Loading...
Audit Report 09.30.2017City Of Okeechobee, Florida FINANCIAL STATEMENTS For Year Ended September 30, 2017 City of Okeechobee, Florida Table of Contents For the year ended September 30, 2017 - 2 - Introductory Section Title Page 1 Table of Contents 2 City Officials 3 Financial Section Independent Auditors’ Report 5 Management’s Discussion and Analysis 9 Basic Financial Statements Government-wide Financial Statements •Statement of Net Position - Governmental Activities 19 •Statement of Activities - Governmental Activities 20 Fund Financial Statements Governmental Funds •Balance Sheet 21 •Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 22 •Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 23 Fiduciary Funds (Component Units that are Fiduciary in Nature) •Statement of Fiduciary Net Position - Pension Trust Funds 24 •Statement of Changes in Fiduciary Net Position - Pension Trust Funds 25 Notes to Financial Statements 27 Required Supplementary Information Other Than Management’s Discussion and Analysis •Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - General Fund 59 •Required Pension Supplementary Information – Schedule of Changes in Net Pension Liability and Related Ratios – Years Information is Available 60 •Required Pension Supplementary Information – Schedule of Contributions – Years Information is Available 64 •Required Pension Supplementary Information – Schedule of Investment Returns – Years Information is Available 65 •Required Other Postemployment Benefits Supplementary Information - Schedule of Funding Progress 66 •Notes to Required Supplementary Information 67 Reports on Internal Control and Compliance Matters •Independent Auditors’ 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 71 •Independent Auditors’ Management Letter 73 •Independent Accountants’ Report on Compliance with Local Government Investment Policies 75 City of Okeechobee, Florida City Officials For the year ended September 30, 2017 - 3 - Dowling R. Watford, Jr. Mayor, Chairman Gary Ritter Noel A. Chandler Monica Clark Mike O’Connor Council Members John R. Cook City Attorney Marcos Montes De Oca City Administrator Lane Gamiotea City Clerk India Riedel Finance Director Herbert Smith Chief of Fire Robert Peterson Chief of Police David Allen Director of Public Works - 4 - THIS PAGE IS INTENTIONALLY LEFT BLANK. - 5 - Carr, Riggs & Ingram, LLC 215 Baytree Drive Melbourne, Florida 32940 (321) 255-0088 (321) 259-8648 (fax) www.cricpa.com INDEPENDENT AUDITORS’ REPORT The Honorable Mayor and Members of the City Council of the City of Okeechobee, Florida We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of the City of Okeechobee, Florida, as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the City of Okeechobee, Florida’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Police Officers’ and Firefighters’ Pension Trust Funds and the City of Okeechobee and Okeechobee Utilities Authority Employees’ Retirement System, which represent 100% of the assets, net position and additions of the pension trust fiduciary funds. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the Police Officers’ and Firefighters’ Pension Trust Funds and the City of Okeechobee and Okeechobee Utilities Authority Employees’ Retirement System is based on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 ‐ 6 ‐  and the reasonableness of significant accounting estimates made by management, as well as  evaluating the overall presentation of the financial statements.    We believe that the audit evidence we have obtained is sufficient and appropriate to provide a  basis for our audit opinions.    Opinions     In our opinion, based on our audit and the reports of other auditors, the financial statements  referred to above present fairly, in all material respects, the respective financial position of the  governmental activities, each major fund and the aggregate remaining fund information of the City  of Okeechobee, Florida, as of September 30, 2017, and the respective changes in financial position  thereof for the year then ended in conformity with accounting principles generally accepted in the  United States of America.    Other Matters    Required Supplementary Information    Accounting principles generally accepted in the United States of America require that the  management’s discussion and analysis (pages 9 through 16), the budgetary comparison information  (page 59 and page 67), and the pension and other postemployment benefits information (pages 60  through 66 and pages 68 through 69) 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 Information     Our audit was conducted for the purpose of forming opinions on the financial statements that  collectively comprise the City of Okeechobee, Florida’s basic financial statements. The introductory  section is presented for purposes of additional analysis and is not a required part of the financial  statements.     The introductory section has not been subjected to the auditing procedures applied in the audit of  the basic financial statements, and accordingly, we do not express an opinion or provide any  assurance on it.    - 7 - Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 8, 2018 on our consideration of the City of Okeechobee, Florida’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Okeechobee’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Okeechobee, Florida’s internal control over financial reporting and compliance. Melbourne, Florida June 8, 2018 - 8 - THIS PAGE IS INTENTIONALLY LEFT BLANK. City of Okeechobee, Florida Management's Discussion and Analysis - 9 - Our discussion and analysis of the City of Okeechobee, Florida’s (“the City’s”) financial performance provides an overview of the City’s financial activities for the year ended September 30, 2017. Please read it in conjunction with the City’s basic financial statements, which immediately follow this discussion. FINANCIAL HIGHLIGHTS The following are highlights of financial activity for the year ended September 30, 2017: •The City’s total assets exceeded its liabilities at September 30, 2017 by $18,166,670. •The City’s total revenues were $6,172,735 for the year ended September 30, 2017, compared to total expenses of $6,537,295, which resulted in a $364,560 decrease in net position. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The basic financial statements are comprised of three components: 1) government- wide financial statements, 2) fund financial statements and 3) notes to basic financial statements. A.Government-Wide Financial Statements The government-wide financial statements, which consist of the following two statements, are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private sector business. The statement of net position presents information on all of the 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 the City is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the 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, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements can be found on pages 19 and 20 of this report. B.Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City's funds can be divided into two fund types: governmental funds and fiduciary funds. City of Okeechobee, Florida Management's Discussion and Analysis -10 - B. Fund Financial Statements (Continued) Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near- term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the year. Such information may be useful in evaluating a government’s near- term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City’s near-term financing decisions. Both the governmental fund balance sheet and the statement of revenues, expenditures and changes in fund balances provide reconciliations to facilitate this comparison between governmental funds and governmental activities. The basic governmental fund financial statements can be found on pages 21 through 23 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. The basic fiduciary fund financial statements can be found on pages 24 and 25 of this report. C. Notes to Basic Financial Statements The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. The notes to basic financial statements can be found on pages 27 through 56 of this report. City of Okeechobee, Florida Management's Discussion and Analysis -11 - GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of financial position. The following table reflects the condensed government-wide statement of net position. City of Okeechobee Statement of Net Position 2017 2016_ Current and other assets $ 11,515,261 $ 12,237,358 Capital assets 8,458,936 7,885,166 Total assets 19,974,197 20,122,524 Deferred outflows 1,420,835 1,314,534 Current liabilities 550,667 390,514 Noncurrent liabilities 2,151,797 2,059,487 Total liabilities 2,702,464 2,450,001 Deferred inflows 525,898 455,827 Net position: Net investment in capital assets 8,458,936 7,885,166 Restricted 928,976 711,139 Unrestricted 8,778,758 9,934,925 Total net position $ 18,166,670 $ 18,531,230 Governmental Activities Total net position decreased by $364,560 primarily as a result of $148,327 decrease in total assets, and a $252,463 increase of total liabilities. Deferred outflows and inflows related to pensions increased by $106,301 and $71,393, respectively. The decrease in total assets was primarily due to a $722,097 decrease in current and other assets offset by a $573,770 increase in capital assets. The net change in current and noncurrent liabilities was $252,463 as current liabilities increased by $160,153 related to timing of payables and non-current liabilities increased by $92,310 resulting from an increase in the compensated absences, net pension liability and OPEB obligation. City of Okeechobee, Florida Management's Discussion and Analysis -12 - The following table shows condensed revenue and expense data: City of Okeechobee, Florida Statement of Activities 2017 2016 REVENUES: Program revenues: Charges for services $ 621,683 $ 709,589 Operating grants and contributions 677,458 662,766 Capital grants and contributions 84,045 304,742 General revenues: Property taxes 1,957,520 1,887,967 Public utility taxes 841,848 794,308 Franchise fees 548,286 532,036 Shared revenues 1,406,638 1,330,468 Investment income and other 35,257 34,315 Total revenues 6,172,735 6,256,191 EXPENSES: General government 1,326,989 1,353,464 Public safety 3,697,679 3,643,759 Transportation 728,367 844,397 Physical environment 784,260 907,791 Economic development -9,000 Culture and recreation -6,606 Total expenses 6,537,295 6,765,017 Change in net position (364,560) (508,826) Net position, beginning October 1 18,531,230 19,040,056 Net position, ending September 30 $ 18,166,670 $ 18,531,230 The City experienced a decrease of 1.3% in total revenues – a $83,456 decrease to $6.17 million. The decrease is primarily due to a $220,697 decrease in capital grants and is offset by a $210,455 increase in general revenue. An increase in the assessed taxable values and continuing millage rate of 7.9932 were the contributory factors in the increase of property tax revenue of $69,553. Utility Tax revenues increased $47,540 based on higher consumer consumption. The Shared Revenue for the State of Florida (SRS) increased $76,170. The City experienced a decrease of 3.4% in total expenses – a $227,722 decrease to $6.53 million. The decrease is primarily due to a $123,531 decrease in expenses for physical environment. The $116,030 decrease in transportation expense also was a large contributor to the overall expenditures for the year. The combined decreases in expense and revenues for grant funded capital expenditure resulted in a decrease in net position of $364,560. City of Okeechobee, Florida Management's Discussion and Analysis -13 - FUND FINANCIAL ANALYSIS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $10,923,527 a decrease of $880,928 in comparison with the prior year. Approximately 80% of this total amount $8,699,083, constitutes unassigned fund balance, which is available for spending at the government's discretion. Assigned fund balances include $1,208,660 for subsequent year’s expenditures and $53,060 for future capital projects. Public facilities fund balance of $917,356 plus law enforcement $11,620 are restricted funds based on their specific stipulated purpose. The remainder of fund balance is non-spendable inventory of $33,748. The general fund is the chief operating fund of the City. At the end of the current fiscal year, assigned and unassigned fund balance of the general fund was $9,900,608 while total fund balance was $10,851,712. As a measure of the general fund's liquidity, it may be useful to compare both assigned and unassigned fund balance and total fund balance to total fund expenditures. The total assigned and unassigned fund balance and total fund balance represent approximately 138% and 151% respectively of total general fund expenditures. Revenues from grants were used in the construction of infrastructure and other improvements in the City. General Fund Budgetary Highlights The amount appropriated for expenditures in the