,853 1,734,142 Interest - 145,326 145,326 - Loans 1,460,047 - 1,460,047 - Due from Governmental Units 760,763 93,001 853,764 - Internal Loans 9,111 (9,111) - - Inventories 18,880 28,465 47,345 721,785 Prepaid Items 123,693 1,837 125,530 313,738 Advance to Component Unit 186,995 155,000 341,995 - Capital Assets Not Depreciated 6,264,341 99,998 6,364,339 12,458,773 Capital Assets (Net of Accumulated Depreciation) 7,631,311 6,188,364 13,819,675 26,062,818 TOTAL ASSETS 34,529,834 16,018,784 50,548,618 49,701,193 DEFERRED OUTFLOWS OF RECOURSES: Pension & OPEB Related Items 1,925,948 216,690 $ 2,142,638 89,923 LIABILITIES: Accounts Payable 726,251 751,946 1,478,197 249,054 Accrued Liabilities 102,683 7,373 110,056 173,858 Advance from Government Units - - - 558,419 Due to Governmental Units 37,395 - 37,395 237,771 Unearned Revenue 114,866 - 114,866 31,232 Interest Payable 7,625 - 7,625 - Advance from Primary Government - - - 341,995 Vested Employee Benefits - Due in more than one year 214,197 - 214,197 254,330 Bonds Payable - Due within one year 623,510 - 623,510 - Bonds Payable - Due in more than one year 787,018 - 787,018 - Net OPEB Liability - Due in more than one year 1,220,934 - 1,220,934 4,532,928 Net Pension Liability - Due in more than one year 8,366,017 648,838 9,014,855 4,394,395 Note Payable - Due within one year - - - 270,497 Note Payable - Due in more than one year - - - 132,312 TOTAL LIABILITIES 12,200,496 1,408,157 13,608,653 11,176,791 DEFERRED INFLOWS OF RESOURCES: Pension & OPEB Related Items 69,818 111,348 181,166 170,039 Taxes Levied for a Subsequent Period 2,771,714 - 2,771,714 2,449,077 TOTAL DEFERRED OUTFLOWS 2,841,532 111,348 2,952,880 2,619,116 NET POSITION: Net Investment in Capital Assets 12,485,124 6,288,362 18,773,486 36,586,021 Restricted 4,959,569 - 4,959,569 2,555,904 Unrestricted 3,969,061 8,427,607 12,396,668 (3,146,716) TOTAL NET POSITION 21,413,754 $ 14,715,969 $ 36,129,723 $ 35,995,209 $ County of Otsego, Michigan Statement of Net Position December 31, 2019 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 214,752 $ - $ - $ - $ (214,752) $ - $ (214,752) $ - $ Judicial 2,753,529 595,665 1,256,690 - (901,174) - (901,174) - General Government 2,504,971 527,468 209,623 - (1,767,880) - (1,767,880) - Public Safety 4,754,551 1,606,821 119,009 - (3,028,721) - (3,028,721) - Public Works 342,058 3,125 1,310 - (337,623) - (337,623) - Health and Welfare 1,229,255 162,946 264,360 - (801,949) - (801,949) - Community/Economic Development 232,533 94,697 - - (137,836) - (137,836) - Recreation and Culture 1,996,987 1,062,066 649,760 - (285,161) - (285,161) - Other 386,339 - - - (386,339) - (386,339) - Interest - Unallocated 56,450 - - - (56,450) - (56,450) - Total Governmental Activities 14,471,425 4,052,788 2,500,752 - (7,917,885) - (7,917,885) - Business-type Activities: Delinquent Tax Collection 201,547 362,335 - - - 160,788 160,788 - Tax Foreclosure 108,341 127,837 18,732 - - 38,228 38,228 - Airport 1,683,312 868,887 - - - (814,425) (814,425) - Public Transit 1,474,473 248,788 730,390 433,510 - (61,785) (61,785) - Non-Major Enterprise Funds 307,377 213,768 - - - (93,609) (93,609) - Total Business-type Activities 3,775,050 1,821,615 749,122 433,510 - (770,803) (770,803) - Total Primary Government 18,246,475 $ 5,874,403 $ 3,249,874 $ 433,510 $ (7,917,885) (770,803) (8,688,688) - Component Units: Road Commission 7,564,725 $ 2,815,913 $ 4,982,829 $ 2,994,478 $ 3,228,495 Ambulance 2,518,390 1,471,165 70,754 - (976,471) Commission on Aging 9/30/2019 2,066,848 121,192 490,920 - (1,454,736) 845,284 555,382 - - (289,902) Total Component Units 12,995,247 4,963,652 5,544,503 2,994,478 507,386 Total 31,241,722 $ 10,838,055 $ 8,794,377 $ 3,427,988 $ General Revenues and Transfers: Taxes 8,671,663 316,488 8,988,151 3,677,258 State Revenue Sharing 505,934 - 505,934 Investment Earnings 365,247 444,969 810,216 20,852 Transfers 491,800 (491,800) - - Other 140,930 236,823 377,753 181,488 Total General Revenues and Transfers 10,175,574 506,480 10,682,054 3,879,598 Changes in Net Position 2,257,689 (264,323) 1,993,366 4,386,984 Net Position - Beginning (As Restated See Note 16) 19,156,065 14,980,292 34,136,357 31,608,225 Net Position - Ending 21,413,754 $ 14,715,969 $ 36,129,723 $ 35,995,209 $ Program Revenues Primary Government County of Otsego, Michigan Statement of Activities For the Year Ended December 31, 2019 Net (Expense) Revenue and Changes in Net Position See accompanying notes to financial statements. 11 ---PAGE BREAK--- ` Public Improvement Total Housing Capital Project Park & Nonmajor Governmental General Commission Fund Recreation Governmental Funds ASSETS: Cash and Equivalents - Unrestricted 2,638,091 $ 109,110 $ 1,052,277 $ 149,616 $ 4,327,967 $ 8,277,061 $ Investments - Unrestricted 2,659,273 - 536,714 273,200 2,429,482 5,898,669 Receivables: Taxes 338,042 - - 324,855 2,446,859 3,109,756 Accounts 60,767 296 61,075 1,778 242,851 366,767 Loans - 1,460,047 - - - 1,460,047 Due from Other Funds 4,000 - - - 500 4,500 Advance to Other Funds - - 9,111 - 9,111 Due from Governmental Units 323,519 - - - 437,244 760,763 Inventories 18,555 - - - - 18,555 Prepaid Items 25,536 - - - 19,589 45,125 Long-Term Advances to Other Funds - Component Units - - 186,995 - - 186,995 TOTAL ASSETS 6,067,783 $ 1,569,453 $ 1,846,172 $ 749,449 $ 9,904,492 $ 20,137,349 $ LIABILITIES: Due to Other Funds - $ 4,500 $ - $ - $ - $ 4,500 $ Accounts Payable 172,122 312 - 62,815 470,061 705,310 Due to Other Governmental Units - - - - 37,395 37,395 Accrued Liabilities 74,296 81 - 3,333 22,322 100,032 Unearned Revenue 30,732 - - 84,134 - 114,866 TOTAL LIABILITIES 277,150 4,893 - 150,282 529,778 962,103 DEFERRED INFLOWS OF RESOURCES: Unavailable Resources - 1,460,047 - - - 1,460,047 Taxes Levied for a Subsequent Period - - - 324,855 2,446,859 2,771,714 TOTAL DEFERRED INFLOW OF RESOURCES - 1,460,047 - 324,855 2,446,859 4,231,761 FUND BALANCES: Nonspendable 44,091 - - - 19,589 63,680 Restricted - 104,513 - 274,312 4,580,744 4,959,569 Committed - - 1,846,172 - 2,327,522 4,173,694 Assigned 1,533,077 - - - - 1,533,077 Unassigned 4,213,465 - - - - 4,213,465 TOTAL FUND BALANCES 5,790,633 104,513 1,846,172 274,312 6,927,855 14,943,485 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 6,067,783 $ 1,569,453 $ 1,846,172 $ 749,449 $ 9,904,492 $ Reconciliation to amounts reported for governmental activities in the statement of net position: Capital Assets used by Governmental Activities 13,895,652 Long-term Debt Payable for Governmental Activities (1,410,528) Accrued Interest Payable (7,625) Vested Employee Benefits (214,197) Pension Liability and Deferred Items (6,515,872) OPEB Liability and Deferred Items (1,214,949) Deferred Revenue Recognized as Current Revenue 1,460,047 Internal Service Funds 477,741 Net position of governmental activities 21,413,754 $ December 31, 2019 Governmental Funds Balance Sheet County of Otsego, Michigan See accompanying notes to financial statements. 12 ---PAGE BREAK--- Public Improvement Total Housing Capital Project Park & Nonmajor Governmental General Commission Fund Recreation Governmental Funds REVENUES: Taxes 5,484,784 $ - $ - $ 317,173 $ 2,869,706 $ 8,671,663 $ Licenses and Permits 48,719 - - - - 48,719 Federal Sources 98,706 23,403 - 15,000 466,235 603,344 State Sources 1,429,464 - - - 1,024,134 2,453,598 Local Sources 22,418 1,246 - - 669,938 693,602 Charges for Services 1,039,856 - - 214,925 1,049,398 2,304,179 Fines and Forfeits 13,628 - - - 160,838 174,466 Interest and Rentals 272,591 193 234 9,521 80,242 362,781 Other Revenue 331,717 92,012 - 26,718 1,215,907 1,666,354 TOTAL REVENUES 8,741,883 116,854 234 583,337 7,536,398 16,978,706 EXPENDITURES: Legislative 214,752 - - - - 214,752 Judicial 2,001,001 - - - 778,327 2,779,328 General Government 1,639,041 - - - 484,816 2,123,857 Public Safety 2,561,035 - - - 2,057,140 4,618,175 Public Works 8,780 - - - 333,278 342,058 Health and Welfare 609,024 - - - 624,468 1,233,492 Community/Economic Development 112,642 124,833 - - - 237,475 Recreation and Culture - - - 493,405 1,126,720 1,620,125 Other Expenditures 386,339 - - - - 386,339 Capital Outlay - - - 56,311 2,007,744 2,064,055 Debt Service 8,925 - - - 1,406,798 1,415,723 TOTAL EXPENDITURES 7,541,539 124,833 - 549,716 8,819,291 17,035,379 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,200,344 (7,979) 234 33,621 (1,282,893) (56,673) OTHER FINANCING SOURCES (USES): Transfers In 159,135 98,538 - - 1,998,256 2,255,929 Transfers Out (912,706) (99,048) - - (752,375) (1,764,129) Total Other Financing Sources (Uses) (753,571) (510) - - 1,245,881 491,800 NET CHANGE IN FUND BALANCE 446,773 (8,489) 234 33,621 (37,012) 435,127 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 5,343,860 113,002 1,845,938 240,691 6,964,867 14,508,358 FUND BALANCES END OF YEAR 5,790,633 $ 104,513 $ 1,846,172 $ 274,312 $ 6,927,855 $ 14,943,485 $ For the Year Ended December 31, 2019 Changes in Fund Balance - Governmental Funds Statement of Revenues, Expenditures, and County of Otsego, Michigan See accompanying notes to financial statements. 13 ---PAGE BREAK--- Net changes in fund balances - total governmental funds 435,127 $ 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, ($910,641) was exceeded by capital outlay, $2,064,055. 1,153,414 Repayment of principal is an expenditure in the governmental funds but reduces the liability in the statement of net position. Principal repayments: Bonds Payable 1,360,073 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 (743,858) 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 (18,490) Accrued Interest Payable (800) OPEB Liabilities & Related Deferred Items 617,934 Pension Liability & related Deferred Items (496,812) Internal service fund activity (48,899) Changes in net position of governmental activities 2,257,689 $ For the Year Ended December 31, 2019 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 9/30/2019 Funds Funds Funds ASSETS: Current Assets: Cash and Equivalents 1,362,055 $ 257,529 $ 22,124 $ 595,000 $ 275,084 $ 2,511,792 $ 275,213 $ Investments 4,173,236 1,593,353 - - - 5,766,589 137,894 Taxes Receivable 956,925 - - 1,845 - 958,770 - Interest Receivable 145,326 - - - - 145,326 - Accounts Receivable 2,681 11,305 47,006 3,573 14,188 78,753 9,333 Due from Governmental Units - 93,001 - 93,001 - Advances to Component Units 155,000 - - - - 155,000 - Prepaid Items - - - - 1,837 1,837 78,568 Inventory - - 28,465 - - 28,465 325 Total Current Assets 6,795,223 1,862,187 97,595 693,419 291,109 9,739,533 501,333 Noncurrent Assets: Capital Assets (Not Depreciated) - - - 99,998 - 99,998 - Capital Assets (Net of Accumulated Depreciation) - - 5,281,780 857,403 49,181 6,188,364 - Total Noncurrent Assets - - 5,281,780 957,401 49,181 6,288,362 - TOTAL ASSETS 6,795,223 1,862,187 5,379,375 1,650,820 340,290 16,027,895 501,333 DEFERRED OUTFLOWS OF RESOURCES: Pension Related Items - - - 216,690 - 216,690 - LIABILITIES: Current Liabilities: Accounts Payable 18,698 13,473 67,877 645,882 6,016 751,946 20,941 Accrued Liabilities 1,591 1,592 4,190 - - 7,373 2,651 Advance from Other Funds - - 9,111 - - 9,111 - Total Current Liabilities 20,289 15,065 81,178 645,882 6,016 768,430 23,592 Noncurrent Liabilities: Net Pension Liability - - - 648,838 - 648,838 - TOTAL LIABILITIES 20,289 15,065 81,178 1,294,720 6,016 1,417,268 23,592 Deferred Inflow of Resources Pension Related Items - - - 111,348 - 111,348 - NET POSITION: Net Investment in Capital Assets - - 5,281,780 957,401 49,181 6,288,362 - Unrestricted 6,774,934 1,847,122 16,417 (495,959) 285,093 8,427,607 477,741 TOTAL NET POSITION 6,774,934 $ 1,847,122 $ 5,298,197 $ 461,442 $ 334,274 $ 14,715,969 $ 477,741 $ Major Business-type Activities - Enterprise Funds County of Otsego, Michigan Statement of Net Position Proprietary Funds December 31, 2019 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 9/30/2019 Funds Funds Funds OPERATING REVENUES: State Sources - $ 18,732 $ - $ - $ - $ 18,732 $ - $ Local Sources - - - - - - - Charges for Services 97,562 127,837 868,887 248,788 213,768 1,556,842 2,214,096 Interest on Delinquent Taxes 264,773 - - - - 264,773 - Other Revenues - - 10,834 - - 10,834 - TOTAL REVENUES 362,335 146,569 879,721 248,788 213,768 1,851,181 2,214,096 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 64,201 64,578 151,476 1,063,406 - 1,343,661 1,760,167 Contractual Services 98,991 - 178,313 - 192,631 469,935 273,082 Materials and Supplies 6,832 3,348 617,316 - 41,068 668,564 12,993 Equipment Repair and Maintenance 5,039 - - - - 5,039 14,638 Utilities - - - - - - 188,117 Depreciation - - 593,221 113,085 12,301 718,607 - Other Expenses 26,484 40,415 142,986 297,982 61,377 569,244 16,464 TOTAL EXPENSES 201,547 108,341 1,683,312 1,474,473 307,377 3,775,050 2,265,461 OPERATING INCOME (LOSS) 160,788 38,228 (803,591) (1,225,685) (93,609) (1,923,869) (51,365) NON-OPERATING REVENUES (EXPENSES): State Grants - - - 505,681 - 505,681 - Federal Grants - - - 224,709 - 224,709 - Interest Earned on Investments 392,722 47,512 2,809 - 1,926 444,969 2,466 Property Taxes Levied - - - 316,488 - 316,488 - Other 3,679 106,308 - 13,872 102,130 225,989 - TOTAL NONOPERATING REVENUES (EXPENSES) 396,401 153,820 2,809 1,060,750 104,056 1,717,836 2,466 INCOME (LOSS) BEFORE INTERFUND TRANSFERS 557,189 192,048 (800,782) (164,935) 10,447 (206,033) (48,899) INTERFUND TRANSFERS: Capital Contributions - - - 433,510 - 433,510 - Transfers In - - 90,000 - 22,000 112,000 - Transfers Out (497,475) (106,325) - - - (603,800) - CHANGES IN NET POSITION 59,714 85,723 (710,782) 268,575 32,447 (264,323) (48,899) - - - NET POSITION, BEGINNING OF YEAR 6,715,220 1,761,399 6,008,979 192,867 301,827 14,980,292 526,640 NET POSITION, END OF YEAR 6,774,934 $ 1,847,122 $ 5,298,197 $ 461,442 $ 334,274 $ 14,715,969 $ 477,741 $ 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, 