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AUDIT: 2016 AUDIT REPORT STROM & ASSOCIATES (Financial & Compliance Report) i i i ` JEFFERSON COUNTY 1 BOULDER,MONTANA 1 I FINANCIAL AND COMPLIANCE REPORT Fiscal year Ended June 30,2016 I ( Strom & Associates, P. C. PO BOX 1980 Billings,Montana 59103 Certified:Public Accountants 3203 3''.A..1.€ x. Suite 208 Phone: 406-252-2765 TO Box 1980 B-rrtuif cauclj"tistromcva-net Billings, 241 March 24,2017 Board of County Commissioners Jefferson County Boulder,MT 59632 Re: Letter of Transmittal for Audit of FY 2016 We have audited the basic financial statement of Jefferson County, and submit our report and other comments as follows: The audit was a Single Audit as required by The Montana Single Audit Act of 1991. 1. DISTRIBUTION OF AUDIT REPORTS: The reports will be distributed as follows: Reports submitted to the District Copies Distributed To 1 Clerk and recorder Board Chair Local Newspaper* 1 Public Inspection Copy 4 *See Paragraph 3 for new advertising requirements. Reports submitted to other Agencies Copies Distributed To 1 Cbunty Attorney 1 Local Government Services-electronic 2. GENERAL COMMENTS ABOUT THE AUDIT: Overall the County's records and accounting system are in pass with no comments condition. The Clerk and staff should be commended for ajob well done. 57 • 3. ADVERTISING OF AUDIT REPORTS: The Montana Single Audit Act(Chapter 489. Laws of 1991) materially revised the responsibilities for publishing local govern- ment audit reports. Effective July 1, 1992, each audited County will be required to send a copy of their annual or biennial audit reports to a newspaper of general circulation in their area. Because of this requirement,we have provided you with an additional copy of the audit report. In addition,this law requires each audited County to send to their appropriate newspaper for publication a statement to the effect that the audit report is on file in its entirety,open to public inspection,and that the District will send a copy of the audit report to any interested person upon request. Publication is required to be done 30 days after you receive the audit report Please find attached a sample of a letter to your local newspaper requesting the advertisement and a sample of the standard adver- tisement required for schools. It was a pleasure working with the District staff and we are looking forward to working with you again next year. If there are any questions on any matter covered above,please call 252-2765, Sincerely, STROM&ASSOCIATES,PC Billings,Montana March 24,2017 58 • SAMPLE LETTER TO NEWSPAPER REGARDING AUDIT PUBLICATION STATEMENT March 24,2017 Name of Newspaper Address City,MT 59 RE: Audit Report Publication Section 2-7-521,MCA,provides that thirty days after a County audit report is forwarded to the County officials,the County shall send to the official newspaper of the City/Town for publication: I. A summary of significant findings, including a statement indicating that it is only a summary and is not intended to be used as an audit report,and 2. A statement that the audit report is on file in its entirety and open to public inspection. All publication costs are required by statute to be borne by the Jefferson County.so please bill us for those costs. Enclosed for your information,as required by statute, is a complete copy of the audit report. The audit report is not required by law to be published. Only the Summary of Significant Findings should be published. Thank you for your cooperation. Sincerely, Clerk Page enclosed to be published Billing Address: Clerk Jefferson County Boulder,MT 59632 59 SAMPLE OF ADVERTISEMENT REQUIRED AUDIT PUBLICATION STATEMENT An audit of the affairs of Jefferson County has been conducted by Strom & Associates, PC. The audit covered the fiscal year ended June 30,2016. Section 2-7-521, MCA, requires the publication of the following summary of significant findings. Summary of Significant Findings The audit report for Jefferson County for the fiscal year ended June 30, 2016, contains an Independent Auditor's Report on the County's basic financial statements. The report issued for the fiscal year ended 2016 contains unmodified opinion(s). The audit report also contains several other auditor's reports. Following is a listing of the reports and a summary of the findings included in each. This is only a summary and is not intended to be used as an audit report. I. 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 - This report contains the following findings: 2016-001 Inmate Commissary Account internal controls 2. Report on Prior Audit Report Recommendations-This report summarizes the findings from the prior audit report(and man- agement letter,if applicable),and the status of those findings. Public Inspection of Audit Report The complete audit report is on file in its entirety and is open to public inspection at the County. Very truly yours. 60 1 it ' ' i 0WNTh i E 1AR 2 82017 By Clerktrecr� JEFFERSON COUNTY ' BOULDER, MONTANA 1 FINANCIAL AND COMPLIANCE REPORT Fiscal year Ended June 30,2016 I 1 Strom & Associates, P. C. PO BOX 1980 Billings, Montana 59103 I S JEFFERSON COUNTY BOULDER, MT 59632 TABLE OF CONTENTS Page No TABLE OF CONTENTS I ORGANIZATION-BOARD OF COUNTY COMMISSIONERS AND OFFICIALS 2 MANAGEMENT'S DISCUSSION AND ANALYSIS 3-7 ' INDEPENDENT AUDITOR'S REPORT 8-9 BASIC FINANCIAL STATEMENTS: Statement of Net Position 10 Statement of Activities 11 Balance Sheet—Governmental Funds and a Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position 12- 13 Statement of Revenues,Expenditures. and Changes in Fund Balances Governmental Funds 14- 15 Reconciliation of the Statement of Revenues, Expenditures,and Changes in Fund Balance of Governmental Funds to the Statement of Activities 16 ' Statement of Fund Net Position-Proprietary Funds 17 Statement of Revenues,Expenses,and Changes in Fund Net Position—Proprietary Funds 18 Statement of Cash Flow-Proprietary Funds 19 ' Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position 20 Notes to the Financial Statements 21 -44 ' REQUIRED SUPPLEMENTAL INFORMATION: Schedule of Funding Progress— Other Post-Employment Benefits Other Than Pensions(OPEB) 45 ' Schedule of Proportionate Share of Net Pension Liability 46 Schedule of Contributions to Montana Retirement Systems 47 Schedule of Revenues,Expenditures,and Changes in Fund Balance(Budget and Actual)- I All Budgeted Major Funds 48-51 Notes to the Budget and Actual Schedule 52-53 INDEPENDENT AUDITOR'S REPORTS: ' 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 54-55 SCHEDULE OF FINDINGS AND RESPONSES 56 1 1 1 JEFFERSON COUNTY 1 BOULDER, MT 59632 1 ORGANIZATION Board of County Commissioners Bob Mullen Chair ' Leonard Wortman Commissioner Cory Kirsch Commissioner OFFICIALS Bonnie Ramey Clerk&Recorder Terri Kunz County Treasurer Craig Doolittle Sheriff/Coroner Dennis Giulio Justice of the Peace Steve Haddon County Attorney I I 2 I ' Jefferson County Management's Discussion and Analysis Fiscal Year Ended June 30,2016 The financial management of Jefferson County Montana offer this discussion and analysis of the financial statements as a narra- tive to provide an easy to read and understood over view of the Jefferson County financial documents, which are also included. The public is encouraged to read this analysis.and the corresponding financial reports. The Financial Statements The financial statements presented herein include all of the activities of Jefferson County Montana using the integrated approach as prescribed by GASB Statement No.34. The calculation of annual required contributions for post employee benefits as re- quired by GASB 45 is on file at the Jefferson County Clerk&Recorders office. ' The Government-wide Financial Statements present the financial picture of the County from the economic resources measure- ment focus using the accrual basis of accounting. They present governmental activities and business-type activities separately. These statements include all assets of the County as well as all liabilities(including long tel m debt).Additionally,certain eliminations have occurred as prescribed by the statement in regards to inter-fund activity,payables and receivables. The Fund Financial Statement includes statements for each of the three categories of activities;governmental,business-type and fiduciary.The governmental activities are prepared using the current financial resources measurement focus and modified accrual basis of accounting.The business-type activities are prepared using the economic resources measurement focus and the accrual basis of accounting.The fiduciary activities are agency funds,which only report a balance sheet and do not have a meas- urement focus.Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach. In abbreviated terns the Government-wide Financial Statements deal with Mill Levy funded activities,such as the General Fund. The Business Type Activity Funds deal with enterprise funds,such as Solid Waste.The Fiduciary Balance Sheet is the Medical Flex Account. ' Financial Highlights The Governmental Activities net assets of Jefferson County exceed its liabilities at the close of the most recent fiscal year by $11,891,282.61. The Business-type Activities net assets of Jefferson County exceed its liabilities at the close of the most recent fiscal year by $415,674.80. ' Governmental Activities unrestricted net assets are$6,993,248.17.The Business-type Activities unrestricted net assets are in the amount of$233,480.60 which may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the county's fund designations and fiscal policies. The county's Governmental Activities net assets increased by$495,935.60. The county's Business-type Activities net assets decreased by($3,158.50). Cash reserves remained at the same level as in 2014 and 2015. Analysis of Financial Highlights ' Jefferson County's financial position remains solid.The cash on hand has increased in the amount of$291,362.67. The Governmental Activities unrestricted net assets are$6,993,248.17.The Business-type Activities unrestricted net assets of $233,480.60 may be used to meet the government's ongoing obligations to citizens and creditors in accordance with the county's ' fund designations. Jefferson County has continued in offering competitive salaries to our employees and quality services to our residents while bet- tering our cash for the year.The governing body will need to closely watch the budget as the financial condition of the country continues to oscillate.Jefferson County will continue to work towards bettering our cash position while safe guarding the services provided to county residents. 3 1 Analysis of Significant Changes As of fiscal year-end 2016,future full funding for the Payment In-Lieu of Taxes(PILT)program and continued authorization of the Secure Rural Schools(SRS)are in question. In SFY 2016,Federal PILT money was received by Jefferson County in the amount of$1,178,171 and funds for the SRS program were$287,773,of which 15%was set aside for Title III programs and $36,953 was distributed to school districts in the county.Loss of any of this funding will have a devastating effect on many coun- ty services and,particularly,public school programs.Jefferson County has two Tax Increment Financing(TIF)Districts. One is located in the northern end of the county and the other in the southern end. The districts are a proactive measure to help diversify the Jefferson County economy away from the over dependence on natural resources.The purpose of the TIF is to get public in- frastructure developed in an area currently without infrastructure to set the stage for future value added industrial development. This is a good tool for local governments with limited resources to bring infrastructure using the tax increment from new devel- opment.TIF is for 15-years or could be longer if a bond is sold to finance the infrastructure. Both TIP districts have been successful in attracting businesses to their respective areas and continue to encourage interest from new businesses.The City of Boulder has recently expressed an interest in creating a TIF district in the Boulder area.It remains to be seen if the proposed TIF will be urban or rural in nature. Golden Sunlight Mine near Cardwell went through a major reduction in force due to reduced gold production from its open pit and the world commodity price of gold. The mine laid off roughly 60%of its work force and opened an underground mining operation.The venture has been successful as monthly production is meeting targeted expectations.This change followed re- duced production and falling prices the past two years which further reduced the county's taxable valuation from net and gross proceeds. It is not anticipated the underground operation will produce as much gold as the mine produced in the past,but we remain hopeful the volume produced and the resulting valuation will stabilize. In December 2015,the new Clerk and Recorder's Building was opened to the public.In hindsight how the County operated with- out this space is unimaginable.The building has been a boon to County operations and as a badly needed community meeting resource.The County Commissioners moved their meeting chambers to the elections side of the building,mitigating the prob- lems that were encountered previously in using the courtroom as their public meeting place. The building was funded with an Intercap loan for a term of 15 years. The Montana Developmental Center(MDC)is scheduled to be closed by June 30,2017.MDC has been providing services to Montana's most vulnerable populations for about 125 years and most recently provided 250 jobs to Boulder and surrounding communities.Although it appears some of the foregone jobs may be retained pending 2017 legislative action,the end effect could be devastating to Boulder and Jefferson County.Impacts to real estate markets and values,school census,and Main Street business could have negative long-term consequences.These varied consequences would ultimately cause deterioration of taxa- ble valuation for all County taxing jurisdictions. In the 2016 general election,a new County Attorney and Clerk of District Court were elected.Several bond issues were support- ed by the electorate, including a weed levy, a health department levy and a levy to support a county wide emergency alert system. Analysis of Significant General Fund Variations There were no major variations in the General Fund budget. Analysis of Significant Capital Assets and Long Term Debt Jefferson County continues to pursue the creation of new RSIDs.These RS IDs cause long term debt, but allow Jefferson County to improve infrastructure with payment from residents who are benefited by the improvements.This local partnership strategy has been very well received and will be an on-going program for Jefferson County. A total of$4,909.91 was paid on RSID#2507,515,088 was paid on RSID#2511, and$11,450.16 was paid on RSID#2517,leav- ing$1,459,259.54 owing. 1 t 4 I IAccount RSID bonds payable/ Debt 07/01/2015 Paid Owed Intercap Loan 06/30/2016 231400 RSID#2503 515,000.00 0.00 515,000.00 I 231401 RSID#2505 320,000.00 0.00 320,000.00 235301 RSID#2507 48,645.86 4,909.91 43,735.95 235302 i RSID#2511 150,905.90 15,088.00 135,817.90 I 235306 RSID#2517 1 16,405.85 1 1,450.16 104,955.69 235000 General Fund 1000 146,304.07 31,108.36 115,195.71 231402 RSID#2510 339,750.00 0 339,750.00 235001 General Fund 1000 82,852.03 0 805,959.83 I (C&R building) Infrastructure Assets I None applicable. Future Projects I Mining operations continue to fluctuate in Jefferson County. Changes to the Golden Sunlight Mine were addressed above.Mon- tana Tunnels continues to be closed due to lack of:financing,and a couple of the new mines at Elkhorn has not yet opened also due to lack of:financing.Montana Tunnels and one of the Elkhorn mines are both owned by Eastern Resources. I Jefferson County continues to be involved in an effort to have old,abandoned mines assayed and reclaimed by processing tailings or dumps at existing mills. Ultimately,with enough demand,to encourage the construction of a new mill or ore concentrator at, potentially,the South TIF. I We have granted matching funds for two different water studies that look at the drainages for the Boulder and Jefferson Rivers. These studies will provide valuable information for us to consider for future development. While both studies have been complet- ed,analysis of the information's impact to Jefferson County's public policies(such as land use)is still being determined. We are also involved with the Superfund site in Northern Jefferson County from the old lead smelter in East Helena. IJefferson County continues to provide information and guidance to county residents about how to create new RS IDs.This pro- vides a vehicle for county residents to partner with the county to improve roads which residents use to access their homes and businesses. The resources the county has for improving roads are limited and the RSID process continues to expand our resident's I capabilities in a manner that is directly controlled by the residents within the special purpose districts.The RSIDs are generally funded with Intercap loan funding,although one project was:financed through bonds issued by a local bank. The voters in Clancy voters created a Water/Sewer District in the General Election of November 2014 due to drastic water quali- ty issues and failed septic systems. While the district has been established,difficulties continue with moving the matter forward to the desired outcome of a functioning water and sewer district. Jefferson County used Treasurer State Endowment Program(TSEP)funds to replace the Dunn Lane Bridge over the Boulder I River in the Fall ot2015.The partnership with the TSEP program enables the County to bring integrity to a structurally sound bridge system county wide. The County has requested TSEP funding from the 201 7 Legislature to replace the Hot