willard city basic financial statements and ...willard city’s finances, in a manner similar to a...

WILLARD CITYBASIC FINANCIAL STATEMENTS AND

REQUIRED SUPPLEMENTARY INFORMATION WITH INDEPENDENT AUDITOR'S REPORTS

YEAR ENDED JUNE 30, 2020

WILLARD CITYTABLE OF CONTENTS

FINANCIAL SECTION: Page

Independent Auditor's Report 1-2

Management Discussion and Analysis 3-8

Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position 9

Statement of Activities 10

Fund Financial Statements:

Balance Sheet Governmental Funds 11

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 12

Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 13

Reconciliation of the Statement of Revenues, Expenditures, and Changesin Fund Balances Governmental Funds to the Statement of Activities 14

Statement of Net Position Proprietary Funds 15

Statement of Revenues, Expenditures, and Changes in Fund Net Position Proprietary Funds 16

Statement of Cash Flows Proprietary Funds 17

Notes to the Financial Statements 18-50

Required Supplementary Information:

Budgetary Comparison Schedules - General Fund 51-52

Schedule of the Proportionate Share of the Net Pension Liability 53

Schedule of Contributions 54

Notes to Required Supplementary Information 55

Supplementary Information:

Schedule of Net Revenues and Aggregate Debt Service 56

Auditor's Reports:

Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 57-58

Independent Auditor's Report in Accordance with the State Compliance Audit Guide 59-60

Schedule of Findings 61

INDEPENDENT AUDITOR’S REPORT To the Mayor and City Council of Willard City

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, business-type activities, and each major fund of Willard City, as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise Willard City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, business-type activities, and each major fund of Willard City, as of June 30, 2020, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, schedule of the proportionate share of the net pension liability, and the schedule of contributions on pages 3–8 and 51–55 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 19, 2020, on our consideration of Willard City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Willard City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Willard City’s internal control over financial reporting and compliance.

Child, Richards CPAs & Advisors Ogden, Utah November 19, 2020

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MANAGEMENT'SDISCUSSION AND ANALYSIS

WILLARD CITYMANAGEMENT’S DISCUSSION & ANALYSIS

FOR THE YEAR ENDED JUNE 30, 2020

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The Mayor, City Council and management of Willard City offers the readers of the Willard City financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2020.

This report form is designed to provide more information on the city’s activities and is classified in the following manner:

Government activities - refer to general administration, police, parks, streets, fire, etc.

Business type activities - refer to operations such as water, garbage and sewer.

FINANCIAL HIGHLIGHTS

The total net position of the City increased by $171,573. The governmental activities’ net position increased by $49,701. The business-type activities’ net position increased by $121,872.

The total net position of $12,319,196 is made up of $9,626,333 in the net investment in capital assets, $2,070,192 in unrestricted net position, and $622,671 in restricted net position.

The City’s long-term debt decreased by $289,000 due to regular principal payments. The total long-term debt amount is $10,235,333.

At the close of the current year, Willard City governmental funds reported an ending fund balance of $1,089,264, an increase of $45,294 in comparison with the prior year.

REPORTING THE CITY AS A WHOLE

In addition to the Management’s Discussion and Analysis (MD&A), the basic financial statements contain three basic components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. The first several statements are condensed and present a government-wide view of the City’s finances. This view categorizes the City’s operation as either governmental or business-type activities. Governmental activities include basic services such as police, fire and inspection, public works, parks and recreation, and general government administration. The business-type activities include water and garbage services funded by user fees.

The government-wide financial statements are designed to provide readers with a broad overview of Willard City’s finances, in a manner similar to a private sector business.

The statement of net position presents information on all of Willard City’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of Willard City is improving or deteriorating.



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The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus all of the current year’s revenues and expenses are taken into account regardless of when cash is received or paid. Both of the government-wide financial statements distinguish functions of Willard City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges.

REPORTING THE CITY’S MOST SIGNIFICANT FUNDS

A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Willard City also uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and enterprise funds.

Government funds are used to account for the same functions reported as governmental activities in the government-wide financial statements. These funds focus on how money flows into and out of these funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City’s general government operations and the basic services it provides. Governmental fund information helps users determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in a reconciliation included with the fund financial statements.

The only major governmental fund (as determined by generally accepted accounting principles) is the General Fund. The balance of the governmental funds is determined to be non-major and is included in the combining statements within this report.

Proprietary (Enterprise) funds - Willard City now has two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities as in the government-wide financial statements. Willard City uses the enterprise fund to account for its Water and Garbage Utility. Accounting for the Sewer Utility has also been added as a proprietary fund. As determined by generally accepted accounting principles, the enterprise fund meets the criteria of major fund classification.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of Willard City, assets exceed liabilities by $12,319,196.



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By far the largest portion of Willard City’s net position reflects its investment in capital assets (e.g., land, buildings, infrastructure assets, machinery and equipment, less any related debt used to acquire those assets that are still outstanding.) The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

A condensed Statement of Net Position follows:

STATEMENT OF NET POSITION Governmental Activities Business-Type Activities Total 2020 2019 2020 2019 2020 2019

Cash $1,115,891 $1,112,192 $2,113,584 $2,477,405 $ 3,229,475 $ 3,589,597Receivable 389,383 294,557 99,518 82,861 488,901 377,418Other Assets 2,653 3,120 4,906 4,342 7,559 7,462Capital Assets 3,112,565 3,095,117 17,009,202 16,887,285 20,121,767 19,982,402

Total Assets 4,620,492 4,504,986 19,227,210 19,451,893 23,847,702 23,956,879

Deferred Outflows 69,659 145,950 8,606 30,666 78,265 176,616

Current Liabilities 228,033 185,695 357,573 126,312 585,606 312,007Long-term Liabilities 196,434 317,662 10,538,899 10,655,539 10,735,333 10,973,201

Total Liabilities 424,467 503,357 10,896,472 10,781,851 11,320,939 11,285,208

Deferred Inflows of Resources 266,308 197,904 19,524 2,760 285,832 200,664

Net Position:

Net Investment in Capital Assets 3,112,565 2,777,455 6,710,202 6,299,285 9,822,767 9,076,740

Restricted 174,016 212,159 448,655 720,016 622,671 932,175Unrestricted 712,795 960,061 1,160,963 1,678,647 1,873,758 2,638,708

Total Net Position $3,999,376 $3,949,675 $8,319,820 $8,697,948 $ 12,319,196 $ 12,647,623

The City’s total net position at year end was $12,319,196, most of which consisted of investments in capital assets. This amount totaled $9,626,334 (78%)

Total receivables increased by $111,483, which is mainly due to the CARES Act Funding receivable.

Total debt increased by $35,730 due to the advance funding of impact fees for the water tank.