2019 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 9/30/2019 Funds Funds Funds CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 96,724 $ 135,468 $ 903,379 $ 250,694 $ 205,333 $ 1,591,598 $ 2,238,783 $ Interest on Delinquent Taxes 262,777 - - - - 262,777 - Net Delinquent Taxes Collected (Purchased) 66,494 - - - - 66,494 - Payments to Suppliers (35,541) (38,892) (871,566) (297,982) (338,975) (1,582,956) (1,671,042) Payments to Employees for Services and Benefits (63,533) (63,909) (147,286) (540,055) - (814,783) (601,950) Net Cash Provided (Used) by Operating Activities 326,921 32,667 (115,473) (587,343) (133,642) (476,870) (34,209) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: State Grants - - - 420,899 - 420,899 - Federal Grants - - - 207,576 - 207,576 - Property Tax - - - 316,273 - 316,273 - Other 3,679 106,308 - 10,821 102,130 222,938 - Transfers In - - 90,000 - 22,000 112,000 - Transfers Out (497,475) (106,325) - - - (603,800) - Net Cash Provided (Used) by Noncapital and Related Financing Activities (493,796) (17) 90,000 955,569 124,130 675,886 - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Proceeds from Sale of Capital Assets - - - 3,051 - 3,051 - Acquisition of Capital Assets - - - (433,510) - (433,510) - Federal Capital Grant - - - 96,932 - 96,932 - State Capital Grant - - - 336,578 - 336,578 - Net Cash Provided (Used) by Capital and Related Financing Activities - - - 3,051 - 3,051 - CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings 392,722 47,512 2,809 - 1,926 444,969 2,466 Net Cash Provided (Used) by Investing Activities 392,722 47,512 2,809 - 1,926 444,969 2,466 Net Increase (Decrease) in Cash and Equivalents 225,847 80,162 (22,664) 371,277 (7,586) 647,036 (31,743) Balances - Beginning of the Year 5,309,444 1,770,720 44,788 223,723 282,670 7,631,345 444,850 Balances - End of the Year 5,535,291 $ 1,850,882 $ 22,124 $ 595,000 $ 275,084 $ 8,278,381 $ 413,107 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) 160,788 $ 38,228 $ (803,591) $ (1,225,685) $ (93,609) $ (1,923,869) $ (51,365) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - - 593,221 113,085 12,301 718,607 - Change in Assets and Liabilities: Taxes Receivable 66,494 - - - - 66,494 - Interest Receivable (1,996) - - - - (1,996) - Accounts Receivable (838) (11,101) 23,658 1,906 (11,460) 2,165 3,020 Interfund Advances, Payables, & Receivables 99,999 - (11,733) - - 88,266 - Prepaid Items - - - - (1,837) (1,837) 21,287 Inventory - - 26,014 - - 26,014 - Other Assets - - - - 3,025 3,025 - Accounts Payable 1,806 4,871 52,768 433,835 (42,062) 451,218 (8,389) Accrued Liabilities 668 669 4,190 - - 5,527 1,238 Change in Pension Liability and Deferred Amounts - - - 89,516 - 89,516 - Net Cash Provided (Used) by Operating Activities 326,921 $ 32,667 $ (115,473) $ (587,343) $ (133,642) $ (476,870) $ (34,209) $ Business-type Activities - Enterprise Funds Major County of Otsego, Michigan Statement of Cash Flows Proprietary Funds For the Year Ended December 31, 2019 See accompanying notes to financial statements. 17 ---PAGE BREAK--- County of Otsego, Michigan Agency Funds ASSETS: Cash and Equivalents 2,227,582 $ TOTAL ASSETS 2,227,582 $ LIABILITIES: Undistributed Tax Collections 960,601 $ Bonds, Restitutions and Payables to Others 1,266,981 TOTAL LIABILITIES 2,227,582 $ Statement of Fiduciary Net Position Fiduciary Funds December 31, 2019 See accompanying notes to financial statements. 18 ---PAGE BREAK--- Component Units ---PAGE BREAK--- Commission Road Ambulance on Aging Commission Corporation 9/30/2019 Totals ASSETS: Cash and Equivalents 4,942,746 $ (12,463) $ 827,933 $ 21,650 $ 5,779,866 $ Investments - 17,000 - 163,994 180,994 Receivables: Taxes 1,111,517 1,012,400 - 325,160 2,449,077 Accounts (Net of Allowance) 1,274,104 405,845 23,549 30,644 1,734,142 Inventories 712,049 - 2,515 7,221 721,785 Prepaid Items 313,738 - - - 313,738 Capital Assets (Not Depreciated) 12,458,773 - - - 12,458,773 Capital Assets (Net of Accumulated Depreciation) 24,530,057 1,532,761 - - 26,062,818 TOTAL ASSETS 45,342,984 2,955,543 853,997 548,669 49,701,193 DEFERRED OUTFLOWS OF RESOURCES Pension Related Items 89,923 - - - 89,923 LIABILITIES: Accounts Payable 208,930 22,633 15,431 2,060 249,054 Accrued Liabilities 122,464 5,313 44,121 1,960 173,858 Due to Governmental Units 237,771 - - - 237,771 Advance from Governmental Units 558,419 - - - 558,419 Unearned Revenues - - - 31,232 31,232 Installment Notes Payable - Due within one year 270,497 - - - 270,497 Installment Notes Payable - Due in more than one year 132,312 - - - 132,312 Advance from Primary Government - 341,995 - - 341,995 Net Pension Liabilities- Due in more than one year 4,394,395 - - - 4,394,395 (OPEB) Labilities - Due in more than one year 4,532,928 - - - 4,532,928 Vested Employee Benefits - Due in more than one year 254,330 - - - 254,330 TOTAL LIABILITIES 10,712,046 369,941 59,552 35,252 11,176,791 DEFERRED INFLOWS OF RESOURCES: Pension & OPEB Related Items 170,039 - - - 170,039 Taxes Levied for a Subsequent Period 1,111,517 1,012,400 - 325,160 2,449,077 Total Deferred Inflows of Resources 1,281,556 1,012,400 - 325,160 2,619,116 NET POSITION: Net Investment in Capital Assets 36,586,021 - - 36,586,021 Restricted for Ambulance and Emergency Services - 1,573,202 - - 1,573,202 Restricted for - - - 188,257 188,257 Restricted for Commission on Aging - - 794,445 - 794,445 Unrestricted (3,146,716) - - - (3,146,716) TOTAL NET POSITION 33,439,305 $ 1,573,202 $ 794,445 $ 188,257 $ 35,995,209 $ County of Otsego, Michigan Statement of Net Position Component Units December 31, 2019 See accompanying notes to financial statements. 19 ---PAGE BREAK--- Operating Capital Commission Charges for Grants and Grants and Road Ambulance on Aging Functions/Programs Expenses Services Contributions Contributions Commission Corporation 9/30/2019 Total Road Commission: Public Works 7,564,725 $ 2,815,913 $ 4,982,829 $ 2,994,478 $ 3,228,495 $ - $ - $ - $ 3,228,495 $ Ambulance Corporation: Health and Welfare 2,518,390 1,471,165 70,754 - - (976,471) - - (976,471) Commission on Aging 9/30/2019: Health and Welfare 2,066,848 121,192 490,920 - - - (1,454,736) - (1,454,736) Recreation and Culture 845,284 555,382 - - - - - (289,902) (289,902) Total Component Units 12,995,247 $ 4,963,652 $ 5,544,503 $ 2,994,478 $ 3,228,495 (976,471) (1,454,736) (289,902) 507,386 General Revenues: Property Tax 1,104,720 989,128 1,266,209 317,201 3,677,258 Investment Earnings - 4,102 11,409 5,341 20,852 Other - 6,981 172,274 2,233 181,488 Total General Revenues 1,104,720 1,000,211 1,449,892 324,775 3,879,598 Changes in Net Position 4,333,215 23,740 (4,844) 34,873 4,386,984 Net Position - Beginning 29,106,090 1,549,462 799,289 153,384 31,608,225 Net Position - Ending 33,439,305 $ 1,573,202 $ 794,445 $ 188,257 $ 35,995,209 $ Net (Expense) Revenue and Changes in Net Position County of Otsego, Michigan Statement of Activities Component Units For the Year Ended December 31, 2019 Program Revenues See accompanying notes to financial statements. 20 ---PAGE BREAK--- Notes to Financial Statements ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 21 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, 2019 22 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, 2020.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 2019 was $233,412. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 23 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Joint Ventures (Continued) Financial information as of September 30, 2019 (the most recent audited financial statements) is as follows: Assets $ 7,309,507 Deferred outflows of resources 337,230 Liabilities 4,149,648 Deferred inflows of resources 374,550 Net position 3,122,539 Change in net position (1,188,781 ) Participant payments Total participant payments 1,059,229 County of Otsego 233,412 County of Otsego percentage of total 22% Michigan Technical Education Center - Kirtland Community College, a community college district established pursuant to the provisions of Public Act 331 of 1996, obtained funding through the Michigan Economic Development Corporation ("MEDC") to construct and equip Michigan Technical Education Center ("M-TEC"), an educational facility in Otsego County. On December 7, 1999, the electors of the County authorized a tax levy not to exceed .6464 mills for a period of twenty years for the purpose of generating funds to operate the facility. The facility provides vocational, technical, job skills, or workforce development programs and services. Pursuant to the operating agreement, Kirtland established an advisory board (which includes representatives of the County) and is to report its preliminary, final, and amended M-TEC budgets to the County's board. Financial records for M-TEC are recorded and maintained by the Kirtland Community College and are audited separately. M-TEC is used in conjunction with and occupied by the University Center established and operated by the University Center of Gaylord, a non-profit corporation. North Country Community Mental Health Authority (the "CMH Authority") - The CMH Authority consists of the counties of Antrim, Charlevoix, Cheboygan, Emmet, Kalkaska, and Otsego. Financial records for the CMH Authority are recorded and maintained by the Authority and audited separately. The funding formula for the community mental health operations and services is in accordance with an agreement approved by each county. The current agreement provides that each county will pay at an agreed upon rate. The Otsego County 2019 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, 2019 24 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, 2019, except for the following component unit and enterprise fund: Fund Fund Presentation Fiscal Year End Commission on Aging Component Unit September 30, 2019 Bus System Enterprise Fund September 30, 2019 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, 2019 25 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 2019 taxable valuation of the County of Otsego totaled $1,296,529,445, 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, 0.6464 mills for M-Tec Operations, and 0.5569 mills for UN 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-tech and UN Center of Gaylord levies as these are run through the agency funds. The County reports the following major governmental funds: General Fund This is the County’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Housing Commission Fund This fund accounts for grant revenue and contributions restricted for the improvement of housing within the County. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 26 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Park & Recreation Fund This fund accounts for grant revenue, taxes, charges for service, and contributions restricted for the maintenance and operations of parks and recreational activities within the County. The Public Improvement Fund This fund accounts for and reports financial resources that are committed to expenditure and internal lending for the purposes of capital improvements. The county report 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 Bus System Fund This fund accounts for the operation of the public transit system. The Airport Fund This fund accounts for the financial activity of the Gaylord Regional Airport. 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, 2019 27 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Agency Funds Agency Funds are used to account for assets held by the County as an agent for individuals, private organizations, other governments, and/or other funds. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the government’s tax collection function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenue include: charges to customers or applicants for goods, services or privileges provided; operating grants and contributions; and capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes. Proprietary funds distinguish operating revenue and expenses from nonoperating items. Operating revenue and expenses generally result from providing services in connection with a proprietary fund’s principal ongoing operations. The principal operating revenue of our proprietary funds relate to charges to customers for tax collections. Operating expenses for proprietary funds include the cost of sales and services, and administrative expenses. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. D - Assets, Liabilities, Deferred Outflows/Inflows of Resources and Net Position/Fund Balance Bank Deposits and Investments – Deposits and investments are considered to be cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income from all funds is allocated to each fund based on the average cash balances. Deposits are recorded at cost. Receivables and Payables – In general, outstanding balances between funds are reported as “due to/from other funds.” Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as “advances to/from other funds. Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as “internal balances.” All trade and property tax receivables are shown as net of allowance for uncollectible amounts. Property taxes are levied on each December 1st and July 1st on the taxable valuation of property as of the preceding December 31st. Taxes are considered delinquent on March 1st of the following year, at which time penalties and interest are assessed. The accounts receivable for the Ambulance Corporation component unit is presented net of allowance for doubtful accounts of $454,000. 