Springs Bridge in 2017. I The Jefferson County Road Department continues to upgrade and improve county roads.The Montana Department of Transpor- tation(MDT)rebuilt six miles of Highway 69 south of Boulder in 2016.Jefferson County had agreed to allow the use of Hubbard Lane,Upper Valley Road,and White Bridge Road as a detour route during much of the construction. To prepare for the construc- tion project,Jefferson County utilized millings taken off of the Interstate to hard surface the detour.The MDT has agreed to chip Iseal the detour in the spring of 2017.Additional millings were used to hard surface several roads in the County. Sedimentation in Pipestone Creek has been a major contributor to flooding problems in Whitehall,as well as providing a prime nursery for Eurasian Milfoil in the upper Missouri River drainage.In the 2013 Legislature,Jefferson County was approved for a I $1.4 million grant to ameliorate the flooding problems and begin addressing the milfoil infestation. In the 2015 Legislature,an additional$1.0 million was added to address eradication of the Eurasian Milfoil from the Jefferson Slough. In the summer of 2016,chemicals were applied to the Eurasian Milfoil in the Jefferson Slough with promising results. In the fall of2016,a bridge construction project was let to improve Pipestone Creek flow at a bottleneck on the Koontz Road.Both projects will continue to be addressed in the future,although,additional funds will not be requested from the 2017 Legislative Session. I 5 The Jefferson County Fair Board made improvements to the fairgrounds by siding and painting buildings. In addition, two old, unusable buildings were razed. As part of the Highway 69 construction project. a walking path that connected the fairgrounds to the City of Boulder was constructed. Jefferson County secured an Intercap loan for the cost of erecting a canopy over the bleach- ers,purchasing new rodeo arena paneling,and expanding the concession stand at the rodeo grounds. The Jefferson County Commissioners have utilized the vacated space from the Clerk and Recorder's move for improved office infrastructure for themselves, the Planning Office and the Safety Office. Additionally, courthouse office space will be made available to the Jefferson Local Development Corporation(JLDC).The 2017 budget included the addition of a half-time position to assist with event planning and other activities in concert with the JLDC and will utilize the same space. Citizens in the rural area surrounding Whitehall have requested the creation of an Ambulance District.The creation of the district is in process with a vote to create and elect board members expected to take place in approximately June 2017. 1 1 I 6 1 I ' Management Discussion and Analysis Comparison Schedules NET POSITION Governmental Activities Business-type Activities I 6/30/2015 6/30/2016 CHANGE %CHANGE 6/30/2015 6/30/2016 CHANGE %CHANGE Current Assets 12,298,475 12,796,646 498,171 4.05% 663,309 681,057 17.748 2.68% Restricted Assets 149,451 154,943 5,492 3.67% 70,465 70,765 300 0.43% Capital Assets,net 6 369 409 7 278 448 909,039 14.27% 202,324 182.195 120,129) -9.95% 'total Assets 18,817,335 20,230,037 1,412,702 7.51% 936,098 934.017 (2,081) -0.22% IDeferred outflows of resources 334,829 1,056,372 721,543 215.50% 27,149 35.308 8,159 30.05% Current Liabilities 539,330 475,524 (63,806) -11.83% 37,750 29,426 (8,324) -22.05% Long Term Liabilities 5,826.111 8 233 749 2,407,638 41.32% 418,085 486167167 67 082 16.05% Total Liabilities 6,365441 8,709,273 2343,832 36.82% 455,835 514,593 58,758 12.89% Deferred Inflows of Resources 1,582,053 937 421 (644 637) -40.75% 88,578 39,057 (49,521) -55.91% Net Position I Net Investment in Capital Assets 5,824.296 6,072,782 248.486 4.27% 202,324 182,195 (20,129) -9.95% Restricted 9,972,151 9.479.188 (492,963) -4.94% 0.00% Unrestricted (4,591,782) (3703 368) 888,414 -1935% 216 510 233,480 16970 7.84% Total Net Position 11,204,665 11,848,602 643,937 5 75% 418,834 415,675 (3,159) -0.75% ICHANGES IN NET POSITION Governmental Activities Business-type Activities Revenues 6/30/2015 6/30/2016 CHANGE %CHANGE 6/30/2015 6/30/2016 CHANGE %CHANGE Program Revenues. I Charges for Services 1.169,354 946,572 (222,782) -19.05% 849,661 825,655 (24,006) -2.83% Operating Grants 1,130,87] 979,481 (151390) -1339% 0.00% General Revenues'. Taxes/Assessments 5,524,372 6,164,249 639,877 11.58% - 7,938 7,938 100.00% I Local option taxes 531,926 (531926) -10000% 0.00% Licenses and Permits 18,825 18,825 100.00% 0.00% Federal/State Shared Revenues 2,228,888 2,744,908 516,020 23.15% 9,624 9,273 (351) -365% Miscellaneous 52,792 117,321 64,529 122.23% - - - 0.00% I Investment and Royalty Earnings 53,028 173,026 119,998 226.29% 1 488 2,236 748 50.27% Asset recovery 118,000 1 1 8,000 100.00% 0.00% Gain loss on Sale of Assets 28137 35933 7196 25.57% - 0.00% Total Revenues 10,719,368 11,297,715 578,347 540%. 860,773 845,102 (15,671) -1.82% I Program Expenses General government 3,179.433 4,059,930 880,497 2769% Public safety 2,428,545 2,690,750 262,205 10.80% Public works 1,821,109 2,050,075 228.966 12.57% Public health 603,232 570,772 (32,460) -5.38% I Social and economic services 117,840 169,088 51 248 43.49% Culture and recreation 561,745 541,256 (20,489) -3.65% Housing and community development 226.930 215,107 (11,823) -5 21% Conservation of natural resources 294,831 305,205 10,374 3.52% Miscellaneous - 16,435 16,435 100.00% I Debt service- Interest and other charges 64,988 65.160 172 0.26% BUSINESS-TYPE ACTIVITIES: Solid Waste 862,323 848,261 (14,062) -1.63% I Total Expenses 9,298.653 10 683 778 1385,125 1490% 862,323 848261 (14 062) -1.63% Change in Net Position 1,420,715 613,937 (806,778) (1,550) (3,159) (1,609) I I I I 7 4 CSC-"Apr I'. C. Certified-Public Accountants 3203 3''Ave N. Suite 208 Phone:gob-252-2765 ' PO Sox ig$6 'F-}Yltil!•' cuuttt£tst?'L?15'tt-.t;'ii..Piet ithnf�S, �btT5936$ INDEPENDENT AUDITOR'S REPORT ' Board of County Commissioners Jefferson County Boulder,MT 59632 Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information the Jefferson County(County) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the County's basic financial statements as listed in ' the table of contents. Manaaement'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 (GAAP); this includes the design, implementation, and mainte- nance of internal control relevant to the preparation and fair presentation of financial statements that are free from material mis- statement,whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance t with auditing standards generally accepted in the United States of America and the standards applicable to financial audits con- tained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material mis- statement. 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 rele- vant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appro- priate 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,the financial statements referred to above present fairly, in all material respects,the respective financial position of the governmental activities,the business-type activities,each major fund,and the aggregate remaining fund information of the ' Jefferson County as of June 30, 2016,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. 1 8 Other Matters Required Supplementary Information(RSI) Accounting principles generally accepted in the United States of America requires that the management's discussion and analysis (pages 3-7), and the schedule of funding for other post-employment benefits other than pensions(page 45),and schedule of pro- portionate share of net pension liability(page 46),and Schedule of Contributions to Montana Retirement Systems(page 47),and budgetary comparison information (pages 48-53) 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 basic financial statements in an appropriate operational, economic,or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America. which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquir- ies,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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 24,2017 on our consideration of the Jefferson County 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 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 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 Jefferson County internal control over financial reporting and compli- ance. STROM&ASSOCIATES,PC Billings,Montana March 24,2017 1 t 9 I Jefferson County ' Jefferson County Boulder,MT 59632 STATEMENT OF NET POSITION June 30,2016 Governmental Business-type ' Activities Activities Total ASSETS: I Current assets. Cash and cash equivalents $ 10,566.166 $ 565,033 $ 11,131,199 Taxes receivable 2,106296 115,720 2,222.016 Accounts receivable-net 304 304 Due from other governments 124,184 - 124,184 Total current assets 12,796,646 681,057 13,477,703 INoncurrent assets: Restricted cash and investments 154,943 70,765 225,708 Loan receivable 208,887 - 208,887 II Capital assets. Land 114,230 59,399 173,629 Net depreciable assets 7,164,218 122,796 7,287,014 Total noncurrent assets 7,642,278 252,960 7,895,238 Total assets 20 438,924 934,017 21,372,941 DEFERRED OUTFLOWS OF RESOURCES. Employer pension plan activities 1,056,372 35,308 1,091,680 I Total deferred outflows of resources 1,056,372 35,308 1,091,680 Total assets and deferred outflows of resources $ 21,495 296 $ 969,325 5 22 464621 LIABILITIES: II Current liabilities: Accounts payable 1 578 1,578 Accrued wages payable 195,125 14,610 209,735 Current portions compensated absences 163,066 14,816 177,882 ' Current portion long-term capital obligations 115,755 - 115,755 Total current liabilities 475,524 29,426 504,950 Noncurrent liabilities: Long-term obligations 6.754,420 448,882 7,203,302 Compensated absences 389,418 36,285 425,703 Long-term capital obligations 1,089,911 - 1,089,911 Total noncurrent liabilities 8,233,749 485,167 8,718,916 Total liabilities 8.709,273 514,593 9,223,866 DEFERRED INFLOWS OF RESOURCES: Employer pension plan 937,421 39,057 976,478 Total deferred inflows of resources 937,421 39,057 976,478 NET POSITION. Net investment in capital assets 6.072,782 182,195 6,254,977 Restricted 9,479,188 9,479,188 Unrestricted(Deficit) (3,703,368) 233,480 (3,469,888) Total net position 11,848,602 415,675 12,264,277 Total liabilities,deferred inflows and net position $ 21,495,296 $ 969,325 $ 22,464,621 I ' The accompanying NOTES TO DIE FINANCIAL STATEMENTS are an integral part of these statements. 10 1 Jefferson County Jefferson County Boulder_MT 59632 STATEMENT OF ACTIVITIES For the year ended June 30,2016 Program Revenues Net(Expenses)Revenues and Changes in Net Position t Primary Government Operating Charge for Grants and Governmental Business-type Expenses Services Contributions Activities Activities Total ' GOVERNMENT OPERATIONS: General government S 4,059,930 $ 343,736 S 179,121 $ (3,537,073) $ (3,537 073) Public safety 2,690,750 482,444 72,871 (2,135,435) (2,135,435) Public works 2,050,075 103,527 316,577 (1,629,97 t) (1,629,971) Public health 570,772 7,500 53,620 (509,652) (509,652) Social and economic services 169,088 - 26,423 (142,665) (142,665) Culture and recreation 541,256 9,365 12,947 (518,944) (518,944) Housing and community development 215,107 - 1,821 (213,286) (213,286) Conservation of natural resources 305,205 . 314,205 9,000 9,000 Miscellaneous 16,435 - 1,896 (14,539) (14,539) Debt service. Interest and other charges 65,1.60 - - (65,1.60) (65,160) Total Governmental Activities 10,683,778 946,572 979,481 (8,757,725) (8,757,725) I BUSINESS-TYPE ACTIVITIES: Solid Waste 848,261 825,655 - (22,606) (22,606) Total Business-type activities 848.261 825655 - (22 606) (22,606) Total Primary Government $ 11,532039 $ 1,772,227 $ 979,481 S (8,757,725) $ (22,606) $ (8,780,331) GENERAL REVENUES'. Taxes/Assessments 6,164,249 7,938 6,172,187 Licenses and Permits 18,825 - 18,825 Federal/State Shared Revenues 2,744,908 9,273 2,754,181 Miscellaneous 117,321 - 117,321 ' Investment and Royalty Earnings 173,026 2,236 175,262 Asset recovery 118,000 - 118,000 Gain loss on Sale of Assets 35,333 - 35,333 Total General Revenues 9,371,662 19,447 9,391,109 Change in Net Position 613,937 (3,159) 610,778 NET POSITION. Beginning of the Year 11,204,665 418,834 11623,499 Prior Period Adjustments 30,000 - 30,000 End of the Year $ 11,848,602 $ 415,675 $ 12,264,277 I I I I The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. II I I I Jefferson County ' Jefferson County Boulder.MT 59632 BALANCE SHEET GOVERNMENTAL FUNDS IJune 30,2016 I MAJOR General Road Public Safety North End TIF South End TIF District District I ASSETS: Current assets. Cash and cash equivalents $ 3,523,005 5 721,665 $ 677,224 $ 23,109 $ 543,092 Taxes receivable 223,015 134,237 430,669 - - - - I Interfund receivable 135,814 - Due from other governments 16,301 102,633 Noncurrent assets: Restricted cash and investments - 7.156 - - - I Loan receivable - - - - - Total assets 3,898,135 863,058 1 210,526 23,109 543,092 DEFERRED OUTFLOWS OF RESOURCES: I Total deferred outflows of resources - - - - - Total assets and deferred outflows of resources $ 3,898,135 $ 863,058 $ 1,210 526 $ 23.109 $ 543,092 I LIABILITIES. - - Current liabilities. Accounts payable Accrued wages payable 66,314 19,358 58,619 - - Interfund payable - - - 286,433 45,335 ITotal liabilities 66,314 19,358 58,619 286,433 45,335 DEFERRED INFLOWS OF RESOURCES: Unavailable property taxes receivable 223,015 134,237 430,669 - - ITotal deferred inflows of resources 223,015 134,237 430,669 - - FUND BALANCE(DEFICITS): Restricted - 709,463 721,238 - 497,757 I Unassigned 3,608,806 - - (263,324) - , Total fund balance 3,608,806 709,463 721,238 (263,324) 497,757 Total liabilities,deferred inflows of resources, and fund balance $ 3,898,135 $ 863,058 $ 1,210,526 $ 23,109 $ 543,092 I I I I ' The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. 12 I I Jefferson County Jefferson County ' Boulder,MT 59632 BALANCE SHEET GOVERNMENTAL FUNDS ' June 30,2016 MAJOR Other Total Hard Rock Mine Saddle Mountain South Hills RSID Governmental Governmental Trust Account RSID Funds Funds ASSETS: ' Current assets: Cash and cash equivalents $ 2,362 945 $ 102,034 $ 71,902 $ 2,534 579 $ 10.559,555 Taxes receivable - 515,909 320,000 482,466 2,106,296 Interfund receivable 352,962 - - - 488,776 Due from other governments - - - 5,250 124,184 Noncurrent assets: Restricted cash and investments - 36,832 - 110.955 154,943 Loan receivable 208,887 - - - 208,887 Total assets 2,924,794 654,775 391,902 3,133,250 13,642,641 DEFERRED OUTFLOWS OF RESOURCES. Total deferred outflows of resources - - - - _ Total assets and deterred outflows of resources $ 2,924,794 $ 654375 $ 391,902 $ 3,133,250 $ 13,642,641 III LIABILITIES: Current liabilities: t Accounts payable - - - 1,578 1,578 Accrued wages payable - - - 45,136 189,427 Interfund payable - - - 157,008 488,776 Total liabilities - - - 203,722 679,781 ' DEFERRED INFLOWS OF RESOURCES'. Unavailable property taxes receivable - 515,909 320,000 482,466 2,106,296 Total deferred inflows of resources - 515,909 320,000 482,466 2,106,296 t FUND BALANCE(DEFICITS): Restricted 2,924,794 138_.866 71,902 2,531,887 7,595 907 , Unassigned - - - (84,825) 3,260,657 Total fund balance 2,924,794 138,866 71,902 2,447,062 10,856,564 Total liabilities,deferred inflows of resources, and fund balance $ 2,924,794 $ 654,775 $ 391,902 $ 3,133,250 $ 13,642,641 IIRECONCILIATION'f0 THE STATEMENT OF NET POSITION Total fund balance reported above $ 10,856,564 Internal Service Fund Net Position 225.409 Governmental Capital Assets 7,030,762 Employer pension plan activities 1,056,372 ' Long-term Liabilities Long-Term Obligations (6,754,420) Compensated Absences (529,294) Long-Term Capital Obligations (1,205,666) Employer pension plan (937,421) Unavailable property taxes receivable 2,106,296 Net Position of Governmental Activities $ 11,848,602 The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. ' 13 I Jefferson County I Jefferson County Boulder,MT 59632 STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES I GOVERNMENTAL FUNDS For the year ended June 30,2016 I MAJOR General Road Public Safety North End TIF South End TIF District District IREVENUES: Taxeslassessments $ 1,783,089 $ 516,402 $ 1.407,617 $ 39,098 $ 405,539 Licenses and permits 3,000 - 475 - - Intergovernmental revenues 1 425 957 512,414 347,842 - 36,612 - - -Charges for services 191,521 2,370 459,315 Fines and forfeitures 109,220 Miscellaneous 19,628 715 19,699 - 13,600 Investment and royalty earnings 60,961 17,777 18,527 79 1,786 ITotal revenues 3,593,376 1,049,678 2,253 475 39,177 457,537 EXPENDITURES: Current: - - I General government 2,541 618 454 Public safety 48,839 2,449,058- - Public works - 1,080,725 - 81 154,018 Public health 45,541 - - - - I Social and economic services 11,100 - _ - - -Culture and recreation - Housing and community development Conservation of natural resources - - - - - I Miscellaneous - - - - - Debt service'. Principal 33,624 Interest and other charges 2,416 - - 9,409 9,356 Capital outlay 593,702 106,975 116,659 - 24,609 ITotal expenditures 3,276,840 1,188,154 2,565,717 9,490 187,983 Excess(deficiency)of revenues over expenditures 316,536 (138,476) (312,242) 29,687 269,554 IOTHER FINANCING SOURCES;USES. Sale of capital assets 15,630 2,909 21,234 - - Loan proceeds 725,623 - - - I Asset recovery 118,000 - - - _ Fund transfers is 272,544 112,048 179,480 Fund transfers(out) (350,595] Total other financial sources.'uses 781,202 114,957 200,714 - - INet changes in fund balances 1,097,738 (23,519) (111,528) 29,687 269,554 FUND BALANCE: Beginning of the year 2,481,068 732,982 832,766 (293,011) 228,203 I Prior period adjustments 30,000 S 3 - - - End of year ,608,806 $ 709,463 $ 721,238 $ (263,324) $ 497,757 I I ' The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. 