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Governmental Activities Business-Type Activities Total 2020 2019 2020 2019 2020 2019Revenues: General Revenues:

Taxes $ 772,422 $ 702,267 $ - $ - $ 772,422 $ 702,267Interest 51,578 71,625 13,796 6,818 65,374 78,443Miscellaneous 31,359 42,106 - - 31,359 42,106

Program Revenues:Charges for Services 224,448 251,918 922,888 897,690 1,147,336 1,149,608Grants and Contributions 199,999 912,183 220,850 1,023,918 420,849 1,936,101

Total Revenues 1,279,806 1,980,099 1,157,534 1,928,426 2,437,340 3,908,525Expenses

General Government 382,951 350,325 - - 382,951 350,325Police 304,285 294,652 - - 304,285 294,652Fire 79,499 90,534 - - 79,499 90,534Hwy and Improvements 398,654 265,812 - - 398,654 265,812Parks 64,716 58,718 - - 64,716 58,718Water - - 348,281 346,136 348,281 346,136Refuse - - 74,938 68,933 74,938 68,933Sewer - - 612,443 518,856 612,443 518,856

Total Expenses 1,230,105 1,060,041 1,035,662 933,925 2,265,767 1,993,966Change in Net Position 49,701 920,058 121,872 994,501 171,573 1,914,559Beginning Net Position, as restated 3,949,675 3,029,617 8,197,948 7,703,447 12,147,623 9,963,141

Ending Net Position $3,999,376 $3,949,675 $8,319,820 $8,697,948 $12,319,196 $11,877,700

The City as a whole had an increase in net position of $171,573. Grants and Contributions totaled $420,849 in 2020 compared to $1,936,101 in 2019. Charges for services decreased by $2,272 in 2020.



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FINANCIAL ANALYSIS OF GOVERNMENT’S FUNDS

The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balance of spendable resources. Such information is useful in assessing the City’s financing requirements.

As of June 30, 2020, Willard City’s Governmental Funds (General and Capital Projects) reported a combined ending fund balance of $1,089,264, an increase of $45,294 in comparison with the prior year. Approximately 36% of the fund balance of $1,089,264 constitutes unassigned fund balance, which is available for spending at the government’s discretion. The City had $2,653 in nonspendable fund balance represented by prepaid expenses, $174,016 in restricted fund balances for Class C Roads and $520,780, in assigned fund balances for Fire Protection, Ambulance and Capital Projects.

The General Fund is the chief operating fund of the City. All activities which are not required to be accounted for in separate funds either by state or local ordinance or by a desire to maintain a matching of revenues and expenses are accounted for in this fund.

The total revenue of the General Fund for the year ending June 30, 2020 was $1,217,574. Taxes continue to be the largest source of revenue in the General Fund and represent 63% of the total general fund revenues. This compares with 60% in the prior fiscal year ended June 30, 2019. The major source of tax revenue comes from sales & use taxes and is 41% of the tax revenue. Fines and Forfeitures contributed 9% of the general fund revenue, compared to 12% the prior year.

Expenditures of the General fund for the year ending June 30, 2020 totaled $1,081,489 and were $44,451 below the final budgeted expenditure amount of $1,125,940.

As stated earlier, the City maintains the Enterprise fund to account for the business-type activities of the City. The separate fund statements included in this report provide the same information for business-type activities as is provided in the government-wide financial statements. However, the difference is that the fund statements provide much more detail.

Major capital asset events during the fiscal year ending June 30, 2020, included the following:

$153,023 for the Willard Nature Park, still in progress. $29,565 for a pump for the 1995 well



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WILLARD CITY'S CAPITAL ASSETS

Governmental

Activities Business-Type

ActivitiesLand $ 315,160 $ 215,336 Construction in Progress 153,023 - Land Improvements 934,181 - Buildings 761,792 - Machinery and Equipment 1,120,261 1,024,549 Utility System - 21,276,493 Easements - 267,806 Infrastructure 1,933,695 - Less Accumulated Depreciation (2,105,547) (5,774,982)

Total Capital Assets, Net $ 3,112,565 $ 17,009,202

Additional information on the City’s capital assets can be found in the footnotes to this financial report.

WILLARD CITY'S LONG-TERM DEBT

Governmental

Activities Business-Type

ActivitiesWater Revenue 2013 Refunding Bonds $ - $ 261,000Sewer Revenue Bond Series 2015 - 10,038,000Net Pension Liability 178,833 31,899Compensated Absences 17,600

Total $ 196,433 $ 10,330,899

Long-term debt - June 30, 2020, the City had total bonded debt outstanding of $10,330,899. $292,000 of the total amount is due within the next year. The total amount is debt which is secured solely by specific revenue sources (revenue bonds). The General fund for governmental activities had no debt.

The City’s bonded debt decreased by $289,000 during the fiscal year due to regular principal payments to the Water Revenue Bonds and Sewer Revenue Bonds.

Additional information on the outstanding debt obligations of the City can be found in the footnotes of this report. Request for information - This financial report is designed to provide a general overview of Willard City’s finances for all those who are interested. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Willard City Recorder, PO Box 593, Willard, UT 84340.

BASIC FINANCIAL STATEMENTS

WILLARD CITYSTATEMENT OF NET POSITION

JUNE 30, 2020

GovernmentalActivities

Business-typeActivities Total

ASSETSCash $ 941,875 $ 1,664,929 $ 2,606,804Restricted Cash 174,016 448,655 622,671Accounts Receivable (Net) - 99,518 99,518Due From Other Governments 389,383 - 389,383Prepaid Expenses 2,653 4,906 7,559Capital Assets:

Land 315,160 215,336 530,496Construction in Progress 153,023 - 153,023Easements - 267,806 267,806Land Improvements 934,181 - 934,181Buildings 761,792 - 761,792Machinery and Equipment 1,120,261 1,024,549 2,144,810Utility Systems - 21,276,493 21,276,493Infrastructure 1,933,695 - 1,933,695

Less Accumulated Depreciation (2,105,547) (5,774,982) (7,880,529)Total Capital Assets, Net 3,112,565 17,009,202 20,121,767

Total Assets 4,620,492 19,227,210 23,847,702

DEFERRED OUTFLOWS OF RESOURCESRelated to Pensions 69,659 8,606 78,265

Total Deferred Outflows of Resources 69,659 8,606 78,265

Total Assets and Deferred Outflows of Resources 4,690,151 19,235,816 23,925,967

LIABILITIESAccounts Payable 71,148 65,573 136,721Accrued Expenses 47,468 - 47,468Advance Funding Liability - 500,000 500,000Deposits 109,417 - 109,417Noncurrent Liabilities:

Due Within One Year - 292,000 292,000Due Within More Than One Year 196,434 10,038,899 10,235,333

Total Liabilities 424,467 10,896,472 11,320,939

DEFERRED INFLOWS OF RESOURCESUnavailable Revenue - Property Taxes 190,630 - 190,630Related to Pensions 75,678 19,524 95,202

Total Deferred Inflows of Resources 266,308 19,524 285,832

NET POSITIONNet Investment in Capital Assets 3,112,565 6,710,202 9,822,767Restricted For:

Impact Fees - 8,370 8,370Debt Service - 440,285 440,285Class "C" Roads 174,016 - 174,016

Unrestricted 712,795 1,160,963 1,873,758

Total Net Position $ 3,999,376 $ 8,319,820 $ 12,319,196

The accompanying notes are an integral part of these financial statements.9

WILLARD CITYSTATEMENT OF ACTIVITIES


Program Revenues Changes in Net Position

Functions/Programs ExpensesCharges for

Services

OperatingGrants and

Contributions

Capital Grantsand

ContributionsGovernmental

ActivitiesBusiness-type

Activities TotalGovernmental Activities

General Government $ 382,951 $ 5,237 $ 62,232 $ - $ (315,482) $ - $ (315,482)Police 304,285 104,168 2,470 28,956 (168,691) - (168,691)Fire 79,499 5,474 - 5,089 (68,936) - (68,936)Highways and Public Improvement 398,654 88,911 101,252 - (208,491) - (208,491)Parks 64,716 20,658 - - (44,058) - (44,058)