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, 2019 28 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, 2019 29 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 $63,680 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 $4,959,069 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 $4,173,694 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, 2019 30 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. Unassigned fund balance of the general fund includes $1,503,077 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, 2019 31 NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (Continued) e. The budget and approved appropriations lapse at the end of the fiscal year. f. The County does not record encumbrances in the accounting records during the year as normal practice and, therefore, no outstanding encumbrances exist at year end. Budgeted amounts are as originally adopted or amended by the Board of Commissioners during the year. Individual amendments were not material in relation to the original appropriations which were amended. The modified accrual basis of accounting is used for budgetary purposes. The General Fund revenue budget was adopted on the basis of activities or programs financed by the General Fund. Michigan Public Act 621 of 1978 (the Budgeting Act) requires that budgets be adopted for Governmental Funds. U.S. generally accepted accounting principles require that the financial statements present budgetary comparisons for the Governmental Fund Types for which budgets were legally adopted. The original budget adopted for the General fund was modified throughout the year through various budget amendments. The budget document presents information by fund, function, department and line items. The legal level of budgetary control adopted by the governing body is the department level. NOTE 3 - DEPOSITS AND INVESTMENTS At year end, the County’s deposits and investments were reported in the basic financial statements in the following categories: Governmental Business-type Total Primary Fiduciary Component Activities Activities Government Funds Units Cash Equivalents - Unrestricted $ 14,558,837 $ 8,278,381 $ 22,837,218 $ 2,227,582 $ 5,960,860 Total $ 14,558,837 $ 8,278,381 $ 22.837,218 $ 2,227,582 $ 5,960,860 The breakdown between deposits and investments is as follows: Primary Fiduciary Component Government Funds Units Bank Deposits (checking and savings accounts, and money markets) $ 11,021,486 $ 2,227,582 $ 5,777,474 Investments 11,803,152 - 180,994 Petty Cash and Cash on Hand 12,580 - 2,392 Total $ 22,837,218 $ 2,227,582 $ 5,960,860 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 32 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) Maturities in Years Fair Value Less Than 1 1 – 5 6 – 10 More Than 10 Investments: CD’s $ 1,439,013 $ 1,255,640 $ 183,373 $ - $ - Governmental Fixed Income 9,853,372 - - - 9,853,372 Commercial Paper 510,767 510,767 - - - Total Investments $ 11,803,152 $ 1,766,407 $ 183,373 $ - $ 9,853,372 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, 2019: Fund Name Ticker/CUSIP S&P Rating Governmental Fixed Income multiple AAA+ Commercial Paper MUFG BK LTD A1 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, $10,675,837 of the County’s bank balance of $12,258,100 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, 2019 33 NOTE 3 - DEPOSITS AND INVESTMENTS (Continued) The County has the following fair value measurements as of December 31, 2019: Total Level 1 Level 2 Level 3 Governmental Fixed Income $ 9,853,372 $ - $ 9,853,372 $ - Commercial Paper 510,767 - 510,767 - CD’s* 1,439,013 - - - Total $ 11,803,152 $ - $ 10,364,139 $ - *CD’s are exempt from classification in the fair value hierarchy. Statutory Authority: An act (PA 152) to amend 1943 PA 20, entitled “An act relative to the investment of funds of public corporations of the state; and to validate certain investments,” by amending section 1 (MCL 129.91), as amended by 2009 PA 21. Except as provided in section 5, the governing body by resolution may authorize its investment officer to invest the funds of that public corporation in one or more of the following: a. Bonds, securities, and other obligations of the United States or an agency or instrumentality of the United States. b. Certificates of deposit, savings accounts, or depository receipts of a financial institution, but only if the financial institution complies with subsection certificates of deposit obtained through a financial institution as provided in subsection or deposit accounts of a financial institution as provided in subsection c. Commercial paper rated at the time of purchase within the two highest classifications established by not less than two standard rating services and matures not more than 270 days after the date of purchase. d. Repurchase agreements consisting of instruments listed in subdivision e. Bankers’ acceptances of United States banks. f. Obligations of this state or any of its political subdivisions that at the time of purchase are rated as investment grade by not less than one standard rating service. g. Mutual funds registered under the investment company act of 1940, 15 USC 80a-1 to 80a-64, with authority to purchase only investment vehicles that are legal for direct investment by a public corporation. However, a mutual fund is not disqualified as a permissible investment solely by reason of any of the following: The purchase of securities on a when-issued or delayed delivery basis. (ii) The ability to lend portfolio securities as long as the mutual fund receives collateral at all times equal to at least 100% of the value of the securities loaned. (iii) The limited ability to borrow and pledge a like portion of the portfolio’s assets for temporary or emergency purposes. h. Obligations described in subdivisions through if purchased through an interlocal agreement under the urban cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512. i. Investment pools organized under the surplus funds investment pool act, 1982 PA 367, MCL 129.111 to 129.118. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 34 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 $ 2,436,427 $ 302,315 $ 62,990 $ 2,801,732 Construction in Progress 2,771,224 769,704 (78,319 ) 3,462,609 Subtotal 5,207,651 1,072,019 (15,329 ) 6,264,341 Capital assets being depreciated: Buildings 17,194,638 740,042 15,329 17,950,009 Leasehold Improvements 24,854 - - 24,854 Furniture & Fixtures 895,452 - - 895,452 Equipment: Data Handling 2,026,681 - - 2,026,681 Other Equipment 2,637,503 - - 2,637,503 Vehicles 1,687,835 251,994 - 1,939,829 Infrastructure 37,130 - - 37,130 Subtotal 24,504,093 992,036 15,329 25,511,458 Less accumulated depreciation for: Buildings (11,602,180 ) (584,037 ) - (12,186,217 ) Leasehold improvements (24,854 ) - - (24,854 ) Furniture & Fixtures (808,371 ) (45,116 ) - (853,487 ) Equipment: Data Handling (1,783,673 ) (59,842 ) - (1,843,515 ) Other Equipment (1,222,483 ) (110,687 ) - (1,333,170 ) Vehicles (1,508,979 ) (108,962 ) - (1,617,941 ) Infrastructure (18,966 ) (1,997 ) - (20,963 ) Subtotal (16,969,506 ) (910,641 ) - (17,880,147 ) Net Capital Assets Being Depreciated 7,534,587 81,395 15,329 7,631,311 Capital Assets – Net $ 12,742,238 $ 1,153,414 $ - $ 13,895,652 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 35 NOTE 4 - CAPITAL ASSETS (Continued) Depreciation expense was charged to programs of the primary government as follows: Governmental Activities: General Government $ 354,758 Public Safety 181,729 Recreation and Culture 374,154 Total Governmental Activities $ 910,641 Beginning Adjustments/ Ending Balances Additions Deductions Balances Business-type Activities: Capital assets not being depreciated: Land $ 99,998 $ - $ - $ 99,998 Capital assets being depreciated: Buildings 2,641,858 - - 2,641,858 Furniture & Fixtures 6,000 - - 6,000 Vehicles 2,087,470 416,760 (67,275 ) 2,436,955 Equipment 375,477 16,750 - 392,227 Infrastructure 12,779,602 - - 12,779,602 Subtotal 17,890,407 433,510 (67,275 ) 18,256,642 Less accumulated depreciation for: Buildings (1,424,510 ) (105,503 ) - (1,530,013 ) Furniture & Fixtures (6,000 ) - - (6,000 ) Vehicles (1,749,925 ) (72,272 ) 67,275 (1,754,922 ) Equipment (263,822 ) (24,027 ) - (287,849 ) Infrastructure (7,972,689 ) (516,805 ) - (8,489,494 ) Subtotal (11,416,946 ) (718,607 ) 67,275 (12,068,278 ) Net Capital Assets Being Depreciated 6,473,461 (285,097 ) - 6,188,364 Capital Assets – Net $ 6,573,459 $ (285,097 ) $ - $ 6,288,362 Depreciation expense was charged to the business-type activities as follows: Business-type Activities: Bus System 9/30/2019 $ 113,085 Airport 593,221 University Center Metropolitan Area Network 12,301 Total Business-Type Activities $ 718,607 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 36 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 Not Being Depreciated: Construction in Progress $ 19,648 $ - $ (19,648) $ - Capital Assets Being Depreciated: Buildings 1,600,544 - - 1,600,544 Other Equipment 692,445 6,300 - 698,745 Vehicles 2,270,900 176,833 19,648 2,467,381 Subtotal 4,563,889 183,133 19,648 4,766,670 Less Accumulated Depreciation: Buildings (743,066 ) (64,022 ) - (807,088 ) Other Equipment (609,052 ) (26,593 ) - (635,645 ) Vehicles (1,639,245 ) (151,931 ) - (1,791,176 ) Subtotal (2,991,363 ) (242,546 ) - (3,233,909 ) Net Capital Assets Being Depreciated 1,572,526 (59,413 ) 19,648 1,532,761 Total Net Capital Assets $ 1,592,174 $ (59,413 ) $ - $ 1,532,761 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 01/01/19 Additions Deductions 12/31/19 Capital Assets Not Being Depreciated Land $ 125,501 $ - $ - $ 125,501 Land Improvements – Infrastructure 11,521,618 811,654 - 12,333,272 Subtotal 11,647,119 811,654 - 12,458,773 Capital Assets Being Depreciated Buildings 3,936,130 - - 3,936,130 Road Equipment 7,656,680 427,678 20,000 8,064,358 Shop Equipment 106,679 - - 106,679 Office Equipment 42,047 9,127 4,328 46,846 Engineers’ Equipment 13,562 - - 13,562 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 49,557 - - 49,557 Infrastructure – Bridges 1,112,301 - - 1,112,301 Infrastructure – Roads 33,949,125 2,182,824 184,252 35,947,697 Subtotal 46,867,881 2,619,629 208,580 49,278,930 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 37 NOTE 4 - CAPITAL ASSETS (Continued) Beginning Ending Balances Adjustments/ Balances 01/01/19 Additions Deductions 12/31/19 Less Accumulated Depreciation Buildings 1,978,308 87,242 - 2,065,550 Road Equipment 6,023,392 657,907 19,582 6,661,717 Shop Equipment 103,661 2,006 - 105,667 Office Equipment 40,261 2,018 4,328 37,951 Engineers’ Equipment 13,562 - - 13,562 Yard and Storage Equipment 1,800 - - 1,800 Traffic Signals 45,716 320 - 46,036 Infrastructure – Bridges 333,949 26,699 - 360,648 Infrastructure – Roads 13,923,486 1,716,708 184,252 15,455,942 Subtotal 22,464,135 2,492,900 208,162 24,748,873 Net Capital Assets Being Depreciated 24,403,746 126,729 (418 ) 24,530,057 Capital Assets - Net $ 36,050,865 $ 938,383 $ (418 ) $ 36,988,830 OTSEGO COUNTY COMMISSION ON AGING Capital asset activity of the Otsego County Commission on Aging for the current year was as follows: Beginning Adjustments/ Ending Balances Additions Deductions Balances Capital assets being depreciated: Leasehold Improvements & Equipment $ 140,189 $ - $ - $ 140,189 Less accumulated depreciation (140,189 ) - - (140,189 ) Net Capital Assets $ - $ - $ - $ - NOTE 5 - RECEIVABLES Governmental Business-type Component Activities Activities Units Accounts $ 376,100 $ 78,753 $ 2,188,142 Less: Allowance for uncollectible accounts - - (454,000) Property taxes 3,109,047 958,770 2,449,077 Due from other governments 760,763 - - Loans 1,460,047 - - Interest - 145,326 - Totals $ 5,705,957 $ 1,182,849 $ 4,183,219 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 38 NOTE 6 - INTERFUND RECEIVABLES, PAYABLES, & TRANSFERS The composition of interfund balances as of December 31, 2019, was as follows: Due to and from primary government funds Due from Other Funds Due to Other Funds Housing Commission $ - $ 4,500 General 4,000 - Nonmajor Governmental 500 $ 4,500 $ 4,500 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. Interfund advances - primary government Advance to Other Funds Advance From Other Funds Public Improvement Capital Project $ 9,111 $ - Airport - 9,111 $ 9,111 $ 9,111 Advances to and from component units Advance to Component Unit Advance From Primary government Public Improvement Capital Project Fund $ 186,995 $ - Delinquent Tax Revolving Fund 155,000 - Ambulance - 341,995 $ 341,995 $ 341,995 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 39 NOTE 6 - INTERFUND RECEIVABLES, PAYABLES, & TRANSFERS (Continued) For the year ended December 31, 2019, interfund transfers consisted of the following: Transfers In Transfers Out General Fund $ 159,135 $ 912,706 Housing Commission 98,538 99,048 Nonmajor Governmental Funds 1,998,256 752,375 Delinquent Tax Fund - 497,475 Tax Foreclosure - 106,325 Airport 90,000 - Nonmajor Enterprise Funds 22,000 - $ 2,367,929 $ 2,367,929 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. NOTE 7 - LONG-TERM DEBT Changes in Long-term Debt. Long-term liability activity for the year ended December 31, 2019, was as follows: Due Interest Principal Beginning Ending Within Rate Matures Balance Increases Decreases Balance One Year Governmental Activities: Otsego County Building Authority Series 2017 Bonds, maturing serially in annual installments ranging from $360,000 to $395,000. 1.75-2.0% 2022 $ 1,530,000 $ - $ (370,000 ) $ 1,160,000 $ 380,000 . Otsego County Building Authority Series 2010 Bonds, maturing serially in annual installments ranging from $20,000 to $240,000. 2.0-4.0% 2020 460,000 - (220,000 ) 240,000 240,000 Otsego County Building Authority Series 2011 Bonds, issued on behalf of Otsego County Road Commission maturing serially in annual installments ranging from $35,000 to $65,000. 3.25-5.0% 2031 655,000 - (655,000 ) - - ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 40 NOTE 7 - LONG-TERM DEBT (Continued) Due Interest Principal Beginning Ending Within Rate Matures Balance Increases Decreases Balance One Year Otsego County Brownfield Redevelopment Authority loan, maturing in semiannual installments ranging from $47,472 to $48,148. 