14 I I Jefferson County Jefferson County ' Boulder,MT 59632 STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS ' For the year ended June 30,2016 MAJOR ' Hard Rock Mine Saddle Mountain Other Total Trust Account South Hills RSID RSIU Governmental Governmental Funds Funds ' REVENUES: Taxes/assessments $ - S 53,175 $ 39,454 $ 1,961,495 $ 6,205,869 Licenses and permits - . - 15,350 18,825 Intergovernmental revenues 215,488 - - 1,102,433 3,640,746 ' Charges for services - - - 174,654 827,860 Fines and forfeitures - - - 9,494 118,714 Miscellaneous - - - 63,680 117,322 Investment and royalty earnings 29,523 535 251 43,588 173,027 Total revenues 245,011 53,710 39,705 3,370,694 11,102,363 EXPENDITURES. • Current. General government 780,000 - - 522,535 3,844,607 , Public safety - - - 26,148 2,524,045 Public works - - - 659,518 1,894,342 Public health - - - 523,280 568,821 Social and economic services - - - 157,910 169,010 Culture and recreation - - - 528,139 528,139 Housing and community development 105,942 - - 109,027 214,969 Conservation of natural resources - - . 305,205 305,205 Miscellaneous - - - 16,286 16,286 ' Debt service. Principal - - - 31,446 65,070 Interest and other charges - 25,188 14,938 3,853 65,160 Capital outlay - - - 513,971 1,355,916 Total expenditures 885,942 25,188 14,938 3,397,318 11 551,570 ' Excess(deficiency)of revenues over expenditures (640,931) 28,522 24,767 (26,624) (449,207) OTHER FINANCING SOURCES/USES. Sale of capital assets - - - - 39,773 Loan proceeds . - - 339,750 1,065,373 Asset recovery - - - - 118,000 ' Fund transfers in - - - 262,291 826,363 Fund transfers(out) - - - (555,496) (906,091) Total other financial sources/uses - - - 46,545 1,143,418 Net changes in fund balances (640,931) 28,522 24,767 19,921 694,211 I FUND BALANCE: Beginning of the year 3,565,725 110,344 47,135 2,427,141 10,132,353 Prior period adjustments - - 30,000 End of the year $ 2,924,794 $ 138,866 $ 71,902 $ 2,447,062 $ 10,856,564 I I The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. ' 15 I Jefferson County I Jefferson County Boulder,MT 59632 RECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES, I AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the year ended June 30,2016 ' Net Changes in Fund Balance $ 694,211 Change in net position From internal service funds (20,102) I Revenues on the Statement of Activities not included in governmental funds statement: Increase(decrease)in taxes receivable (41,620) I State Pension Aid 83,639 Revenues reported in the governmental funds statement not included In the Statement of Activities Bond/Note Proceeds 1,065,373 IISale of Fixed Assets 39,773 (1,105,146) Expenses on the Statement of Activities not included in the governmental funds statement: I Depreciation Expense (434,470) Actuarial Pension Expense (25,146) (Increase)decrease in compensated absence liability 6 252 (453,364) Expenditures reported in the governmental funds statement not included in the Statement of Activities Capital outlays 1,355,916 Gain loss on sale of assets 35,333 Principal payments on bonds 65 070 1,456,319 IChange in net position reported on the Statement of Activities $ 613.937 I I I I I I ' The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. 16 I I Jefferson County Jefferson County Boulder,MT 59632 STATEMENT OF NET POSITION PROPRIETARY FUNDS ' June 30,2016 MAJOR ' Governmental Solid Waste Activities- Internal Service ' ASSETS' Current assets: Cash and cash equivalents $ 565,033 S 6,611 Taxes receivable 115,720 ' Accounts receivable-net 304 - Total current assets 681,057 6,611 Noncurrent assets: ' Restricted cash and investments 70,765 - Capital assets- Land 59,399 Net depreciable assets 122,796 247,686 Total noncurrent assets 252,960 247,686 Total assets 934,017 254,297 DEFERRED OUTFLOWS OF RESOURCES: Employer pension plan activities 35,308 - Total deferred outflows of resources 35,308 - Total assets and deferred outflows of resources $ 969,325 $ 254,297 LIABILITIES: ' Current liabilities: Accrued wages payable 14,610 5,698 Current portions compensated absences 14,816 6253 Total current liabilities 29,426 11,951 Noncurrent liabilities: Long-term obligations 448,882 - ' Compensated absences 36.285 16,937 Total noncurrent liabilities 485,167 16,937 Total liabilities 514,593 28,888 ' DEFERRED INFLOWS OF RESOURCES: Employer pension plan 39,057 - Total deferred inflows of resources 39,057 - ' NET POS]TION Net investment in capital assets 182.195 247,686 Unrestricted(Deficit) 233,480 (22,277) Total net position 415,675 225,409 Total liabilities,deferred inflows and net position $ 969,325 $ 254,297 I I The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. t 17 I • I Jefferson County I Jefferson County Boulder,MT 59632 STATEMENT OF REVENUES,EXPENSES,AND CHANGES LN FUND NET POSITION t PROPRIETARY FUNDS For the year ended June 30,2016 I MAJOR Governmental I Solid Waste Activities- Internal Service OPERATING REVENUES. I Charges for services 23,195 97,906 Miscellaneous 18,358 18,156 Special assessments 784,102 Total operating revenues 825,655 116,062 I OPERATING EXPENSES: Personal services 495,719 160,727 Supplies 74,349 27,173 Purchased services 231,306 12,037 I Fixed charges 26,758 7,988 Depreciation 20,129 7,967 Total operating expense 848,261 215,892 IOperating income(loss) (22,606) (99,830) NONOPERATING REVENUES(EXPENSES) - I Taxes/assessment revenue 7.938 Intergovernmental revenue 9,273 Interest revenue 2.236 Total nonoperating revenue(expenses) 19,447 - IINCOME(LOSS)BEFORE CONTRIBUTIONS AND TRANSFERS Transfers in - 79,728 IChange in net position (3,159) (20,102) NET POSITION: I Beginning of the Year 418,834 245,511 End of the Year $ 415,675 $ 225,409 I I I I ' The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. 18 Il I Jefferson County Jefferson County ' Boulder,MT 59632 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30,2016 1 MAJOR Governmental ' Solid Waste Activities- Internal Service CASH FLOWS FROM OPERATING ACTIVITIES: , Receipts from customers $ 864,181 $ 116,062 Payments to employees (485,368) (157,383) Payments to suppliers (332,413) (47,198) Net cash provided(used)by operating activities 46,400 (88,519) CASH FLOWS FROM NONCAPITAL FINANCING II ACTIVITIES'. Operating subsidies and transfers between funds - 79,728 Subsidies from taxes assessments 7,938 - ' Net cash provided(used)by noncapital financing activities 7,938 79,728 CASH FLOWS FROM INVESTING ACTIVITIES' Interest and dividends 2,236 - Net cash provided(used)by investing activities 2,236 - Net increase(decrease)in cash and cash equivalents 56,574 (8,791) I BALANCE: Beginning of the year 579,224 15,402 End of the year $ 635,798 $ 6,611 RECONCILIATION OF OPERATING INCOME(LOSS) TO NET CASH PROVIDED(USED)BY OPERATING ACTT VITIFC• Operating income(loss) $ (22,606) $ (99,830) Adjustments to reconcile operating income to net cash provided(used)by operating activities: Depreciation expense 20,129 7,967 GASB 68 pension expense 695 - Changes in assets and liabilities: Accounts receivable (214) - Special assessments receivable 38,740 - Compensated absences 8,085 1,948 Accrued payables 1,571 1,396 Net cash provided(used)by operating activities $ 46,400 $ (88,519) Supplemental schedule of noncash activities GASB 68 state contribution $ 9,273 $ - I I The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. ' 19 I I Jefferson County I Jefferson County Boulder,MT 59632 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS I June 30,2016 I Investment Trust Private Purpose Funds Trust Funds Agency Funds ASSETS: Current assets: I Cash and cash equivalents $ 9,964,720 $ 15,894 $ 274,269 Taxes receivable 2,509,003 Total Assets $ 9,964,720 $ 15,894 $ 2,783,272 I LIABILITIES'. Current liabilities: Warrants payable - - 256,826 Due to others - - 2,467,012 I Other current liabilities - 16,301 59,434 - Total Liabilities 16,301 $ 2,783,272 NET POSITION: ' Held in trust for pooled investments 9,964,720 - Held in trust for pensions (407) Total Net Position $ 9,964,720 $ (407) I TATEMENT OF CHANGES IN FIDUCIARY NET POSITIO I FIDUCIARY FUNDS For the year ended June 30,2016 ' Investment Trust Private Purpose Funds Trust Funds ADDITIONS: Miscellaneous $ - $ 23,546 I Contributions to investment trust 11,587,219 - Investment and royalty earnings 43,171 Total Additions 11,630,390 23,546 I DEDUCTIONS: Distribution of investments 11,382,040 22,886 Total Deductions 11,382,040 22,886 IChange in net position 248,350 660 NET POSITION: Beginning of the year 9,716,370 (1,067) End of the year $ 9,964,720 $ (407) I I ' The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. 20 I JEFFERSON COUNTY t NOTES TO THE FINANCIAL STATEMENTS For the year ended June 30,2016 NOTE I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES I. a. REPORTING ENTITY ' The basic financial statements of the Jefferson County (County) have been prepared on a prescribed basis of accounting that demonstrates compliance with the accounting and budget laws of the State of Montana, which conforms to generally accepted accounting principles (GAAP). the County applies all relevant Governmental Accounting Standards Board (GASB) pro- nouncements. During fiscal year 2016 the County adopted the following: • GASH Statement No. 72—Fair Value Measurement and Application. This Statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The County has implemented this statement in fiscal year 2016. • GASB Statement No. 73 —Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASH Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. This statement provides guidance on non-employer entity pension plans. This statement appears to be applicable to the State of Montana and has no effect on the County. • GASB Statement No. 77 —Tax Abatement Disclosures. This Statement requires governments that enter into tax abate- ment agreements to disclose the agreements. This statement is applicable for periods beginning after December 15, 2015. The County has implemented this statement in fiscal year 2016,and had no tax abatements during this timeframe. • GASB Statement No. 78— Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans. This Statement amends the scope and applicability of Statement 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple-employer defined benefit pension plan that(I) is not a state or local governmental pension plan,(2) is used to provide defined benefit pensions both to employees of state or local gov- ernmental employers and to employees of employers that are not state or local governmental employers, and (3) has no predominant state or local governmental employer(either individually or collectively with other state or local governmen- tal employers that provide pensions through the pension plan). This statement is applicable for periods beginning after December 15,2015. The County has implemented this statement in fiscal year 2016 and determined it has no effect on its financial reporting. • GASB Statement No. 79—Certain External Investment Pools and Pool Participants. This Statement addresses accounting and financial reporting for certain external investment pools and pool participants. Specifically, it establishes criteria for an external investment pool to qualify for making the election to measure all of its investments at amortized cost for fi- nancial reporting purposes. This statement is applicable for periods beginning after December 15. 2015. This change is required of the State of Montana. Beginning in FY 2016, the State will report STIP investments on a Net Asset Value (NAV)basis in its financial statements. The County has determined this to be a note disclosure change and trivial net as- set value adjustment at year-end for any STIP investments held at year-end by the County. • GASB Statement No. 80—Blending Requirements for Certain Component Units,an amendment of GASH Statement No. 14. This Statement amends the blending requirements for the financial statement presentation of component units of all state and local governments. The additional criterion requires blending of a component unit incorporated as a not-for- profit corporation in which the primary government is the sole corporate member. The requirements of this Statement are effective for reporting periods beginning after June 15,2016. The County has reviewed this Statement and they have no not-for profit corporations and determined it does not apply. • GASB Statement No. 81 —Irrevocable Split-Interest Agreements. This Statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets,liabilities,and deferred inflows of resources at the inception of the agreement.The requirements of this Statement are effective for financial statements for periods be- ginning after December 15. 2016, and should be applied retroactively. In FY 2016, the County reviewed this Statement and determined they have no irrevocable split-interest agreements. The following are a listing of GASB statements which have been issued and the County assessment of effects to the financial statements. • GASH Statement No. 82—Pension Issues an amendment of GASB Statements No. 67,No. 68, and No. 73. This State- ment clarifies that payments that are made by an employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements should be classified as plan member contributions for pur- poses of Statement 67 and as employee contributions for purposes of Statement 68. The County will implement this statement upon the State of Montana implementing. 21 JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 The County provides a full range of governmental services to the citizens of the County. These services include but are not lira- ' ited to construction. reconstruction, maintenance and repair of roads, parks and recreation, public safety, criminal justice. and other government services. Solid waste services are provided and accounted for in an Enterprise Fund. The Board of County Commissioners is elected by the public and has the authority to make decisions, appoint administrators and managers,and signif- icantly influence operations. ' The Jefferson County was incorporated under the laws of the State of Montana and as required by GAAP, the financial state- ments of the reporting entity include those of the Jefferson County(the primary government)and any component units.The crite- ria for including organizations as component units within the County's reporting entity is set forth in Section 2100 of the Gov- ernmental Accounting Standards Board's(GASB)"Codification of Government Accounting and Financial Reporting Standards." The basic criteria include appointing a voting majority of an organization's governing body, as well as the County's ability to impose its will on that organization,or the potential for the organization to provide specific financial benefit to,or impose specif- ic financial burdens on,the County. Based on those criteria the County has no component units. 1. b. BASIS OF PRESENTATION AND ACCOUNTING I.b. 1. GOVERNMENT-WIDE STATEMENTS The government-wide financial statements include the statement of net position and the statement of activities. The governmen- tal activities column incorporates data from governmental funds and internal service funds, while business-type activities incor- porate data from the government's enterprise funds(primary government). Separate financial statements are provided for gov- ernmental funds,proprietary funds, and fiduciary funds,even though the latter are excluded from the government-wide financial statements. The government-wide financial statements report using the economic resource measurement focus and the accrual basis of ac- ' counting generally including the elimination of internal activity between or within funds. 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 recog- nized in the year for which they are levied while grants are recognized when grantor eligibility requirements are met. ' Transfers between the funds included in governmental activities are eliminated so that only the net amount is included as trans- fers in the governmental activities column. The statement of activities reports the direct expenses or segments of a given function offset by program revenues directly con- nected with the functional program. Direct expenses are those that are specifically associated with a function or segment. Pro- gram revenues include: • Charges to customers or applicants who purchase,use, or directly benefit from goods, services,or privileges provided by t a given function or segment. • Operating grants that are restricted to a particular function or segment. Property taxes, investment earnings, state entitlement payments, and other revenue sources not properly included with program revenue are reported as general revenues. The comparison of direct expenses with program revenues identifies the extent to which each governmental function or business-type segment is self-supporting or drawing from general revenues. I. b.2. FUND ACCOUNTING ' The fund financial statements provide information about the government's funds, including its fiduciary funds. Separate state- ments for each fund category—governmental,proprietary, and fiduciary—are presented. The emphasis of fund financial state- ments is on major governmental and enterprise funds,each displayed in a separate column. All remaining governmental and en- terprise funds are aggregated and reported as non-major funds.The investment trust fund is displayed as a fiduciary fund. Major individual governmental and enterprise funds are reported as separate columns in the fund financial statements. Since the re- sources in the fiduciary funds cannot be used for County operations,they are not included in the government-wide statements. ' Governmental fund financial statements are reported using the current fi nancial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets, current liabilities, and fund balance are included on the balance sheet. Operating statements of these funds present net increases and decreases in current assets. Revenues are recorded when they are both measurable and available. Available means collectible within the current period,anything collected ' after June 30 is generally not material. Unavailable income is recorded in governmental funds for delinquent taxes. Expendi- tures are recorded when the related fund liability is incurred,except for principal and interest on general long-term debt and com- pensated absence payments which are recognized when due. Capital assets are functional expenditures in governmental funds, and proceeds from long-term debt or capital leases are reported as other financing sources. 