Total Governmental Activities 1,230,105 224,448 165,954 34,045 (805,658) - (805,658)

Business-type ActivitiesWater 348,281 323,912 - 90,450 - 66,081 66,081Refuse 74,938 87,536 - - - 12,598 12,598Sewer 612,443 519,440 - 122,400 - 29,397 29,397

Total Business-type Activities 1,035,662 930,888 - 212,850 - 108,076 108,076

Total Government $ 2,265,767 $ 1,155,336 $ 165,954 $ 246,895 (805,658) 108,076 (697,582)

General Revenues:Taxes

Property 219,776 - 219,776Sales and Use 314,800 - 314,800Franchise 120,799 - 120,799Telecommunication 9,601 - 9,601Mass Transit 107,446 - 107,446

Interest and Investment Earnings 51,578 13,796 65,374Miscellaneous 31,359 - 31,359

Total General Revenues 855,359 13,796 869,155

Change in Net Position 49,701 121,872 171,573Net Position at Beginning of Year, as restated 3,949,675 8,197,948 12,147,623

Net Position at End of Year $ 3,999,376 $ 8,319,820 $ 12,319,196

The accompanying notes are an integral part of these financial statements. 10

WILLARD CITYBALANCE SHEET

GOVERNMENTAL FUNDSAS OF JUNE 30, 2020

GeneralCapitalProjects

TotalGovernmental

Funds

ASSETSCash $ 434,974 $ 506,901 $ 941,875Restricted Cash 174,016 - 174,016Due From Other Governments 389,383 - 389,383Prepaid Expenses 2,653 - 2,653

TOTAL ASSETS $ 1,001,026 $ 506,901 $ 1,507,927

LIABILITIESAccounts Payable $ 69,360 $ 1,788 $ 71,148Accrued Expenses 47,468 - 47,468Deposits 109,417 - 109,417

TOTAL LIABILITIES 226,245 1,788 228,033

DEFERRED INFLOWS OF RESOURCESUnavailable Revenue - Property Taxes 190,630 - 190,630

TOTAL DEFERRED INFLOWS OF RESOURCES 190,630 - 190,630

FUND BALANCESNonspendable 2,653 - 2,653Restricted for:

Class C Roads 174,016 - 174,016Grant Funds - - -

Assigned to:Fire Protection 15,667 - 15,667Ambulance - - -Capital Projects - 505,113 505,113

Unassigned 391,815 - 391,815

TOTAL FUND BALANCES 584,151 505,113 1,089,264TOTAL LIABILITIES, DEFERRED INFLOWS OFRESOURCES, AND FUND BALANCES $ 1,001,026 $ 506,901 $ 1,507,927


WILLARD CITYRECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF NET POSITIONJUNE 30, 2020

Amounts reported for governmental activities in the statement of net position are different because:

Total fund balances--total governmental funds $ 1,089,264

Capital assets used in governmental activities arenot financial resources and, therefore are notreported in the funds. 3,112,565

Deferred inflows of resources, a use of net position that applies to future periods, is not shown in the fund statements. (75,678)

Deferred outflows of resources, a consumption of net position thatapplies to future periods, is not shown in the fund statements. 69,659

Long-term liabilities are not due and payable in the current periodand therefore are not reported in the fund financial statements. Those liabilities consist of:

Net Pension Liability (178,833)

Compensated absences are not due and payable in the current period and therefore are not reported in the funds. (17,601)

Net position of governmental activities $ 3,999,376


WILLARD CITYSTATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDSFOR THE YEAR ENDED JUNE 30, 2020

GeneralCapitalProjects

TotalGovernmental

Funds

REVENUESTaxes $ 772,422 $ - $ 772,422Licenses and Permits 94,148 - 94,148Intergovernmental 137,767 - 137,767Charges for Services 26,132 - 26,132Fines 104,168 - 104,168Other Revenues 82,937 - 82,937

Total Revenues 1,217,574 - 1,217,574

EXPENDITURESCurrent Operating:

General Government 365,669 - 365,669Public Safety 335,766 - 335,766Highways and Public Improvements 341,637 - 341,637Parks 38,417 - 38,417

Capital Outlay:General Government - - -Public Safety - - -Highways and Public Improvements - - -Parks - 153,023 153,023

Total Expenditures 1,081,489 153,023 1,234,512

Excess of Revenues Over (Under) Expenditures 136,085 (153,023) (16,938)

OTHER FINANCING SOURCES (USES)CARES Act Funding 62,232 - 62,232Transfers-In - 170,000 170,000Transfers-Out (170,000) - (170,000)

Total Other Financing Sources (Uses) (107,768) 170,000 62,232

Net Change in Fund Balances 28,317 16,977 45,294

Fund Balances at Beginning of Year 555,834 488,136 1,043,970

Fund Balances at End of Year $ 584,151 $ 505,113 $ 1,089,264


WILLARD CITYRECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2020

Net change in fund balance, total governmental funds $ 45,294

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. In the statement of activities, the cost of those assets is allocated over theirestimated useful lives as depreciation expense.This is the amount by which capital outlaysexceeded depreciation in the current period.

Capital Outlays 153,023Depreciation Expense (135,575) 17,448

The governmental funds report the proceeds from the sales of assetsas revenues, while the government-wide financial statements reportthe difference between the sale proceeds and the net book value ofthe assets sold as a gain or loss.

Net book value of assets sold -

The Statement of Activities includes the net pension benefit (expense)from the adoption of GASB 68, which is not included in the fundfinancial statements. (11,010)

Contribution from developers and governments of capital infrastructuredoes not provide a current financial resource to the government, but a long-term economic resource. -

Repayment of compensated absences is an expenditurein the governmental funds, but the repayment reducesthe liability, already accrued in the statement of net position. The compensated absences repaid was: (2,031)

Change in net position of governmental activities $ 49,701


WILLARD CITYSTATEMENT OF NET POSITION - PROPRIETARY FUNDS

JUNE 30, 2020

Utility Sewer TotalASSETS

Current Assets:Cash $ 570,745 $ 1,094,184 $ 1,664,929Accounts Receivable (Net) 50,450 49,068 99,518Prepaid Expenses 2,653 2,253 4,906

Total Current Assets 623,848 1,145,505 1,769,353

Noncurrent Assets:Restricted Cash - 448,655 448,655Capital Assets

Land 70,500 144,836 215,336Construction in Progress - - -Easements - 267,806 267,806Equipment 142,985 881,564 1,024,549Utility Systems 4,270,859 17,005,634 21,276,493Less Accumulated Depreciation (2,055,807) (3,719,175) (5,774,982)

Total Capital Assets, Net 2,428,537 14,580,665 17,009,202

Total Noncurrent Assets 2,428,537 15,029,320 17,457,857

Total Assets 3,052,385 16,174,825 19,227,210

Deferred Outflows of Resources - Pensions 8,606 - 8,606

Total Assets and Deferred Outflows of Resources $ 3,060,991 $ 16,174,825 $ 19,235,816

LIABILITIESCurrent Liabilities:

Accounts Payable $ 25,308 $ 40,265 $ 65,573Advance Funding Liability 500,000 - 500,000Current Portion of Long-Term Obligations 17,000 275,000 292,000

Total Current Liabilities 542,308 315,265 857,573

Noncurrent Liabilities:Long-Term Obligations, Net of Current Portion 244,000 9,763,000 10,007,000Net Pension Liability 31,899 - 31,899

Total Liabilities 818,207 10,078,265 10,896,472

Deferred Inflows of Resources - Pensions 19,524 - 19,524

Total Liabilities and Deferred Inflows of Resources 837,731 10,078,265 10,915,996

NET POSITIONNet Investment in Capital Assets 2,167,537 4,542,665 6,710,202Restricted for Impact Fees - 8,370 8,370Restricted for Debt Service - 440,285 440,285Unrestricted 55,723 1,105,240 1,160,963

Total Net Position 2,223,260 6,096,560 8,319,820

Total Liabilities, Deferred Inflows, and Net Position $ 3,060,991 $ 16,174,825 $ 19,235,816


WILLARD CITYSTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

PROPRIETARY FUNDSFOR THE YEAR ENDED JUNE 30, 2020

Utility Sewer Total

Operating Revenues:Charges for Services:

Water $ 315,504 $ - $ 315,504Refuse 87,536 - 87,536Sewer - 511,440 511,440

Total Operating Revenues 403,040 511,440 914,480

Operating Expenses:Salaries and Benefits 133,343 90,306 223,649Utilities 46,439 31,442 77,881Contracted Services 74,938 - 74,938Professional Services 13,364 13,146 26,510Supplies and Maintenance 34,026 64,462 98,488Depreciation and Amortization 79,089 390,648 469,737Insurance and Surety Bonds 32,324 22,439 54,763

Total Operating Expenses 413,523 612,443 1,025,966

Operating Income (Loss) (10,483) (101,003) (111,486)

Nonoperating Revenues (Expenses)Connection Fees 8,408 8,000 16,408Impact Fees 90,450 122,400 212,850Interest Revenue 12,693 1,103 13,796Interest Expense (9,696) - (9,696)

Total Nonoperating Revenues (Expenses) 101,855 131,503 233,358

Net Income (Loss) Before Contributions 91,372 30,500 121,872

Capital Contributions - - -

Change in Net Position 91,372 30,500 121,872

Total Net Position - Beginning, as restated (Note J) 2,131,888 6,066,060 8,197,948

Total Net Position- Ending $ 2,223,260 $ 6,096,560 $ 8,319,820


WILLARD CITYSTATEMENT OF CASH FLOWS

PROPRIETARY FUNDSFOR THE YEAR ENDED JUNE 30, 2020

Utility Sewer Total

Cash Flows from Operating ActivitiesCash Received From Customers $ 387,116 $ 510,708 $ 897,824Cash Paid to Suppliers (251,930) (140,436) (392,366)Cash Paid to Employees (130,159) (90,306) (220,465)

Net Cash Provided (Used) by Operating Activities 5,027 279,966 284,993

Cash Flows from Noncapital Financing ActivitiesChange in Interfund Borrowings - - -Transfers In - - -Transfers Out - - -

Net Cash Used in Noncapital Financing Activities - - -

Cash Flows from Capital and Related Financing ActivitiesPrincipal Payments - Bonds (16,000) (273,000) (289,000)Acquisition of Capital Assets (593,172) - (593,172)Interest Paid (9,696) - (9,696)Impact Fees Collected (Refunded) 90,450 122,400 212,850Connection Fees Collected 8,408 8,000 16,408

Net Cash Used in Capital and Related Financing Activities (520,010) (142,600) (662,610)

Cash Flows from Investing ActivitiesInterest on Investments 12,693 1,103 13,796

Net Cash Provided by Investing Activities 12,693 1,103 13,796

Net Increase (Decrease) in Cash (502,290) 138,469 (363,821)

Cash - July 1 1,073,035 1,404,370 2,477,405

Cash - June 30 $ 570,745 $ 1,542,839 $ 2,113,584

Reconciliation of Operating Income (Loss) to NetCash Provided by Operating Activities

Operating Income (Loss) $ (10,483) $ (101,003) $ (111,486)

Adjustments to Reconcile Operating Income (Loss)to Net Cash Provided by Operating Activities

Depreciation 79,089 390,648 469,737Changes in Assets and Liabilities:

Accounts Receivable (15,924) (732) (16,656)Prepaid Expenses (174) (392) (566)Accounts Payable (50,665) (8,555) (59,220)Net Pension Liability 3,184 - 3,184

Net Cash Provided by Operating Activities $ 5,027 $ 279,966 $ 284,993

Noncash capital and financing activities: Contributions from Developers $ - $ - $ -


WILLARD CITYNOTES TO FINANCIAL STATEMENTS

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I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. General Statement

The government is a municipal corporation governed by an elected mayor and council. The City was founded March 31, 1851. The City provides the following services as authorized by its charter: Public safety (police and fire), public utilities (water and refuse), highways and streets, social services, culture-recreation, public improvements, planning and zoning, and general administrative services.

The City’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP) The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The City has adopted GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance. Accordingly, the City has elected to apply all applicable GASB pronouncements and codified accounting standards issued by GASB. The more significant accounting policies established in GAAP and used by the City are discussed below.

In defining the government, for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth by the Governmental Accounting Standards board (GASB). Under GASB Statement No. 61, The Financial Reporting Entity, the financial reporting entity consists of the primary government and no component units.

B. Basic Financial Statements

The City’s basic financial statements consist of the government-wide statements, including a statement of net position and a statement of activities, and fund financial statements, which provide a more detailed level of financial information.

Government-Wide Financial Statements

Statement of Net Position - The statement of net position and the statement of activities display information about the City as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statements distinguish between those activities of the City that are governmental and those that are considered business-type activities. The statement of net position presents the financial condition of the governmental and business-type activities of the City at year end.


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I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

B. Basic Financial Statements (continued)

Statement of Activities - The statement of activities presents a comparison between direct expenses and program revenues for each program or function of the City’s governmental activities and for business-type activities of the City. Direct expenses are those that are specifically associated with a service, program, or department and therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, grants and contributions that are restricted to meeting the operational or capital requirements of a particular program, and interest earned on grants that is required to be used to support a particular program. Revenues which are not classified as program revenues are presented as general revenues of the City, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental program or business activity is self-financing or draws from the general revenues of the City.

C. Fund Financial Statements

During the year, the City segregates transactions related to certain City functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the City at this more detailed level. The focus of governmental and enterprise fund financial statements is on major funds. Each major fund is presented in a separate column.

D. Fund Accounting

The City uses funds to maintain its financial records during the year. A fund is defined as a fiscal and accounting entity with a self balancing set of accounts.

There are three categories of funds: governmental, proprietary, and fiduciary. The following fund types are used by the City:

Governmental Funds:

The focus of the governmental funds’ measurement (in the fund statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The following is a description of the governmental funds of the City:

General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund.


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D. Fund Accounting (continued)

Capital Projects Fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by business-type/proprietary funds).

Proprietary Funds:

The focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. Proprietary funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The government applies all applicable FASB pronouncements in accounting and reporting for its proprietary operations.