1.5% 2024 101,366 - (101,366 ) - - Equipment purchase agreement installments of $952 including interest of .44%, secured by related equipment. 0.44% 2019 10,197 - (10,197 ) - - Total Installment Debt 2,756,563 - (1,356,563 ) 1,400,000 620,000 Premium on Bond Issuance 14,038 - (3,510 ) 10,528 3,510 Accrued Compensated Absences 195,707 18,490 - 214,197 - Total Governmental Activities Debt $ 2,966,308 $ 18,490 $ (1,360,073 ) $ 1,624,725 $ 623,510 Annual debt service requirements to maturity for the above obligations are as follows: Bonds Payable Year End December 31 Principal Interest 2020 $ 620,000 $ 27,050 2021 780,000 23,500 Total $ 1,400,000 $ 50,550 Vested Employee Benefits – Governmental Activities Substantially all County employees are entitled to certain vacation and sick pay benefits that accrue and vest under various parameters including individual labor contracts. Accrued benefits for all governmental fund types are reported as long-term debt. OTSEGO COUNTY ROAD COMMISSION The long-term debt of the Road Commission is summarized as follows: Due Balance Balance Within 01/01/19 Additions Reductions 12/31/19 One Year Otsego County Building Authority Bonds Payable – 2011 Series, payable general obligation, serial maturity, 3.25% to 5.00% interest, due June 2031. $ 655,000 $ - $ 655,000 $ - $ - ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 41 NOTE 7 - LONG-TERM DEBT (Continued) Balance Balance Within 01/01/19 Additions Reductions 12/31/19 One Year Installment payable secured by equipment, payable in installments of $1,748 including interest of 2.19%, due 2020. 184,686 - 17,141 167,545 167,545 Installment payable secured by equipment, payable in installments of $113 including interest of 2.69%, due 2020. 93,666 1,177 130 94,713 94,713 Installment payable secured by equipment, payable in annual installments of $14,122 including interest of 4.18%, due 2023. 81,659 67,150 8,258 140,551 8,239 Subtotal 1,015,011 68,327 680,529 402,809 $ 270,497 Vested Employee Benefits 252,218 2,112 - 254,330 TOTAL LONG-TERM DEBT $ 1,267,229 $ 70,439 $ 680,529 $ 657,139 Net increase. Installments Payable Year End December 31 Principal Interest 2020 $ 270,497 $ 7,817 2021 8,588 5,534 2022 8,952 5,170 2023 114,772 4,790 Total $ 402,809 $ 23,311 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. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 42 NOTE 8 - RISK MANAGEMENT (Continued) 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, 2019, the balance of the County's member retention was $383,437. Changes in the balances of claims liabilities are as follows: Fiscal Year Ended December 31, 2019 2018 Estimated liability, beginning of year $ 17,188 $ 12,160 Receipts 61,019 60,652 Estimated claims incurred (44,501) (44,888) Claim payments (3,180) (10,736) Estimated liability, end of year $ 30,526 $ 17,188 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, 2019 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, 2019 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, 2019, 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, 2019 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, 2019, 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, 2019, Otsego County property taxes were reduced by $11,317 under this program. Bagley Township Tax Abatements: For the year ended December 31, 2019, Otsego County property taxes were reduced by $6,393 under this program. Corwith Township Tax Abatements: For the year ended December 31, 2019, Otsego County property taxes were reduced by $1,722 under this program. Livingston Township Tax Abatements: For the year ended December 31, 2019, Otsego County property taxes were reduced by $1,207 under this program. Commercial Facilities Exemption Municipalities within the County's boundaries entered into property tax abatement agreements with local businesses under the Commercial Redevelopment Act, known as the Commercial Facilities Exemption (CFT) PA 255 of 1978, as amended. The purpose of the exemption is to provide a tax incentive to businesses to establish themselves in the designated commercial redevelopment district. CFT on such properties have resulted in an abatement of property taxes which reduced the property taxes collected by Otsego County and its component units as follows: City of Gaylord Tax Abatements: For the year ended December 31, 2019, Otsego County property taxes were reduced by $3,234 under this program. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 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, 2019, Otsego County property taxes were reduced by $595 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, 2019 46 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 01 – Gnrl Non Union: Closed to new hires, linked to Division HB 2018 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 07 – Library NonUnion: Open Division 2018 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, lined to Division HF 2018 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 1.00% Act 88: No 11 – POAM: Closed to new hires, linked to Division HC 2018 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, 2019 47 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 13 – Elected/Appt Spvs: Closed to new hires, linked to Division HA 2018 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 2.00% Act 88: No 14 – 46th Trial Court: Closed to new hires, linked to Division HD 2018 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 16 – Gnrl Local 214 Clerical: Closed to new hires, linked to Division HE 2018 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 2.00% Act 88: No 17 – 87-A Judge/FOC pre 9/1/14: Closed to new hires, Linked to Division HD 2018 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% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 48 Act 88: No NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) 20 – Sheriff Union: Closed to new hires, linked to Division HG 2018 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 2018 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 2018 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: Open Division, linked to Division 13 2018 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 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 49 HB – General Non Union after 1/1/09: Open Division, linked to Division 01 2018 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 HC – POAM hired after 1/1/11: Open Division, linked to Division 11 2018 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: Open Division, link to Divisions 14, 17 2018 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 HE – Clerical Loc#214 af 1/1/2012: Open Division, linked to Division 16 2018 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 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 50 HF – Bus hired af 1/1/2011: Open Division, linked to Division 10 2018 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 HG – All FT POLC on/aftr 1/1/16: Open Division, linked to Divisions 20, 21 2018 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, 2018, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 111 Inactive employees entitled to but not yet receiving benefits 56 Active employees 109 276 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 $ 7,455 21 $ 1,068 07 $ 1,481 70 $ 298 10 $ 4,629 HA $ 1,809 11 $ 2,213 HB $ 2,564 13 $ 21,436 HC $ 1,257 14 $ 9,197 HD $ 1,993 16 $ 3,377 HE $ 694 17 $ 2,039 HF $ 1,167 20 $ 9,565 HG $ 339 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 51 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Net Pension Liability The County’s net pension liability was measured as of December 31, 2018, 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, 2018 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.5% Salary increases 3.75% in the long-term Investment rate of return 7.75%, net of investment and administrative expense including inflation Mortality rates used were based on the RP-2014 Group Annuity Mortality Table of a 50% Male and 50% Female blend. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of 2009-2013. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Global Equity 55.5% 3.41% Global Fixed Income 18.5% 0.23% Real Assets 13.5% 0.97% Diversifying Strategies 12.5% 0.63% Discount Rate. The discount rate used to measure the total pension liability is 8.00% for 2018. 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, 2019 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, 2017 22,608,641 $ 15,223,354 $ 7,385,287 $ Service cost 370,158 - 370,158 Interest on total pension liability 1,767,809 - 1,767,809 Changes in benefits 391 - 391 Difference between expected and actual experience 11,745 - 11,745 Changes in assumptions - - - Employer contributions - 1,128,063 (1,128,063) Employee contributions - 46,517 (46,517) Net investment income - (598,116) 598,116 Benefit payments, including employee refunds (1,392,250) (1,392,250) - Other 14,309 (12,290) 26,599 Administrative expense - (29,330) 29,330 Net changes 772,162 (857,406) 1,629,568 Balances as of December 31, 2018 23,380,803 $ 14,365,948 $ 9,014,855 $ 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 8.00%, 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 (7.00%) or 1- percentage-point higher (9.00%) than the current rate: 1% Decrease Current Discount Rate 1% Increase (7.00%) (8.00%) (9.00%) County’s net pension liability $11,563,085 $9,014,855 $6,845,078 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, 2019 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, 2019, the County recognized pension expense of $1,636,642. At December 31, 2019, 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 - $ 181,166 $ Changes in assumptions - - Net difference between projected and actual earnings on pension plan investments 1,087,847 - Contributions subsequent to the measurement date 1,048,806 - Total 2,136,653 $ 181,166 $ 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 September 30: 2020 $ 226,682 2021 99,889 2022 218,891 2023 361,219 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, 2018. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 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 2018 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 2018 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 2018 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, 2019 55 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Employees Covered by Benefit Terms At December 31, 2019, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 50 Inactive employees entitled to but not yet receiving benefits 9 Active employees 31 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 blended rate for 2019 of 33.65% of nonunion payroll and 27.20% of general employees. Net Pension Liability The Road Commission’s net pension liability was measured as of December 31, 2019, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. Actuarial Assumptions. The total pension liability in the December 31, 2019 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50 % Salary increases 3.75 % Investment rate of return 7.75 net of interest and administrative expense including inflation Mortality rates used were based on the RP-2014 Mortality Table of a 50% Male and 50% Female blend. The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience study of January 1, 2009, through December 31, 2013. The long-term expected rate of return on pension plan investments was determined using a model method in which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and administrative expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Asset Class Target Allocation Real Rate of Return Global Equity 55.5% 3.42% Global Fixed Income 18.5% 0.23% Real Assets 13.5% 0.97% Diversifying Strategies 12.5% 0.63% ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 56 NOTE 12 - EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (Continued) Discount Rate. The discount rate used to measure the total pension liability is 8.00% for 2019. 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, 2018 12,807,573 $ 7,163,277 $ 5,644,296 $ Service cost 181,390 - 181,390 Interest on total pension liability 997,328 - 997,328 Changes in benefits - - - Difference between expected and actual experience (187,144) - (187,144) Changes in assumptions - - - Employer contributions - 1,135,488 (1,135,488) Employee contributions - 87,733 (87,733) Net investment income - 1,016,274 (1,016,274) Benefit payments, including employee refunds (863,330) (863,330) - Administrative expense - (17,601) 17,601 Other changes (19,581) - (19,581) Net changes 108,663 1,358,564 (1,249,901) Balances as of December 31, 2019 12,916,236 $ 8,521,841 $ 4,394,395 $ 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 (7.00%) (8.00%) (9.00%) Road Commission’s net pension liability $5,727,163 $4,394,395 $3,253,505 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, 2019 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, 2019, the Road Commission recognized pension expense of $684,239. At December 31, 2019, 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 Difference between expected and actual experience 89,923 $ - $ Changes in assumptions - - Net difference between projected and actual earnings on pension plan investments - 136,964 Total 89,923 $ 136,964 $ 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: 2020 $ 62,945 2021 (115,030 ) 2022 90,948 2023 (85,904 ) 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, 2019 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, 2017, the date of the last plan valuation, the County’s healthcare plan covered 29 members of which 10 were active plan members and 19 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 2019, the County contributed $71,219 to the plan. Employees Covered by Benefit Terms As of December 31, 2019, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 18 Inactive employees entitled to but not yet receiving benefits - Active employees 2 Total participants covered by OPEB Plan 20 Total OPEB Liability and Trust Assets - The County’s total OPEB liability of $1,220,934 was measured as of December 31, 2019, and was determined by an actuarial valuation as of that date. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 59 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) As of December 31, 2019, there was $0 in assets in the County’s OPEB trust as the County is treating this a pay-as- you-go plan. Actuarial assumptions and other inputs - The total OPEB liability was determined by an actuarial valuation as of December 31, 2019 and the following actuarial assumptions, applies to all periods included in the measurement: Inflation Included in investment rate Salary Increases 2.0% Investment rate of return NA 20-year Aa Municipal bond rate 3.26% Mortality Public General and Police, Headcount-weighted 2010 Employee and Healthy Retiree with MP-2018 Mortality Improvement Scale Discount Rate - The discount rate used to measure the total OPEB liability was 3.26%. Because the plan does not have a dedicated OPEB trust, there are not assets projected to be sufficient to make projected future benefit payments of current plan members. For projected benefits that are covered by projected assets, the long-term expected rate was used to discount the projected benefits. From the year that benefit payments ere not projected to be covered by the projects assets (“the depletion date”), projected benefits were discounted at a discount rate that reflects a 20-year AA/Aa tax-exempt municipal bond yield. A single equivalent discount rate that yields the same present value of benefits is calculated. This discount rate is used to determine the Total OPEB Liability. The discount rate used as of December 31, 2018 was 3.16%. Total Pension Plan Fiduciary Net Pension Liability Net Position Liability Balances at December 31, 2018 1,930,701 $ - $ 1,930,701 $ Service cost 48,184 - 48,184 Interest 60,282 - 60,282 Change in plan term (510,178) - (510,178) Difference between expected and actual experience (313,823) - (313,823) Assumptions 76,987 - 76,987 Employer contributions - 71,219 (71,219) Net investment income - - - Benfit Payments (71,219) (71,219) - Administrative expense - - - Net changes (709,767) - (709,767) Balances as of December 31, 2019 1,220,934 $ - $ 1,220,934 $ ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 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 $1,345,873 $1,220,934 $1,115,804 Trend 1% Decrease Current Rate 1% Increase Net OPEB Liability $1,115,052 $1,220,934 $1,343,942 OPEB Expense - Components of County’s OPEB Expense for the fiscal year ending December 31, 2019 are as follows: 12/31/2019 Service Cost $ 48,184 Interest on Total OPEB Liability 60,282 Experience (Gains)/Losses (313,823) Changes of Assumptions 98,358 Changes in Plan Terms (510,178) Other Changes in Fiduciary Net Position - Total OPEB Expense $ (617,177) Deferred Outflows and Inflows of Resources Related to OPEB Plan Deferred Deferred Outflows of Inflows of Resources Resources Experience (Gains)/Losses - $ - $ Changes in Assumptions 5,985 - Investment Earnings (Gains)/Losses - - 5,985 $ - $ ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 61 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) 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 September 30: 2020 $ 5,985 2021 - 2022 - 2023 - 2024 - 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 2019, the Commission contributed $769,649 to the plan. Employees Covered by Benefit Terms As of December 31, 2019, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefit payments 37 Inactive employees entitled to but not yet receiving benefits - Active employees 16 Total participants covered by OPEB Plan 53 Total OPEB Liability and Trust Assets - The Road Commission’s total OPEB liability of $5,650,645 was measured as of December 31, 2018, and was determined by an actuarial valuation as of that date. As of December 31, 2019, there was $1,117,717 in assets in the Road Commission’s OPEB trust. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 62 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) Actuarial assumptions and other inputs - The total OPEB liability was determined by an actuarial valuation as of December 31, 2019 and the following actuarial assumptions, applies to all periods included in the measurement: Inflation Included in investment rate of return Salary Increases 3.50% Investment rate of return 7.00% Mortality 2010 Public General Employees and Healthy Retirees, with MP–2019 mortality improvement. 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 63.2% 8.00% Global Fixed Income 30.5% 5.50% Real Assets 3.1% 6.20% Diversifying Strategies 2.1% 2.75% Cash 1.1% 0.50% 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 4.47%. The projection of cash flows used to determine the discount rate assumed that Employer contributions of $400,000 will be made until 40% funded. Based on those assumptions, the retirement plan’s fiduciary net position was not projected to be sufficient to make all projected future benefit payments of current plan members. For projected benefits that are covered by projected assets, the long-term expected rate was used to discount the projected benefits. From the year that benefit payments were not projected to be covered by the projected assets (the “depletion date”), projected benefits were discounted at a discount rate reflecting the 20-year AA/Aa tax-exempt bond yield. A single equivalent discount rate that yields the same present value of benefits is calculated. This discount rate of 3.40% is used to determine the Total OPEB Liability. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 63 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability Balances at December 31, 2018 6,168,545 $ 490,210 $ 5,678,335 $ Change in assumptions (402,224) - (402,224) Service cost 87,279 - 87,279 Interest 208,114 - 208,114 Experience (Gains)/Losses (141,420) - (141,420) Contributions to OPEB Trust - 500,000 (500,000) Contributions paid from operations - 269,649 (269,649) Net investment income - 128,666 (128,666) Benefit payments (269,649) (269,649) - Administrative expense - (1,159) 1,159 Net changes (517,900) 627,507 (1,145,407) Balances as December 31, 2019 5,650,645 $ 1,117,717 $ 4,532,928 $ 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 Total OPEB Liability $ 6,133,329 $ 5,650,645 $ 5,231,789 Plan Fiduciary Net Position 1,117,717 1,117,717 1,117,717 Net OPEB Liability $ 5,015,612 $ 4,532,928 $ 4,114,072 Trend 1% Decrease Current Rate 1% Increase Total OPEB Liability $ 5,174,679 $ 5,650,645 $ 6,193,840 Plan Fiduciary Net Position 1,117,717 1,117,717 1,117,717 Net OPEB Liability $ 4,056,962 $ 4,532,928 $ 5,076,123 ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 64 NOTE 14 - OTHER POST EMPLOYMENT BENEFITS PLAN (Continued) OPEB Expense – Components of Road Commission’s OPEB Expense for the fiscal year ending December 31, 2019 are as follows: Changes in Assumptions $ (402,224 ) Service Cost 87,279 Interest on Total OPEB Liability 208,114 Experience Losses (141,420 ) Projected Earnings on OPEB Plan Investments (51,774 ) Investment Earnings (Gains)/Losses (5,898 ) Administrative Expenses 1,159 Total OPEB Expense $ (304,764 ) Deferred Outflows and Inflows of Resources Related to OPEB Plan Deferred Outflows Deferred Inflows of Resources of Resources Experience (Gains)/Losses $ - $ - Changes of Assumptions - - Investment Earnings (Gains)/Losses - 33,075 Total $ - $ 33,075 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: 2020 (5,898) $ 2021 (5,898) 2022 (5,899) 2023 (15,380) NOTE 15 - SUBSEQUENT EVENT The County has evaluated its December 31, 2019, financial statements for subsequent events through the date the financial statements were issued. As a result of the spread of the COVID19 coronavirus, economic uncertainties have arisen which are likely to negatively impact on charges for service as many of the services have been reduced or halted as a result of the pandemic. This factor may result in a reduction in fund balance and net position in the future periods. Other financial impacts could occur though such potential impacts are unknown at this time. ---PAGE BREAK--- County of Otsego, Michigan Notes to Financial Statements December 31, 2019 65 NOTE 16- RESTATEMENT Governmental General Net Position Fund Beginning net position as previously stated at January 1, 2019 $ 19,100,565 $ 3,735,381 To remove expense recorded in the general fund that should Have been recorded in the MI Indigent Defense Fund - 10,205 Restatement of Fund Balance – change in accounting taxes receivable to book back to revenue to prior year 55,500 55,500 Beginning net position as restated at January 1, 2019 $ 19,156,056 $ 3,801,086 Michigan Indigent Defense Fund Beginning net position as previously stated at January 1, 2019 $ - *To remove the combining of the MI Indigent Defense fund With the general fund and create a new special revenue fund (26,882 ) To remove expense recorded in the general fund that should Have been recorded in the MI Indigent Defense Fund (10,205 ) Beginning net position as restated at January 1, 2019 $ (37,087 ) *This item will only affect the one fund as this fund was removed from the combined total in the current year and does not affect any non-combined fund totals ---PAGE BREAK--- Required Supplementary Information ---PAGE BREAK--- 2018 2017 2016 2015 2014 Total pension liability Service cost 370,158 $ 336,412 $ 349,718 $ 348,000 $ 338,932 $ Interest 1,767,809 1,719,681 1,696,843 1,543,901 1,479,439 Changes in benefits 391 (91,145) (10,695) - - Difference between expected and actual experience 11,745 (48,394) (503,144) 724,207 - Changes in assumptions - - - 1,036,885 - Benefit payments, including refund of member contributions (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Other changes 14,309 (54) - - - Net change in total pension liability 772,162 645,120 322,971 2,548,216 840,003 Total pension liability - beginning 22,608,641 21,963,521 21,640,550 19,092,334 18,252,331 Total pension liability - ending 23,380,803 $ 22,608,641 $ 21,963,521 $ 21,640,550 $ 19,092,334 $ Plan fiduciary net position Contributions - employer 1,128,063 $ 1,096,794 $ 865,641 $ 693,476 $ 640,433 $ Contributions - employee 46,517 30,679 7,937 5,905 3,630 Net investment income (598,116) 1,806,557 1,422,497 (195,083) 800,044 Benefit payments, including refunds of member contributions (1,392,250) (1,271,380) (1,209,751) (1,104,777) (978,368) Administrative expense (29,330) (28,580) (28,053) (28,591) (29,357) Other changes (12,290) (57) - - - Net change in plan fiduciary net position (857,406) 1,634,013 1,058,271 (629,070) 436,382 Plan fiduciary net position - beginning 15,223,354 13,589,341 12,531,070 13,160,140 12,723,758 Plan fiduciary net position - ending 14,365,948 $ 15,223,354 $ 13,589,341 $ 12,531,070 $ 13,160,140 $ County's net pension liability - ending 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 61.4% 67.3% 61.9% 57.9% 68.9% Covered - employee payroll 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 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, 2019 For MERS Years Ending 12/31 Employee Retirement and Benefit Systems See accompanying notes to financial statements 66 ---PAGE BREAK--- 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Actuarially determined contribution 878,063 $ 934,199 $ 856,396 $ 715,641 $ 693,477 $ 640,433 $ 727,962 $ 705,702 $ 565,476 $ 716,885 $ Contributions in relation to the actuarially determined contribution (1,128,063) (1,184,199) (1,106,396) (865,641) (693,477) (640,433) (727,962) (705,702) (565,476) (716,885) Contribution deficiency (excess) (250,000) $ (250,000) $ (250,000) $ (150,000) $ - $ - $ - $ - $ - $ - $ Covered - employee payroll 4,741,881 $ 4,401,566 $ 4,575,021 $ 4,547,735 $ 4,390,047 $ 4,188,926 $ 4,080,889 $ 4,014,917 $ 4,400,424 $ 4,385,025 $ Contributions as a percentage of covered-employee payroll 24% 27% 24% 19% 16% 15% 18% 18% 13% 16% Notes to Schedule: Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation Salary increases Investment rate of return Retirement age Mortality 3.75% in the long-term 7.75%, net of investment and administrative expense including inflation 60 years Assumptions were based on the RP-2014 Group Annuity Mortality Table - Blended 50% Male / 50% Female For MERS Years Ending 12/31 Methods and assumptions used to determine contribution rates Entry age Level percentage of payroll, closed 24 years 10-years smoothed market 2.50% County of Otsego, Michigan Required Supplementary Information Schedule of Employer Contributions For the Year Ended December 31, 2019 Actuarially determined contribution rates are calculated as of December 31st, two years prior to the end of the fiscal year in which contributions are reported. Employee Retirement and Benefit Systems See accompanying notes to financial statements. 