22 JEFFERSON COUNTY ' NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 Revenues from local sources consist primarily of property taxes. Property tax revenue and revenues received from the State of Montana are recognized when susceptible to accrual. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned since they are measurable and available. Cost reimbursement grant funds are considered to be both measurable and available to the extent of expenditures made under the provisions of the grant and,accordingly,when such funds are received and the expenditure has not been incurred they are recorded as unearned grant revenues because the revenues are available. All other revenue items are con- sidered to be measurable and available only when cash is received by the County. Proprietary,trust,and agency fund financial statements use the economic resources measurement focus and are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. On an accrual basis,revenue from property taxes and assessments are rec- ognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses gen- erally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongo- ing operations. The principal operating revenues of the solid waste fund and internal service fund are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, ad- ministrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.Resources received for capita!acquisition or construction are reported as separate items. GASB Statement No. 34 requires the general fund be reported as a major fund. Other individual governmental and enterprise funds should be reported in separate columns as major funds based on these criteria: • Total assets, liabilities,revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total (assets, liabilities, and so forth)for all funds of that category or type(that is, total governmental or total enterprise funds),and • Total assets, liabilities, revenues.or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined. In addition to funds that meet the major fund criteria,any other governmental or enterprise fund that government officials believe is particularly important to financial statement users may he reported as a major fund. Jefferson County reports the South End TIF District as a major fund although it does not meet the above criteria. The County reports the following major governmental funds: • General Fund—The General Fund is the general operating fund of the County and accounts for all revenues and expendi- tures of the County not encompassed within other funds. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures and the capital improvement costs that are not paid through other funds are paid from the General Fund. In the governmental fund financial statements,the general fund also includes the activities of the PITT fund since the restrictions on that fund is similar to the general fund. • Road—This fund is used to account for the construction,maintenance,or improvement of public highways in the county. County levies for the road fund that are assessed and collected must be deposited into this fund. • Public Safety—This fund is used to account for providing the public safety of citizens. County levies must be used to support county law enforcement services and to maintain county detention centers and must be deposited into this fund.. • North End TIF District—A special revenue fund that accounts for taxes received from tax increment financing. • South End TIF District—A special revenue fund that accounts for taxes received from tax increment financing. • Hard Rock Mine Trust Account—This fund is used to account for state remittance of metalliferous mine license taxes. Funds can only be spent when an impact plan for a large-scale mineral development approved pursuant to MCA 90-6-307 identifies a jurisdictional revenue disparity. • South Hills RSID—A debt service fund used to service the debt payments on the South Hills construction. • Saddle Mountain RSID—A debt service fund used to service the debt payments on the Saddle Mountain construction. 23 ' JEFFERSON COUNTY ' NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 The County reports the following major enterprise funds: ' • Solid Waste Fund—This fund is used to account for financing the activities of the County's solid waste service. 1.b. 3. OTHER FUND TYPES ' Internal Service Funds—Accounts for the financing of goods or services provided by one department to other departments of the County, or to other governments. on a cost reimbursement basis. The fund includes a central shop fund. Because all of the ser- vices predominately benefit governmental rather than business type functions, they are included with governmental activities in ' the government-wide financial statements. Private-Purpose Trust Funds — Accounts for the receipt and disbursement of monies from the employee flex account. This ac- counting reflects the County's trust relationship with the flex fund account. Investment Trust Funds—To report the external portion of investment pools reported by the sponsoring government. This ac- counting reflects the County's trust relationship with the other investing parties. Agency Funds—Account for assets that the County holds on behalf of others as their agent and for warrants written but not re- deemed that are reported in the County's payroll and claims clearing funds and employee payroll tax withholdings. Cash is held for warrants which were written but have not been paid by the County Treasurer. A warrant is an order by which the drawer(the person with authority to make the order)commands the County trustee to pay a particular sum of money to a payee(person or t entity)from funds in the County treasury which are or may become available. This fund primarily consists of revenues collected by the County on behalf of other governments. I.c. ASSETS,LIABILITIES AND NET POSITION(FUND BALANCE) ' I.c. I CASH AND INVESTMENTS Cash includes amounts in demand deposits, as well as short-term investments as authorized by State statutes. Montana Code ' Annotated(MCA) allows Montana local governments to invest public money not necessary for immediate use in United States government treasury bills, notes, bonds: certain United States treasury obligations; United States government security money market fund if investments consist of those listed above; time or savings deposits with a bank or credit union which is FDIC or NCUA insured; or in repurchase agreements as authorized by MCA, or Montana Board of Investments Short Term Investment ' Pool (STIP). Interest earned on the pooled investments is distributed to each contributing entity and fund on a pro rata basis. Investments are recorded at fair market value. For purposes of the Statement of Cash flows,the County considers all highly liquid investments with a maturity of three months ' or less when purchased to be cash equivalents. Cash overdrafts reported in the fund statements are classified as current liabilities in the governmental fund statements. The cash overdrafts are eliminated in the governmental activities columns of the statement of net position. ' Restricted cash accounts of the Enterprise Fund are restricted for specific use as required by the bond indenture agreement cove- nants established with the issuance and sale of the revenue bonds representing a liability to the enterprise funds. These restricted cash accounts are used to repay current debt, establish a reserve for future debt and to establish a replacement and deprecation reserve for the purpose of replacing the system in the future. I.c.2. TAXES AND SPECIAL ASSESSMENTS ' Property tax levies are set in connection with the budget process, and are based on taxable values listed as of January 1 for all property located in the County. Taxable values are established by the Montana Department of Revenue based on market values. A revaluation of all property is required to be completed on a periodic basis. Taxable value is defined by State statute as a fixed ' percentage of market value. Property taxes and special assessments are collected by the County Treasurer who credits to the County funds their respective share of the collections. The tax levies are collectible in two installments,which become delinquent after November 30 and May ' 31. Property taxes are liens upon the property being taxed. After a period of three years,the County may begin foreclosure pro- ceedings and sell the property at auction. The County receives its share of the sale proceeds of any such auction. 24 JEFFERSON COUNTY ' NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 Taxes and special assessments that become delinquent are charged interest at the rate of 5/6 of 1%per month plus a penalty of 2%. After a period of three years,the County may begin foreclosure proceedings and sell real property at auction. In the case of personal property,the property may be seized and sold after the taxes become delinquent. 1. c.3. INVENTORIES Materials and supplies at year end was not material. The cost of such inventories is recorded as expenditures when purchased rather than when consumed. 1.c.4. CAPITAL ASSETS The County's property,plant and equipment,property,plant, equipment, and infrastructure(e.g.roads, bridges,sidewalks,light- ing, and similar items) with useful lives of more than one year are stated at historical cost and comprehensively reported in the government-wide financial statements. Historical cost was established at the initial booking of the capital assets by determining actual costs or estimating using standard costing procedures. The County considers capital assets to be items in excess of $15,000 with a useful life in excess of one year. The costs of normal maintenance and repair are not capitalized. Land and con- struction in progress are not depreciated. Depreciation on the other capital assets is provided over their estimated useful lives on the straight-line method. The useful lives of these assets have been estimated as follows: Capital Asset Classes Lives Buildings 7— 100 years Improvements other than buildings 7—50 years Machinery and Equipment 7-30 years I.c. 5. DEFERRED OUTFLOWS/INFLOWS OF RESOURCES In addition to assets, the statement of financial position reports a separate section for deferred outflows of resources.This sepa- rate 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. In addition to liabilities,the statement of financial position reports a separate section for deferred inflows of resources.This sepa- rate 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. Pension Liability—Deferred outflow/inflow The County recognizes a net pension liability for each qualified pension plan in which it participates. Changes in the net pension liability during the fiscal year are recorded as pension expense, or as deferred inflows of resources, or deferred outflows of re- sources depending on the nature of the change, in the period incurred. Those changes in net pension liability that are recorded as deferred inflows of resources or deferred outflows of resources that arise from changes in actuarial assumptions or other inputs and differences between expected or actual experience, are amortized over the weighted average remaining service life of all participants in the respective qualified pension plan and recorded as a component of pension expense beginning with the period in which they are incurred. Projected earnings on qualified pension plan investments are recognized as a component of pension expense. Differences between projected and actual investment earnings are reported as deferred inflows of resources or deferred outflows of resources and amortized as a component of pension expense. Property Taxes/Special Assessments—Deferred inflows The County reports deferred inflows under the modified accrual basis of accounting in the governmental funds for property taxes and special assessments. These amounts are deferred and recognized as an inflow of resources in the period the amounts become available. In the governmental fund balance sheet,they are reported as unavailable from property taxes and special assessments receivable. I. c.6. VACATION AND SICK LEAVE Classified County employees accumulate vacation and sick leave for later use or for payment upon termination, death,or retire- ment. Classified County employees earn vacation leave at the rate of 15 days per year during the first 10 years of employment, and at increasing rates thereafter to a maximum of 24 days per year after 20 years of employment. There is no requirement that vacation leave be taken, but the maximum permissible accumulation is the amount earned in the most recent two-year period. At termination,employees are paid for any accumulated vacation leave at the current rate of pay. Classified County employees earn sick leave at the rate of one day per month. There is no limit on the accumulation of unused sick leave. However,upon termina- tion, only 25%of accumulated sick leave is paid at the current rate of pay. I 25 JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) IFor the year ended June 30,2016 Liabilities incurred because of unused vacation and sick leave accumulated by employees are reflected in the financial state- I ments. Expenditures for unused leave are recorded when paid in governmental funds and when accrued on the statement of ac- tivities. The amount expected to be paid within one year is$163,066 and it is generally paid out of the general fund. The amount expected to be paid within one year in enterprise funds is$14,816 and is paid out of the fund which has incurred the liability. I 1.c.7. NET POSITION AND FUND BALANCE Statement of Net Position include the following: • Net Investment in Capital Assets—The component of net position that reports the difference between capital assets less ' ' both the accumulated depreciation and the outstanding balance of debt that is directly attributable to the acquisition, con- struction,or improvement of these capital assets. • Restricted — The component of net position that is either externally imposed by creditors (such as through debt cove- nants),grantors. contributors,or laws or regulations of other governments;or imposed by law through constitutional pro- ' visions or enabling legislation. • Unrestricted—The difference between the assets and liabilities that is not reported in the other element of net position. Governmental fund financial statements include the following fund balances: 1 • Restricted—Includes amounts that can be spent only for the specific purposes stipulated by the constitution, external re- source providers,or through enabling legislation. • Unassigned—Amounts that are available for any purpose; these amounts are reported only in the general fund or funds that have negative fund balances. ' As of June 30,2016,fund balance components other than unassigned fund balance consist of the following: Purpose Restricted I General government $ 3,445,376 Public safety 744,580 Public works 2,143,789 Public health 332,381 Social and economic services 65,007 Culture and recreation 308,821 Housing and community development 69,751 I Future capital costs 54,842 Debt Service 431,360 Total 7.595.907 I When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance are available,the County considers restricted funds to have been spent first. l.d. OTHER I1.d. 1. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that I affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the financial state- ments, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INOTE 2. CASH,CASH EQUIVALENTS.AND INVESTMENTS At June 30,2016, the summary of cash, cash equivalents for governmental and business-type activities,and fiduciary funds is as Ifollows: Governmental Business-type Fiduciary Account Type Activities Activities Funds Total I Cash and Cash Equivalents $ 10,566,166 $ Restricted Assets 154,943 565.033 $ 10,254,883 $ 21,386,082 70,765 0 225,708 Total $ 10 721.109 $ 635.79ft 10.254.883 $ 21.611.790 I 26 1 JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 The carrying amount of cash on hand,deposits and investments at June 30,2016, is as follows: Amount Cash on Hand $ 2,420 Demand Accounts 2,873,589 Time Deposits 1,763,289 Mutual Funds 830,259 STIP 16,142,233 Total $ 21.611.790 Custodial Credit Risk—Deposits:Custodial credit risk is the risk that in the event of a bank failure,the County's deposits may not be returned to it.The County does not have a deposit policy for custodial credit risk.As of June 30,2016,the County's bank balance was exposed to custodial credit risk as follows: Deposits Fair Value June 30,2016 Covered depository insurance 640,966 Collateral held by the pledging bank's trust depart- 3,766.138 ment but not in the Entity's name. Total bank balance $ 4.407.104 2.a. SHORT TERM INVESTMENT POOL(STIP) ' Short-Term Investment Pool (STIP) is an investment program managed and administered under the direction of the Montana Board of Investments(MBOI)as authorized by the Unified Investment Program. STIP invests the operating funds of the State of Montana,participating local government entity funds,and the liquidity requirements of the various pension and trust funds man- aged by MBOI. STIP is not registered with the Securities and Exchange Commission (SEC) as an investment company and therefore is not re- quired to abide by the SEC's rule 2a7 of the Investment Company Act of 1940. For financial reporting purposes,the STIP port- folio will be reported on a Net Asset Value basis versus amortized cost starting in fiscal year 2016. The shareholder's STIP ownership is represented by shares. Shareholders having funds to invest and owning shares are required to give one business day's notice to buy or sell shares. Share prices are fixed at$1.00 per share for transactional purposes. The STIP investment portfolio consists of securities with maximum maturity of 2 years or less. The portfolio is reported at net asset value for financial reporting purposes. Purchases of securities other than U.S.government or U.S.Agency obligations are restricted to those which are pre-approved and part of an"Approved List."STIP may invest only in the following securities and investment vehicles: (1) U.S. Treasury or U.S. dollar denominated securities fully guaranteed by the U.S. Government;(2) U.S. Government Agency securities denominated in U.S.dollars:(3)Publicly traded U.S.dollar denominated corporate bonds,notes, and medium term notes(MTNs);(4)U.S.dollar denominated Commercial Paper(CP); (5)U.S. dollar denominated Bankers' Acceptance(BA); (6) U.S. dollar denominated Cer- tificates of Deposits(CD);(7)U.S. dollar denominated Asset-Backed Securities(ABS)collateralized by credit cards, automobile loans and leases,student loans,and equipment leases;(8)U.S.dollar denominated Asset-Backed Commercial Paper(ABCP);(9) Repurchase or Reverse Repurchase Agreements with an approved primary dealer or the custodial bank,and under the terms of a written master repurchase agreement; (10) Investments required to implement the bond credit enhancement authorized by Reso- lution 219; (I I) SEC registered 2a-7 Institutional Money Market Funds that are considered "U.S. Treasury"or"U.S. Govern- ment"money market mutual funds according to the SEC regulations; and(12)Short term investment vehicles available through the custodial bank. Fair Value Measurement: The STIP categorizes its fair value measurements using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy,as follows: • Level 1: Investments whose values are based on quoted prices(unadjusted) for identical assets in active markets that a government can access at the measurement date; • Level 2: Investments whose values are based on observable inputs other than quoted market prices that a government can access at the measurement date;and, • Level 3: Unobservable inputs for an asset and may require a degree of professional judgment that a govemment can ac- cess at the measurement date. t 27 JEFFERSON COUNTY ' NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 For additional information contact the Montana Board of Investments, P.O. Box 200126, Helena, MT 59620-0126—Telephone (406)-444-0001 httr://investmentmt.corn/AnnualReeortsAudits 2. b. RESTRICTED ASSETS ' The following restricted cash was held by the County Treasurer as of June 30,2016: Fund Name Road Librar No.Jeffer- Jack Moun- South Hills Solid Total ' son Library rain Estates RSID Waste Gas tax held for road $ 7,156 $ District RSID improvements 0 $ 0 $ 0 $ 0 $ 0 $ 7,156 Donation for library 0 1.147 103'118 0 0 0 104,265 ' improvements Future debt service 0 0 0 6.690 36.832 70,765 114.287 Total 1 4 1 1 ' 62 6 8 2 70 76 2 70 2.c. EXTERNAL INVESTMENT POOL investment tmentypol policy and Montanan law. The the County and managed external County Trsurer. The accordance ternal portion of the ' County's investment pools are accounted for as investment trust funds. There is one type of investment trust fund reported by the County, pooled investment trust fund. The County has one pooled investment trust fund which is invested in STIP,CDRS, CDs and NOW accounts. The pooled funds are carried at fair value. Non-pooled investments are also carried at fair value. The fair value of non-pooled investments is determined annually and is ' based on current market prices. The County has not provided nor obtained any legally binding guarantees during the fiscal year ended June 30, 2016 to support the value of shares in the pool. Income from pooled investments is allocated to the individual funds or external participants based on the fund or participant's month end cash balance in relation to total pooled investments. The following represent a condensed statement of net position and changes in net position for the Treasurer's Pool as of June 30, 2016: Statement of Net Position: Equity of Internal pool participants $ 7,993,522 ' Equity of External pool participants 9 964 720 Total net position $ t�964 a ' Statement of Changes in Net Position Investment earnings Internal External Participant Investment in Pool $ 29,307 $ 43,171 Distribution to Participants 10,115,720 11,587,219 Change in Net Position (10 134 6751 !1] 382 0401 ' Net Position—Beginning 10,352 248,350 Net Position—Ending 7983170 9716370 7 993 577 �q qFd ��n ' NOTE 3. TAXES/ASSESSMENTS RECEIVABLE The County is permitted by State statutes to levy taxes up to certain fixed limits for various purposes. The assessed value of the ' roll as of January I, 2015, upon which the levy for the 2016 fiscal year was based, was $26,721,038 for the County-wide, $24,682,275 for the Road, $1,435,514 for Mosquito District #1, $138,203 for Mosquito District #2, $2,452,399 for Mosquito District #3, $14,232,775 for the Library, $12,488,263 for the North Jefferson Libra ry, $25,665,077 for the Planning board, $24,682,272 for Emergency Disaster, and$133,969 for Basin Lites. The tax rates assessed for the year ended June 30,2016 to ' finance County operations and applicable taxes receivable for the County follows: ' 28 • JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 Taxes Assessments Receivable Receivable Total Fund Mill Levies 0 $ 223,015 40.70 $ 223,015 $ 0 42,289 General* 0.84 42,289 Weed 45,036 0 45,036 Weed 0.69 0 7,380 0.61 7.380 37,884 Fair 6.07 37,884 0 District Court 73 239 0 73,239 Senior and sanitation 10.02 0 17,289 3.22 17,289 17,475 Extension zero 1.58 17475 0 Extension service 430,669 0 430,669 Museum mfety* 52.10 0 4,929 1.10 4,929 216 Employer 0.00 216 0 Permoyer medical group 19.40 109,032 0 109,032 Road* medical 134,237 0 134,237 Road* 20.76 709 0 709 Mosquito district 1 10.00 11.63 94 0 09 Mosquito district 2 11. 1 036 0 1,036 Mosquito district 3 10.77 0 40,226 15.02 40.226 North 14 07 58,675 0 58,675 Pl nh ng board Library 2.07 13,535 0 13,535 Planning mer en y board 1 326 0 1,326 Emergency disaster 8.80 0 200 170 Basin lites 0.28.80 200 00 0 170 Predatory animal 1,608 1,608 Mosquito Predatory animal cattle 0.00 0 5 598 5,598 osgito District#1 Fee 0.00 0.00 0 0 225 225 Destiny Hsls Road RID 0 814 814 South Hills RMD 0.00 1,316 1,316 0.00 0 456 Moonlight Mtn. ridge RSID 0 00 0 456 Moonlight ridge estates RSID 0 238 238 Moonlight ridge RMD 0.00 63 63 0.00 0 Meadowlark Gulch ch RID D 0.00 0 1,108 1,108 Martinez Gulch RID 0 300 300 Martinez Gulch RMD 0.00 515,909 515,909 Solid South asleRSID* 0.00 0 00 0 115,720 115,720 0.00 Saddle Mountain e Mt 320.000 320.000 t ountain RSID* 250.64 0$ L258A91 .. $ 2 222,016 Total * Denotes Major Funds NOTE 4. ACCOUNTS RECEIVABLE Accounts receivable represent the outstanding balances of amounts billed for services the County has provided for solid waste. An allowance for doubtful accounts has not been established. The amount outstanding at June 30,2016 is$304. NOTE 5. DUE FROM OTHER GOVERNMENTS Due from other governments represent amounts due to the County for costs incurred but not reimbursed by third party grantors. The amounts reported and the organization due from are noted below: Fund Amount Due From Reason General* $ 16,301 Flex plan Borrowed amount from employee flex plans Public safety* 46,782 State of MT Board of prisoners Public safety* 55,851 Whitehall Law enforcement agreement Tobacco Grant 5,250 State of MT Tobacco grant Total R 124.184 * Denotes Major Funds 29 , ' JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) IFor the year ended June 30,2016 NOTE 6. 1NTERFUND RECEIVABLE/PAYABLE I Interfund receivables and payables represent loan resources from one fund to another fund experiencing a temporary cash short- age. Each fund is a separate fiscal entity and therefore presents Interfund borrowing on fund level financial statements. Liabili- ties arising from Interfund borrowing do not constitute general long-term debt. The amounts reported and the purpose of the I Interfund borrowing are noted below: Interfund Receivable Amount Interfund Payable Purpose of the Transfer Hard Rock Mine Trust* $ 45.335 South end TIFD* Fund TIFD Development ' Hard Rock Mine Trust* 21,194 Clancy W&S Cover negative cash Hard Rock Mine Trust* 286,433 North end TIFD* Fund TIFD Development PILT* 8,431 Forest park estates RSID Cover negative cash PILT* 7,752 Moonlight ridge Cover negative cash I PILT* 11,100 Big sky acres Cover negative cash PILT* 53,768 Planning Cover negative cash PILT* 471 No.end TIFD RMD Cover negative cash PILT* 7,143 Tobacco grant Cover negative cash I PILT* PILT* 39,019 Sugar beet row Cover negative cash 8.130 Fair Cover negative cash Total $ 488176 ' * Denotes Major Funds NOTE 7. LOANS RECEIVABLE I Loans receivable represent amounts due to the County Hard Rock Mine Trust Fund for economic development opportunities in the County. The Jefferson Local Dev. Corp. loan is due in one payment with interest of$238,810 at 3/18/2021. The amounts reported and the organization due from are noted below: I Outstanding Interest Length of Maturity Amount June 30, Description Issue Date Rate Loan Date Issued 2016 Jefferson Local Dev.Corp. 3/18/15 3% 6 years 3/18/21 $ 200,000 $ 200,000 I Whitehall Tool 0% 5 years 8,887 8,887 $ 208 S87 $--2-02-181 I NOTE 8. CAPITAL ASSETS,DEPRECIATION AND NET CAPITAL ASSETS 8.a. At June 30,2016,the schedule of changes in general capital assets follows: I Governmental Activities: Balance Balance July 1,2015 Additions Deletions June 30,2016 Non-depreciable: Land $ 114,230 $ 0 $ 0 $ 114,230 ITotal Non-depreciable 1 14,230 $ 0 $ 0 $ 114230 Depreciable: Buildings $ 4,718,265 $ 663,735 $ 0 $ 5,382,000 I Machinery and equipment 4,311,174 298,615 (91,496) 4,518,293 Improvements other than buildings 1,790,128 393,566 0 2,183,694 Total Depreciable $ 10.819.567 $ 1355 916 $ (91 496) $ 12083.987 I Accumulated Depreciation: Buildings $ (2,006,719) $ (106,260) $ 0 $ (2,112,979) Machinery and equipment (2,417,611) (277,652) 87,056 (2,608,207) Improvements other than buildings (140,058) (58,525) 0 (198.583) I Total Depreciation $ (4.564.388) $__(49 ,43_7) $ 87,056 $ (4.919.769) Net Depreciable Assets 6,255.179 913,479 (4,440) 7,164,218 Net General Capital Assets $ 6.369.409 $ 913.479 S (4 440) 1_70_8.448 30 I JEFFERSON COUNTY ' NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 8. b. General capital asset depreciation expense was charged to governmental functions as follows: Function Amount General government $ 126,503 Public safety 146,956 Public works 154,807 Public health 1,464 Culture and recreation 12,707 Total Depreciation Expense $ 442,437 ' 8.c. At June 30,2016,the schedule of changes in business-type activities capital assets follows: Business-type Activities: Balance Balance ' July 1,2015 Additions June 30,2016 Non-depreciable: Land $ 59,399 $ 0 $ 59,399 Total Non-depreciable $ 59 399 $ 0 $ 59.399 ' Depreciable: Improvements other than buildings $ 364,589 $ 0 $ 364,589 ' Machinery and equipment 460,841 0 460.841 Total Depreciable $ 825 430 S 0 $ 825 430 Accumulated Depreciation: ' Improvements other than buildings $ (357,225) $ (1,659) $ (358,884) Machinery and equipment (325,280) (18,470) (343,750) Total Depreciation $ (682.505) x(20 1291 $ (702 638 Net Depreciable Assets 142,925 (20.129) 122,796 ' Net Business-type Capital Assets 202 324 $ (20.129) $ 182 195 NOTE 9. CHANGES IN LONG-TERM DEBT ' 9.a. At June 30,2016,the schedule of changes in general long-term debt follows: t Principal Governmental Activities New Debt Payments Balance and Other and Other Balance Due within July 1,2015 Additions Reductions June 30.2016 One Year Bonds and Notes Payable: Special Assessment Bond $ 835,000 $ 339,750 $ 0 $ 1,174,750 $ 0 Intercap loans 545.113 725,623 (65,070) 1,205,666 115,755 , Total Bonds and Notes Payable $ 1380.113 $$ 1 7 (65.070 416) $ 2 380 $. 115 755 Other Liabilities: Compensated Absences $ 556,788 $ 0 $ (4,304) $ 552,484 $ 163,066 Accrued Pension 3,482,553 1,307.687 0 4,790.240 0 , Other Post-Employment Benefits(OPEB) 789,430 0 0 789,430 0 Total Other Liabilities 4.828 771 $ 1.307 687 $_______(4,39_4.1 $ 6.132.154 $ 163 066 Total Governmental ' Activities-Long-Term Debt: $ 620$,$4 2373.060 $ (69,3741 8 512, 5L0 $ 278 821 9.b. SPECIAL ASSESSMENT BONDS The County issued special assessment bonds for the improvement of special improvement districts. Special assessment bonds are t payable form the collection of special assessments levied against benefited property owners within defined special improvement districts. These bonds were issued for the terms and payment schedules indicated in the following schedule: 31 I ' JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) IFor the year ended June 30,2016 Outstanding I Interest Length of Maturity Amount June 30 Description Issue Date Rate Loan Date Issued 2016 Saddle Mountain RSID 11/15/07 3-6% 20 years 7/1/28 S 537,000 $ 320,000 I South Hills RSID 8/14/07 3-6.5% 20 years 7/1/27 783,000 515,000 Jack Mtn.Estates RSID 11/3/15 4.3% 15 years 7/1/31 339.750 339,750 1.174.750 I Debt service requirements to maturity for principal and interest for all bonded long term obligations are as follows: For the year ended 6/30: Special Assessment Bonds I 2017 $Principal Interest 0 $ 55,119 2018 46,795 53,767 2019 58,095 51,317 I 2020 78,880 48,682 2021 89,667 45,346 2022-2026 517,088 163,010 2027-2031 368,665 37,553 I 2032 15,561 332 Totals _s_1.174.751 $ 455.126 9.c. INTERCAP LOAN IThe County entered into intercap loans in prior years for various improvements projects. The loans were issued for the terms and payment schedule indicated below. Outstanding I Interest Length of Maturity Amount June 30 Description Issue Date Rate* Loan Date Issued 2016 Big Dipper Rd. Imp. 9/19/08 1-4.25% 15 years 8/15/23 $ 75,376 $ 43,736 Building purchase 5/15/09 1-3.25% 10 years 8/15/19 300,000 115,196 I Moonlight Ridge RID 12/24/09 1-3.25% 15 years 2/15/25 241,097 135,818 Martinez Gulch RID 11/20/09 1-3.25% 14 years 8/15/24 262,879 104,956 Clerk and recorder building 6/19/15 1.25-1.55% 15 years 8/15/30 808.475 805.960 $ 1.687 827 $ 1.205.666 ' Debt service requirements to maturity for principal and interest for all Intercap long term obligations are as follows: I For the year ended 6/30: Intercap Principal Interest 2017 S 115,755 $ 16,737 2018 116,986 16,224 I 2019 118,661 14,622 2020 102,845 12,998 2021 87,181 11,528 I 2022-2026 399,435 37,802 2027-2031 264.803 11,447 Totals $ 1 205 666 $ 121357 I *Intercap loans have variable interest rates. Interest rates are subject to change annually.Interest rates to the borrower are adjust- ed on February 16th of each year and are based on a spread over the interest paid on one-year term,tax-exempt bonds which are sold to fund the loans. I9.d. At June 30,2016,the schedule of changes in Business-Type long-term debt follows: I 32 JEFFERSON COUNTY ' NOTES TO THE FINANCIAL STATEMENTS(continued) ' For the year ended June 30,2016 New Debt Business-Type Activities Balance and Other Balance Due within July 1,2015 Additions June 30,2016 One Year Other Liabilities: Compensated Absences $ 43,016 $ 8,085 $ 51,101 $ 14,816 Accrued Pension 340,361 49,102 389,463 0 Other Post-Employment Benefits(OPEB) 59,419 0 59,419 0 Total Other Liabilities $ 442,796 $ 57.187 $ 499,981 $ 14,816 NOTE 10. DEFERRED INFLOWS OF RESOURCES I ■ 10.a. PROPERTY TAXES Fund Amount Reason I General* $ 223,015 Taxes receivable Bridge 42,289 Taxes receivable Weed 45,036 Taxes receivable Fair 7,380 Taxes receivable District Court 37,884 Taxes receivable Health and sanitation 73.239 Taxes receivable Senior citizens 17,289 Taxes receivable Extension service 17.475 Taxes receivable Public safety* 430,669 Taxes receivable Museum 4,929 Taxes receivable Employer contribution group 216 Taxes receivable ' Permissive medical 109,032 Taxes receivable Road* 134,237 Taxes receivable Mosquito district 1 709 Taxes receivable Mosquito district 2 94 Taxes receivable Mosquito district 3 1,036 Taxes receivable Library 40.226 Taxes receivable North Jefferson Library 58,675 Taxes receivable ' Planning board 13,535 Taxes receivable Emergency disaster 1,326 Taxes receivable Basin lites 200 Taxes receivable Predatory animal 170 Assessments receivable , Predatory animal cattle 1,608 Assessments receivable Mosquito District#1 Fee 5,598 Assessments receivable Destiny Hills Road RID 225 Assessments receivable South Hills RMD 814 Assessments receivable Jack Mtn. Estates RSID 1,316 Assessments receivable Moonlight ridge estates RSID 456 Assessments receivable Moonlight ridge RMD 238 Assessments receivable Meadowlark Ridge RMD 63 Assessments receivable t Martinez Gulch RID 1,108 Assessments receivable Martinez Gulch RMD 300 Assessments receivable South Hills RSID* 515,909 Assessments receivable Saddle Mountain RSID* 320,000 Assessments receivable Total $ 2,106 296 * Denotes Major Funds NOTE 11. PRIOR PERIOD ADJUSTMENTS ' Fund Governmental Reason Funds General* $ 30,000 Reimbursement of prior period costs Total 30 000 * Denotes Major Funds I 33 ' JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) IFor the year ended June 30,2016 NOTE 12. DEFICIT FUND BALANCES IDeficit fund balance result from commitments exceeding the resources. The following is a listing of deficit fund balances. Fund Amount How County plans to correct I North End TIF District $ (263,324) Future tax collections Moonlight Ridge RMD (2,052) Future tax collections Forest Park Estates RSID (8,431) Future tax collections North End TIFID RMD (471) Future tax collections I Big Sky Acres RSID (11,100) Future tax collections Clancy W&S District (21,194) Creation of water