Proprietary funds are required to account for operations for which a fee is charged to external users for goods or services and the activity (a) is financed with debt that is solely secured by a pledge of the net revenues, (b) has third party requirements that the cost of providing services, including capital costs, be recovered with fees and charges or (c) establishes fees and charges based on a pricing policy designed to recover similar costs.

As a general rule the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the government’s various departments. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.

The following is a description of the proprietary funds of the City.

Utility Fund is used to account for the provision of water and refuse services to the residents of the City. Activities of the fund include administration, operations and maintenance of the water and refuse system and billing and collection activities. The fund also accounts for the accumulation of resources for, and the payment of, long-term debt principal and interest for debt. All costs are financed through charges to utility customers with rates reviewed regularly and adjusted if necessary to ensure integrity of the funds.

Sewer Fund is used to account for the provision of sewer services to the residents of the City. For the time being the fund is used to collect impact fees and construct the sewer system. In the future the fund will include activities of administration, operations, and maintenance of the sewer system and charges will be assessed to users of the system.


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E. Measurement Focus/Basis of Accounting

Measurement focus refers to what is being measured; basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made regardless of the measurement focus applied.

Government-wide financial statements and fund financial statements for proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included on the statement of net position and the operating statements present increases (revenues) and decreases (expenses) in net total assets. Under the accrual basis of accounting, revenues are recognized when earned, including unbilled water and refuse services which are accrued. Expenses are recognized at the time a liability is incurred.

Fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting revenues are recognized when susceptible to accrual (i.e., when they are "measurable and available").

"Measurable" means the amount of the transaction can be determined and "available" means collectible within the current period. The government considers all revenues available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt which is recognized when due, and certain compensated absences and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable available financial resources.

Property taxes, franchise taxes, licenses, and interest are susceptible to accrual. Sales taxes collected and held by the state at year end on behalf of the government are also recognized as revenue. Other receipts and taxes become measurable and available when cash is received by the government and are recognized as revenue at that time.

Entitlements and shared revenues are recorded at the time of receipt or earlier if the accrual criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met.


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F. Assets, Liabilities and Equity

Deposits and Investments

Cash and Cash Equivalents are generally considered short-term, highly liquid investments with a maturity of three months or less from the purchase date.

Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income.

Restricted Cash

Proceeds from an outside source have been classified as restricted on the statement of net position in the Sewer fund. These funds are maintained in a separate bank account and their use is limited to new development and construction of the sewer system.

Interfund Receivables and Payables

During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as “due to and from other funds.” Short-term interfund loans are reported as “interfund receivables and payables.” Long-term interfund loans (noncurrent portion) are reported as “advances from and to other funds.” Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of Net Position.

Receivables and Payables

In the government-wide statements, receivables consist of all revenues earned at year end and not yet received. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable.

Capital Assets

Capital assets which include property, plant, equipment, and infrastructure assets (e.g. roads, bridges and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statement for proprietary funds. All capital assets are valued at historical cost or estimated historical cost if actual historical is not available. Donated assets are valued at their fair market value on the date donated. Repairs and maintenance are recorded as expenses.


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F. Assets, Liabilities and Equity (continued)

Capital Assets (continued)

Renewals and betterments are capitalized. Interest has not been capitalized during the construction period on property, plant and equipment.

Assets capitalized, not including infrastructure assets, have an original cost of $5,000 or more and over three years of useful life. Infrastructure assets capitalized have an original cost of $100,000 or more. Depreciation has been calculated on each class of depreciable property using the straight-line method.

Estimated useful lives are as follows:

Assets YearsBuildings 50Water system 50Infrastructure 20Equipment 7

Fund Financial Statements

In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same as in the government-wide statements.

Long-term Debt

The accounting treatment of long-term debt depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements.

All long-term debt to be repaid from governmental and business-type resources are reported as liabilities in the government-wide statements. The long-term debt consists primarily of bonds payable.

Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. The debt proceeds are reported as other financing sources and payment of principal and interest reported as expenditures. The accounting for the proprietary fund is the same in the fund statements as it is in the government-wide statements.


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Compensated Absences

City employees accrue vacation leave, or compensated absences, by prescribed formula based on length of service. The value of accumulated benefits earned by employees, which may be used in subsequent years or paid upon termination or retirement, is recorded as long-term debt in the government-wide statements. The current portion of this debt is estimated based on historical trends.

Equity Classifications

Government-wide Statements

Equity is classified as net position and displayed in three components:

a. Net investment in capital assets – Consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets.

b. Restricted net position – Consists of net position with constraints in place on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation.

c. Unrestricted net position – All other net position that do not meet the

definition of “restricted” or “invested in capital assets, net of related debt.”

It is the City’s policy to first apply restricted resources rather than unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available.


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Fund Statements

Proprietary fund equity is classified the same as in the government-wide statements.

The governmental fund balances may be classified as follows:

a. Non-spendable fund balance – Fund balances that cannot be spent either because they are in non-spendable form or because they are legally or contractually required to be maintained intact.

b. Restricted fund balance – Fund balances are reported as restricted when they are constrained by externally imposed legal restrictions, by law through constitutional provisions or enabling legislation, or restrictions set by creditors, grantors, or contributors.

c. Committed fund balance – Fund balances are reported as committed when the Council formally designates the use of resources by ordinance or resolution for a specific purpose and cannot be used for any other purpose unless the City Council likewise formally changes the use.

d. Assigned fund balance – Fund balances are reported as assigned when the City Council or Management intends to use funds for a specific purpose. Normally funds are assigned by the appropriation process of setting the budget. Additionally, funds in special revenue, debt service, and capital project funds are by their nature assigned to the purpose of those respective funds.

e. Unassigned fund balance – Fund balances in the general fund are reported as unassigned when they are neither restricted, committed, nor assigned. They may be used for any governmental purpose.

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the City considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the City considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless City Council has provided otherwise in its commitment or assignment actions.


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Deferred Inflows and Outflows of Resources

In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and thus, will not be recognized as an outflow of resources (expense/expenditure) until then. The City has only one item that qualifies for reporting in this category. It is the deferred contributions and differences between projected and actual earnings on its pension plan assets.

In addition to liabilities, the statement of net position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Utah Retirement Systems Pension Plan (URS) and additions to/deductions from URS’s fiduciary net position have been determined on the same basis as they are reported by URS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Interfund Transactions

Interfund services provided and used are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed.

All other interfund transactions, except quasi-external transactions and reimbursement, are reported as transfers. Nonrecurring or non-routine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as non-operating transfers.


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Property Tax

Real property taxes are collected by the County Treasurer and remitted to the City after collection. Taxes are due and payable on November 1st and delinquent after 12 o'clock noon on November 30th of each year. The tax levy is established by June 15th with a lien date of January 1st. Property tax revenue is not recognized when levied, because it is not expected to be collected within 60 days after the end of the fiscal year.

Operating Revenues and Expenses

Operating revenues and expenses in the proprietary funds consist of those revenues that result from the ongoing principal operations of the City. Operating revenues consist of charges for services. Nonoperating revenues and expenses consist of those revenues and expenses that are related to financing and investing type activities and result from nonexchange transactions or ancillary activities.