67 ---PAGE BREAK--- 2019 2018 Total OPEB Liability - Beginning of Year 1,930,701 $ 1,848,952 $ Service cost 48,184 46,710 Interest 60,282 58,758 Change in Plan Term (510,178) - Assumption changes and differences between actual and expected experience (236,836) 48,727 Benefit payments (71,219) (72,446) OPEB Liability - End of Year 1,220,934 1,930,701 Plan fiduciary net position Contributions - employer 71,219 72,446 Net investment income - - Benefits payments, including refunds of member contributions (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 1,220,934 $ 1,930,701 $ Plan fiduciary net position as a percentage of the total OPEB liability 42.9% 42.9% Covered Payroll 1,259,742 $ 4,401,556 $ Net OPEB liability as a percentage of covered payroll 33.1% 33.1% Schedule of Employer Contributions Actuarially determined employer contribution 155,657 155,520 Employer contribution (71,219) (72,446) Contribution deficiency/(excess) 84,438 83,074 Covered Payroll 4,401,556 $ 4,401,556 $ Contribution as percentage of covered payroll 11.2% 11.2% Notes to Schedule: Actuarial cost method Entry age normal Discount rate 3.26% Salary increases 2.0%, average Investment rate of return NA (pay-as-you-go plan) Healthcare cost trend rate 8.25% in 2020 graded down .25% per year to 4.5% Mortality rate 2010 Public General and Police, headcount-weighted 2010 Employee and Healthy Retirees, with MP-2018 Mortality improvement scale County of Otsego, Michigan Required Supplementary Information Schedule of Changes in OPEB Liability and Related Ratios Year Ended December 31, 2019 Actuarially determined contribution rates are calculated as of December 31, 2019 Methods and assumptions used to determine contribution rates: Employee Retirement and Benefit Systems See accompanying notes to financial statements. 68 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes and Penalties 5,492,797 $ 5,503,486 $ 5,484,784 $ (18,702) $ Licenses and Permits 37,518 48,685 48,719 34 Federal Sources 80,000 86,381 98,706 12,325 State Sources 1,390,007 1,459,757 1,429,464 (30,293) Local Contributions 25,000 25,928 22,418 (3,510) Charges for Services 988,745 1,096,429 1,039,856 (56,573) Fines and Forfeits 12,050 12,050 13,628 1,578 Interest and Rentals 164,005 269,790 272,591 2,801 Other Revenues 295,625 330,743 331,717 974 TOTAL REVENUES 8,485,747 8,833,249 8,741,883 (91,366) EXPENDITURES: Legislative: Board of Commissioners 221,091 216,275 214,752 1,523 Judicial: Circuit Court 1,279,180 1,145,052 898,866 246,186 Lien Fees 15,000 15,000 9,937 5,063 Drug Court 147,920 153,620 127,388 26,232 RDSS Transport 15,000 15,000 5,725 9,275 District Court 7,912 7,912 3,075 4,837 Jury Commission 44,725 69,717 63,437 6,280 Probate Court 194,000 194,000 188,242 5,758 Probation/Parole 1,500 1,500 1,238 262 Prosecuting Attorney 715,819 718,506 702,125 16,381 Family Counseling 4,000 4,000 968 3,032 Total Judicial 2,425,056 2,324,307 2,001,001 323,306 General Government: Administrative Services 246,001 246,001 246,001 - Building and Grounds 325,000 325,000 325,000 - Clerk and Register of Deeds 299,030 312,491 310,672 1,819 Audit Services 13,297 13,297 12,772 525 IT Department 115,650 115,650 106,340 9,310 Equalization 223,991 227,732 225,594 2,138 Treasurer 152,176 152,176 146,503 5,673 Cooperative Extension 63,784 63,784 62,627 1,157 Elections 15,740 26,740 17,692 9,048 Legal Defense 40,000 51,152 49,284 1,868 Human Resources 88,667 88,667 88,667 - Surveyor 200 200 200 - Soil Conservation 4,000 4,000 4,000 - Survey and Remonumentation 55,000 55,000 43,689 11,311 Total General Government 1,642,536 1,681,890 1,639,041 42,849 Public Safety: Sheriff 1,038,107 1,104,127 1,097,335 6,792 Civil Division 88,091 61,711 59,973 1,738 SANE 20,000 20,000 20,000 - Justice Training 3,000 3,000 - 3,000 Marine Safety 8,296 11,230 10,797 433 Safety Education 66,000 66,000 41,822 24,178 Snowmobile 8,271 8,271 4,835 3,436 Secondary Road Patrol 101,063 103,357 96,346 7,011 ORV 7,371 8,871 8,727 144 School Resource Officer 82,644 82,644 56,832 25,812 Jail 1,069,102 1,135,832 1,134,368 1,464 Emergency Services 30,000 30,000 30,000 - Total Public Safety 2,521,945 2,635,043 2,561,035 74,008 For the Year Ended December 31, 2019 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund 69 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) For the Year Ended December 31, 2019 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule General Fund Public Works: Drains 6,000 8,780 8,780 - Health And Welfare: Communicable Diseases 500 500 500 - Medical Examiner 121,600 125,950 77,655 48,295 District Health 233,412 233,412 233,412 - Mental Health 94,003 94,003 94,003 - Soldiers and Sailors Relief 5,000 10,000 5,415 4,585 Veterans' Burial 4,650 4,650 4,602 48 Veterans' Affairs 96,645 125,991 107,015 18,976 Substance Abuse 88,712 88,712 86,422 2,290 Total Health and Welfare 644,522 683,218 609,024 74,194 Community and Economic Development: Planning and Zoning 85,767 112,700 112,642 58 Debt Service: Equipment 8,925 8,925 8,925 - Other Expenditures: Appropriations 23,338 23,338 23,338 - Bonds and Insurance 220,000 221,856 221,856 - Retiree Insurance 57,407 57,407 54,710 2,697 Additional Pension Contribution 55,426 55,426 55,426 - Other 31,675 31,675 31,009 666 Total Other Expenditures 387,846 389,702 386,339 3,363 TOTAL EXPENDITURES 7,943,688 8,060,840 7,541,539 519,301 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 542,059 772,409 1,200,344 427,935 OTHER FINANCING SOURCES (USES): Transfers In 118,625 118,625 159,135 40,510 Transfers Out (611,984) (912,206) (912,706) (500) Total Other Financing Sources (Uses) (493,359) (793,581) (753,571) 40,010 NET CHANGE IN FUND BALANCES 48,700 $ (21,172) $ 446,773 467,945 $ FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 5,343,860 FUND BALANCES END OF YEAR 5,790,633 $ 70 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Federal Sources - $ 170,000 $ 23,403 $ (146,597) $ Local Sources - 30,505 1,246 (29,259) Interest and Rentals - 250 193 (57) Other Revenues - 181,460 92,012 (89,448) TOTAL REVENUES - 382,215 116,854 (265,361) EXPENDITURES: Community and Economic Development - 290,979 124,833 166,146 TOTAL EXPENDITURES - 290,979 124,833 166,146 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) - 91,236 (7,979) (99,215) OTHER FINANCING SOURCES (USES): Transfers In - 114,696 98,538 (16,158) Transfers Out - (209,055) (99,048) 110,007 Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCES - $ (3,123) $ (8,489) (5,366) $ FUND BALANCES BEGINNING OF YEAR 113,002 FUND BALANCES END OF YEAR 104,513 $ For the Year Ended December 31, 2019 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Housing Commission Fund 71 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Interest and Rentals - $ - $ 234 $ 234 $ TOTAL REVENUES - - 234 234 NET CHANGE IN FUND BALANCES - $ - $ 234 234 $ FUND BALANCES BEGINNING OF YEAR 1,845,938 FUND BALANCES END OF YEAR 1,846,172 $ For the Year Ended December 31, 2019 Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Public Improvement 72 ---PAGE BREAK--- Variance with Final Budget - Actual Positive Original Final Amounts (Negative) REVENUES: Taxes 312,656 $ 312,656 $ 317,173 $ 4,517 $ Federal Sources - 15,000 15,000 - Charges for Services 201,300 201,300 214,925 13,625 Interest and Rentals 656 9,673 9,521 (152) Other Revenues 15,800 16,300 26,718 10,418 TOTAL REVENUES 530,412 554,929 583,337 28,408 EXPENDITURES: Recreation & Culture 480,412 509,188 493,405 15,783 Capital Outlay 50,000 56,311 56,311 - TOTAL EXPENDITURES 530,412 565,499 549,716 15,783 NET CHANGE IN FUND BALANCES - $ (10,570) $ 33,621 44,191 $ FUND BALANCES BEGINNING OF YEAR 240,691 FUND BALANCES END OF YEAR 240,691 $ Budgeted Amounts County of Otsego, Michigan Required Supplementary Information Budgetary Comparison Schedule Park and Recreation For the Year Ended December 31, 2019 73 ---PAGE BREAK--- Other Information ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals ASSETS: Cash and Equivalents 2,196,517 $ 398,409 $ 33,405 $ 9,760 $ 2,638,091 $ Investments 1,554,605 1,104,668 - - 2,659,273 Receivables: Taxes 338,042 - - - 338,042 Accounts 60,767 - - - 60,767 Due from Other Funds 4,000 - - - 4,000 Due from Other Governmental Units 323,519 - - - 323,519 Inventories 18,555 - - - 18,555 Prepaid Expense 25,536 - - - 25,536 TOTAL ASSETS 4,521,541 $ 1,503,077 $ 33,405 $ 9,760 $ 6,067,783 $ LIABILITIES: Accounts Payable 158,957 $ - $ 13,165 $ - $ 172,122 $ Accrued Liabilities 74,296 - - - 74,296 Unearned Revenue 30,732 - - - 30,732 TOTAL LIABILITIES 263,985 - 13,165 - 277,150 FUND BALANCES: Nonspendable 44,091 - - - 44,091 Assigned - 1,503,077 20,240 9,760 1,533,077 Unassigned 4,213,465 - - - 4,213,465 TOTAL FUND BALANCES 4,257,556 1,503,077 20,240 9,760 5,790,633 TOTAL LIABILITIES AND FUND BALANCES 4,521,541 $ 1,503,077 $ 33,405 $ 9,760 $ 6,067,783 $ County of Otsego, Michigan Combining Balance Sheet General Fund December 31, 2019 74 ---PAGE BREAK--- Soldiers and Budget Legal Sailors General Stabilization Defense Relief Totals REVENUES: Taxes and Penalties 5,484,784 $ - $ - $ - $ 5,484,784 $ Licenses and Permits 48,719 - - - 48,719 Federal Sources 98,706 - - - 98,706 State Sources 1,429,464 - - - 1,429,464 Local Sources 22,418 - - - 22,418 Charges for Services 1,039,856 - - - 1,039,856 Interest and Rentals 267,589 4,936 66 - 272,591 Fines and Forfeitures 13,628 - - - 13,628 Other Revenue 331,717 - - - 331,717 TOTAL REVENUES 8,736,881 4,936 66 - 8,741,883 EXPENDITURES: Legislative 214,752 - - - 214,752 Judicial 2,001,001 - - - 2,001,001 General Government 1,589,757 - 49,284 - 1,639,041 Public Safety 2,561,035 - - - 2,561,035 Public Works 8,780 - - - 8,780 Health and Welfare 603,609 - - 5,415 609,024 Community/Economic Development 112,642 - - - 112,642 Debt Service 8,925 - - - 8,925 Other Expenditures 386,339 - - - 386,339 TOTAL EXPENDITURES 7,486,840 - 49,284 5,415 7,541,539 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 1,250,041 4,936 (49,218) (5,415) 1,200,344 OTHER FINANCING SOURCES (USES): Transfers In 119,135 - 40,000 - 159,135 Transfers Out (912,706) - - - (912,706) Total Other Financing Sources (Uses) (793,571) - 40,000 - (753,571) NET CHANGE IN FUND BALANCES 456,470 4,936 (9,218) (5,415) 446,773 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 3,801,086 1,498,141 29,458 15,175 5,343,860 FUND BALANCES END OF YEAR 4,257,556 $ 1,503,077 $ 20,240 $ 9,760 $ 5,790,633 $ See note 16 for explanation of the General Fund's fund balance restatement as the combined beginning balance is restated related to the reclassification of the Michigan Indigent Defense fund as a Special Revenue fund and not bended into the General fund. County of Otsego, Michigan Combining Statement of Revenues, Expenditures, and Changes in Fund Balance - General Fund For the Year Ended December 31, 2019 75 ---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 8,412 $ 63,365 $ 159,927 $ 308,760 $ 66,668 $ 8,201 $ 157,577 $ 114,832 $ Investments - - - - 324,001 - 120,000 - Taxes Receivable - - 723,977 - 389,985 - 324,541 - Accounts Receivable - 1,884 - - - - - - Due from Other Funds - - - - - - - - Due from Other Governmental Units 14,585 - - 101,849 8,067 - - - Prepaid Items - - - 6,190 - - - - TOTAL ASSETS 22,997 $ 65,249 $ 883,904 $ 416,799 $ 788,721 $ 8,201 $ 602,118 $ 114,832 $ LIABILITIES: Accounts Payable 5,047 $ 7,450 $ - $ 10,681 $ 14,584 $ - $ 19,461 $ - $ Due to Other Governmental Units - - - - - - - - Accrued Liabilities 840 319 - 8,061 4,735 - - - TOTAL LIABILITIES 5,887 7,769 - 18,742 19,319 - 19,461 - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - 723,977 - 389,985 - 324,541 - FUND BALANCES: Nonspendable - - - 6,190 - - - - Restricted - 57,480 159,927 - 379,417 8,201 258,116 114,832 Committed 17,110 - - 391,867 - - - - TOTAL FUND BALANCES 17,110 57,480 159,927 398,057 379,417 8,201 258,116 114,832 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 22,997 $ 65,249 $ 883,904 $ 416,799 $ 788,721 $ 8,201 $ 602,118 $ 114,832 $ County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds December 31, 2019 Special Revenue Funds 76 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Redevelopment Building Automation 911 Pistol Officers Law Authority Department Fund Library Funds Licensing Training Library ASSETS: Cash and Equivalents 238,920 $ 415,649 $ 106,123 $ 82,152 $ 315,925 $ 47,375 $ 31,248 $ 21,553 $ Investments - 548,597 - 663,734 - - - - Taxes Receivable - - - 519,925 - - - - Accounts Receivable - 4,095 - - 187,804 98 - - Due from Other Funds - - - - - - - - Due from Other Governmental Units - - - - - 540 - - Prepaid Items - - - - - - - - TOTAL ASSETS 238,920 $ 968,341 $ 106,123 $ 1,265,811 $ 503,729 $ 48,013 $ 31,248 $ 21,553 $ LIABILITIES: Accounts Payable - $ 4,650 $ 1,340 $ 25,471 $ 261,052 $ - $ - $ 538 $ Due to Other Governmental Units - - - - - - - - Accrued Liabilities - 3,584 - (228) - - - - TOTAL LIABILITIES - 8,234 1,340 25,243 261,052 - - 538 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - 519,925 - - - - FUND BALANCES: Nonspendable - - - - - - - - Restricted 238,920 960,107 104,783 720,643 242,677 48,013 31,248 21,015 Committed - - - - - - - - TOTAL FUND BALANCES 238,920 960,107 104,783 720,643 242,677 48,013 31,248 21,015 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 238,920 $ 968,341 $ 106,123 $ 1,265,811 $ 503,729 $ 48,013 $ 31,248 $ 21,553 $ County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds Special Revenue Funds December 31, 2019 77 ---PAGE BREAK--- Debt Capital Service Fund Project Fund EMS Building Department Child Iron Belle Michigan Bradford Capital of Human Care Trail Indigent Equipment Lake Debt Project Services Probate Maintenance Defense Revolving Dam Service Fund ASSETS: Cash and Equivalents 9,270 $ 50,467 $ 2,500 $ 15,109 $ 76,631 $ 20,273 $ - $ 3,830 $ Investments 5,000 - - - - - - - Taxes Receivable - - - - - - - 113 Accounts Receivable - - - - - - - - Due from Other Funds - - - 500 - - - - Due from Other Governmental Units - 12,203 - - - - - - Prepaid Items - 2,038 - 11,361 - - - - TOTAL ASSETS 14,270 $ 64,708 $ 2,500 $ 26,970 $ 76,631 $ 20,273 $ - $ 3,943 $ LIABILITIES: Accounts Payable 198 $ 10,563 $ - $ 15,518 $ 1,758 $ - $ - $ - $ Due to Other Governmental Units - 37,395 - - - - - - Accrued Liabilities - 2,511 2,500 - - - - - TOTAL LIABILITIES 198 50,469 2,500 15,518 1,758 - - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - - 113 FUND BALANCES: Nonspendable - 2,038 - 11,361 - - - - Restricted 14,072 - - 91 - 20,273 - - Committed - 12,201 - - 74,873 - - 3,830 TOTAL FUND BALANCES 14,072 14,239 - 11,452 74,873 20,273 - 3,830 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 14,270 $ 64,708 $ 2,500 $ 26,970 $ 76,631 $ 20,273 $ - $ 3,943 $ December 31, 2019 Special Revenue Funds County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds 78 ---PAGE BREAK--- Groen Nature Court Court Greon Preserve University Library Restoration Restoration Airport Capital Capital Building Center Capital Building Building Building Construction Projects II Projects Maintenance Projects Fund ASSETS: Cash and Equivalents 19,617 $ 6,592 $ 102,547 $ 191,108 $ 15,857 $ 225 $ 85,122 $ 609,840 $ Investments - - - - - - 551,386 216,764 Taxes Receivable - 487,523 - - - - 795 - Accounts Receivable - - - - 48,970 - - - Due from Other Funds - - - - - - - - Due from Other Governmental Units - - - - - - - - Prepaid Items - - - - - - - - TOTAL ASSETS 19,617 $ 494,115 $ 102,547 $ 191,108 $ 64,827 $ 225 $ 637,303 $ 826,604 $ LIABILITIES: Accounts Payable - $ - $ - $ - $ 48,970 $ - $ - $ - $ Due to Other Governmental Units - - - - - - - - Accrued Liabilities - - - - - - - - TOTAL LIABILITIES - - - - 48,970 - - - DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - 487,523 - - - - 795 - FUND BALANCES: Nonspendable - - - - - - - Restricted - - - - - - 636,508 - Committed 19,617 6,592 102,547 191,108 15,857 225 826,604 TOTAL FUND BALANCES 19,617 6,592 102,547 191,108 15,857 225 636,508 826,604 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 19,617 $ 494,115 $ 102,547 $ 191,108 $ 64,827 $ 225 $ 637,303 $ 826,604 $ Combining Balance Sheet Nonmajor Governmental Funds December 31, 2019 Capital Project Funds County of Otsego, Michigan 79 ---PAGE BREAK--- Library Capital Projects Tennis Court Iron Belle Trail Trail Head Capital Facilities Bond Fund Construction Capital Project Capital Project Projects Planning Fund Total ASSETS: Cash and Equivalents 13,529 $ - $ 231,391 $ 33,553 $ 659,819 $ 34,000 $ 4,327,967 $ Investments - - - - - - 2,429,482 Taxes Receivable - - - - - - 2,446,859 Accounts Receivable - - - - - - 242,851 Due from Other Funds - - - - - - 500 Due from Other Governmental Units - - 300,000 - - - 437,244 Prepaid Items - - - - - - 19,589 TOTAL ASSETS 13,529 $ - $ 531,391 $ 33,553 $ 659,819 $ 34,000 $ 9,904,492 $ LIABILITIES: Accounts Payable 13,463 $ - $ 523 $ - $ 10,254 $ 18,540 $ 470,061 $ Due to Other Governmental Units - - - - - - 37,395 Accrued Liabilities - - - - - - 22,322 TOTAL LIABILITIES 13,463 - 523 - 10,254 18,540 529,778 DEFERRED INFLOWS OF RESOURCES Taxes Levied for a Subsequent Period - - - - - - 2,446,859 FUND BALANCES: Nonspendable - - - - - - 19,589 Restricted - - 530,868 33,553 - - 4,580,744 Committed 66 - - - 649,565 15,460 2,327,522 TOTAL FUND BALANCES 66 - 530,868 33,553 649,565 15,460 6,927,855 TOTAL LIABILITIES, INFLOWS OF RESOURCES AND FUND BALANCES 13,529 $ - $ 531,391 $ 33,553 $ 659,819 $ 34,000 $ 9,904,492 $ Capital Project Funds County of Otsego, Michigan Combining Balance Sheet Nonmajor Governmental Funds December 31, 2019 80 ---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 - $ - $ 706,469 $ - $ 380,683 $ - $ 442,727 $ - $ Federal Sources - - - 364,245 - - - - State Sources - - - 41,563 - - - - Local Sources - - - - - - - - Charges for Services 99,486 - - 33,917 43,914 - - - Fines and Forfeits - - - - 340 - - - Interest and Rentals - - 1 - 11,435 13 3,710 248 Other Revenues 1,349 235,366 4,984 - 23,982 - 3,125 - TOTAL REVENUES 100,835 235,366 711,454 439,725 460,354 13 449,562 248 EXPENDITURES: Judicial - - - 496,142 - - - - General Government - - 466,398 - - - - - Public Safety 151,856 - - - 438,888 - - - Public Works - - - - - - 292,100 - Health And Welfare - - - - - - - - Recreation and Culture - 201,112 - - - - - - Capital Outlay - - - - 39,929 - - - Debt Service - - - - - - - - TOTAL EXPENDITURES 151,856 201,112 466,398 496,142 478,817 - 292,100 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (51,021) 34,254 245,056 (56,417) (18,463) 13 157,462 248 OTHER FINANCING SOURCES (USES): Transfers In 66,156 - - 110,349 - - - - Transfers Out - - (232,673) - - - - - TOTAL OTHER FINANCING SOURCES (USES) 66,156 - (232,673) 110,349 - - - - NET CHANGE IN FUND BALANCES 15,135 34,254 12,383 53,932 (18,463) 13 157,462 248 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 1,975 23,226 147,544 344,125 397,880 8,188 100,654 114,584 FUND BALANCES END OF YEAR 17,110 $ 57,480 $ 159,927 $ 398,057 $ 379,417 $ 8,201 $ 258,116 $ 114,832 $ Combining Statement of Revenues, Expenditures, County of Otsego, Michigan and Changes in Fund Balance Nonmajor Governmental Funds Special Revenue Funds For the Year Ended December 31, 2019 81 ---PAGE BREAK--- Register Brownfield of Deeds Emergency Concealed Local Redevelopment Building Automation 911 Pistol Officers Law Authority Department Fund Library Funds Licensing Training Library REVENUES: Taxes and Penalties 116,372 $ - $ - $ 512,927 $ - $ - $ - $ - $ Federal Sources - - - 21,991 - - - - State Sources - - - 33,828 - - - - Local Sources - - - - - - - - Charges for Services - 502,149 38,310 1,335 273,610 11,172 4,196 - Fines and Forfeits - - - 160,498 - - - - Interest and Rentals - 12,993 - 18,816 507 - - - Other Revenues - 1,778 - 35,694 453,510 2,916 - 3,499 TOTAL REVENUES 116,372 516,920 38,310 785,089 727,627 14,088 4,196 3,499 EXPENDITURES: Judicial - - - - - - - 1,855 General Government - - 18,418 - - - - - Public Safety - 514,142 - - 949,891 613 1,750 - Public Works - - - - - - - - Health And Welfare - - - - - - - - Recreation and Culture - - - 842,330 - - - - Capital Outlay - - - - - - - - Debt Service 102,885 - - - - - - - TOTAL EXPENDITURES 102,885 514,142 18,418 842,330 949,891 613 1,750 1,855 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 13,487 2,778 19,892 (57,241) (222,264) 13,475 2,446 1,644 OTHER FINANCING SOURCES (USES): Transfers In - - - - - - - - Transfers Out - (6,000) - - (22,300) - - - TOTAL OTHER FINANCING SOURCES (USES) - (6,000) - - (22,300) - - - NET CHANGE IN FUND BALANCES 13,487 (3,222) 19,892 (57,241) (244,564) 13,475 2,446 1,644 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 225,433 963,329 84,891 777,884 487,241 34,538 28,802 19,371 FUND BALANCES END OF YEAR 238,920 $ 960,107 $ 104,783 $ 720,643 $ 242,677 $ 48,013 $ 31,248 $ 21,015 $ Combining Statement of Revenues, Expenditures, County of Otsego, Michigan Nonmajor Governmental Funds and Changes in Fund Balance For the Year Ended December 31, 2019 Special Revenue Funds 82 ---PAGE BREAK--- Debt Capital Service Fund Project Fund EMS Building Department Child Iron Belle Michigan Bradford Capital of Human Care Trail Indigent Equipment Lake Debt Project Services Probate Maintenance Defense Revolving Dam Service Fund REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ - $ 37 $ Federal Sources - - - - - - - - State Sources - 252,842 - 194,591 - - - - Local Sources - - - - - - 669,938 - Charges for Services - - - - - - - - Fines and Forfeits - - - - - - - - Interest and Rentals 112 - - 168 2,211 153 - 6 Other Revenues - 62,174 - - - - - - TOTAL REVENUES 112 315,016 - 194,759 2,211 153 669,938 43 EXPENDITURES: Judicial - - - 257,442 22,888 - - - General Government - - - - - - - - Public Safety - - - - - - - - Public Works - - - - - - - - Health And Welfare 5,986 618,482 - - - - - - Recreation and Culture - - - - - - - - Capital Outlay - - - - 203,716 - - - Debt Service - - - - - - 1,303,913 - TOTAL EXPENDITURES 5,986 618,482 - 257,442 226,604 - 1,303,913 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (5,874) (303,466) - (62,683) (224,393) 153 (633,975) 43 OTHER FINANCING SOURCES (USES): Transfers In 9,480 295,000 - 111,222 143,475 - 633,975 - Transfers Out - - - - - - - - TOTAL OTHER FINANCING SOURCES (USES) 9,480 295,000 - 111,222 143,475 - 633,975 - NET CHANGE IN FUND BALANCES 3,606 (8,466) - 48,539 (80,918) 153 - 43 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 10,466 22,705 - (37,087) 155,791 20,120 - 3,787 FUND BALANCES END OF YEAR 14,072 $ 14,239 $ - $ 11,452 $ 74,873 $ 20,273 $ - $ 3,830 $ County of Otsego, Michigan Combining Statement of Revenues, Expenditures, For the Year Ended December 31, 2019 Special Revenue Funds and Changes in Fund Balance Nonmajor Governmental Funds 83 ---PAGE BREAK--- Groen Nature Library Court Geron Preserve University Library Construction Restoration Airport Capital Capital Building Center Capital Building Millage Building Construction Projects II Projects Maintenance Projects Fund REVENUES: Taxes and Penalties - $ 470,499 $ - $ - $ - $ - $ 239,536 $ 456 $ Federal Sources - - - - - - - - State Sources - - - 1,310 - - - - Local Sources - - - - - - - - Charges for Services - - 41,309 - - - - - Fines and Forfeits - - - - - - - - Interest and Rentals 171 4,816 - - 511 6 16,168 7,733 Other Revenues - 3,296 - - 384,234 - - - TOTAL REVENUES 171 478,611 41,309 1,310 384,745 6 255,704 8,189 EXPENDITURES: Judicial - - - - - - - - General Government - - - - - - - - Public Safety - - - - - - - - Public Works - - - 20,992 - - - - Health And Welfare - - - - - - - - Recreation and Culture - - - - - - 79,512 - Capital Outlay - - - 8,350 384,629 - - - Debt Service - - - - - - - - TOTAL EXPENDITURES - - - 29,342 384,629 - 79,512 - EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) 171 478,611 41,309 (28,032) 116 6 176,192 8,189 OTHER FINANCING SOURCES (USES): Transfers In - - - 50,000 - - - - Transfers Out - (489,226) - - - - - (2,077) TOTAL OTHER FINANCING SOURCES (USES) - (489,226) - 50,000 - - - (2,077) NET CHANGE IN FUND BALANCES 171 (10,615) 41,309 21,968 116 6 176,192 6,112 FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 19,446 17,207 61,238 169,140 15,741 219 460,316 820,492 FUND BALANCES END OF YEAR 19,617 $ 6,592 $ 102,547 $ 191,108 $ 15,857 $ 225 $ 636,508 $ 826,604 $ Capital Project Funds Combining Statement of Revenues, Expenditures, County of Otsego, Michigan and Changes in Fund Balance Nonmajor Governmental Funds For the Year Ended December 31, 2019 84 ---PAGE BREAK--- Library Capital Projects Tennis Court Iron Belle Trail Trail Head Capital Facilities Bond Fund Construction Capital Project Capital Projects Projects Planning Fund Total REVENUES: Taxes and Penalties - $ - $ - $ - $ - $ - $ 2,869,706 $ Federal Sources - - - 78,941 1,058 - 466,235 State Sources - - 500,000 - - - 1,024,134 Local Sources - - - - - - 669,938 Charges for Services - - - - - - 1,049,398 Fines and Forfeits - - - - - - 160,838 Interest and Rentals - - 465 - - 80,242 Other Revenues - - - - - - 1,215,907 TOTAL REVENUES - - 500,465 78,941 1,057 - 7,536,398 EXPENDITURES: Judicial - - - - - - 778,327 General Government - - - - - - 484,816 Public Safety - - - - - - 2,057,140 Public Works - - - - 1,646 18,540 333,278 Health And Welfare - - - - - - 624,468 Recreation and Culture 3,736 30 - - - - 1,126,720 Capital Outlay 769,704 - 274,113 28,201 299,102 - 2,007,744 Debt Service - - - - - - 1,406,798 TOTAL EXPENDITURES 773,440 30 274,113 28,201 300,748 18,540 8,819,291 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES BEFORE OTHER FINANCING SOURCES (USES) (773,440) (30) 226,352 50,740 (299,691) (18,540) (1,282,893) OTHER FINANCING SOURCES (USES): Transfers In 219,500 99 - - 325,000 34,000 1,998,256 Transfers Out - - - - (99) - (752,375) TOTAL OTHER FINANCING SOURCES (USES) 219,500 99 - - 324,901 34,000 1,245,881 NET CHANGE IN FUND BALANCES (553,940) 69 226,352 50,740 25,210 15,460 (37,012) FUND BALANCES BEGINNING OF YEAR (As Restated See Note 16) 554,006 (69) 304,516 (17,187) 624,355 - 6,964,867 FUND BALANCES END OF YEAR 66 $ - $ 530,868 $ 33,553 $ 649,565 $ 15,460 $ 6,927,855 $ 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, 2019 85 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total ASSETS: Cash and Equivalents 54,872 $ 140,146 $ 80,195 $ 275,213 $ Investments - - 137,894 137,894 Accounts Receivable 4,501 3,259 1,573 9,333 Prepaid Items - 380 78,188 78,568 Inventory - 325 - 325 TOTAL ASSETS 59,373 $ 144,110 $ 297,850 $ 501,333 $ LIABILITIES: Accounts Payable 14,122 $ 5,432 $ 1,387 $ 20,941 $ Accrued Liabilities - 2,651 - 2,651 TOTAL LIABILITIES 14,122 8,083 1,387 23,592 NET POSITION: Unrestricted 45,251 136,027 296,463 477,741 TOTAL NET POSITION 45,251 136,027 296,463 477,741 TOTAL LIABILITIES AND NET POSITION 59,373 $ 144,110 $ 297,850 $ 501,333 $ County of Otsego, Michigan Combining Statement of Net Position Internal Service Funds December 31, 2019 86 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Total OPERATING REVENUES: Charges for Services 482,601 $ 635,488 $ 1,096,007 $ 2,214,096 $ TOTAL OPERATING REVENUES 482,601 635,488 1,096,007 2,214,096 OPERATING EXPENSES: Salaries, Wages, and Fringe Benefits 26,352 576,836 1,156,979 1,760,167 Contractual Services 271,375 1,707 - 273,082 Materials and Supplies 6,061 5,780 1,152 12,993 Equipment Repair and Maintenance 12,969 1,669 - 14,638 Utilities 188,117 - - 188,117 Other 4,610 11,854 - 16,464 TOTAL OPERATING EXPENSES 509,484 597,846 1,158,131 2,265,461 OPERATING INCOME (LOSS) (26,883) 37,642 (62,124) (51,365) Non Operating Revenues (Expenses): Interest Earnings - - 2,466 2,466 Changes in Net Position (26,883) 37,642 (59,658) (48,899) Net Position Beginning of Year 72,134 98,385 356,121 526,640 Net Position End of Year 45,251 $ 136,027 $ 296,463 $ 477,741 $ County of Otsego, Michigan Combining Statement of Revenues, Expenses, and Changes in Net Position - Internal Service Funds For the Year Ended December 31, 2019 87 ---PAGE BREAK--- Building and Administrative Health Grounds Services Care Totals CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from Customers 483,079 $ 632,267 $ 1,123,437 $ 2,238,783 $ Payments to Suppliers (497,299) (16,916) (1,156,827) (1,671,042) Payments to Employees