original 16/17 budget increased from $8,254,811 to $7,264,505 in the final 16/17 budget, a decrease of $990,306. The decrease in general government expenses, fire and police public safety expenses, physical environment expenses, transportation expenses and capital outlay largely contributed to the overall decrease in expenditures. City of Okeechobee, Florida Management's Discussion and Analysis -14 - CAPITAL ASSETS AND LONG-TERM LIABILITIES Capital assets. The City’s investment in capital assets as of September 30, 2017, amounted to $8,458,936, (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, equipment and construction in progress. During the year, the City’s net capital asset balance increased $573,770. The City’s major additions of $ $1,415,213 to capital assets including construction in progress of $806,070 during the current fiscal year included the following: •Replacement computers for (1) Finance; (2)-Police Department, (2) Fire Department, and (1) Public Works •Replacement desk, credenzas, etc. within General Services •Replaced 14 police vehicles including equipment for Police Department •Spillman server upgrade for Police Department data system •Portable handheld radios (2) Fire Department •Fire station modifications – Replacement overhead door •Office addition at Public Works facility •Addition of oak trees within Flagler Park •Centennial Park Project I (continuing) •City Hall Renovations continuing during the fiscal year •Various infrastructure improvements including the roadways and sidewalk improvements •Citywide communication system These additions were offset by depreciation expense of $549,007, and disposals with a net book value of $292,436, which largely relates to the sale of 12 police vehicles. City of Okeechobee, Florida Management's Discussion and Analysis -15 - City’s Capital Assets (net of depreciation) 2017 2016 Land $ 1,378,744 $ 1,378,744 Construction in progress 810,796 31,021 Buildings 991,780 1,030,889 Improvements other than buildings 4,271,132 4,440,900 Equipment 1,006,484 1,003,612 Total $ 8,458,936 $ 7,885,166 Additional information on the City’s capital assets can be found in Note 4.C. on page 38 of this report. Long-term Liabilities City’s Outstanding Debt Long-term Liabilities 2017 2016 Net OPEB obligation $ 1,455,446 $ 1,375,989 Compensated absences 397,097 451,939 Pension liability 299,254 231,559 Total $ 2,151,797 $ 2,059,487 The City’s long-term liabilities increased by $92,310 during the current fiscal year. The largest contributing factor is the additional liability for the OPEB obligation of $79,457. The Pension liability increase was significant with an increase of $67,695. These increases were offset by a $54,842 reduction in compensated absences. Additional information on the City’s long-term debt can be found in Note 4.E. on page 39 of this report. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET The City Council adopted a millage rate 7.9932 for budget year 2018. The adopted millage rate is more than 5.38% of the roll-back rate. A $160,984 increase in budgeted ad valorem revenue is largely due to the increase in current taxable values and new construction added to this years assessed tax rolls. Revenues for the fiscal year 2018 adopted budget for all funds of the City total approximately $6,820,301, an increase from the prior year final budget of approximately $311,898. These revenues include the General, Public Facility, Capital Projects and Special Law Enforcement fund revenues. The change in revenue is based mostly on the expected increase in Ad Valorem Tax revenue and Intergovernmental revenues. City of Okeechobee, Florida Management's Discussion and Analysis -16 - Expenditures for the fiscal year 2018 adopted budget for all funds of the City total approximately $8,956,414, an increase of 1.2% or $112,078 from the prior year budget. The decrease in expenditures is based mostly on the decrease in capital expenditures. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City of Okeechobee’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City of Okeechobee, 55 S.E. Third Avenue, Okeechobee, Florida 34974. - 17 - BASIC FINANCIAL STATEMENTS - 18 - THIS PAGE IS INTENTIONALLY LEFT BLANK. City of Okeechobee, Florida Statement of Net Position - Governmental Activities The accompanying notes are an integral part of these financial statements. - 19 - September 30, 2017 ASSETS Cash and cash equivalents 11,006,146$ Accounts receivable 160,292 Due from other governments 315,075 Inventory 33,748 Capital assets: Nondepreciable Land 1,378,744 Construction in progress 810,796 Depreciable, net of accumulated depreciation Buildings 991,780 Improvements other than buildings 4,271,132 Equipment 1,006,484 Total assets 19,974,197 DEFERRED OUTFLOWS OF RESOURCES Deferred outflow - pensions 1,420,835 Total deferred outflows of resources 1,420,835 LIABILITIES Accounts payable 368,281 Accrued expenses 182,386 Noncurrent liabilities: Due within one year - compensated absences 30,481 Due in more than one year Compensated absences 366,616 Net pension liability 299,254 OPEB obligation 1,455,446 Total liabilities 2,702,464 DEFERRED INFLOWS OF RESOURCES Deferred inflow - business tax revenue 41,067 Deferred inflow - pensions 484,831 Total deferred inflows of resources 525,898 NET POSITION Net investment in capital assets 8,458,936 Restricted for: Law enforcement 11,620 Public facilities 917,356 Unrestricted 8,778,758 Total net position 18,166,670$ - City of Okeechobee, Florida Statement of Activities - Governmental Funds The accompanying notes are an integral part of these financial statements. - 20 - Program Revenues Net (Expense) Operating Capital Revenue and Charges for Grants and Grants and Changes in Functions/Programs Expenses Services Contributions Contributions Net Position General government 1,326,989$ 577,074$ -$ 57,750$ (692,165)$ Public safety 3,697,679 19,225 - - (3,678,454) Transportation 728,367 25,384 677,458 - (25,525) Physical environment 784,260 - - 26,295 (757,965) Total governmental activities 6,537,295$ 621,683$ 677,458$ 84,045$ (5,154,109) General revenues: Property taxes 1,957,520 Public utility taxes 841,848 Franchise fees 548,286 Shared revenues not restricted to specific programs 1,406,638 Unrestricted investment earnings 6,208 Miscellaneous 29,049 Total general revenues 4,789,549 Change in net position (364,560) Net position, beginning of year 18,531,230 Net position, end of year 18,166,670$ - Year ended September 30, 2017 City of Okeechobee, Florida Balance Sheet - Governmental Funds The accompanying notes are an integral part of these financial statements. - 21 - Community Total Development Nonmajor Governmental September 30, 2017 General Capital Project Funds Funds ASSETS Cash and cash equivalents 10,869,572$ 124,954$ 11,620$ 11,006,146$ Accounts receivable 160,292 - - 160,292 Due from other funds 38,205 - - 38,205 Due from other governments 315,075 - - 315,075 Inventory 33,748 - - 33,748 Total assets 11,416,892$ 124,954$ 11,620$ 11,553,466$ LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES Liabilities Accounts payable 341,727$ 26,554$ -$ 368,281$ Accrued expenses 182,386 - - 182,386 Due to other funds - 38,205 - 38,205 Total liabilities 524,113 64,759 - 588,872 Deferred inflows of resources: Deferred revenue - business tax revenue 41,067 - - 41,067 Fund balances: Nonspendable for: Inventory 33,748 - - 33,748 Restricted for: Public facilities 917,356 - - 917,356 Law enforcement - - 11,620 11,620 Assigned for: Subsequent year's expenditures 1,208,660 - - 1,208,660 Future capital projects 53,060 - - 53,060 Unassigned 8,638,888 60,195 - 8,699,083 Total fund balances 10,851,712 60,195 11,620 10,923,527 Total liabilities, deferred inflows of resources and fund balances 11,416,892$ 124,954$ 11,620$ - - - Amounts reported for governmental activities in the statement of net position are different because: Deferred outflows of resources related to pension are not recognized in the governmental funds; however, they are recorded in the statement of net position under full accrual accounting.1,420,835 Deferred inflows of resources related to pensions are not recognized in governmental funds; however, they are recorded in the statement of net position under full accrual accounting.(484,831) Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.8,458,936 Long-term liabilities, including the net OPEB obligation, net pension liability and compensated absences, are not due and payable in the current period and, therefore, are not reported in the funds.(2,151,797) Net position of governmental activities 18,166,670$ City of Okeechobee, Florida Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds The accompanying notes are an integral part of these financial statements. - 22 - Community Total Development Nonmajor Governmental Year ended September 30, 2017 General Capital Project Funds Funds Revenues Taxes 2,761,955$ -$ -$ 2,761,955$ Intergovernmental 2,411,932 - - 2,411,932 Charges for services 412,784 - - 412,784 Permits and fees 630,850 - - 630,850 Contributions and donations 9,486 - - 9,486 Fines and forfeitures 20,485 - 2,089 22,574 Investment earnings 6,208 - - 6,208 Miscellaneous 19,564 1 - 19,565 Total revenues 6,273,264 1 2,089 6,275,354 Expenditures Current: General government 1,233,232 - - 1,233,232 Public safety 3,542,560 - 450 3,543,010 Transportation 1,097,012 - - 1,097,012 Physical environment 131,934 8,176 - 140,110 Capital outlay 1,161,186 227,732 - 1,388,918 Total expenditures 7,165,924 235,908 450 7,402,282 Excess (deficit) of revenues over (under) expenditures (892,660) (235,907) 1,639 (1,126,928) Other financing sources (uses) Transfers in - 300,000 - 300,000 Transfers out (300,000) - - (300,000) Proceeds from sale of capital assets 246,000 - - 246,000 Total other financing sources (uses)(54,000) 300,000 - 246,000 Net change in fund balances (946,660) 64,093 1,639 (880,928) Fund balances, beginning of year 11,798,372 (3,898) 9,981 11,804,455 Fund balances, end of year 10,851,712$ 60,195$ 11,620$ 10,923,527$ - - - - City of Okeechobee, Florida Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities The accompanying notes are an integral part of these financial statements. - 23 - Year ended September 30, 2017 Net change in fund balances - total governmental funds (880,928)$ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period.839,911 In the statement of activities, only the gain (loss) on the sale of capital assets is reported. However, in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net position differs from the change in fund balance by the net book value of the disposed capital assets.(266,141) Cash pension contributions reported in the funds were less than the calculated pension expense on the statement of activities and, therefore, decrease net position.(32,787) Other postemployment benefit obligation reported in the statement of activities does not require the use of current financial resources; therefore, is not reported as an expenditure in governmental funds.(79,457) Compensated absences are reported in the statement of activities when earned. As they do not require the use of current financial resources, they are not reported as expenditures on governmental funds until they have matured. This is the net amount of compensated absences reported in the statement of activities in the prior year that have matured in the current year.54,842 Change in net position of governmental activities (364,560)$ - City of Okeechobee, Florida Statement of Fiduciary Net Position - Pension Trust Funds The accompanying notes are an integral part of these financial statements. - 24 - Pension September 30, 2017 Trust Funds ASSETS Cash equivalents 162,875$ Investments: Mutual funds 17,176,894 Receivables 249,810 Due from broker 52,000 Total assets 17,641,579 LIABILITIES Accounts payable 34,813 Due to other plan 6,661 Total liabilities 41,474 NET POSITION Held in trust for pension benefits 17,600,105$ - City of Okeechobee, Florida Statement of Changes in Fiduciary Net Position - Pension Trust Funds The accompanying notes are an integral part of these financial statements. - 25 - Pension Year ended September 30, 2017 Trust Funds ADDITIONS Contributions: State 129,248$ City 372,015 Employees 127,677 Total contributions 628,940 Investment earnings: Net appreciation in the fair value of investments 1,467,567 Interest and dividends 385,110 Total investment earnings 1,852,677 Less investment expenses (67,048) Net investment earnings 1,785,629 Total additions 2,414,569 DEDUCTIONS Benefits paid to participants 513,382 Refunds on termination 37,815 DROP payments 169,985 Administrative expenses 125,276 Total deductions 846,458 Change in net position 1,568,111 Net position held in trust for pension benefits, beginning of year 22,863,450 Assets transferred to Okeechobee Utility Authority (6,831,456) Net position held in trust for pension benefits, end of year 17,600,105$ - - 26 - THIS PAGE IS INTENTIONALLY LEFT BLANK. City of Okeechobee, Florida Notes to Financial Statements - 27 - NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. REPORTING ENTITY