II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

A. Budget Information

Annual budgets are prepared and adopted in accordance with the "Uniform Fiscal Procedures Act for Utah cities" by the Willard City Municipal Council on or before June 22nd for the following fiscal year which begins on July 1st. Budgets may be increased by resolution of the Municipal Council at any time during the year, following a public hearing. Budgets are adopted at sub-department levels; however budget amendments by resolution are generally required only if the department desires to exceed its total budget appropriation.

The City adheres to the following procedures in establishing the budgetary data reflected in the financial statements:

1. On or before May 1st, the Mayor submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them.

2. Prior to the formal adoption of the budget the City Council will hold budget workshop meetings which are open to the public.


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II. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued)

A. Budget Information (continued)

3. Prior to June 22nd, the City Council sets a date for a public budget hearing at which time taxpayers' comments are heard. Copies of the proposed budget are made available for public inspection 10 days prior to the budget hearing. At theconclusion of the budget hearing the budget, as amended, is legally enacted through passage of a resolution.

4. Formal budgetary integration is employed as a management control device during the year for the General Fund and Enterprise Funds.

5. Budgets for the General Fund are adopted on a basis consistent with Generally Accepted Accounting Principles (GAAP). Budgets for the proprietary fund types are prepared using the accrual basis of accounting except that depreciation for all proprietary fund types are not budgeted. Budgeted amounts are as originally adopted, or as amended by the City Council during the fiscal year.

6. Unencumbered budget appropriations lapse at the end of the fiscal year.

B. Fund Equity Restrictions

Restricted for Class "C" Roads - The State of Utah remits a portion of license fees paid and gasoline taxes collected to local units of government as Class "C" Road Funds to be used for the construction and maintenance of roads within the boundaries of the local jurisdiction. All unexpended funds that have been received are restricted at the end of the fiscal year to be appropriated in subsequent budget years.

Restricted for Grant Funds- Grant funds received with restrictions on eligible expenditures, must be held as restricted at year end, in the event the eligible expenditure has not been incurred to use those funds.

Restricted for Debt Service – The covenants of the outstanding water revenue bonds and sewer revenue bonds require that debt service reserves be established and maintained throughout the remaining life of these bonds. Detail on these restrictions is explained further under bond compliance.

Restricted for Impact Fees – Impact fees are charges imposed by the City upon developers or new homeowners for their respective impact on the cost of the sewer system or water system. These funds are restricted for the purpose from which they were charged to the homeowner or developer.

Restricted for Construction – The City issued bonds and received grants for the construction of the sewer system. These funds are restricted for the specified purpose of construction.


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III. DETAILED NOTES ON TRANSACTION CLASSES/ACCOUNTS

A. Deposits and Investments

The City maintains a cash and investment pool that is available for use by all funds. Cash includes amounts in demand deposits as well as time deposits. Investments are stated at cost or amortized cost, which approximates fair value. Each fund’s portion of this pool is displayed as “Cash and Cash Equivalents’ which also includes cash accounts that are separately held by some of the City’s funds. Deposits are not collateralized nor are they required to be by State statute.

The City follows the requirements of the Utah Money Management Act (Utah Code, Section 51, Chapter 7) in handling its depository and investment transactions. This Act requires the depositing of City funds in a “qualified depository”.

The Act defines a “qualified depository” as any financial institution whose deposits are insured by an agency of the Federal government and which has been certified by the State Commissioner of Financial Institutions as meeting the requirements of the Act and adhering to the rules of the Utah Money Management Council.Deposits

Custodial Credit Risk

Custodial credit risk is the risk that, in the event of a bank failure, the City deposits may not be returned to it. The City does not have a formal deposit policy for custodial credit risk. As of June 30, 2020, $0 of the City’s bank balances of $240,116 was uninsured and uncollateralized.

Investments

The State of Utah Money Management Council has the responsibility to advise the State Treasurer about investment policies, promote measures and rules that will assist in strengthening the banking and credit structure of the state, and review the rules adopted under the authority of the State of Utah Money Management Act that relate to the deposit and investment of public funds.

The City follows the requirements of the Utah Money Management Act (Utah Code, Title 51, Chapter 7) in handling its depository and investment transactions. The Act requires the depositing of City funds in a qualified depository. The Act defines a qualified depository as any financial institution whose deposits are insured by an agency of the Federal Government and which has been certified by the State Commissioner of Financial Institutions as meeting the requirements of the Act and adhering to the rules of the Utah Money Management Council.


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III. DETAILED NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)

A. Deposits and Investments (continued)

The Money Management Act defines the types of securities authorized as appropriate investments for the City’s funds and the conditions for making investment transactions. Investment transactions may be conducted only through qualified depositories, certified dealers, or directly with issuers of the investment securities.

Statutes authorize the City to invest in negotiable or nonnegotiable deposits of qualified depositories and permitted negotiable depositories; repurchase and reverse repurchase agreements; commercial paper that is classified as “first tier” by two nationally recognized statistical rating organizations; bankers’ acceptances; obligations of the United States Treasury including bills, notes, and bonds; obligations, other than mortgage derivative products, issued by U.S. government sponsored enterprises (U.S. Agencies) such as the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae); bonds, notes, and other evidence of indebtedness of political subdivisions of the State; fixed rate corporate obligations and variable rate securities rated “A” or higher, or the equivalent of “A” or higher, by two nationally recognized statistical rating organizations; shares or certificates in a money market mutual fund as defined in the Money Management Act; and the Utah State Public Treasurers’ Investment Fund.

The Utah State Treasurer’s Office operates the Public Treasurers’ Investment Fund (PTIF). The PTIF is available for investment of funds administered by any Utah public treasurer and is not registered with the SEC as an investment company. The PTIF is authorized and regulated by the Money Management Act (Utah Code, Title 51, Chapter 7). The Act established the Money Management Council which oversees the activities of the State Treasurer and the PTIF and details the types of authorized investments. Deposits in the PTIF are not insured or otherwise guaranteed by the State of Utah, and participants share proportionally in any realized gains or losses on investments.

The PTIF operates and reports to participants on an amortized cost basis. The income, gains, and losses of the PTIF, net of administration fees, are allocated based upon the participant’s average daily balance. The fair value of the PTIF investment pool is approximately equal to the value of the pool shares.

Fair Value of Investments

The City measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follows:

Level 1: Quoted prices for identical investments in active markets; Level 2: Observable inputs other than quoted market prices; and, Level 3: Unobservable inputs.


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At June 30, 2020, the City had the following recurring fair value measurements.

Total Level 1 Level 2 Level 3Investments by fair value levelDebt securities:

Utah Public Treasurer's Investment Fund $ 3,011,998 $ - $ 3,011,998 $ -Total debt securities $ 3,011,998 $ - $ 3,011,998 $ -

Debt and equity securities classified in Level 1 are valued using prices quoted in active markets for those securities. Debt and equity securities classified in Level 2 are valued using the following approaches:

U.S. Treasuries, U.S. Agencies, and Commercial Paper: quoted prices for identical securities in markets that are not active.

Corporate and Municipal Bonds: quoted prices for similar securities in active markets. Money Market, Bond, and Equity Mutual Funds: published fair value per share (unit) for each

fund. Utah Public Treasurers’ Investment Fund: application of the June 30, 2020 fair value factor, as

calculated by the Utah State Treasurer, to the City’s average daily balance in the Fund.