and sewer district Sugar Beet Row RRGL (39,019) Future tax collections Tobacco Grant (2,558) Reimbursable grant collections I Total $ f348.i491 * Denotes Major Funds INOTE 13. INTERFUND OPERATING TRANSFERS IN/OUT Fund-In Amount Fund-Out Purpose of Transfer Capital projects $ 5,000 General* Future capital purchases I Weed 10,000 Mosquito District 41 Operating transfers General* 272,544 Permissive medical levy Budgeted transfer Road* 51,185 Permissive medical levy Budgeted transfer Bridge 1,994 Permissive medical levy Budgeted transfer I District Court Public Safety* 13,295 Permissive medical levy Budgeted transfer 179,480 Permissive medical levy Budgeted transfer SID Revolving 17,000 Jack Mtn Estates Established per resolution#29-2015 Health and sanitation 5,000 Junk Vehicle Operating transfer I Planning General* 4,998 Land use planning Budgeted transfer 547,780 PILT* Budgeted transfer# Road* 60,863 PILT* Budgeted transfer Bridge 63,473 PILT* Budgeted transfer I Bridge 16,390 PILT* Budgeted transfer Planning 60,146 PILT* Budgeted transfer County land info act 64,995 PILT* Budgeted transfer Central shop 79,728 PILT* Budgeted transfer ITotal $ 1 453 871 * Denotes Major Funds # PILT is combined with the General fund as fund balance restrictions are similar,therefore, this transfer is consolidated II out. NOTE 14. OTHER POST EMPLOYMENT BENEFITS IPlan Description- The County provides the same health care plan to all of its members. The County had fewer than 100 plan participants and thus qualified to use an Alternative Measurement Method instead of an actuarial valuation to determine the OPEB liability. Valuations involve estimates of the reported amounts and assumptions about the probability of events far into the I future and estimated amounts are subject to continued revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for the plan are based on types of benefits provided under the current plan. The valuation assumed that 100%of plan participants would elect to continue coverage after retirement. I Funding Policy - The government pays OPEB liabilities on a pay as you go basis. The trust fund for future liabilities has not been established. Benefits Provided The County provides healthcare benefits for retirees and their dependents. Retirees are required to pay 100% ' of the health insurance premium to retain the healthcare benefits. The County covers 100%of the premiums for active employ- ees. Employees covered by benefit terms. At July I,2014,the following employees were covered by the benefit terms: 34 JEFFERSON COUNTY ' NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 Active employees 70 Retired employees 2 ' Total OPEB Liability The County's total OPEB liability of$848.849 was measured as of July I, 2014, and was determined by an Alternative Meas- ' urement Method using Entry Age Normal Method. Assumptions and other inputs. The total OPEB liability in the July 1, 2014 Alternative Measurement Method was determined ' using the following assumptions and other inputs,applied to all periods included in the measurement, unless otherwise specified: Inflation 1.49% Salary increases 3% Discount rate(adjusted for inflation rate) 1% Health care cost rate trend Year %Increase ' 2015 5.20% 2016 4.90% 2017 4.70% 2018 4.90% 2019 5.30% 2020 5.60% 2021 5.70% 2022 5.60% ' 2023 and after 5.70% Retiree's share of benefit related costs 100% Changes in the Total OPEB Liability I Balance at June 30,2015 $ 848,849 Changes for the year: ' Service cost 123,207 Interest 61,391 Changes of benefit terms 0 Changes in assumptions or other inputs 0 Benefit payments (184,598) Net Changes 0 Balance at June 30,2016 $ 4 4 Sensitivity of the total OPEB liability to changes in the discount rate. The following presents the total OPEB liability of the County, as well as what the County's total OPEB liability would be if it were calculated using a discount rate that is 1- ' percentage-point lower(0%)or 1-percentage-point higher(2%)than the current discount rate: 1%Decrease Discount Rate 1%Increase (0%) (1%) (2%) Total OPEB Liability $ 886,243 $ 848,849 $ 796,812 Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The following presents the total OPEB liabil- ity of the County, as well as what the County's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower(4.2%to 4.7%) or I-percentage-point higher(6.2%to 6.7%)than the current healthcare cost trend rates: 1%Decrease Discount Rate 1%Increase (4.2%to 4.7%) (5.2%to 5.7%) (6.2%to 6.7%) Total OPEB Liability $ 736,137 $ 848,849 $ 984,920 The County did not have deferred outflows or inflows of resources associated with the OPEB liability. I 35 I ' JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 NOTE 15. RISK MANAGEMENT The County is exposed to various types of risk of loss, including: a)damage to and loss of property and contents; b)employee torts;c)professional liability, i.e. errors and omissions;d)environmental damage; e)workers' compensation, i.e. employee inju- ries and f)medical insurance costs of employees. Several methods are used to provide insurance for these risks Jefferson County elected to participate in the Montana Association of Counties Workers' Compensation Trust (The Trust) to provide workers' compensation coverage. The County pays annual premiums to The Trust for its workers' compensation cover- , age and for its portion of the debt service for the bonds sold by The Trust to provide aggregate excess coverage, provide re- sources for previously unfunded liabilities, and establish initial insurance reserves. The Trust is governed by an elected board of nine county commissioners which has the authority to determine management and set operational policies. The Trust has ob- tained reinsurance through commercial companies for claims in excess of$1,000,000 per occurrence. Financial statements for The Trust are available from the Montana Association of Counties,Helena, Montana. The County also elected to participate in the Montana Association of Counties Joint Powers Insurance Authority Trust(The Au- thority)to provide liability and general insurance coverage. Coverage is provided in the amount of$500,000 for property, liabil- ity, errors and $omissions, and crime coverage. The Authority has obtained reinsurance through commercial companies for claims in excess of the above areas for various amounts. Claims administration services are handled by a private insurance firm and general administration is handled by the Montana Association of Counties. Financial statements are available from the Mon- tana Association of Counties,Helena,Montana. ' Commercial policies, transferring all risks of loss, except for relatively small deductible amounts, are purchased for employee medical insurance. The County has no coverage for potential losses from environmental damages. Levels of insurance have not changed materially from the prior year and settlements have not exceeded insurance coverage limits during the current or each of ' the two previous years. NOTE 16. EMPLOYEE RETIREMENT SYSTEM ' The County participates in two state-wide, cost-sharing multiple employer defined benefit retirement plans which cover all em- ployees. The Sheriffs Retirement System(SRS) covers officers. The Public Employee Retirement System (PERS) covers non- SRS employees. The plans are established under State law and are administered by the State of Montana. ' Both plans issue publicly available annual reports, stand-alone financial statements, actuarial valuations, experience studies and plan audited financial statements. Those reports may be obtained from the following: t Public Employees Retirement System P.O.Box 200131 100 N.Park Avenue Suite 200 Helena,MT 59620-0131 Phone: 406-444-3154 www.mpera.mt.gov 16.a. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OF RETIREMENT SYSTEMS ' The Montana Public Employee Retirement Administration(MPERA)prepares its financial statements using the accrual basis of accounting. For the purposes of measuring the Net Pension Liability, deferred inflows of resources and deferred outflows of resources related to pensions, Pension Expense, information about the fiduciary net position and additions to/deductions from fiduciary net position have been determined on the same accrual basis as they are reported by MPERA.For this purpose,member contributions are recognized in the period in which contributions are due. Employer contributions are recognized when due and the employer has made a formal commitment to provide the contributions. Revenues are recognized in the accounting period they are earned and become measurable. Benefit payments and refunds are recognized in the accounting period when due and payable ' in accordance with the benefit terms. Expenses are recognized in the period incurred. Investments are reported at fair value. MPERA adhere to all applicable Governmental Accounting Standards Board (GASB) statements. 36 t JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 I 16.b. PUBLIC EMPLOYEE RETIREMENT SYSTEM(PERS) The PERS-Defined Benefit Retirement Plan(DBRP), administered by the Montana Public Employee Retirement Administration (MPERA).is a multiple-employer,cost-sharing plan established July 1, 1945,and governed by Title 19,chapters 2&3,Montana Code Annotated (MCA). This plan covers the State, local governments, certain employees of the Montana University System, and school districts. All new members are initially members of the PERS-DBRP and have a 12-month window during which they may choose to re- main in the PERS-DBRP or join the PERS-DCRP by filing an irrevocable election. Members may not be members of both the defined contribution and defined benefit retirement plans. The PERS-DBRP provides retirement, disability,and death benefits to plan members and their beneficiaries. Benefits are estab- lished by state law and can only be amended by the Legislature. 16. b. I. SUMMARY OF BENEFITS Eligibility for benefit(Service retirement): Hired prior to July 1,2011: Age 60,5 years of membership service;Age 65,regardless of membership service;or any age,30 years of membership service. Hired on or after July 1.2011: Age 65, 5 years of membership service;Age 70,regardless of membership service. Early retirement,actuarially reduced: Hired prior to July 1,2011: Age 50,5 years of membership service;or any age,25 years of membership service. Hired on or after July 1,2011: Age 55,5 years of membership service. Vesting: 5 years of membership service Member's highest average compensation(HAC): Hired prior to July 1,2011: highest average compensation during any consecutive 36 months; Hired on or after July 1,2011:highest average compensation during any consecutive 60 months: Compensation Cap: I Hired on or after July 1, 2013: — 110%annual cap on compensation considered as part of a member's highest average com- pensation. Monthly benefit formula: Members hired prior to July 1,2011: Less than 25 years of membership service 1.785%of HAC per year of service credit;25 years of membership service or more 2%of HAC per year of service credit. Members hired on or after July 1,2011: Less than 10 years of membership service 1.5%of HAC per year of service credit; 10 years or more, but less than 30 years of membership service 1.785%of HAC per year of service credit; 30 years or more of membership service 2%of HAC per year of service credit. Guaranteed Annual Benefit Adjustment(GABA): After the member has completed 12 full months of retirement, the member's benefit increases by the applicable percentage (provided below)each January, inclusive of other adjustments to the member's benefit. • 3%for members hired prior to July I,2007 • 1.5%for members hired between July 1,2007 and June 30,2013 •Members hired on or after July 1,2013: (a) 1.5%for each year PERS is funded at or above 90%; (b) 1.5%is reduced by 0.1%for each 2%PERS is funded below 90%;and (c)0%whenever the amortization period for PERS is 40 years or more. 16.b.2. OVERVIEW OF CONTRIBUTIONS Rates are specified by state law for periodic member and employer contributions and are a percentage of the member's compen- sation. Contributions are deducted from each member's salary and remitted by participating employers.The State legislature has the authority to establish and amend contribution rates to the plan. Member and employer contribution rates are shown in the table below. 37 ' JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) IFor the year ended June 30,2016 1.Member contributions to the system of 7.9%are temporary and will be decreased to 6.9%on January 1 following actuary I valuation results that show the amortization period has dropped below 25 years and would remain below 25 years following the reduction of both the additional employer and additional member contribution rates. 2.Employer contributions to the system: a. Effective July 1, 2014, following the 2013 Legislative Session, PERS-employer contributions increase an additional I 0.1%a year and will continue over 10 years through 2024.The additional employer contributions including the 0.27% added in 2007 and 2009,will terminate on January 1 following an actuary valuation that shows the amortization period of the PERSDBRP has dropped below 25 years and remains below the 25 years following the reduction of both the ad- ditional employer and member contributions rates. I b. Effective July 1, 2013, employers are required to make contributions on working retirees' compensation. Member con- tributions for working retirees are not required. c. The portion of employer contributions allocated to the PCR are included in the employers reporting.The PCR was paid I off effective March 2016 and the contributions previously directed to the PCR are now directed to member accounts. 3.Non Employer Contributions: a. Special Funding i. The State contributes 0.1%of members'compensation on behalf of local government entities. I ii. The State contributes 0.37%of members' compensation on behalf of school district entities. b. Not Special Funding i. The State contributes a portion of Coal Severance Tax income and earnings from the Coal Trust Permanent Trust fund. ' Member State& Local Government School Districts FiscalYear Hired Hired Universities <07/01/11 >07/01/11 Employer Employer State Employer State 2016 7.900% 7.900% 8.370% 8.270% 0.100% 8.000% 0.370% 2015 7.900% 7.900% 8.270% 8.170% 0.100% 7.900% 0.370% 2014 7.900% 7.900% 8.170% 8.070% 0.100% 7.800% 0.370% 2012-2013 6.900% 7.900% 7.170% 7.070% 0.100% 6.800% 0.370% • 2010-2011 6.900% 7.170% 7.070% 0.100% 6.800% 0.370% 2008-2009 6.900% 7.035% 6.935% 0.100% 6.800% 0.235% 2000-2007 6.900% 6.900% 6.800% 0.100% 6.800% 0.100% ' 16.b.3. ACTUARIAL ASSUMPTIONS The Total Pension Liability as of June 30, 2014, is based on the results of an actuarial valuation date of June 30,2014, with up- date procedures to roll forward the Total Pension Liability to June 30,2015.There were several significant assumptions and other ' inputs used to measure the Total Pension Liability.The actuarial assumptions used in the June 30,2015 valuation were based on the results of the last actuarial experience study,dated June 2010 for the six-year period July 1, 2003 to June 30, 2009. Among those assumptions were the following: I General Wage Growth* 4.00% *includes Inflation at 3.00% Merit Increases 0%to 6% Investment Return(net of admin expenses) 7.75% I Admin Expense as%of Payroll 0.27% Postretirement Benefit Increases 3%for members hired prior to July 1,2007 1.5%for members hired between July 1,2007 and June 30,2013 ' Members hired on or after July 1,2013: • 1.5%for each year PERS is funded at or above 90% • 1.5% is reduced by 0.1% for each 2%PERS is funded below 90%; I and • 0%whenever the amortization period for PERS is 40 years or more • Mortality assumptions among contributing members,terminated vested members, service retired members and beneficiaries I based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2015 with scale AA. • Mortality assumptions among Disabled Retirees are based on RP 2000 Combined Employee and Annuitant Mortality Tables with no projections.No future mortality improvement is assumed. I 38 JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30.2016 16.b.4. DISCOUNT RATE The discount rate used to measure the Total Pension Liability was 7.75%. The projection of cash flows used to determine the discount rate assumed that contributions from participating plan members, employers, and non- employer contributing entities will be made based on the Board's funding policy,which establishes the contractually required rates under Montana Code Anno- tated. The State contributes 0.1%of salaries for local governments and 0.37%for school districts. In addition,the State contrib- utes coal severance tax and interest money from the general fund. The interest is contributed monthly and the severance tax is contributed quarterly. Based on those assumptions, the System's fiduciary net position was projected to be adequate to make all the projected future benefit payments of current plan members through the year 2123. 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 Lia- bility.No municipal bond rate was incorporated in the discount rate. 16.b. 5. TARGET ALLOCATIONS Asset Class Target Asset Allocation Long-Term Expected Real Rate of Return Cash Equivalents 2.00% -0.25% Domestic Equity 36.00% 4.55% Foreign Equity 18.00% 6.10% Fixed Income 24.00% 1.25% Private Equity 12.00% 8.00% Real Estate 8.00% 4.25% The long-term expected return on pension plan assets is reviewed as part of the regular experience studies prepared for the Sys- tem. The most recent analysis, performed for the period covering fiscal years 2003 through 2009, is outlined in a report dated June 2010, which is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption including rates of return adopted by similar public sector systems, and by using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and infla- tion) are developed by the investment consultant for each major asset class. These ranges were 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 then adding expected inflation. The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. Best estimates are presented as the arithmetic real rates of return for each major asset class in- cluded in the System's target asset allocation as of June 30,2015, is summarized in the above table. 