The City of Okeechobee (the “City”) was originally incorporated in 1915 and its present charter was adopted in 1919 under Chapter 8318 of Special Acts of 1919. The City operates under the council form of government and provides the following services: general government, public safety, transportation and physical environment. These financial statements present the primary government and its component units. Blended component units, although legally separate entities, are, in substance, part of the government’s operations and so data from these units are combined with data of the primary government. Discretely presented component units are entities that are legally separate from the City, but whose relationship with the City are such that the exclusion would cause the City’s financial statements to be misleading or incomplete. The City has no discretely presented component units. The City reports the following component units: Municipal Firefighters’ Pension Trust Fund – The fund is under the supervision of a five member local independent Board of Trustees who are selected for office under the provisions of Florida Statutes, Chapter 175. The Board of Trustees cannot amend the provisions of the plan without the approval of the City Council. This plan covers all full-time firefighters of the City. The City funds the plan, according to any contribution deficit as determined by an actuarial valuation for the plan, beyond the contributions by employees and the State Insurance Premium Tax Contribution. It is accounted for in the Pension Trust funds. Municipal Police Officers’ Pension Trust Fund – The fund is under the supervision of a five member local independent Board of Trustees who are selected for office under the provisions of Florida Statutes, Chapter 185. The Board of Trustees cannot amend the provisions of the plan without the approval of the City Council. This plan covers all full-time sworn officers of the City. The City funds the plan, according to any contribution deficit as determined by an actuarial valuation for the plan, beyond the contributions by employees and the State Insurance Premium Tax Contribution. It is accounted for in the Pension Trust funds. The Employees’ Retirement System of the City of Okeechobee, Florida – The fund is under the supervision of a five member local independent Board of Trustees. The Board of Trustees cannot amend the provisions of the plan without the approval of the City Council. This plan benefits the City general employees. The City funds the plan. It is accounted for in the Pension Trust funds in 2017 as the City does have fiduciary responsibility. City of Okeechobee, Florida Notes to Financial Statements - 28 - NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of changes in net position) report information on all of the nonfiduciary activities of the primary government. Governmental activities are those which normally are supported by taxes and intergovernmental revenues. Likewise the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, licenses, charges for services and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. City of Okeechobee, Florida Notes to Financial Statements - 29 - NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (Continued) The City reports the following major governmental funds: The general fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The community development capital project fund accounts for the assets, liabilities, revenues and expenditures related to the construction of infrastructure and other improvements in the City not including grant funds that are instead included in the appropriations grant capital project fund. The City reports the following nonmajor governmental funds: The law enforcement special revenue fund accounts for the assets that are restricted to fund certain expenditures of the City’s police department. Additionally, the City reports the following fund types: The pension trust fund account is used to account for assets held by the City in a fiduciary capacity for the general employees’, police officers’ and firefighters’ pension plans. The funds are operated by carrying out specific terms of statutes, ordinances and other governing regulations. The effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as pro- gram revenues. Likewise, general revenues include all taxes. Expenses for compensated absences are allocated based on the assigned function of the related employee. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. City of Okeechobee, Florida Notes to Financial Statements - 30 - NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, DEFERRED INFLOWS AND NET POSITION OR EQUITY 1. Cash and investments The investment of municipal funds is authorized by local ordinance and Florida Statutes. This allows the City to invest in the Local Government Surplus Funds Trust Fund or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act, SEC registered money market funds with the highest credit quality rating, interest-bearing time deposits or savings accounts in qualified public depositories, direct obligations of the U.S. Treasury, commercial paper with certain ratings, pre-refunded municipal obligations, banker's acceptances maturing within one year, investment agreements, direct and general long-term and short-term obligations of any state with proper credit rating and full faith and credit pledge, municipal obligations with proper credit rating and repurchase agreements with maturities of 30 days or less with organizations with certain stipulations and requirements. The City invests certain surplus funds in an external investment pool, the Local Government Surplus Funds Trust Fund (the “State Pool”). The State Pool is administered by the Florida State Board of Administration (“SBA”), who provides regulatory oversight. The Florida PRIME has adopted operating procedures consistent with the requirements for an investment pool under GASB 79 to be reported at amortized cost. The fair value of the City’s position in the pool is equal to the value of pooled shares. The funds can with withdrawn at any time, and there are no unfunded commitments. The City pools the investments of its governmental funds. Investment earnings of the pool are allocated to the participating funds at the end of each month based on the ratio of each participant funds’ investment to the total pooled investment. Cash and cash equivalents include cash deposits, cash funds held in broker accounts and investments held in the Local Government Surplus Funds Trust Fund (Florida PRIME). Within the firefighters’, police officers’ and general employees’ pension trust funds, plan assets are managed by Bowen, Hanes and Company. The plans follow the investment guidelines as established within the ordinance. The pension trust funds are allowed to invest in the State Pool; obligations of the U.S. Government or agencies thereof; banking institutions within the state and other such institutions within the guidelines of the state statutes, which are insured by the Federal Deposit Insurance Corporation; investments agreements; direct and general long-term obligations of any state with proper credit rating and full faith and credit pledge; municipal obligations with proper credit rating; annuity and life insurance contracts; bonds issued by the State of Israel; and stocks, bonds, and commingled funds administered by National or State banks or evidences of indebtedness issued or guaranteed by a corporation organized under the laws of the United States, provided that the corporation is listed on a nationally recognized exchange and holds proper credit ratings as set forth by a major credit rating service. These equity investments are not to exceed 60% of the assets of the pension trust funds on a cost basis. Temporary investment funds held by the custodian in a money market fund are classified as cash equivalents within the investment account. City of Okeechobee, Florida Notes to Financial Statements - 31 - NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, DEFERRED INFLOWS AND NET POSITION OR EQUITY (Continued) 1. Cash and investments (continued) Pension trust fund investments are reported at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price. Shares of mutual funds, including proprietary funds and common and collective funds are valued at quoted market prices, which represent the net asset value of shares held by the pension trust fund at year-end. Interest is recognized when earned. Gains and losses from the sale or exchange of investments are recognized on the transaction date. The difference between the excess of fair value over cost represents unrealized gains. 2. Receivables and payables All trade and property tax receivables are considered to be fully collectible. The City's property tax is levied annually on the real and personal property located in the City on January 1st of the prior year. Tax collections by the Okeechobee County tax collector begin in November of each year with a due date of March 31 of the following year. All property taxes remaining unpaid at May 30 are subject to a tax certificate sale. The City is permitted by State law to levy taxes up to 10 mills on assessed valuation. During a Special Session in June, 2007, the Florida Legislature adopted HB1B, which limits municipal property tax rates beginning in the 2008 fiscal year. This legislation established reductions in the millage rate based on a calculated growth in per capita taxes between the 2002 and 2007 fiscal years. The Legislature did authorize local governments to use the rolled back millage rate if approved by a super majority vote of the governing body. The Okeechobee City Council levy for the fiscal year ended September 30, 2017 was 7.9932 mills, which is 0.04% more than the rolled back rate. The City Council determines the millage rates and adopts a tax levy by resolution prior to September 30 to fund the next ensuing fiscal year's budget. The assessment of all properties and collection of municipal taxes are provided by the County's Property Appraiser and Tax Collector. The ad valorem tax calendar is as follows: Lien date - January 1 Levy date - Prior to September 30 Due date - November 1 Delinquent date - April 1 3. Inventory Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO) method. The costs of inventories are recorded as expenditures when used (consumption method). City of Okeechobee, Florida Notes to Financial Statements - 32 - NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, DEFERRED INFLOWS AND NET POSITION OR EQUITY (Continued) 4. Capital assets Capital assets, which include: property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks and similar items), are reported in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $500 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant and equipment are depreciated using the straight-line method over the following esti- mated useful lives: Assets Years Buildings 25-60 Building improvements 12-20 Vehicles 10 Equipment 5-15 5. Compensated absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. All sick and vacation pay is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. 6. Deferred inflows and outflows of resources The deferred outflows and inflows related to pensions are an aggregate of items related to pensions as calculated in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions. Total deferred inflows of resources related to pensions were $484,831, and total deferred outflows were $1,420,835 for the year ended September 30, 2017. Note 5-B includes a complete discussion of retirement commitments. Resources received before time requirements have been met, for example business tax revenues, are classified as deferred inflows of resources. 7. Long-term obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net position. City of Okeechobee, Florida Notes to Financial Statements - 33 - NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, DEFERRED INFLOWS AND NET POSITION OR EQUITY (Continued) 7. Long-term obligations (continued) In the governmental fund financial statements, the face amount of debt issued is reported as other financing sources. 8. Fund equity The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used in the governmental fund financial statements are as follows: Nonspendable Fund Balance – Amounts that are (a) not in spendable form or (b) legally or contractually required to be maintained intact. “Not in spendable form” includes items that are not expected to be converted to cash (such as inventories and prepaid amounts) and items such as long- term amounts of loans and notes receivables, as well as property acquired for resale. The corpus (or principal) of a permanent fund is an example of an amount that is legally or contractually required to be maintained intact. Restricted Fund Balance – Amounts that can be spent only for specific purposes stipulated by (a) external resource providers such as creditors (by debt covenants), grantors, contributors or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance – Amounts that can be used only for the specific purposes determined by a formal action (resolution) of the Council, the Council’s highest level of decision making authority. Commitments may be changed or lifted only by the council taking the same formal action (resolution) that imposed the constraint originally. The City had no committed fund balance at year end. Assigned Fund Balance – Includes spendable fund balance amounts established by the City Administrator or the Council that are intended to be used for specific purposes that are neither considered restricted or committed. Unassigned Fund Balance – Unassigned fund balance is the residual classification for the general fund. This classification represents fund balance that has not been assigned to other funds and that has not been restricted, committed or assigned to specific purposes within the general fund. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed or assigned for those specific purposes. The City would typically use restricted fund balances first, followed by committed resources and then assigned resources, as appropriate opportunities arise, but reserves the right to selectively spend unassigned resources first to defer the use of these other classified funds. City of Okeechobee, Florida  Notes to Financial Statements  ‐ 34 ‐    NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)    D.  ASSETS, LIABILITIES, DEFERRED INFLOWS AND NET POSITION OR EQUITY (Continued)    9. 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 City's Police Officers’ and Firefighters’ pension trust funds and the Florida Retirement  System Pension Plan and Health Insurance Subsidy Program and additions to/deductions from the  plans’ fiduciary net position have been determined on the same basis as they are reported by the  plans. 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.    10. Use of estimates    The preparation of the financial statements in conformity with accounting principles generally  accepted in the United States of America requires management to make estimates and  assumptions. This will affect the reported amounts of assets, liabilities, deferred inflows and  deferred outflows, the disclosure of contingent assets, liabilities, deferred inflows and deferred  outflows at the date of the financial statements, and the reported amounts of revenues and  expenditures/expenses during the reporting period. Actual results could differ from these  estimates.      NOTE 2: RECONCILIATION OF GOVERNMENT‐WIDE AND FUND FINANCIAL STATEMENTS    A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE  SHEET AND THE GOVERNMENT‐WIDE STATEMENT OF NET POSITION    The governmental fund balance sheet includes reconciliation between fund balance‐total  governmental funds and net position‐governmental activities as reported in the government‐wide  statement of net position.     One element of that reconciliation states that "long‐term liabilities, including the net OPEB obligation  and compensated absences, are not due and payable in the current period and, therefore, are not  reported in the funds." The details of this $(2,151,797) difference are as follows:    Net OPEB obligation  $     (1,455,446) Compensated absences             (397,097) Net pension liability (299,254)            Net adjustment to reduce fund balance ‐ total governmental funds to   arrive at net position‐governmental activities  $     (2,151,797)    City of Okeechobee, Florida  Notes to Financial Statements  ‐ 35 ‐    NOTE 2: RECONCILIATION OF GOVERNMENT‐WIDE AND FUND FINANCIAL STATEMENTS    B. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND STATEMENT  OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES AND THE GOVERNMENT‐WIDE  STATEMENT OF ACTIVITIES    The governmental fund statement of revenues, expenditures and changes in fund balances includes  a reconciliation between net changes in fund balances ‐ total governmental funds and changes in  net position of governmental activities as reported in the government‐wide statement of activities.  One element of that reconciliation explains that "governmental funds report capital outlays as  expenditures”. However, in the statement of activities, the cost of those assets is allocated over  their estimated useful lives as depreciation expense." The details of this $839,911 difference are as  follows:    Capital outlay 1,388,918 Depreciation expense (549,007)            Net adjustment to increase net changes in fund balances ‐ total                    governmental funds  to arrive at changes in net position of governmental  activities 839,911$               NOTE 3: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY    A. BUDGETARY INFORMATION     As permitted by GASB Statement No. 34, Basic Financial Statements and Management Discussion  and Analysis for State and Local Governments, the City has elected to disclose all budgetary  information in the notes to the required supplementary information.    NOTE 4: DETAILED NOTES ON ALL FUNDS    A.  DEPOSITS AND INVESTMENTS    At September 30, 2017, the City's carrying amount of deposits was $11,005,822 and the bank  balance was $11,116,920. In addition, the City maintained $324 of petty cash. As of September 30,  2017, $250,000 of the City’s bank balances is covered by federal depository insurance (FDIC).  Monies invested in amounts greater than the insurance coverage are secured by the qualified  public depositories pledging securities with the State Treasurer in such amounts required by the  Florida Security for Public Depositories Act. In the event of a default or insolvency of a qualified  public depositor, the State Treasurer will implement procedures for payment of losses according to  the validated claims of the City pursuant to Section 280.08, Florida Statutes.             City of Okeechobee, Florida Notes to Financial Statements - 36 - NOTE 4: DETAILED NOTES ON ALL FUNDS (Continued) A. DEPOSITS AND INVESTMENTS (Continued) Fair Value GASB 72, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under GASB 72 are described as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access. Level 2: Inputs to the valuation methodology include • quoted prices for similar assets or liabilities in active markets; • quoted prices for identical or similar assets or liabilities in inactive markets; • inputs other than quoted prices that are observable for the asset or liability; • inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at September 30, 2017. Level 1 investments noted in the following table are valued at quoted market prices. Level 2 investments noted in the following table are valued at quoted prices for similar liabilities in active markets. The money market fund is valued at amortized cost. They can be redeemed daily, and have no unfunded commitments. At September 30, 2017, the City had the following investments and effective duration presented in terms of years and levels: City of Okeechobee, Florida Notes to Financial Statements -37 - NOTE 4: DETAILED NOTES ON ALL FUNDS (Continued) A.DEPOSITS AND INVESTMENTS (Continued) Investment type Fair Value Less than 1 1 - 5 6 - 10 More than 10 Rating Agency Level Pension trust funds: Mutual funds- equities 10,785,484 - - 10,785,484 - Not rated -L1 Mutual funds- fixed income 6,391,410 - - 6,391,410 - BBB - AA S&P L2 17,176,894$ -$ -$ 17,176,894$ -$ Cash Equivalents, at cost Money Market Fund 162,875 Total Cash Equivalents, at cost 162,875 Total Investments 17,339,769$ Credit risk Fixed income securities have inherent financial risks, including credit risk and interest rate risk. Credit risk for fixed income securities is the risk that the issuer will not fulfill its obligations. The City’s investment policy and the investment policies for the firefighters’, police officers’ and general employees’ pension trust funds limit investments to securities with specific ranking criteria. Interest rate risk Interest rate risk exists when there is a possibility that changes in interest rates could adversely affect an investment’s fair value. In accordance with Florida Statute 218.415(6), the City's policy is to match investment maturities with known cash needs and anticipated cash flow requirements. The City’s pension trust funds do not address interest rate risk. Concentration of credit risk Concentration of credit risk is an increased risk of loss that occurs as more investments are acquired from one issuer (i.e. lack of diversification). The City’s investment policy and the investment policies for the firefighters’, police officers’ and general employees’ pension trust funds do not specifically address concentration of credit risk. Foreign currency risk The City’s firefighters’, police officers’, and general employees’ pension trust funds contain investments in foreign corporate bonds; however, all of the investments are denominated in U.S. dollars and are not exposed to foreign currency risk. City of Okeechobee, Florida Notes to Financial Statements -38 - NOTE 4: DETAILED NOTES ON ALL FUNDS (Continued) B.RECEIVABLES Receivables as of September 30, 2017 are as follows: General Fund Municipal Police Officers’ Pension Trust Municipal Firefighters’ Pension Trust General Employees Pension Trust Franchise/Utility taxes 150,647$ -$ -$ -$ Contributions - 133,391 79,230 37,189 Other 9,645 - - - Receivables, net 160,292$ 133,391$ 79,230$ 37,189$ C.CAPITAL ASSETS Capital asset activity for the year ended September 30, 2017 was as follows: Beginning Balance Increases Decreases Ending Balance Governmental activities: Capital assets, not being depreciated: Land 1,378,744$ -$ -$ 1,378,744$ Construction in progress 31,021 806,070 (26,295) 810,796 Total capital assets, not being depreciated 1,409,765 806,070 (26,295) 2,189,540 Capital assets, being depreciated: Buildings 1,981,257 24,573 - 2,005,830 Improvements other than buildings 7,579,641 110,971 - 7,690,612 Equipment 2,914,261 473,599 (297,736) 3,090,124 Total capital assets, being depreciated 12,475,159 609,143 (297,736) 12,786,566 Less accumulated depreciation for: Buildings (950,368) (63,682) - (1,014,050) Improvements other than buildings (3,138,741) (280,739) - (3,419,480) Equipment (1,910,649) (204,586) 31,595 (2,083,640) Total accumulated depreciation (5,999,758)(549,007) 31,595 (6,517,170) Total capital assets, being depreciated, net 6,475,401 60,136 (266,141) 6,269,396 Governmental activities capital assets, net $ 7,885,166 866,206$ (292,436)$ 8,458,936$ City of Okeechobee, Florida Notes to Financial Statements -39 - NOTE 4: DETAILED NOTES ON ALL FUNDS (Continued) C. CAPITAL ASSETS (Continued) Depreciation expense was charged to functions/programs of the government as follows: Governmental activities: General government 63,314$ Public safety 175,482 Physical environment 310,211 Total depreciation expense - governmental activities $ 549,007 D.INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund loans for short-term operating purposes resulted in a due to the General fund from Community Development Capital Project fund of $38,205. All amounts are expected to be repaid within one year. During the year ended September 30, 2017, the General fund transferred $300,000 to the Community Development Capital Project Fund. The transfers represented engineering costs for the respective partially grant funded capital projects. E.CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the year ended September 30, 2017, was as follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Governmental activities: Compensated absences $ 451,939 119,939$ (174,781)$ 397,097$ 30,481$ Net OPEB obligation 1,375,989 96,655 (17,198) 1,455,446 - Net pension liability 231,559 567,864 (500,169) 299,254 - Long-term liabilities 2,059,487$ 784,458$ (692,148)$ 2,151,797$ 30,481$ For the governmental activities, compensated absences are generally liquidated by the general fund. NOTE 5: OTHER INFORMATION A.RISK MANAGEMENT The City is exposed to various risks of loss, including, but not limited to theft, damage or destruction of its buildings, equipment, records and monetary assets, and liability for personal injury, property damage and consequences of employee and public official actions. The City participates in a non- assessable public risk pool to cover significant loss exposure and purchases commercial insurance for third party pollution liability coverage. The pool maintains a loss reserve and purchases specific City of Okeechobee, Florida Notes to Financial Statements -40 - NOTE 5: OTHER INFORMATION (Continued) A.RISK MANAGEMENT (Continued) excess insurance, aggregate excess insurance and multiple loss coverage from commercial carriers and underwriters. B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS Plan Descriptions – The City contributes to two single-employer defined benefit pension plans: City of Okeechobee Municipal Police Officers’ Pension Trust Fund and City of Okeechobee Municipal Firefighters’ Pension Trust Fund (the “Plans”). The Plans provide retirement, disability and death benefits to plan members and their beneficiaries. Chapters 185 and 175 of the Florida Statutes establish the minimum benefits and the minimum standards for the