City of Van Alstyne 2018 Annual Financial Report

1. City of Van Alstyne2018 Annual Financial Report Presented by:Susan K. LaFollett CPA Managing Partner LaFollett and Abbott PLLC Certified Public Accountants June11, 2019

2. Agenda Objectives & Scope of Audit Financial Report Financial Highlights Overview of Audit Results Recommendations Required Governance Communications Letter Closing Remarks

3. Objectives & Scope of Audit • Objectives • Conduct an audit in accordance with Government Auditing Standards. • Plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. • Full Scope Audit • Governmental Activities • Business-type Activities • Component Units – EDC & CDC • Each Major Fund

4. Financial Report • Table of Contents • Independent Auditor’s Report (pgs. 1-2) • Management’s Discussion and Analysis (pgs. 3-7) • Government-Wide Financial Statements (pgs. 8-9) • Fund Financial Statements (pgs. 10-16) • Notes to Financial Statements (pgs. 17-45) • Required Supplemental Information (pgs. 46-50) • Independent Auditor’s Report on Internal Controls and Compliance (pgs. 51-56)

5. Financial Highlights – Government-Wide Statements • Full Accrual Basis: • Net position of City is $13,917,858 (pg. 8) at FY18. • Overall, net position of the City increased by $1,290,829 (pg. 9) or 10%. • Unrestricted net position of the City is $391,732 (pg. 8) at FY18. This is a decrease of $395,116 from FY17.

6. Financial Highlights – Government-Wide Statements • This is year 4 for GASB Standard #68 – Accounting and Financial Reporting for Pensions • TMRS has estimated the City’s pension liability to be $373,088 (pg. 8) at FY18. • The Schedule of Changes in Net Pension Liability (pg. 44) shows the City’s pension is 92% funded at FY18.

7. Financial Highlights – Government-Wide Statements • This is the implementation year for GASB Standard #75 – Accounting and Financial Reporting for Postemployment Benefits Other than Pensions (OPEB) • TMRS has estimated the City’s OPEB liability to be $74,861 (pg. 9) at FYE18.

8. Financial Highlights – Fund Statements – General Fund • General Fund unassigned fund balances (pg. 10): • $1,202,335 at FY18 • $1,190,217 at FY17 • Increase of $12,118 • These funds can be used to meet the City’s ongoing obligations • Balances represents 3.5 months reserves at FY18. • 3 to 6 months reserves are optimal.

9. Financial Highlights – Fund Statements – Water & Sewer • Water & Sewer Fund unrestricted net position (pg. 14): • $(788,149) at FY18 • $(176,391) at FY17 • There is no reserves at FY18, which may be used to meet the Fund’s ongoing obligations. • 3 to 6 months reserves are optimal. • Total net position increased by $378,852 (pg. 15) or 5%.

10. Financial Highlights – Component Units • Discretely Presented Component Units (pgs. 8-9): EDC • Total net position - $646,878 • Decrease in net position $38,810 CDC • Total net position - $318,091 • Decrease in net position $1,602

11. Overview of Audit Results • Independent Auditors Report (pgs. 1-2) • Unmodified Audit Opinion (“Clean Opinion”)

12. Overview of Audit Results • 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 (pgs. 51-52): • FY18 Material Weakness: • 2018-001 EDC Financial Reporting • 2018 -002 EDC Board Oversight

13. Recommendations • Implement written inventory policies and procedures to manage and record inventory. • Capitalize all fixed asset purchases greater than $5,000 and record the amounts in the capital outlay accounts. • Create and implement written credit card policies, including appropriate approvals, to govern the credit card purchasing process. • Consider establishing a special revenue fund to account for the street project funds generated by sales tax revenues. • Evaluate and record an amount for unbilled utility receivables at year end. • Hire a Rate Model Analyst to preform a 5 year rate study in order to determine appropriate water and sewer rates that will support operating and infrastructure costs. • Adopt budgets for the Water & Sewer Fund to increase overall net position to a positive amount and eventually to an optimal amount of 3–6 months of operating expenses.

14. Recommendations • CDC • To improve internal controls, consider moving accounting from QuickBooks to the ASYST system at the City. • Due to fraud risk, discontinue use of debit card.

15. Required Governance Communications Letter • Miscellaneous matters discussed in this letter: • Qualitative Aspects of Accounting Practices – • Sensitive estimates – allowance for uncollectible municipal court fines and ambulance services • Significant disclosures – long-term debt • Difficulties encountered in performing the audit – none • Corrected and uncorrected misstatements - • All recommended adjustments were accepted by the City – see list at Schedule A • Various immaterial uncorrected adjustments were noted – see list at Schedule B • Disagreements with management – none

16. Closing Remarks • We would like to thank: • City Manager - Lane Jones • Controller - Angela McNeil • City Clerk -Jennifer Gould • CDC Director – Rodney Williams • EDC – Laura Cooper • These individuals were very responsive to our audit requests and a pleasure to work with on this engagement. • Questions or Comments?