16.c. SHERIFFS' RETIREMENT SYSTEM(SRS) The Sheriffs'Retirement System(SRS),administered by the Montana Public Employee Retirement Administration(MPERA), is a multiple-employer,cost-sharing defined benefit plan established July 1, 1974,and governed by Title 19,chapters 2&7,MCA. This plan provides retirement benefits to all Department of Justice criminal and gambling investigators hired after July 1, 1993, all detention officers hired after July 1,2005,and to all Montana sheriffs.Benefits are established by state law and can only be amended by the Legislature.The SRS provides retirement,disability and death benefits to plan members and their beneficiaries. Benefits are based on eligibility,years of service and highest average compensation.Member rights are vested after five years of service. 16. c. I. SUMMARY OF BENEFITS Member's highest average compensation(HAC) Hired prior to July I,2011 -highest average compensation during any consecutive 36 months; Hired on or after July 1,2011 —highest average compensation during any consecutive 60 months. Compensation Can Hired on or after July I.2013—110%annual cap on compensation considered as a part of a member's highest average compen- sation. Eligibility for benefit 20 years of membership service,regardless of age. Early Retirement Age 50, 5 years of membership service,actuarially reduced. I 39 t JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 ' Vesting 5 years of membership service Monthly benefit formula 2.5%of HAC per year of service Guaranteed Annual Benefit Adjustment(GABA) After the member has completed 12 full months of retirement,the member's benefit increases by the applicable percentage(pro- vided below)each January, inclusive of all other adjustments to the member's benefit. •3%for members hired prior to July 1,2007 • 1.5%for members hired on or after July I.2007 ' 16.c.2. OVERVIEW OF CONTRIBUTIONS Rates are specified by state law for periodic employer and employee contributions and are a percentage of the member's compen- sation. Contributions are deducted from each member's salary and remitted by participating employers. The State legislature has the authority to establish and amend contribution rates to the plan. Member and employer contribution rates are shown in the table below: Fiscal Year Member Employer 2010-2016 2008-2009 9.245% 10.115% 9.245% 9.825% 1998-2007 9.245% 9.535% 16.c.3. ACTUARIAL ASSUMPTIONS The Total Pension Liability as of June 30,2014, is based on the results of an actuarial valuation date of June 30,2014,with up- date procedures to roll forward the total pension liability to June 30,2015. The actuarial assumptions used in the June 30,2015 valuation were based on the results of the last actuarial experience study.dated June 2010 for the six year period July 1,2003 to June 30,2009. There were several significant assumptions and other inputs used to measure the Total Pension Liability. Among those assumptions were the following: • General Wage Growth* 4.00% • *includes Inflation at 3.00% • Admin expense as%of Payroll at 0.17% • Merit Increases 0.00%to 7.30% t • Investment Return 7.75% • Postretirement Benefit Increases For members hired prior to July 1,2007 3.00% For members hired on or after July 1,2007 1.50% ' After the member has completed 12 full months of retirement,the member's benefit increases by the applicable per- centage each January, inclusive of other adjustments to the member's benefit. • Mortality assumptions among contributing members,terminated vested members,service retired members and beneficiaries based on RP 2000 Combined Employee and Annuitant Mortality Tables projected to 2015 with scale AA. • Mortality assumptions among Disabled Retirees are based on RP 2000 Combined Employee and Annuitant Mortality Tables with no projections.No future mortality improvement is assumed. 16. c.4. DISCOUNT RATE The discount rate used to measure the Total Pension Liability was 6.68%, which is a blend of the assumed long-term expected rate of return of 7.75%on System's investments and a municipal bond index rate of 3.80%. The projection of cash flows used to determine the discount rate assumed that contributions from participating plan members and employers will be made based on the Board's funding policy,which establishes the contractually required rates under Montana Code Annotated. Based on those as- sumptions,the System's fiduciary net position was projected to not be adequate to make all the projected future benefit payments of current plan members after 2057.Therefore,the portion of future projected benefit payments after 2057 are discounted at the municipal bond index rate. 1 I 40 JEFFERSON COUNTY I NOTES TO THE FINANCIAL STATEMENTS(continued) , For the year ended June 30,2016 16.c. 5. TARGET ALLOCATIONS Asset Class Target Asset Allocation Long-Term Expected Real Rate of Return Cash Equivalents 2.00% -0.25% Domestic Equity 36.00% 4.45% Foreign Equity 18.00% 6.10% Fixed Income 24.00% 1.25% Private Equity 12.00% 8.00% Real Estate 8.00% 4.25% The long-term expected return on pension plan assets is reviewed as part of the regular experience studies prepared for the Sys- tem. The most recent analysis, performed for the period covering fiscal years 2003 through 2009,is outlined in a report dated June 2010,which is located on the MPERA website. Several factors are considered in evaluating the long-term rate of return assumption including rates of return adopted by similar public sector systems,and by using a building block method in which best-estimate ranges of expected future real rates of return(expected returns,net of pension plan investment expense and infla- ' tion)are developed by the investment consultant for each major asset class.These ranges were 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 then adding expected inflation.The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation,a change in the inflation assumption,or a fundamental change in the market that alters ' expected returns in future years.Best estimates are presented as the arithmetic real rates of return for each major asset class in- cluded in the System's target asset allocation as of June 30,2015,is summarized in the above table. 16.d. SENSITIVITY ANALYSIS In accordance with GASB 68 regarding the disclosure of the sensitivity of the net pension liability to changes in the discount rate, the above table presents the net pension liability calculated using the discount rate of 7.75%, as well as what the net pension lia- bility would be if it were calculated using a discount rate that is 1.00%lower(6.75%)or 1.00%higher(8.75%) than the current rate. 1.0%Decrease Current Discount 1.0%Increase (6.75%) Rate (8.75%) Net Pension Pension Liability $ 2,155.216,222 $ 1,397,872,046 $ 758,312,456 Employer's proportion of Net Pension Liability $ 5,785,059 $ 3,752,186 $ 2,035,472 SRS (5.86%) (6.86%) (7.86%) Net Pension Liability $ _ 2,257,357,650 $ 1,643,005,761 $ 1,126,063,873 Employer's proportion of Net Pension Liability $ 2,292,496 $ 1,427,517 $ 718,443 16. e. NET PENSION LIABILITY I In accordance with GASB Statement 68, Accounting and Financial Reporting for Pensions, employers are required to recognize and report certain amounts associated with their participation in the PERS and SRS.Statement 68 became effective June 30,2015 and includes requirements to record and report their proportionate share of the collective Net Pension Liability,Pension Expense, ' Deferred Inflows and Deferred Outflows of resources associated with pensions. In accordance with Statement 68,PERS and SRS have special funding situations in which the State of Montana is legally respon- sible for making contributions directly to PERS and SRS on behalf of the employers. Due to the existence of this special funding situation, local governments and school districts are required to report the portion of the State of Montana's proportionate share of the collective Net Pension Liability that is associated with the employer. The State of Montana also has a funding situation that is not Special Funding whereby the State General Fund provides contribu- tions from the Coal Tax Severance fund and interest to the PERS. All employers are required to report the portion of Coal Tax Severance Tax and interest attributable to the employer. Percent of Percent of Change in PERS Net Pension Liability Collective NPL Collective NPL Percent of as of 6/30/16 as of 6/30/15 as of 6/30/16 as of 6/30/15 Collective NPL Employer Proportionate Share $ 3,752,186 $ 3,260,204 0.268421% 0.261651% 0.006770% State of Montana Proportionate Share associated with Employer 46,089 39,812 0.003297% 0.003195% 0.000102% Total $ ;79R 275 3.300.016 _ 0.271718% 0.264846% 0 006872% 41 1 JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) IFor the year ended June 30,2016 Percent of Percent of Change in I SRS Net Pension Liability Collective NPL Collective NPL Percent of as of 6/30/16 as of 6/30/15 as of 6/30/16 as of 6/30/15 Collective NPL Employer Proportionate Share $ 1,427.517 $ 562,710 1.480843% 1.352115% 0.128728% I Total 427.517 S 562 710 . 1.480843% 1.352115% 0.128728% At June 30,2016,the employer recorded a liability of$3,752,186 and $1,427,517 for PERS and SRS,respectively,for its propor- tionate share of the Net Pension Liability. The Net Pension Liability was measured as of June 30, 2015, and the Total Pension I Liability used to calculate the Net Pension Liability was determined by an actuarial valuation as of July 1, 2015. Therefore,no update procedures were used to roll forward the total pension liability to the measurement date. The employer's proportion of the Net Pension Liability was based on the employer's contributions received by PERS and TRS during the measurement period July 1, 2014,through June 30,2015,relative to the total employer contributions received from all of PERS and SRS participating I employers. At June 30,2016,the employer's proportion was 0.268421 percent and 1.480843 percent for PERS and SRS,respec- tively. Changes in actuarial assumptions and methods: Any changes can be obtained from PERS or SRS as in the first part of this I note. Changes in benefit terms: There have been no changes in benefit terms since the previous measurement date. I Changes in proportionate share: There were no changes between the measurement date of the collective Net Pension Liabil- ity and the employer's reporting date that are expected to have a significant effect on the employer's proportionate share of the collective NPL. I 16.f PENSION EXPENSE PERS Pension Expense as of 6/30/16 I Employer's Proportionate Share $ 267,126 State of Montana Proportionate Share associated with the Employer 2.864 Total $ 269.990 I SRS Pension Expense as of 6/30/16 Employer's Proportionate Share $ 127,821 State of Montana Proportionate Share associated with the Employer 0 ITotal $ 127,$21 At June 30.2016,the employer recognized a Pension Expense of$267,126 and$127,821 for its proportionate share of the PERS and SRS Pension Expense, respectively.The employer also recognized grant revenue of$92,912 and$0 for the support provided I by the State of Montana for its proportionate share of the Pension Expense that is associated with the employer for PERS and SRS, respectively. 16.g. PENSION AMOUNTS TOTAL FOR EMPLOYER—EMPLOYER'S PROPORTION OF PERS AND SRS PENSION I AMOUNTS The employer's The employer's proportionate share proportionate share The employer's associated with associated with Total Pension I PERS SRS Amounts Total Pension Liability $ 17,371,231 $ 5,802,615 $ 23,173,846 Fiduciary Net Position $ 13,619.045 $ 4,375.398 $ 17,994,443 Net Pension Liability $ 3,752,186 $ 1.427.517 $ 5,179,703 I Deferred Outflows of Resources $ 342,199 $ 749,481 $ 1,091,680 Deferred Inflows of Resources $ 352,272 $ 624,205 $ 976,477 Pension Expense $ 267,126 $ 127,821 $ 394,947 1 16.h. DEFERRED INFLOWS AND OUTFLOWS At June 30. 2016, the employer reported its proportionate share of PERS and SRS deferred outflows of resources and deferred Iinflows of resources related to PERS and TRS from the following sources: 42 JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) ' For the year ended June 30,2016 PERS PERS SRS SRS Deferred Outflows Deferred Inflows Deferred Outflows Deferred Inflows of Resources of Resources of Resources of Resources Differences between actual and expected experience $ 0 $ 22,701 $ 0 $ 2,406 Changes in assumptions 0 0 531,354 524,031 I Difference between projected and actual earnings on pension plan investments 0 317,662 0 97,768 Changes in proportion differences be- tween employer contributions and pro- portionate share of contributions 79,613 11,909 109,874 0 #Contributions paid subsequent to the measurement date - FY 2016 Contribu- ' tions $ 262,586 $ 0 $ 108,253 $ 0 Total $ 342A99 $ �5 � $ 749.481 fi24 0 #Amounts reported as deferred outflows of resources related to pensions resulting from the employer's contributions subsequent to the measurement date will be recognized as a reduction of the Net Pension Liability in the year ended June 30, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in Pension Expense as follows: PERS SRS Amount recognized Amount recognized in Pension Expense in Pension Expense Year as an increase or as an increase or ended (decrease)to (decrease)to June 30: Pension Expense Pension Expense 2017 $ (119,089) $ (18,460) 2018 $ (119,089) $ (18.460) 2019 $ (117,100) $ (18,460) 2020 $ 82,618 $ 49,444 2021 $ 0 $ 22,958 Thereafter $ 0 $ 0 NOTE 17. SERVICES PROVIDED TO OTHER GOVERNMENTS ' Jefferson County provides various financial services to other governmental entities located within the County. The County ser- ' vices as the billing agent, cashier and treasurer for tax and assessment collections for various taxing jurisdictions. The County also serves as a bank for such agencies as school districts, irrigation districts, rural fire districts, and other special purpose dis- tricts. The funds collected and held by the County for other entities are accounted for in agency funds. Funds collected for in- corporated cities and towns are periodically remitted to those entities by the County Treasurer. The County has not recorded any service charges for the services it provides other governmental entities. NOTE 18. PENDING LITIGATION I The following litigation is currently outstanding involving Jefferson County: Case Damages Requested Potential of loss A.W. v Jefferson County Montana Not stated Not stated L.J. v.Jefferson County, Montana Not stated Not stated Orozco-Ramirez v.Jefferson County, Montana Not stated Not stated Robertson v.Jefferson County, Montana Not stated Not stated Reneger v. State of Montana, et al., Montana Not stated Not stated Davis, et at v. Ramey, et aL Not stated Not stated I 43 I ' JEFFERSON COUNTY NOTES TO THE FINANCIAL STATEMENTS(continued) For the year ended June 30,2016 NOTE 19. SUBSEQUENT EVENTS ' The County remains in talks related to the restitution for the theft in the treasurer's office in fiscal year 2014. A new contract was signed for work to be done at the fair grounds for$234,900 on July 5,2016. The Big Dipper RSID and the Martinez Gulch Road RSID used excess cash to pay down RSID liabilities by $15,448 and $41,659 respectively in January of 2017. 