operation and funding of the Police Officers’ and the Firefighters’ Municipal Pension Trust Funds, respectively. Per City Ordinances Nos. 750 and 749, sole responsibility for administering the Plans is vested in the Board of Trustees of each plan. The Boards cannot amend the provisions of the plans without the approval of the City. The Plans issue publicly available financial reports that include financial statements and required supplementary information. The reports are available from the City of Okeechobee, Florida, 55 S.E. Third Avenue, Okeechobee, Florida 34974. At September 30, 2017, the Police Officers’ plan included 9 retirees or beneficiaries either receiving or entitled to receive benefits, including 1 disability retiree and 3 survivor beneficiaries. The Police Officers’ plan also includes no terminated members with vested benefits, and has 3 DROP participants. There are 16 active current employees of which 11 are vested and 5 are non-vested. At September 30, 2017, the Firefighters’ plan included 3 retirees receiving or entitled to receive benefits, including 1 beneficiary receiving benefits. The Plan also included 1 terminated vested members entitled to receive benefits. There are 12 active current employees of which 4 are vested and 8 are non-vested. Funding Policies – The contribution requirements of plan members and the City are established and may be amended by City ordinance. Plan members are required to contribute 5% of their annual covered salary for the Police Officers’ and Firefighters’ Municipal Trust Funds. The City is required to contribute an amount equal to the difference in each year between the total aggregate member contributions for the year, plus state contributions for such year, and the normal cost for the year, as shown by the most recent actuarial valuation of the plan; the current contribution rate as a percentage of covered payroll is 18.63% for the Police Officers’ plan and 21.08% for the Firefighters’ plan. The City recognized as revenues and expenditures on-behalf payments relating to pension contributions for its public safety employees that the State of Florida paid to the Police Officers’ and Firefighters’ Plans in the amounts of $78,659 and $50,589, respectively. These contributions are funded by an excise tax upon certain casualty insurance companies on their gross receipts of premiums from policy holders. City of Okeechobee, Florida Notes to Financial Statements -41 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) The City and employees contributions for the year ended September 30, 2017, are as follows: City Employees Police Officers'170,883$ 45,863$ Firefighters'107,123$ 25,409$ Plan Investment Policies and Allocation of Plan Investments - Florida statutes and the plan investment policy authorize the Trustees to invest funds in various investments. The general investment objective of the fund is to preserve the purchasing power of the fund's assets and earn a reasonable rate of return (after inflation) over the long term while minimizing, to the extent reasonable, the short-term volatility of returns. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of September 30, 2017, and the current target and actual allocation of these investments at market, per the performance analysis report, is as follows as of September 30, 2017: Actual Target Investments Percent Percent Domestic Equity 44.9% 45.0% International Equity 14.6% 15.0% Fixed Income 39.4% 40.0% Cash Equivalents 1.1% 0.0% Total 100.0% 100.0% Actual Target Investments Percent Percent Domestic Equity 46.3% 45.0% International Equity 15.3% 15.0% Fixed Income 36.5% 40.0% Cash Equivalents 1.9% 0.0% Total 100.0% 100.0% Firefighters' Police Officers' Money-Weighted Rate of Return - For the year ended September 30, 2017, the annual money- weighted rate of return on the Police Officers’ pension plan investments was (10.68%) and on the Firefighters’ pension plan investments was (10.76%). The money-weighted rate of return expresses investment performance, net of plan investment expenses, as adjusted for the changing amounts actually invested on a monthly basis. City of Okeechobee, Florida Notes to Financial Statements -42 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Net Pension Liability – The City’s net pension liability was measured as of September 30, 2016, and the total pension liability used to calculate net pension liability was determined by an actuarial valuation as of September 30, 2017 for the Police Officers’ and Firefighters pension plan. Total Pension Liability Police Officers'Firefighters' Service cost 264,445$ 156,107$ Interest 543,946 235,684 Difference between actual & expected experience 126,875 56,393 Benefit payments (468,694) (102,590) Refunds (25,003) - Other - 3,256 Net change in total pension liability 441,569 348,850 Total pension liability - beginning 7,758,412 3,282,133 Total pension liability - ending (a)8,199,981$ 3,630,983$ Plan Fiduciary Net Position Police Officers'Firefighters' Contributions - employer (from City)147,312$ 97,709$ Contributions - employer (from State)73,960 49,889 Contributions - members 45,554 27,433 Net investment income 607,763 246,381 Benefit payments (468,694) (102,590) Refunds (25,003) - Administrative expense (32,120) (31,639) Other (6) (1,766) Net change in plan fiduciary net position 348,766 285,417 Plan fiduciary net position - beginning 7,691,340 3,257,415 Plan fiduciary net position - ending (b)8,040,106 3,542,832 Net pension liability (asset) - Ending (a) - (b)159,875$ 88,151$ Plan fiduciary net position as a percentage or Total Pension Liability 98.05% 97.57% For the year ending September 30, 2017, the City recognized a pension expense of $337,738 for the Police Officers’ Plan and $211,205 for the Firefighters’ Plan. On September 30, 2017, the Sponsor reported deferred outflows of resources and deferred inflow of resources related to pensions from the following sources: City of Okeechobee, Florida  Notes to Financial Statements  ‐ 43 ‐    NOTE 5: OTHER INFORMATION (Continued)    B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued)    Deferred Deferred  Outflow of Inflow of  Resources Resources Difference between expected and actual experience 102,476$            140,253$             Change in assumptions 59,859                  ‐                        Net difference between projected and actual earnings on pension plan investments 382,951              145,233               Contributions subsequent to the measurement date 248,448               ‐                        Total 793,734$            285,486$             Deferred Deferred  Outflow of Inflow of  Resources Resources Difference between expected and actual experience 49,069$              15,351$               Change in assumptions 37,501                  ‐                        Net difference between projected and actual earnings on pension plan investments 164,069              58,914                  Contributions subsequent to the measurement date 157,712               ‐                        Total 408,351$            74,265$               Police Officers'  Firefighters'   Deferred outflows of $406,160 resulting from City and State contributions subsequent to the  measurement date will be recognized as a reduction of the net pension liability in the fiscal year end  September 30, 2017 for both the Police and Firefighters pension plans. Amounts reported as deferred  outflows of resources and deferred inflows of resources related to pension will be recognized in  pension expense as follows:    Year ended September 30: 2018 72,104$                2019 72,106                  2020 113,432                2021 (2,722)                   2022 4,880                    Total 259,800$              Police Officers'          City of Okeechobee, Florida Notes to Financial Statements -44 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Year ended September 30: 2018 39,571$ 2019 39,570 2020 62,228 2021 7,538 2022 10,941 Thereafter 16,526 Total 176,374$ Firefighters' Net Pension Liability of the City of Okeechobee – The components of the net pension liability of the City were measured as of September 30, 2017, as follows, is presented in accordance with GASB Statement No. 67, while the net pensions recognized by the City in the current financial statements represents the net pension liability measured as of September 30, 2016 which is allowed by GASB Statement No. 68. Police Fire Total pension liability 8,504,923$ 3,811,073$ Plan fiduciary net position (8,937,259) (3,961,903) City's net pension asset (432,336)$ (150,830)$ Plan fiduciary net position as a percentage of total pension liability 105.08% 103.96% Expected Long-Term Rate of Return - The long-term expected rate of return on pension investments was determined using a building-block method in which best estimate ranges of future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation (2.5%) to arrive at a 5.65% projected long-term real rate of return net of investment expense. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of September 30, 2017 are summarized as follows: City of Okeechobee, Florida Notes to Financial Statements -45 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Percent Long-Term Investments Target Rate of Return* Domestic Equity 45.0% 7.5% International Equity 15.0% 8.5% Fixed Income 40.0% 2.5% Cash Equivalents 0.0%0.0% Total 100.0% *Net of long-term inflation assumptions 2.5% Percent Long-Term Investments Target Rate of Return* Domestic Equity 45.0% 7.5% International Equity 15.0% 8.5% Fixed Income 40.0% 2.5% Cash Equivalents 0.0%0.0% Total 100.0% *Net of long-term inflation assumptions 2.5% Police Officers' Firefighters' Discount Rate - The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that sponsor contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Net Pension Liability to Changes in Discount Rate - The following presents the pension liability of the City, calculated using the discount rate of 7%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1% lower (6%) or 1% higher (8%) than the current rate: 1% Decrease Current Discount 1% Increase 6.00%7.00%8.00% Sponsor's net pension liability (asset)611,543$ (432,336)$ (1,296,186)$ 1% Decrease Current Discount 1% Increase 6.00%7.00%8.00% Sponsor's net pension liability (asset)355,311$ (150,830)$ (580,692)$ Police Officers Firefighters City of Okeechobee, Florida Notes to Financial Statements -46 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) The Employees’ Retirement System (Fund) of the City of Okeechobee, Florida Plan Description - Prior to October 1, 2016, both the Okeechobee Utility Authority (OUA) and the general employees of the City of Okeechobee, Florida were covered by the City of Okeechobee and Okeechobee Utility Authority Employee Retirement System. The plan was previously treated as a cost sharing multiple- employer plan when combined with the Okeechobee Utility Authority. Effective October 1, 2016, the City contributes to the Employees’ Retirement System (Fund) of the City of Okeechobee, Florida (the “System”), a single employer, defined benefit contributory pension trust administered by the System’s Board of Trustees. Substantially all of the City’s regular employees participate in this public employee retirement system. The System was established by City Ordinance No. 655, as amended and restated by City Ordinance No. 686. The System provides retirement, disability and death benefits to plan members and their beneficiaries. The Board of Trustees is authorized by City Ordinance No. 686 to establish and amend all plan provisions. The System issues a publicly available financial report that includes financial statements and required supplementary information. That report is available from the City of Okeechobee, Florida, 55 S.E. Third Avenue, Okeechobee, Florida 34974. At September 30, 2017, the Plan included 17 retirees and/or beneficiaries currently receiving benefits plus 3 terminated employees entitled to benefits but not yet receiving them, and 2 DROP participants. There are 27 active current employees in the Plan, of which 13 are vested and 14 are non-vested. Funding Policy - The contribution requirements of the plan members and the City are established and may be amended by City ordinance. Plan members are required to contribute 6% of their covered annual salary. The City is required to contribute at an actuarially determined rate; the current rate is 4.55% of covered payroll. The City elected to fund the plan based on the initially calculated higher rate of 10%. The City’s contributions for the year ended September 30, 2017, was $94,009 and was equal to the required contribution for the year. Net Pension Liability - For the year ending September 30, 2017, the City reported a liability of $51,228 for the Pension Plan’s net pension liability. The net pension liability was measured as of September 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of October 1, 2015. City of Okeechobee, Florida Notes to Financial Statements -47 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Total Pension Liability Service