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City’s policy for managing its exposure to fair value loss arising from increasing interest rates is to comply with the State’s Money Management Act. Section 51-7-11 of the Money Management Act requires that the remaining term to maturity of investments may not exceed the period of availability of the funds to be invested. The Act further limits the remaining term to maturity on all investments in commercial paper, bankers’ acceptances, fixed rate negotiable deposits, and fixed rate corporate obligations to 270 days - 15 months or less. The Act further limits the remaining term to maturity on all investments in obligations of the United States Treasury; obligations issued by U.S. government sponsored enterprises; and bonds, notes, and other evidence of indebtedness of political subdivisions of the State to 5 years. In addition, variable rate negotiable deposits and variable rate securities may not have a remaining term to final maturity exceeding 3 years.


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As of June 30, 2020, the City’s investments had the following maturities:

Investment Maturities (in Years)

Investment Type Fair Value Less than 1 1-5 6-10More

than 10Quality Ratings

PTIF Investments 3,011,998 3,011,998 - - -not

rated

3,011,998 3,011,998 - - -

Credit Risk

Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City’s policy for reducing its exposure to credit risk is to comply with the State’s Money Management Act, as previously discussed.

At June 30, 2020, the City’s investments had the following quality ratings:

Investment Type Fair Value AAA AA A UnratedPTIF Investments 3,011,998 - - - 3,011,998

3,011,998 - - - 3,011,998

Concentration of Credit Risk

Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The City’s policy for reducing this risk of loss is to comply with the Rules of the Money Management Council. Rule 17 of the Money Management Council limits investments in a single issuer of commercial paper and corporate obligations to 5-10% depending upon the total dollar amount held in the portfolio.

Custodial credit risk (investments) – For an investment, this is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City does not have a formal policy for custodial credit risk.


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The City’s investment in the Utah Public Treasurer’s Investment Fund has no custodial credit risk.

Cash on hand and on deposit: Cash on deposit $ 224,834 PTIF investment 3,004,641

Total cash and investments $ 3,229,475 Cash and investments are included in the accompanying

combined statement of net position as follows: Cash $ 2,606,804 Restricted cash 622,671

Total cash and investments $ 3,229,475

B. Receivables General Water Sewer TotalUser fee receivables $ - $ 50,450 $ 49,068 $ 99,518Intergovernmental:

Property taxes 196,019 - - 196,019Sales taxes 60,643 - - 60,643C road funds 17,418 - - 17,418Franchise tax 7,072 - - 7,072Mass transit 23,909 - - 23,909Telecommunication tax 1,533 - - 1,533CARES Act funding 62,232 - - 62,232Grant receivables 6,864 - - 6,864Developer's expense receivable 13,693 - - 13,693

Total intergovernmental 389,383 - - 389,383Gross receivables 389,383 50,450 49,068 488,901Less: allowance for uncollectibles - - - -Net total receivables $ 389,383 $ 50,450 $ 49,068 $ 488,901


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C. Capital Assets

Beginning Balance Increases Decreases

Ending Balance

Governmental activities Capital assets, not being depreciated Land $ 315,160 $ - $ - $ 315,160 Construction in progress - 153,023 - 153,023 Total capital assets, not being depreciated 315,160 153,023 - 468,183Capital assets, being depreciated Infrastructure 1,933,695 - - 1,933,695 Improvements 934,181 - - 934,181 Buildings 761,792 - - 761,792 Machinery and equipment 1,131,961 - (11,700) 1,120,261 Total capital assets, being depreciated 4,761,629 - (11,700) 4,749,929Accumulated Depreciation for: Infrastructure (926,980) (34,740) - (961,720) Improvements (112,883) (24,149) - (137,032) Buildings (310,819) (15,191) - (326,010) Machinery and equipment (630,990) (61,495) 11,700 (680,785) Total accumulated depreciation (1,981,672) (135,575) 11,700 (2,105,547) Total capital assets, being depreciated, net 2,779,957 (135,575) - 2,644,382Governmental activities capital assets, net $ 3,095,117 $ 17,448 $ - $ 3,112,565

Depreciation expense was charged to functions/departments of the governmental activities as follows:

Governmental Activities: General Government $ 10,951Police 19,465Fire 23,308Highways and Public Improvements 55,552Parks 26,299

Total Depreciation Expense $ 135,575


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C. Capital Assets (Continued)

Beginning Balance Increases Decreases

Ending Balance

Business-type activities Capital assets, not being depreciated Land $ 215,336 $ - $ - $ 215,336 Construction in Progress 95,598 563,607 (659,205) - Easements 267,806 - - 267,806 Total capital assets, not being depreciated 578,740 563,607 (659,205) 483,142Capital assets, being depreciated Water System 3,582,089 688,770 - 4,270,859 Sewer System 17,005,634 - - 17,005,634 Machinery and Equipment 1,024,549 - - 1,024,549 Total capital assets, being depreciated 21,612,272 688,770 - 22,301,042Accumulated Depreciation for: Water System (1,912,253) (79,010) - (1,991,263) Sewer System (2,789,387) (339,393) - (3,128,780) Machinery and Equipment (603,605) (51,334) - (654,939) Total accumulated depreciation (5,305,245) (469,737) - (5,774,982) Total capital assets, being depreciated, net 16,307,027 219,033 - 16,526,060Business-type activities capital assets, net $ 16,885,767 $ 782,640 $ (659,205) $ 17,009,202

Depreciation expense was charged to functions/departments of the business-type activities as follows:

Business-type Activities: Water Fund $ 79,010 Sewer Fund 390,727

Total Depreciation Expense $ 469,737


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III. DETAILED NOTES ON TRANSACTION CLASSES/ACCOUNTS (continued)

D. Long-Term Debt

2013 Water Revenue Refunding Bonds. The government issued water revenue refunding bonds in June of 2013 for the purpose of refinancing the 1995 Bonds and the 1995B Bonds. The bond matures on June 15, 2033. The bonds have an interest rate that increases each year as illustrated in the table below. The average coupon over the life of the bonds is 3.592%. The bonds generated a net present value savings of 10.80% or $40,173. The annual requirements to amortize the bonds are as follows:

2013 Water Revenue Refunding BondsYear

Ended June 30,

Interest Rate Principal Interest Total

2021 2.00% $ 17,000 $ 9,416 $ 26,416 2022 2.15% 17,000 9,076 26,076 2023 2.40% 17,000 8,711 25,711 2024 2.75% 18,000 8,303 26,303 2025 3.00% 18,000 7,807 25,807 2026 3.25% 19,000 7,268 26,268 2027 3.50% 20,000 6,650 26,650 2028 3.75% 20,000 5,950 25,950 2029 4.00% 21,000 5,200 26,200 2030 4.25% 22,000 4,360 26,360 2031 4.50% 23,000 3,425 26,425 2032 4.75% 24,000 2,390 26,390 2033 5.00% 25,000 1,250 26,250

Totals $ 261,000 $ 79,806 $ 340,806

For the year ended June 30, 2020, $9,696 in interest expense was included as a direct function expense to the water program in the statement of activities. All interest of $9,696 was charged to expense and no interest was capitalized.


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D. Long-Term Debt (continued)

2008 Sewer Revenue Bonds. The government issued sewer revenue bonds in December of 2008 for the purpose of constructing the sewer system and for the repayment of debt service. The bond was scheduled to mature on May 11, 2040. It is a non-interest bearing bond with the first payment due on May 11, 2012. These bonds were refunded in 2015 with the Series 2015 Sewer Revenue Bonds.