1 1 I I I M I 44 JEFFERSON COUNTY SCHEDULE OF FUNDING PROGRESS Other Post-Employment Benefits Other Than Pensions(OPEB) For the year ended June 30.2016 Changes of Net Change in Total Total assumptions total OPEB OPEB OPEB Service Changes of or other Benefit liability Liability Liability Fiscal cost Interest benefit terms inputs payments (t) beginning ending year end (a) (b) (c) (d) (e) (sum of a to e) (g) (f+g) 6/30/15 $ 123,207 $ 61,391 $ 78,932 $(5,398,994) $ (184,598) $ (5,320,062) $6,168,911 $ 848,849 6/30/16 $ 123,207 $ 61,391 $ 0 $ 0 $ (184,598) $ 0 $ 848.849 $ 848,849 Schedule is intended to show information for 10 years.Additional years will be displayed as they become available. I I I I 1 I I 1 45 s JEFFERSON COUNTY SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABILITY IFor the year ended June 30,2016 PUBLIC EMPLOYEES RETIREMENT SYSTEM I State of Employer's Montana's Employer's proportionate proportionate proportionate ' share of the share of the share of the net net pension net pension pension liability Plan fiduciary Employer's liability liability Employer's as a percentage net position as proportion associated associated covered- of its covered- a percentage ' of the net with the with the employee employee of the total Year ended pension Employer Employer Total payroll payroll pension June 30: liability (a) (b) fa)+(b)=(c) (d) (a)/(d) liability I 2015 0.261651% $ 3,260,204 $ 39,812 $ 3,300,016 $ 3,132,530 104.076% 79.9% 2016 0.268421% $ 3,752,186 $ 46.089 $ 3,798,275 $ 3,105,174 120.837% 78.4% I SHERIFFS RETIREMENT SYSTEM I Employer's Employer's proportionate proportionate share of the share of the net I net pension pension liability Plan fiduciary Employer's liability Employer's as a percentage net position as proportion associated covered- of its covered- a percentage of the net with the employee employee of the total I Year ended pension Employer payroll payroll pension June 30: liability (a) (d) (a)/(d) liability 2015 1.352115% $ 562,710 $ 1,007,648 55.84% 87.2% 2016 1.480843% $ 1,427,517 $ 1,044,451 136.68% 75.4% Schedule is intended to show information for 10 years. Additional years will be displayed as they become available. I I I I I I I 46 JEFFERSON COUNTY 1 SCHEDULE OF CONTRIBUTIONS TO MONTANA RETIREMENT SYSTEMS ' For the year ended June 30.2016 PUBLIC EMPLOYEES RETIREMENT SYSTEM Contributions in Contributions as relation to the Employer's a percentage of Contractually contractually Contribution covered- covered- required required deficiency employee employee Year ended contributions contributions (excess) payroll payroll June 30: (a) (b) (a)-(b)=(c) (d) (a)/(d) 2015 $ 260,787 $ 260,787 $ - $ 3,132,530 8.325% 2016 $ 262,586 $ 262,586 $ - $ 3,105,174 8.456% I SHERIFFS RETIREMENT SYSTEM Contributions in Contributions as relation to the Employer's a percentage of Contractually contractually Contribution covered- covered- required required deficiency employee employee Year ended contributions contributions (excess) payroll payroll June 30: (a) (b) (a)-(b)=(c) (d) (a)/(d) 2015 $ 102,214 $ 102,214 $ 0 $ 1,007,648 10.144% 2016 $ 108,253 $ 108.253 $ 0 $ 1.044.451 10.365% 1 Schedule is intended to show information for 10 years.Additional years will be displayed as they become available. I I I I I I I 47 I Jefferson County I Jefferson County Boulder,MT 59632 STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES (Budget and Actual) I ALL BUDGETED MAJOR GOVERNMENTAL FUNDS For the year ended June 30,2016 I Original General PILT Final Original Final Budget Budget Actual Budget Budget Actual REVENUES: I Taxes/assessments $ 1,794,537 S 1,794,537 S 1,783,089 $ - $ - $ _ Licenses and permits 2,700 2,700 3 000 Intergovernmental revenues 151,490 151,490 157.280 - - 1,268,677 Charges for services 181,019 181,019 191.521 - - - Fines and forfeitures 9.5,800 95,800 109.220 - - - Miscellaneous 11,355 11,355 19.628 Investment and royalty earnings 7,000 7,000 60,961 Total revenues 2,243,901 2,243 901 2,324,699 . - 1,268,677 III EXPENDITURES: Current: General government 2,742,915 2,742,915 2,508,479 63,000 63,000 33,139 I Public safety 67 154 67,154 48 839 Public works 1.000 1 000 Public health 63,226 63,226 45,541- - Social and economic services 22.400 22,400 1 1,100 - - - Housing and community development - - - - - - I Debt service'. Principal 117,589 117,589 33,624 Interest and other charges 6,547 6,547 2,416 - - - I Capital outlay 686,587 697,587 593,702 - - - , Total expenditures 3,707,418 3.718,418 3243,701 63,000 63,000 33,139 Excess(deficiency)of revenues • I over expenditures (1,463,517) (1,474,517) (919,002) (63,000) _ (63,000) 1,235,538 OTHER FINANCING SOURCES/USES. • Sale of capital assets 11,000 11,000 15,630 - Loan proceeds 787,148 787,148 725,623 - Asset recovery 118,000 Fund transfers in 820,324 820,324 820,324 Fund transfers(out) - - (5,000) (753,366) (893,374) (893,375) ITotal other financial sources/uses 1,618,472 1,618 472 1,556,577 (753,366) (893,374) (775,375) Net changes in fund balances 154,955 143,955 637,575 (816,366) (956,374) 460,163 I FUND BALANCE: Beginning of the year 898,055 1,583,013 Prior period adjustments 30,000 IEnd of the year $ 1,565,630 $ 2,043,176 I I IThe accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. 48 I I Jefferson County Jefferson County ' Boulder,MT 59632 STATEMENT OF REVENUES,EXPENDITURES.AND CHANGES IN FUND BALANCES (Budget and Actual) ALL BUDGETED MAJOR GOVERNMENTAL FUNDS For the year ended June 30,2016 Road Public Safety Original Final Original Final Budget Budget Actual Budget Budget Actual REVENUES'. Taxes/assessments $ 539,481 $ 539.481 $ 516,402 $ 1.471,809 $ 1,471,809 $ 1,407,617 Licenses and permits - - - 450 450 475 Intergovemmental revenues 521,732 521732 512,414 340,117 340,117 347,842 Charges for services 2,000 2.000 2,370 451,001 451,001 459,315 Fines and forfeitures - - - - - - Miscellaneous 120 120 715 2,400 2,400 19,699 Investment and royalty earnings - . 17,777 - - 18,527 Total revenues 1,063,333 1,063,333 1,049,678 2,265,777 2,265,777 2,253,475 EXPENDITURES: t Current: General government 1,500 1.500 454 - - - Public safety - - - 2,467,280 2,476,078 2,449,058 ' Public works 1,367558 1,367.558 1,080,725 - -Public health - - _ - - _ Social and economic services - - - - - _ Housing and community development - - - - _ Debt service'. Principal - - - - - _ Interest and other charges - - - - _ Capital outlay 121,600 121,600 106.975 120.000 120,000 116,659 Total expenditures 1,490,658 1,490.658 1,188,154 2.587.280 2,596,078 2,565.717 Excess(deficiency)of revenues over expenditures (427,325) (427,325) (138.476) (321,503) (330,301) (312,242) OTHER FINANCING SOURCES/USES: Sale of capital assets 2,909 8,947 8,947 21,234 Loan proceeds , Asset recovery _ - Fund transfers in 112,048 112,048 112,048 179,480 179,480 179,480 Fund transfers(out) Total other financial sources/uses 112,048 112,048 I I4 957 188,427 188,427 200,714 Net changes in fund balances (315,277) (315,277) (23.519) (133,076) (141,874) (111,528) FUND BALANCE: ' Beginning of the year 732.982 832.766 Prior period adjustments _ - End of the year $ 709,463 $ 721.238 I I The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. I 49 Jefferson County I Jefferson County Boulder,MT 59632 STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FUND BALANCES (Budget and Actual) ALL BUDGETED MAJOR GOVERNMENTAL FUNDS For the year ended June 30,2016 ' Original North End TIF District South End TIF District Final Original Final Budget Budget Actual Budget Budget Actual REVENUES: $ 5 $ 405,539 Taxes/assessments $ 35 $ 35 $ 39.098 $ - - Licenses and etmits 36,612 36,612 36,612- - Intergovernmental revenues _- - Charges for services - - - -- Fines Miscellaneous forfeitures - - 15 000 15,000 13,600-Miscellaneous 1,786 Investment and royalty earnings 79 Total revenues 35 35 39,t77 51,617 51,617 457,537 I EXPENDITURES- Current: - - - General government - - _ - - Public works - - - -safety - Public 22,700 22700 81 83,100 83,100 154,018 - -Public health Social and economic services - - _ - Housing and community development - - Debt service. Principal Interest and other charges 10,399 10399 9,409 228,193 228,193 9,356 20.000 20,000 - 300.000 300,000 24,609 I Capital outlay 53,099 53,099 9,490 611,293 611,293 187,983 Total expenditures Excess(deficiency)of revenues Rover expenditures (53,064) (53,064) 29,687 (559,676) (559,676) 269,554 OTHER FINANCING SOURCES/USES: Sale of capital assets - _ Loan proceeds - - - - _ -Asset recovery - - - - - Fund transfers in Fund transfers(out) S Total other financial sources/uses - Net changes in fund balances i (53,064) (53,064) 29,687 (559,676) (559,676) 269,554 I FUND BALANCE_ 228,203 Beginning of the year (293,011) Prior period adjustments - End of the year $ (263,324) $ 497,757 I I pThe accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. 50 I Jefferson County 1 Jefferson County Boulder,MT 59632 STATEMENT OF REVENUES.EXPENDITURES.AND CHANGES IN FUND BALANCES (Budget and Actual) ALL BUDGETED MAJOR GOVERNMENTAL FUNDS For the year ended June 30,2016 Hard Rock Mine Trust Account ' Original Final Budget Budget Actual REVENUES: Taxes/assessments $ - $ $ Licenses and permits _ Intergovernmental revenues 234.485 23,485 215.488 Charges for services Fines and forfeitures Miscellaneous - _ - Investment and royalty earnings 22,500 22,500 29,523 Total revenues 256,985 45,985 245,011 EXPENDITURES Current: General government - 780.000 780,000 Public safety - Public works - - - - - Public health - Social and economic services - - Housing and community development 141,000 141.000 105,942 Debt service: - Principal - - Interest and other charges - - Capital outlay - Total expenditures 141,000 921,000 885,942 Excess(deficiency)of revenues over expenditures 115,985 (875,015) (640,931) OTHER FINANCING SOURCES/USES: Sale of capital assets - - Loan proceeds - - Asset recovery - - . - Fund transfers in Fund transfers(out) - - Total other financial sources/uses - Net changes in fund balances 115,985 (875,015) (640,931) FUND BALANCE: Beginning of the year 3,565,725 Prior period adjustments End of the year $ 2,924,794 I I The accompanying NOTES TO THE FINANCIAL STATEMENTS are an integral part of these statements. t 51 I ' JEFFERSON COUNTY NOTES TO THE BUDGE!'VS ACTUAL SCHEDULE IFor the year ended June 30,2016 NOTE 1. BUDGETS 1.a. BUDGETS Budgets are adopted on a basis consistent with the State of Montana budget laws (Title 7, Chapter 6,Part 40, MCA)which are consistent GAAP. Annual appropriated budgets are adopted for all funds of the County. All annual appropriations lapse at fiscal year-end, unless the County elects to encumber supplies and personal property ordered but not received at year end. The Town does not use a formal encumbrance system. ' 1.a. I GENERAL BUDGET POLICIES: Budgeted funds are those of which a legal budget must be adopted to have expenditures from such funds and are noted above. The Schedule of Revenues, Expenditures, and Changes in Fund Balances, Budget vs. Actual,has been prepared on the modified accrual basis of accounting and contains financial information for only the major budgeted funds. The major funds South Hills I RSID and Saddle Mountain RSID are not included because they are not special revenue funds. The major fund Solid Waste is not included in the schedule because it is an enterprise fund. 1 1.a.2 BUDGET OPERATION: The County operates within the budget requirements for incorporated city or town's as specified by State law. The financial report reflects the following budgetary standards: ' (I) A local government shall submit a complete copy of the final budget together with a statement of tax levies to the Department of Administration by the later of October 1 or 60 days after receipt of taxable values from the Depart- ment of Revenue. 1 (2) Local government officials may not make a disbursement or an expenditure or incur an obligation in excess of the to- tal appropriations for a fund. I (3) The governing body may amend the budget during the fiscal year by conducting public hearings at regularly sched- uled meetings.Budget amendments providing for additional appropriations must identify the fund reserves,unantici- pated revenue,or previously unbudgeted revenue that will fund the appropriations. 1 (4) The governing body and each municipal official are limited to the amount of appropriations and by the classifica- tions in the annual appropriation resolution when making disbursements or expenditures or incurring liabilities. Ex- ceptions to this limitation - Appropriations may be adjusted according to procedures authorized by the governing body for: 1 a. debt service funds for obligations related to debt approved by the governing body; b. trust funds for obligations authorized by trust covenants; c. any fund for federal,state, local, or private grants and shared revenue accepted and approved by the governing body; I d. any fund for special assessments approved by the governing body; e. the proceeds from the sale of land; f. any fund for gifts or donations;and g. money borrowed during the fiscal year. ' (5) If an expenditure is to be financed from a tax levy required to be authorized and approved at an election,the expendi- ture may not be made or an obligation may not be incurred against the expenditure until the tax levy is authorized and approved. I (6) At the end of a fiscal year, unencumbered appropriations lapse unless specifically obligated by the County. I I I 52 JEFFERSON COUNTY NOTES TO THE BUDGET VS ACTUAL SCHEDULE(continued) For the year ended June 30,2016 ' NOTE 2. COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE ALL SUB-FUNDS OF THE GENERAL FUND Sub-fund Sub-fund Total I General Consolidation General Fund PILE Fund REVENUES: ' Taxes/assessments $ 1,783,089 $ 0 $ 1,783,089 Licenses and permits 3.000 0 3,000 Intergovernmental revenues 157,280 1,268,677 1,425,957 Charges for services 191.521 0 191,521 Fines and forfeitures 109,220 0 109.220 Miscellaneous 19.628 0 19,628 Investment and royalty earnings 60,961 0 60,961 Total revenues $ 2 324,699 L1.268,677 $ 3 5. 93 376 EXPENDITURES: General government 2,508,479 33,139 2,541,618 Public safety 48,839 0 48,839 Public health 45,541 0 45,541 Social and economic services 11,100 0 11,100 Debt Service: Principal 33,624 0 33,624 Interest&other charges 2,416 0 2,416 Capital outlay 593,702 0 593,702 Total expenditures 24 7 $ . 33 139 3-276.840 Excess(deficiency)of revenues over (919,002) 1,235,538 316,536 expenditures OTHER FINANCING SOURCES/USES: Safe of capital assets 15,630 0 15,630 Loan proceeds 725.623 0 725,623 ' Asset recovery 0 118.000 118,000 Fund transfers in 820,324 0 (547,780) 272,544 Fund transfers(out) (5.000) (839.375) 547,750 (350,595) Total other financial sources/uses 1,556,577 (775,375) 0 1,097,738 Net changes in fund balances 637,575 460,163 1,097,738 FUND BALANCE: Beginning of the Year 898,055 1,583,013 2,481,068 Prior period adjustment 30.000 0 30,000 Ending of the Year(GAAP) I 5_65,6_30 2.043 176 $ 3 M 806 I In the reconciliation the General fund and PILT fund are added together to get to the aggregate general fund shown as a major fund on the Statement of Revenues, Expenditures,and Changes in Fund Balance Governmental Funds. The PILT fund is main- tained as special revenue funds for accounting purposes,however, for external financial reporting it is added to the general fund because it has unassigned fund balance like the general fund. I I 53 I I Illy `R4{M & AS S OC S, ',+C« ' try CertifiedTubtic Accountants 3203 3'Ave l. State 208 Phone:4o5-252-2765 PO Pox tg80 :E-mail: audit-'tstp•ora>cyrcr..r€et 3tiflnps, 1D59203 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 AL/DUNG STANDARDS INDEPENDENT AUDITOR'S REPORT Board of County Commissioners Jefferson County Boulder,MT 59632 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 Governmental Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Jefferson County as of and for the year ended June 30,2016, and the related notes to the financial ' statements, which collectively comprise the Jefferson County's basic financial statements and have issued our report thereon dated March 24,2017. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements,we considered Jefferson County's internal control over financial reporting(internal control)to determine the audit procedures that are appropriate in the circumstances for the purpose of express- ing our opinions on the financial statements,but not for the purpose of expressing an opinion on the effectiveness of the County's internal control. Accordingly,we do not express an opinion on the effectiveness of the County'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 mate- rial 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 weak- ness,yet important enough to merit attention by those charged with governance. ' Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not de- signed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. 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. We did identify a certain deficiency in internal control, described in the accompanying schedule of findings and responses that we consider to be a significant deficiency as item 2016-001. Compliance and Other Matters As part of obtaining reasonable assurance about whether Jefferson County's financial statements are free of material misstate- ment, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, non- compliance 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 are required to be reported under Government Auditing Standards. I I 54 I I Jefferson County's Response to Findings The County's response to the findings identified in our audit are described in the accompanying schedule of findings and re- sponses. The County's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly,we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance.Accordingly,this communication is not suitable for any other purpose. STROM&ASSOCIATES,PC Billings,Montana March 24,2017 I I I I 1 I I I I 55 JEFFERSON COUNTY SCHEDULE OF FINDINGS AND RESPONSES For the year ended June 30,2016 The following is the status of prior year findings and updated for the fiscal year ended June 30,2016. ' Prior year findings/status: 2015-001:Payroll tax account—Resolved 2015-002:Library petty cash internal control—Resolved 2015-003: Inmate Commissary Account internal controls—Repeated as finding 2016-001 below ' Current year findings: 2016-001 Inmate commissary account internal controls(repeat of prior year finding 2015-0031 Criteria: Proper controls over financial reporting should include controls to ensure all revenues,expenditures and bal- ances are reported in the financial reporting system. Condition: The inmate commissary account currently records receipts from inmates and purchases for inmates outside of the financial reporting system. Effect: Revenues,expenditures,cash and equity are all understated for the public safety fund. Context: The Sheriffs office uses the inmate trust account and log books to track inmate purchases of commissary I Cause: items outside of the normal financial reporting process. Purchases of commissary items to sell are made through the inmate trust account which is not reported on County financial statements. Any County revenues resulting from inmates purchase of goods should be rec- orded as revenue in the County financial reporting system. Likewise,any purchases of goods for resale to ' inmates should be reported as expenditures. Recommendation: We recommend making the following changes to the inmate commissary bank account monthly procedures: 1) On a regular basis(minimum weekly),deposit all jail money log funds with the County Treasurer into a new Jail money account in the public safety fund. 2) Create an impress petty cash account(example:$5,000)for small purchases or inmate reimbursements which can- not wait for a county warrant. 3) On a monthly basis submit all invoices spent out of the petty cash account to the Clerk and recorder to reimburse the petty cash back to$5,000. 4) All future purchases out of the new Jail money account in the public safety fund would be through county war- rants. Auditee Response: The recommendations associated with improving the internal controls regarding the prisoner commissary have been reviewed and discussed with the Sheriff and staff and will be followed. I 1 1 I 56