cost 421,387$ Interest 763,785 Difference between actual & expected experience (524,849) Benefit payments (331,215) Refunds (18,267) Net change in total pension liability 310,841 Total pension liability - beginning 11,400,112 Transfer of pension liability for Okeechobee Utility Authority *(10,301,255) Total pension liability - ending (a)1,409,698$ Plan Fiduciary Net Position Contributions - employer (from City)446,184$ Contributions - members 183,145 Net investment income 825,935 Benefit payments (331,215) Refunds (18,267) Administrative expense (57,186) Other (2,208) Net change in plan fiduciary net position 1,046,388 Plan fiduciary net position - beginning 10,238,992 Transfer plan fiduciary net position to Okeechobee Utility Authority*(9,926,910) Plan fiduciary net position - ending (b)1,358,470 Net pension liability (asset) - Ending (a) - (b)51,228$ Plan fiduciary net position as a percentage or Total Pension Liability 96.37% General *Due to the change in nature of the Plan, from a cost sharing to a single employer plan (effective October 1, 2016). The City and employees contributions for the year ended September 30, 2017, are as follows. City Employees General 94,009$ 56,405$ City of Okeechobee, Florida Notes to Financial Statements -48 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Money-Weighted Rate of Return - The annual money-weighted rate of return on plan investments (calculated as the internal rate of return on plan investments, net of plan investment expense) was (9.78%) for the year ended September 30, 2017. The money-weighted rate of return expresses investment performance, net of plan investment expenses, as adjusted for the changing amounts actually invested on a monthly basis. For the year ending September 30, 2017 the City recognized a pension expense of $75,529 for the General Employees’ Retirement Plan. On September 30, 2017, the Sponsor reported deferred outflows of resources and deferred inflow of resources related to pensions from the following sources: Deferred Deferred Outflow of Inflow of Resources Resources Difference between expected and actual experience 4,851$ 85,143$ Change in assumptions 26,428 - Net difference between projected and actual earnings on pension plan investments 93,462 39,937 Contributions subsequent to the measurement date 94,009 - Total 218,750$ 125,080$ General Deferred outflows of $94,009 resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended September 30, 2017. Amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows: Year ended September 30: 2018 6,849$ 2019 6,849 2020 19,137 2021 (12,017) 2022 (8,174) Thereafter (12,983) Total (339)$ General Net Pension Liability of the City of Okeechobee – The components of the net pension liability of the City were measured as of September 30, 2017, as follows, is presented in accordance with GASB Statement No. 67, while the net pensions recognized by the City in the current financial statements represents the net pension liability measured as of September 30, 2016 which is allowed by GASB Statement No. 68. City of Okeechobee, Florida Notes to Financial Statements -49 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) General Total pension liability 4,057,820$ Plan fiduciary net position (4,700,943) City's net pension asset (643,123)$ Plan fiduciary net position as a percentage of total pension liability 115.85% Plan Investment Policies and Allocation of Plan Investments - Florida statutes and the plan investment policy authorize the Trustees to invest funds in various investments. The general investment objective of the fund is to preserve the purchasing power of the fund's assets and earn reasonable rate of return (after inflation) over the long term while minimizing, to the extent reasonable, the short-term volatility of returns. Percent Percent Investments Actual Target Domestic Equity 49.8% 50.0% International Equity 9.6% 10.0% Fixed Income 39.5% 40.0% Cash Equivalents 1.1% 0.0% Total 100.0% 100.0% General Expected Long-Term Rate of Return - The long term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expenses and inflation) are developed for each major asset class. These ranges are combined to produce the long term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation and actual allocation as of September 30, 2017 are summarized in the following table: Percent Long-Term Investments Actual Rate of Return* Domestic Equity 49.8% 7.5% International Equity 9.6%8.5% Fixed Income 39.5% 2.5% Cash Equivalents 1.1%0.0% Total 100.0% 5.6% *Net of long-term inflation assumptions 2.5% General City of Okeechobee, Florida Notes to Financial Statements -50 - NOTE 5: OTHER INFORMATION (Continued) B.RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Discount Rate - The discount rate used to measure the total pension liability was 7.00%. The Pension Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of the current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the City’s Proportionate Share of the Net Pension Liability to Changes in Discount Rate –The following represents the City’s proportionate share of the net pension liability calculated using the discount rate of 7.00% as well as what the City’s proportionate share of the net pension liability would be if it was calculated using a discount rate that is one percentage point lower (6.00%) or one percentage point higher (8.00%) than the current rate: 1% Decrease Current Discount 1% Increase 6.00%7.00%8.00% Sponsor's net pension liability (asset)(172,429)$ (643,123)$ (1,038,966)$ General Actuarial Assumptions – The total pension liability was determined by an actuarial valuation as of October 1, 2016 using the following actuarial assumptions applied to all measurement periods. Fire Police General Actuarial Cost Method Entry Age Normal Entry Age Normal Entry Age Normal Inflation 2.75%2.75%2.50% Salary Increases 7.00%6.00%6% per year Investment Rate of Return 7.00%7.00%7%, net of investment expense Retirement Age 100% when first eligible for Normal Retirement or DROP entry 100% when first eligible for Normal Retirement or DROP entry 100% when first eligible for Normal Retirement or DROP entry City of Okeechobee, Florida  Notes to Financial Statements  ‐ 51 ‐  NOTE 5: OTHER INFORMATION (Continued)    B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued)    Fire Police General Mortality RP‐2000 Combined  Healthy Participant  Mortality Table (for  preretirement mortality)  and the RP‐2000  Mortality Table for  Annuitants (for post‐ retirement mortality),  with mortality  improvements projected  to all future years after  2000 using Scale BB.     For males, the base  mortality rates include a  90% blue collar  adjustment and a 10%  white collar adjustment.  For females, the base  mortality rates include a  100% white collar  adjustment. These are  the same rates currently  in use for Special Risk  Class members of the  Florida Retirement  System (FRS), as  mandated by Florida  House Bill 1309. RP‐2000 mortality  tables with collar  adjustments and  generational projections  using scale BB as used  by the Florida  Retirement System for  the Regular Class  memebers in the July 1,  2016 actuarial  valuation. RP‐2000 Combined  Healthy Participant  Mortality Table (for  preretirement  mortality) and the RP‐ 2000 Mortality Table  for Annuitants (for post‐ retirement mortality),  with mortality  improvements  projected to all future  years after 2000 using  Scale BB. For males, the  base mortality rates  include a 90% blue  collar adjustment and a  10% white collar  adjustment. For  females, the base  mortality rates include  a 100% white collar  adjustment. These are  the same rates  currently in use for  Special Risk Class  members of the Florida  Retirement System  (FRS), as mandated by  Florida House Bill 1309.                   City of Okeechobee, Florida  Notes to Financial Statements  ‐ 52 ‐    NOTE 5: OTHER INFORMATION (Continued)    B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued)    Pension trust funds fiduciary net position activity as of September 30, 2017 was as follows:    Firefighters'  Pension Police  Officers'  Pension  General  Employees'  Pension Total Pension  Trust Funds  ASSETS  Cash equivalents 24,206$         21,851$         116,818$             162,875$            Investments: Mutual funds 3,834,395     8,788,637      4,553,862            17,176,894         Receivables 79,230           133,391         37,189                  249,810               Due from broker 52,000            ‐                   ‐                        52,000                 Total assets 3,989,831     8,943,879      4,707,869            17,641,579          LIABILITIES   Accounts payable 22,393           5,492              6,928                    34,813                 Due to other plan 5,534             1,127              ‐                        6,661                      Total liabilities 27,927           6,619              6,928                    41,474                  NET POSITION  Held in trust for pension benefits 3,961,904$   8,937,260$    4,700,941$          17,600,105$                         City of Okeechobee, Florida Notes to Financial Statements - 53 - NOTE 5: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Pension trust funds increase in fiduciary net position activity as of September 30, 2017 was as follows: Firefighters' Pension Police Officers' Pension General Employees' Pension Total Pension Trust Funds ADDITIONS Contributions State 50,589$ 78,659$ -$ 129,248$ City 107,123 170,883 94,009 372,015 Employees 25,409 45,863 56,405 127,677 Total contributions 183,121 295,405 150,414 628,940 Investment earnings: Net appreciation in the fair value of investments 341,866 730,503 395,198 1,467,567 Interest and dividends 86,078 195,869 103,163 385,110 Total investment earnings 427,944 926,372 498,361 1,852,677 Less investment expenses (23,676) (22,660) (20,712) (67,048) Net investment earnings 404,268 903,712 477,649 1,785,629 Total additions 587,389 1,199,117 628,063 2,414,569 DEDUCTIONS Benefits paid to participants 106,573 255,731 151,078 513,382 Refunds on termination 20,437 - 17,378 37,815 DROP payments - - 169,985 169,985 Administrative expenses 34,933 41,855 48,488 125,276 Total deductions 161,943 297,586 386,929 846,458 Change in net position 425,446 901,531 241,134 1,568,111 Net position held in trust for pension benefits, beginning of year 3,536,458 8,035,729 11,291,263 22,863,450 Assets transferred to Okeechobee Utility Authority - - (6,831,456) (6,831,456) Net position held in trust for pension benefits, end of year 3,961,904$ 8,937,260$ 4,700,941$ 17,600,105$ City of Okeechobee, Florida Notes to Financial Statements - 54 - NOTE 5: OTHER INFORMATION (Continued) C. POSTEMPLOYMENT BENEFITS OTHER THAN PENSION Plan description. The City of Okeechobee, Florida administers a single-employer defined benefit healthcare plan (the “Plan”) that provides medical insurance to its employees and their eligible dependents. Pursuant to Section 112.0801 Florida Statutes, the City is required to provide eligible retirees (as defined in the City’s pension plans) the opportunity to participate in this Plan at the same cost that is applicable to active employees. Benefit provisions for the Plan were established by City Council on January 7, 1991 and may only be amended by City Council. The City has not established a trust or agency fund for the Plan. The City does not issue stand-alone financial statements for this Plan. All financial information related to the Plan is accounted for in the City’s basic financial statements. Employees and their dependents may elect to remain in the Plan upon retirement up to age 65. After age 65 the City's insurance coverage becomes secondary to the retiree's Medicare insurance. The Plan has 2 retirees receiving benefits and has a total of 59 active participants and dependents. Funding policy. The City is funding the plan on a pay-as-you-go basis. Employees and their dependents are required to pay 100% of the insurance premiums charged by the carrier. There is an implied subsidy in the insurance premiums for these employees because the premium charged for retirees is the same as the premium charged for active employees, who are younger than retirees on average. For the year ended September 30, 2017, the City’s contribution is $17,198, which represents an estimate of the implied subsidy described above. Contributions of plan members totaled approximately $2,166 for the year ended September 30, 2017. Annual OPEB cost and net OPEB obligation. The City’s annual OPEB cost (expense) is calculated based on the annual required contribution (ARC) of the employer, an amount determined using the Alternative Measurement Method, permitted by GASB Statement No. 45 for employers in plans with fewer than 100 total plan members. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial accrued liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year ended September 30, 2017, the amount actually contributed to the Plan, and changes in the City’s net OPEB obligation to the Plan: Annual required contribution $ 98,094 Interest on net OPEB obligation 41,280 Adjustment to annual required contribution (42,719) Annual OPEB cost (expense)96,655 Contributions made (17,198) Increase in net OPEB obligation 79,457 Net OPEB obligation – beginning of year 1,375,989 Net OPEB obligation – end of year $ 1,455,446 City of Okeechobee, Florida  Notes to Financial Statements  ‐ 55 ‐    NOTE 5: OTHER INFORMATION (Continued)    C. POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued)    The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the  net OPEB obligation for the fiscal year ending September 30, 2017 was as follows:    Year Ending Annual OPEB  Cost Percentage of Annual OPEB Cost Contributed Net OPEB Obligation 9/30/2017 96,655$          18% 1,455,446$                9/30/2016 385,151          13% 1,375,989                   9/30/2015 225,128          16% 1,007,078                      Funded status and funding progress. Because the Plan has fewer than 200 members, the City is  required to obtain an actuarial valuation at least every three years. The most recent actuarial  valuation was performed as of September 30, 2016. Accordingly, the City will be required to obtain a  subsequent actuarial valuation within three years of that date. As of September 30, 2016, the actuarial  accrued liability for benefits was $757,717, all of which was unfunded. The covered payroll (annual  payroll of active employees covered by the Plan) was $2,639,843, and the ratio of unfunded actuarial  accrued liability (UAAL) to the covered payroll was 29%.    The projection of future benefit payments for an ongoing plan involves estimates of the value of  reported amounts and assumptions about the probability of occurrence of events far into the future.  Examples include assumptions about future employment, future interest rates, mortality, medical cost  inflation, Medicare coverage and changes in marital status. Amounts determined regarding the  funded status of the Plan and the annual required contributions of the employer are subject to  continuous revision as actual results are compared to past expectations and new estimates about the  future are formulated.     The schedule of funding progress presented as required supplementary information following the  notes to the financial statements, will present multiyear trend information that shows whether the  actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued  liabilities for benefits.     Methods and Assumptions. Projections of benefits for financial reporting purposes are based on the  substantive plan (the plan as understood by the employer and the Plan members) and include the  types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit  costs between the employer and Plan members to that point. The methods and assumptions used  include techniques that are designed to reduce the effects of short‐term volatility in actuarial accrued  liabilities and the actuarial value of assets, consistent with the long‐term perspective of the  calculations.      City of Okeechobee, Florida Notes to Financial Statements - 56 - NOTE 5: OTHER INFORMATION (Continued) C. POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued) In the September 30, 2016 valuation, the entry age normal cost method was used. The assumptions included a discount rate of 3%, a general inflation rate of 2.8%, and an annual healthcare cost trend rate of 0%. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on a closed basis over a period of 30 years. As authorized by GASB Statement No. 45, the Alternative Measurement Method with its simplifications of certain assumptions was employed in measuring actuarial accrued liabilities and the ARC. D. CONCENTRATION – COLLECTIVE BARGAINING UNIT Members of the City’s fire department are covered by a collective bargaining agreement. The agreement with the employees covered by the International Association of Firefighters (IAFF) extended through September 30, 2009 and has not been renewed as of the date of our report. NOTE 6: FUTURE ACCOUNTING PRONOUNCEMENTS The Governmental Accounting Standards Board has issued statements that will become effective in 2018. The statements address: • OPEB – accounting and financial reporting by employers; • Split-interest agreements; • Various practice issues (Omnibus); and • Certain debt extinguishment issues. The City is currently evaluating the effects that these statements will have on its 2018 financial statements. NOTE 7: SUBSEQUENT EVENTS During November 2017, the City award the annual police vehicle purchase bid to an unrelated vendor for 12 police vehicles in the amount of approximately $ 249,552. During December 2017, the City entered into a grant agreement with the Florida Department of Transportation for the resurfacing of SE 3rd Avenue from SR 70 to SE 4th Street for $123,531. - 57 - REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT’S DISCUSSION AND ANALYSIS - 58 - THIS PAGE IS INTENTIONALLY LEFT BLANK. City of Okeechobee, Florida Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – General Fund The accompanying notes to required supplementary information are an integral part of this schedule. - 59 - Actual Variance with Original Final (on Budgetary Final Budget Year ended September 30, 2017 Budget Budget Basis)Positive (Negative) Revenues Taxes 2,597,419$ 2,761,948$ 2,761,955$ 7$ Intergovernmental 2,096,135 2,408,723 2,411,932 3,209 Charges for services 399,446 410,995 412,784 1,789 Permits and fees 592,795 630,850 630,850 - Fines and forfeitures 15,270 20,482 20,485 3 Investment earnings 6,550 6,236 6,208 (28) Miscellaneous 14,350 23,169 19,564 (3,605) Contributions and donations - - 9,486 9,486 Total revenues 5,721,965 6,262,403 6,273,264 10,861 Expenditures Current: General government: Legislative 182,699 135,665 131,842 3,823 Executive 195,341 186,238 184,801 1,437 City clerk 216,170 190,847 188,037 2,810 Financial services 276,416 257,124 256,542 582 Legal council 75,710 165,882 155,178 10,704 General services 402,552 349,472 338,983 10,489 Total general government 1,348,888 1,285,228 1,255,383 29,845 Public safety: Fire 1,572,269 1,493,016 1,482,638 10,378 Police 2,267,018 2,083,551 2,064,258 19,293 Total public safety 3,839,287 3,576,567 3,546,896 29,671 Transportation 1,232,471 1,111,379 1,099,156 12,223 Physical environment 712,800 255,043 214,164 40,879 Capital outlay 1,121,365 1,036,288 1,031,545 4,743 Total expenditures 8,254,811 7,264,505 7,147,144 117,361 Deficiency of revenues under expenditures (2,532,846) (1,002,102) (873,880) 128,222 Other financing sources (uses) Operating transfers out - - (300,000) (300,000) Sale of capital assets 237,600 246,000 246,000 - Net other financing sources (uses)237,600 246,000 (54,000) (300,000) Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing sources (uses)(2,295,246) (756,102) (927,880) (171,778) Fund balances, beginning of year 11,798,372 11,798,372 11,798,372 - Fund balances, end of year 9,503,126$ 11,042,270$ 10,870,492 (171,778)$ Reconciliation of budgetary to GAAP basis Current year encumbrances 154,337 Prior year encumbrances (173,117) Fund balance on GAAP basis 10,851,712$ - City of Okeechobee, Florida  Required Pension Supplementary Information –   Schedule of Changes in Net Pension Liability and Related Ratios –   Years Information is Available  The accompanying notes to required supplementary information are an integral part of this schedule.   ‐ 60 ‐  2017 2016* 2015 2014 Total Pension Liability Service cost 235,345$      264,445$        247,353$      251,499$     Interest 573,285        543,946          506,147        479,146       Difference between actual & expected experience (270,100)      126,875          (219,850)      (784)              Assumption changes 22,143           ‐                   94,065           ‐                Benefit payments (255,731)      (468,694)         (203,855)      (201,397)      Refunds ‐                (25,003)           (321)              (26,953)        Net change in total pension liability 304,942        441,569          423,539        501,511       Total pension liability ‐ beginning 8,199,981    7,758,412       7,334,873    6,833,362    Total pension liability ‐ ending (a) 8,504,923    8,199,981       7,758,412    7,334,873    Plan Fiduciary Net Position Contributions ‐ employer (from City) 169,789        147,312          192,581        200,210       Contributions ‐ employer (from State) 78,659          73,960             70,807          67,639          Contributions ‐ members 45,863          45,554             47,740          43,135          Net investment income 903,712        607,763          (95,964)         694,790       Benefit payments (255,731)      (468,694)         (203,855)      (201,397)      Refunds ‐                (25,003)           (321)              (26,953)        Administrative expense (41,855)         (32,120)           (30,198)         (18,097)        Other (3,284)           (6)                     3,886             ‐                Net change in plan fiduciary net position 897,153        348,766          (15,324)         759,327       Plan fiduciary net position ‐ beginning 8,040,106    7,691,340       7,706,664    6,947,337    Plan fiduciary net position ‐ ending (b) 8,937,259    8,040,106       7,691,340    7,706,664    Net pension liability (asset) ‐ Ending (a) ‐ (b) (432,336)$    159,875$        67,072$        (371,791)$    Plan fiduciary net position as a percentage  or Total Pension Liability 105.08% 98.05% 99.14% 105.07% Covered payroll** 917,260$      970,646$        911,189$      862,700$     Net pension liability as a percentage  of covered payroll ‐47.13% 16.47% 7.36%‐43.10% Assumption changes: *  ‐The net pension liability recognized by the City in the current year financial statements represents the net position liability as of  Septmeber 30, 2016, which is allowed by GASB 68. Note: This schedule is presented to illustrate the requirement to show information for 10 years.  However, until a full 10‐year trend is  complied, the City presents information for those years for which information is available. Police Officers' ** Covered payroll was calculated by dividing the total member contributions for the fiscal year, net of any known buyback contributions, by  the member contribution rate of 5%. ‐ Effective 10/1/2016, the mortality rates were changed from the RP‐2000 Combined Healthy Participant Mortality Tables, using projection  scale AA to the mortality rates used by the Florida Retirement System (FRS) for Special Risk Class members. This change was made in  compliance with Florida House Bill 1309, which requires all public pension plans in Florida to use the same mortality rates used in either of  the last two actuarial valuation reports of FRS effective no later than 10/1/2016. ‐ Use of Insurance Tax Premium Revenue (IPTR) received by the State is subject to the default rules of Senate Bill 172 (codified in Chapter  2015‐39) beginning with the IPTR received for the 2015 calendar year. City of Okeechobee, Florida  Required Pension Supplementary Information –   Schedule of Changes in Net Pension Liability and Related Ratios –   Years Information is Available  The accompanying notes to required supplementary information are an integral part of this schedule.   ‐ 61 ‐  2017 2016* 2015 2014 Total Pension Liability Service cost 156,989$      156,107$        144,773$      130,539$     Interest 255,218        235,684          213,154        196,106       Difference between actual & expected experience (91,659)         56,393             (19,771)         (741)              Assumption changes (13,449)          ‐                   49,797           ‐                Benefit payments (106,572)      (102,590)         (96,939)         (142,060)      Refund (20,437)          ‐                    ‐                 ‐                Other ‐                3,256                ‐                 ‐                Net change in total pension liability 180,090        348,850          291,014        183,844       Total pension liability ‐ beginning 3,630,983    3,282,133       2,991,119    2,807,275    Total pension liability ‐ ending (a) 3,811,073    3,630,983       3,282,133    2,991,119    Plan Fiduciary Net Position Contributions ‐ employer (from City) 107,123        97,709             92,863          82,058          Contributions ‐ employer (from State) 50,589          49,889             52,662          53,235          Contributions ‐ members 25,409          27,433             26,324          23,854          Net investment income 404,268        246,381          (44,021)         318,708       Benefit payments (106,572)      (102,590)         (96,939)         (142,060)      Refunds (20,437)          ‐                    ‐                 ‐                Administrative expense (34,934)         (31,639)           (27,132)         (16,233)        Other (6,375)           (1,766)               ‐                 ‐                Net change in plan fiduciary net position 419,071        285,417          3,757            319,562       Plan fiduciary net position ‐ beginning 3,542,832    3,257,415       3,253,658    2,934,096    Plan fiduciary net position ‐ ending (b) 3,961,903    3,542,832       3,257,415    3,253,658    Net pension liability (asset) ‐ Ending (a) ‐ (b) (150,830)$    88,151$          24,718$        (262,539)$    Plan fiduciary net position as a percentage  or Total Pension Liability 103.96% 97.57% 99.25% 108.78% Covered payroll** 508,180$      563,285$        523,119$      477,080$     Net pension liability as a percentage  of covered payroll ‐29.68% 15.65% 4.73%‐55.03% Assumption changes: *  ‐The net pension liability recognized by the City in the current year financial statements represents the net position liability as of  Septmeber 30, 2016, which is allowed by GASB 68. ‐ Effective 10/1/2016, the mortality rates were changed from the RP‐2000 Combined Healthy Participant Mortality Tables, using projection  scale AA to the mortality rates used by the Florida Retirement System (FRS) for Special Risk Class members. This change was made in  compliance with Florida House Bill 1309, which requires all public pension plans in Florida to use the same mortality rates used in either of  the last two actuarial valuation reports of FRS effective no later than 10/1/2016. ‐ Use of Insurance Tax Premium Revenue (IPTR) received by the State is subject to the default rules of Senate Bill 172 (codified in Chapter  2015‐39) beginning with the IPTR received for the 2015 calendar year. Firefighters' Note: This schedule is presented to illustrate the requirement to show information for 10 years.  