The purpose of the refunding was to defer principal payments further into the future as growth has come in below expectations. The Series 2015 Sewer Revenue Bonds were issued in the amount of $10,740,000 and have annual principal payments due in May of each year beginning in May of 2016.

The annual requirements to amortize the bonds are as follows:

2015 Sewer Revenue Bond

Year Ended June 30, Principal

2021 $ 275,000 2022 278,000 2023 281,000 2024 284,000 2025 287,000

2026-2030 1,607,000 2031-2035 1,924,000 2036-2040 2,314,000 2041-2045 2,788,000

Totals $ 10,038,000


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C. Long-Term Debt (continued)

Changes in Long-Term Liabilities - During the year, the following changes occurred in long-term liabilities:

D. Bond Resolution Compliance

Series 2015 Sewer Revenue Bonds, carried from the 2008 Sewer Revenue Bonds

The Series 2015 Sewer Revenue Bonds issuance provides for the establishment of the following reserve funds:

1) The City is required to allocate an amount required for the operation and maintenance expenses for the system for the following month. This allocation should happen on or before the 10th day of each month. As of June 30, 2020 the City’s reserve account had the required balance of $12,384.

2) Beginning on May 10, 2011, and on or before the 10th day of each month, the City is required to reserve an amount equal to half the amount of the next principal payment. The Sinking Fund is designed to acquire sufficient funds on deposit to pay the principal when it comes due. As of June 30, 2020 the City’s reserve account had the required balance of $51,389.

Balance June 30,

2019 Additions Reductions

Balance June 30,

2020

Amounts Due Within One Year

Compensated Absences $ 15,572 $ 2,029 $ - $ 17,601 $ -

Net Pension Liability 302,090 - (123,258) 178,832 -

$ 317,662 $ 2,029 $ (123,258) $ 196,433 $ -

Balance June 30,

2019 Additions Reductions

Balance June 30,

2020

Amounts Due Within One Year

2013 Water Refunding Bonds $ 277,000 $ - $ (16,000) $ 261,000 $ 17,0002015 Sewer Bonds 10,311,000 - (273,000) 10,038,000 275,000Net Pension Liability 67,539 - (35,640) 31,899 -

$ 10,655,539 $ - $ (324,640) $10,330,899 $ 292,000


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D. Bond Resolution Compliance (continued)

3) Beginning on May 10, 2011, and on or before the 10th of each month, the City is required to reserve an amount equal to half the amount of the next principal payment. The Reserve Account shall be used to make the principal payments when there are not sufficient funds in the Sinking Fund to pay the principal due. As of June 30, 2020 the City’s reserve account had the required balance of $185,000.

4) Beginning on May 10, 2011, and on or before the 10th of each month, the City is required to deposit $1,670 plus such additional amounts as may be required to meet any monthly installments to the Emergency Repair and Replacement Account. The deposits shall continue for a period not to exceed ten years or until there is accumulated an amount equal to $200,000. As of June 30, 2020 the City’s reserve account had the required balance of $183,143.

E. Bond Resolution Compliance

The Sewer Fund is required to have net revenues that are at least equal to 125% of Annual Debt Service.

F. Retirement System

General Information about the Pension Plan

Plan Description:

Eligible plan participants are provided with pensions though the Utah Retirement Systems. The Utah Retirement Systems are comprised of the following pension trust funds:

Public Employees Noncontributory Retirement System (Noncontributory System); is a multiple employer, cost sharing, public employee retirement system.

The Public Safety Retirement System (Public Safety System) is a mixed agent and cost-sharing, multiple-employer retirement system;

Tier 2 Public Employees Contributory Retirement System (Tier 2 public Employees System) is a multiple employer cost sharing public employee retirement system;

The Tier 2 Public Employees System became effective July 1, 2011. All eligible employees beginning on or after July 1, 2011, who have no previous service credit with any of the Utah Retirement Systems, are members of the Tier 2 Retirement System.

The Utah Retirement Systems (Systems) are established and governed by the respective sections of Title 49 of the Utah Code Annotated 1953, as amended. The Systems’ defined benefit plans are amended statutorily by the State Legislature. The Utah State Retirement Office Act in Title 49 provides for the administration of the Systems under the direction of the Board, whose members are appointed by the Governor. The Systems are fiduciary funds defined as pension (and other employee benefit) trust funds.


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F. Retirement System (continued)

URS is a component unit of the State of Utah. Title 49 of the Utah Code grants the authority to establish and amend the benefit terms. URS issues a publicly available financial report that can be obtained by writing Utah Retirement Systems, 560 E. 200 S., Salt Lake City, Utah 84102 or visiting the website: www.urs.org.

Benefits Provided: URS provides retirement, disability, and death benefits. Retirement benefits are as follows:

Summary of Benefits by System

SystemFinal Average

SalaryYears of service required and/or age

eligible for benefitBenefit percent per

year of service COLA**Noncontributory System Highest 3 years 30 years any age

2.0% per year all years Up to 4%

25 years any age*20 years age 60*10 years age 62*4 years age 65

Public Safety System Highest 3 years 20 years any age

2.5% per year up to 20 years; Up to 2.5%

10 years age 602.0% per year over

20 years or 4%4 years age 65 Depending

on the Employer

Tier 2 Public Employees System Highest 5 Years 35 years any age

20 years age 60*

10 years age 62*1.50% per year all

years up to 2.5%4 years age 65

* with actuarial reductions

** All post-retirement cost-of-living adjustments are non-compounding and are based on the original benefit except for Judges, which is a compounding benefit. The cost-of-living adjustments are also limited to the actual Consumer Price Index (CPI) increase for the year, although unused CPI increases not met may be carried forward to subsequent years.

Contributions:

As a condition of participation in the Systems, employers and/or employees are required to contribute certain percentages of salary and wages as authorized by statute and specified by the URS Board. Contributions are actuarially determined as an amount that, when combined with employee contributions (where applicable) is expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded actuarial accrued liability. Contribution rates are as follows:

http://www.urs.org/


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F. Retirement System (continued)

Utah Retirement Systems

Employee EmployerEmployer

401(k)

Contributory system 111 - Local Government Div - Tier 2 N/A 15.66% 1.03%

Noncontributory System 15 - Local Government Division Tier 1 N/A 18.47% N/A

Public Safety System Contributory 122 - Tier 2 DB Hybrid Public Safety N/A 23.13% 0.70% Noncontributory 43 - Other Division A with 2.5% COLA N/A 34.04% N/A

Tier 2 DC Only 211 - Local Government N/A 6.69% 10.00% 222 - Public Safety N/A 11.83% 12.00% Tier 2 rates include a statutory required contribution to finance the unfunded actuarial accrued liability of the Tier 1 plans.

Tier 2 rates include a statutory required contribution to finance the unfunded actuarial accrued liability of the Tier 1 plans.

For fiscal year ended June 30, 2020, the employer and employee contributions to the Systems were as follows:

SystemEmployer

ContributionsEmployee

ContributionsNoncontributory System $ 44,871 N/APublic Safety System 40,109 - Tier 2 Public Employees System 7,309 - Tier 2 Public Safety and

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