for Services and Benefits (26,352) (575,598) - (601,950) Net Cash Provided (Used) by Operating Activities (40,572) 39,753 (33,390) (34,209) CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - 2,466 2,466 Net Cash Provided (Used) by Investing Activities - - 2,466 2,466 Net Increase (Decrease) in Cash and Equivalents (40,572) 39,753 (30,924) (31,743) Balances - Beginning of the Year 95,444 100,393 249,013 444,850 Balances - End of the Year 54,872 $ 140,146 $ 218,089 $ 413,107 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (26,883) $ 37,642 $ (62,124) $ (51,365) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Change in Assets and Liabilities: Accounts Receivable 478 (3,221) 5,763 3,020 Prepaid Expense - (380) 21,667 21,287 Accounts Payable (14,167) 4,474 1,304 (8,389) Accrued Liabilities - 1,238 - 1,238 Net Cash Provided (Used) by Operating Activities (40,572) $ 39,753 $ (33,390) $ (34,209) $ County of Otsego, Michigan Combining Statement of Cash Flows Internal Service Funds For the Year Ended December 31, 2019 88 ---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 76,557 $ 122,760 $ 59,116 $ 2,639 $ 1,461 $ 12,551 $ 275,084 $ Accounts Receivable 8,363 2,825 3,000 - - - 14,188 Prepaid Expense - 1,837 - - - - 1,837 Total Current Assets 84,920 127,422 62,116 2,639 1,461 12,551 291,109 Noncurrent Assets Capital Assets (Net of Accumulated Depreciation) - 49,181 - - - - 49,181 TOTAL ASSETS 84,920 $ 176,603 $ 62,116 $ 2,639 $ 1,461 $ 12,551 $ 340,290 $ LIABILITIES: Accounts Payable 4,000 $ 509 $ 574 $ - $ 933 $ - $ 6,016 $ TOTAL LIABILITIES 4,000 509 574 - 933 - 6,016 NET POSITION: Net Investment in Capital Assets - 49,181 - - - - 49,181 Unrestricted 80,920 126,913 61,542 2,639 528 12,551 285,093 TOTAL NET POSITION 80,920 $ 176,094 $ 61,542 $ 2,639 $ 528 $ 12,551 $ 334,274 $ County of Otsego, Michigan Combining Statement of Net Position Nonmajor Enterprise Funds December 31, 2019 89 ---PAGE BREAK--- Global University Positioning Center Airport Advertising System Metropolitan Special I-75 Sign Jail Homestead Fund Area Network Events Fund Commissary Audit Total OPERATING REVENUES: Charges for Services 25,845 $ 86,235 $ 87,857 $ - $ 13,831 $ - $ 213,768 $ TOTAL OPERATING REVENUES 25,845 86,235 87,857 - 13,831 - 213,768 OPERATING EXPENSES: Contractual Services 25,822 71,841 94,616 352 - - 192,631 Materials and Supplies 4,810 - 14,771 - 21,487 - 41,068 Depreciation - 12,301 - - - - 12,301 Other Expenses - 11,337 48,377 - - 1,663 61,377 TOTAL OPERATING EXPENSES 30,632 95,479 157,764 352 21,487 1,663 307,377 OPERATING INCOME (LOSS) (4,787) (9,244) (69,907) (352) (7,656) (1,663) (93,609) NON OPERATING REVENUES (EXPENSES): Other - 102,130 - - - 102,130 Interest Earnings - - - - - 1,926 1,926 INCOME (LOSS) BEFORE TRANSFERS (4,787) (9,244) 32,223 (352) (7,656) 263 10,447 Transfers In 22,000 - - - - - 22,000 Changes in Net Position 17,213 (9,244) 32,223 (352) (7,656) 263 32,447 NET POSITION BEGINNING OF YEAR 63,707 185,338 29,319 2,991 8,184 12,288 301,827 NET POSITION END OF YEAR 80,920 $ 176,094 $ 61,542 $ 2,639 $ 528 $ 12,551 $ 334,274 $ County of Otsego, Michigan Combining Statement of Revenues, Expenses, and Changes in Net Position - Nonmajor Enterprise Funds For the Year Ended December 31, 2019 90 ---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 17,482 $ 85,138 $ 88,882 $ - $ 13,831 $ - $ 205,333 $ Payments to Suppliers (42,492) (105,825) (157,764) (352) (30,879) (1,663) (338,975) Net Cash Provided (Used) by Operating Activities (25,010) (20,687) (68,882) (352) (17,048) (1,663) (133,642) CASH FLOWS FROM NONCAPITAL AND RELATED FINANCING ACTIVITIES: Other - - 102,130 - - - 102,130 Transfers In 22,000 - - - - - 22,000 Net Cash Provided (Used) by Noncapital and Related Financing Activities 22,000 - 102,130 - - - 124,130 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Earnings - - - - - 1,926 1,926 Net Cash Provided (Used) by Investing Activities - - - - - 1,926 1,926 Net Increase (Decrease) in Cash and Equivalents (3,010) (20,687) 33,248 (352) (17,048) 263 (7,586) Balances - Beginning of the Year 79,567 143,447 25,868 2,991 18,509 12,288 282,670 Balances - End of the Year 76,557 $ 122,760 $ 59,116 $ 2,639 $ 1,461 $ 12,551 $ 275,084 $ Reconciliation of Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) (4,787) $ (9,244) $ (69,907) $ (352) $ (7,656) $ (1,663) $ (93,609) $ Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense - 12,301 - - - - 12,301 Change in Assets and Liabilities: Accounts Receivable (8,363) (1,097) (2,000) - - - (11,460) Prepaid Expenses - (1,837) - - - - (1,837) Other Assets - - 3,025 - - - 3,025 Accounts Payable (11,860) (20,810) - - (9,392) - (42,062) Net Cash Provided (Used) by Operating Activities (25,010) $ (20,687) $ (68,882) $ (352) $ (17,048) $ (1,663) $ (133,642) $ County of Otsego, Michigan Combining Statement of Cash Flows Nonmajor Enterprise Funds For the Year Ended December 31, 2019 91 ---PAGE BREAK--- Report on Compliance ---PAGE BREAK--- ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE SUE A. BOWLBY, CPA, PRINCIPAL KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE BOHN, CPA TORI KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MACPA OFFICES IN MICHIGAN & WISCONSIN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] 92 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 Members of 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, 2019, 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 30, 2020. Our report includes a reference to other auditors who audited the financial statements of the Otsego County Commission on Aging, a discretely presented component unit, and the County Bus System, a business-type activity, 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 County Commission on Aging were not audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the County of Otsego, Michigan’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County of Otsego, Michigan’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County of Otsego, Michigan’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. ---PAGE BREAK--- 93 Members of the Board of Commissioners County of Otsego, Michigan Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the County of Otsego, Michigan's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that is required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the 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 30, 2020 ---PAGE BREAK--- ANDERSON, TACKMAN & COMPANY, PLC • CERTIFIED PUBLIC ACCOUNTANTS KINROSS OFFICE SUE A. BOWLBY, CPA, PRINCIPAL KENNETH A. TALSMA, CPA, PRINCIPAL AMBER N. MACK, CPA, PRINCIPAL PHILLIP J. WOLF, CPA LESLIE BOHN, CPA TORI KRUISE, CPA 16978 S. RILEY AVENUE KINCHELOE, MICHIGAN 49788 MEMBER AICPA DIVISION FOR CPA FIRMS MEMBER MACPA OFFICES IN MICHIGAN & WISCONSIN (906) 495-5952 / FAX 495-7312 E-mail: [EMAIL REDACTED] COMMUNICATION WITH THOSE CHARGED WITH GOVERNANCE Members of the Board of Commissioners County of Otsego, Michigan 225 W. Main St. Gaylord, MI 49735 We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the County of Otsego, Michigan for the year ended December 31, 2019, and have issued our report thereon dated June 30, 2020. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated April 3, 2020, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. As part of our audit, we considered the internal control of County of Otsego, Michigan. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the County of Otsego, Michigan’s compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. Generally accepted accounting principles provide for certain required supplementary information (RSI) to supplement the basic financial statements. Our responsibility with respect to the management’s discussion and analysis, employee retirement and benefit systems, and budgetary comparison schedules, which supplement the basic financial statements, is to apply certain limited procedures in accordance with generally accepted auditing standards. However, the RSI will not be audited and, because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance, we will not express an opinion or provide any assurance on the RSI. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 2 We have been engaged to report on the combining fund financial statements and schedule of expenditures of federal awards, which accompany the financial statements but are not RSI. Our responsibility for this other information, as described by professional standards, is to evaluate the presentation of the other information in relation to the financial statements as a whole and to report on whether the other information is fairly stated, in all material respects, in relation to the financial statements as a whole. Planned Scope and Timing of the Audit We performed the audit according to the planned scope and timing previously communicated to you in our letter about planning matters dated on April 3, 2020. 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 adopted 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 $454,000.  Management’s estimate of the Annual Required Contribution and liabilities actuarial for OPEB Obligations and net pension liability was based on various assumptions regarding life expectancies, inflation, premium increases, and investment rates. The financial statement disclosures are neutral, consistent and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 3 Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole. Disagreement with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated June 30, 2020. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit’s financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Comments and Recommendations Cash Recording It was noted in our review of the county component unit cash balances that in one occurrence cash was recorded into the ledger as received, but they had not yet been distributed out of the agency fund per county practice until the following calendar year resulting in an over statement of year end cash balances. We recommend that cash only be recorded as received after distributions have been received, to ensure that the county does not overstate cash balances. Cash Reconciliations In our review of cash balances, we noted that there were a few immaterial cash balances held at component unit balances that appeared to be stale accounts or lacked support. We recommend that the county perform a review of the cash held at component unit balances and adjust the accounts based on their findings. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 4 Outstanding Checks We noted in our review of cash reconciliations that a few long outstanding checks were on the county books in relation to cash accounts held by the library and the We recommend that the county review the Michigan Unclaimed Property Manual and follow it guidance to escheat or absorb these checks to clear them from the outstanding item listing. Taxes Receivable 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. Cash receipts It was noted in our review of cash that in one occurrence when a transfer was made from the pooled cash account to component unit bank account the transfer was noted recorded by the component unit 2020 as the transfer was for payroll to be paid in 2020. This caused a large unreconciled difference in cash balance as of 12/31/2019. We recommend that cash deposits and transfers be recorded into the ledger when they are received regardless of the timing of the related transaction to ensure accurate cash reconciliations. 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. ---PAGE BREAK--- Members of the Board of Commissioners County of Otsego, Michigan Page 5 GASB 83 – Certain Asset Retirement Obligations Effective 06/15/20 (your FY 2020) This statement addresses accounting and financial reporting for certain asset retirement obligations—legally enforceable liabilities associated with the retirement of a tangible capital assets. GASB 84 – Fiduciary Activities Effective 12/15/2020 (your FY 2020) This standard establishes new criteria for determining how to report fiduciary activities in governmental financial statements. The focus is on whether the government is controlling the assets, and who the beneficiaries are. Under this revised standard, certain activities previously reported in agency funds may be reclassified in future periods. Due to the number of specific factors to consider, management should assess the degree to which this standard may impact the County. Other Matters We applied certain limited procedures to the management’s discussion and analysis, schedule of funding progress and budgetary comparison schedules, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquires of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquires, the basic financial statements, and our knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the combining fund financial statements and schedule of federal awards, which accompany the financial statements but are not RSI. With respect to this other information, we made certain inquires of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the other information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. Conclusion We would like to express our appreciation, as well as that of our staff, for the excellent cooperation we received while performing the audit. If we can be of assistance in implementing the above recommendations, please contact us. This information is intended solely for the use of the Board of Commissioners, management, federal awarding agencies, pass-through entities and others within the organization and is not intended to be and should not be used by anyone other than these specified parties. Anderson, Tackman & Company, PLC Certified Public Accountants Kincheloe, Michigan June 30, 2020