However, until a full 10‐year trend is  complied, the City presents information for those years for which information is available. ** Covered payroll was calculated by dividing the total member contributions for the fiscal year, net of any known buyback contributions, by  the member contribution rate of 5%. City of Okeechobee, Florida  Required Pension Supplementary Information –   Schedule of Changes in Net Pension Liability and Related Ratios –   Years Information is Available  The accompanying notes to required supplementary information are an integral part of this schedule.   ‐ 62 ‐  2017 2016* Total Pension Liability Service cost 136,373$      421,387$         Interest 91,058          763,785           Benefit changes ‐                 ‐                    Difference between actual & expected experience ‐                (524,849)          Assumption changes 133,790         Benefit payments (336,740)      (331,215)          Refunds (17,378)         (18,267)            Other *** 2,641,019     ‐                    Net change in total pension liability 2,648,122    310,841           Total pension liability ‐ beginning 1,409,698    11,400,112      Transfer of pension liability for Okeechobee Utility Authority *****‐                (10,301,255)     Total pension liability ‐ ending (a) 4,057,820    1,409,698        Plan Fiduciary Net Position Contributions ‐ employer 94,009          446,184           Contributions ‐ members 56,405          183,145           Net investment income 477,649        825,935           Benefit payments (336,740)      (331,215)          Refunds (17,378)         (18,267)            Administrative expense (48,490)         (57,186)            Other**** 3,117,018    (2,208)               Net change in plan fiduciary net position 3,342,473    1,046,388        Plan fiduciary net position ‐ beginning 1,358,470    10,238,992      Transfer plan fiduciary net position to Okeechobee Utility Authority***** (9,926,910)       Plan fiduciary net position ‐ ending (b) 4,700,943    1,358,470        Net pension liability (asset) ‐ Ending (a) ‐ (b) (643,123)$    51,228$           Plan fiduciary net position as a percentage  or Total Pension Liability 115.85% 96.37% Covered payroll** 940,083$      911,233$         Net pension liability as a percentage  of covered payroll ‐68.41% 5.62% General Employees'   City of Okeechobee, Florida  Required Pension Supplementary Information –   Schedule of Changes in Net Pension Liability and Related Ratios –   Years Information is Available  The accompanying notes to required supplementary information are an integral part of this schedule.   ‐ 63 ‐    Assumption changes: ***** Due to the change in nature of the Plan, from a cost sharing to a single employer plan (effective October 1, 2016). *  ‐The net pension liability recognized by the City in the current year financial statements represents the net position liability as of  Septmeber 30, 2016, which is allowed by GASB 68. ‐ Effective 10/1/2016, the mortality rates were changed from the RP‐2000 Combined Healthy Participant Mortality Tables, using projection  scale AA to the mortality rates used by the Florida Retirement System (FRS) for Special Risk Class members. This change was made in  compliance with Florida House Bill 1309, which requires all public pension plans in Florida to use the same mortality rates used in either of  the last two actuarial valuation reports of FRS effective no later than 10/1/2016. ‐ Effective 10/1/2016, OUA employees are covered under a separately established Plan, the Okeechobee Utility Authority Employees’  Retirement System, and are no longer covered under the City of Okeechobee General Employees’ Retirement System. Note: This schedule is presented to illustrate the requirement to show information for 10 years.  However, until a full 10‐year trend is  complied, the City presents information for those years for which information is available. ** Covered Payroll was calculated by dividing the total member contributions for the fiscal year by the member contribution rate of 6%. *** The Total Pension Liability, the Plan Fiduciary Net Position, and the Net Pension Liability as of September 30, 2015 were allocated based  on the portion of the Employer's Total Required Contribution (from October 1, 2015 Actuarial Valuation dated April 25, 2016). The October 1,  2015 Valuation determined the required employer contribution for the plan year end September 30, 2017. **** Due to the change in nature of the Plan, from a cost sharing to a single employer plan (effective October 1, 2016). Also reflects $59, 910  post‐valuation adjustment to match audited financial statements. City of Okeechobee, Florida  Required Pension Supplementary Information – Schedule of Contributions –  Years Information is Available  The accompanying notes to required supplementary information are an integral part of this schedule.   ‐ 64 ‐  9/30/2017 9/30/2016 9/30/2015 9/30/2014 Actuarially determined contributions 251,591$        219,093$        263,240$        267,849$         Contributions in relation to the actuarially  determined contributions 248,448           221,272      263,388           267,849            Contribution deficiency (excess)3,143$             (2,179)$            (148)$               ‐$        Covered payroll*917,260$        970,646$        911,189$        862,700$         Contributions as a percentage of covered employee payroll 27.09% 22.80% 28.91% 31.05% 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Actuarially determined contributions 170,269$        143,632$        138,914$        122,212$         Contributions in relation to the actuarially  determined contributions 157,712           147,598      145,525           135,293            Contribution deficiency (excess)12,557$           (3,966)$            (6,611)$            (13,081)$          Covered payroll*508,180$        563,285$        523,119$        477,080$         Contributions as a percentage of covered employee payroll 31.03% 26.20% 27.82% 28.36% 9/30/2017 9/30/2016 Actuarially determined contributions 42,774$           49,115$            Contributions in relation to the actuarially  determined contributions 94,009             110,448       Contribution deficiency (excess)(51,235)$         (61,333)$          Covered payroll 940,083$        911,233$         Contributions as a percentage of covered employee payroll 10.00% 12.12% Firefighters' Police Officers' Note: This schedule is presented to illustrate the requirement to show information for 10 years.  However,  until a full 10‐year trend is compiled, the City presents information for those years for which information is  available. * Based on payroll provided for actuarial valuations;  Covered payroll was calculated by dividing the total member contributions for the fiscal year, net of any known buyback contributions, by the member contribution rate of 5%. General Employees' City of Okeechobee, Florida Required Pension Supplementary Information – Schedule of Investment Returns – Years Information is Available The accompanying notes to required supplementary information are an integral part of this schedule. - 65 - 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Annual money-weighted rate of return net of investment expense 10.68%7.59%-1.65%9.96% 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Annual money-weighted rate of return net of investment expense 10.76%6.83%-2.19%10.43% 9/30/2017 9/30/2016 Annual money-weighted rate of return net of investment expense 9.78%7.78% Police Officers' Fire Fighters' Note: This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is complied, the City presents information for those years for which information is available. General Employees' City of Okeechobee, Florida Required Other Postemployment Benefits Supplementary Information - Schedule of Funding Progress - 66 - UAAL Actuarial Unfunded a % of Actuarial Actuarial Accrued AAL Funded Covered Valuation Value of Liability (UAAL)Ratio Covered Payroll Date Assets (a)AAL (b)(b-a)(a/b)Payroll (c)((b-a)/c) 9/30/2016 -$ 757,717$ 757,717$ 0.0%2,639,843$ 29% 9/30/2013 - 1,255,666 1,255,666 0.0%2,345,956 54% 8/1/2010 - 776,235 776,235 0.0%2,515,729 31% City of Okeechobee, Florida Notes to Required Supplementary Information - 67 - A. BUDGETARY INFORMATION Annual budgets are adopted on a basis consistent with U.S. generally accepted accounting principles for all governmental funds. All annual appropriations lapse at fiscal year-end. The City Administrator may make transfers of appropriations within a department as long as the total budget of the department is not increased. Transfers of appropriations between departments require the approval of the council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the department level. The council made certain supplemental budgetary appropriations during the year. Encumbrances accounting is employed in governmental funds. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end are reported as restricted or assigned fund balances and do not constitute expenditures or liabilities because the commitments will be re-appropriated and honored during the subsequent year. City of Okeechobee, Florida Notes to Required Supplementary Information - 68 - B. ADDITIONAL ACTUARIAL INFORMATION Valuation Date: 10/01/2015 Notes: Actuarially determined contribution rates are calculated as of October 1, which is two years prior to the end of the fiscal year in which contributions are reported. Methods and Assumptions Used to Determine Contributions Rates: Police Officers’ Pension Plan Firefighters' Pension Plan General Pension Plan Actuarial Cost Method:Aggregate Aggregate Aggregate Amortization Method:N/A N/A N/A Remaining Amortization Period: N/A N/A N/A Asset Valuation Method: 4-year smoothed market 4-year smoothed market 4-year smoothed market Salary Increases:6.00%7.00%, including inflation 6.00% Investment Rate of Return:7.00%7.00%7.00% Retirement Age:100% when first eligible for Normal Retirement or DROP entry 100% when first eligible for Normal Retirement or DROP entry. 100% when first eligible for Normal Retirement or DROP entry Mortality:RP-2000 Combined Healthy Participant Mortality Table for males and females with mortality improvement projected to all future years after 2000 using Scale AA. The table was used with ages set ahead one year for the October 1, 2013 actuarial valuation. RP-2000 Combined Healthy Participant Mortality Table for males and females with mortality improvement projected to all future years after 2000 using Scale AA. RP-2000 Mortality Tables with collar adjustments and generational projections using scale BB as used by the Florida Retirement System for the Regular Class members in the July 1, 2016 actuarial valuation. City of Okeechobee, Florida Notes to Required Supplementary Information - 69 - Police Officers’ Pension Plan Firefighters' Pension Plan General Pension Plan Notes: See Discussion of Valuation Results on Page 1 of the October 1, 2015 Actuarial Valuation Report issued April 7, 2016 by Gabriel Roeder Smith & Company. See Discussion of Valuation Results on Page 1 of the October 1, 2015 Actuarial Valuation Report issued April 8, 2016 by Gabriel Roeder Smith & Company. See Discussion of Valuation Results on Page 1 of the October 1, 2016 Actuarial Valuation Report issued May 30, 2017 by Gabriel Roeder Smith & Company. - 70 - THIS PAGE IS INTENTIONALLY LEFT BLANK. - 71 - Carr, Riggs & Ingram, LLC 215 Baytree Drive Melbourne, Florida 32940 (321) 255-0088 (321) 259-8648 (fax) www.cricpa.com INDEPENDENT AUDITORS’ 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 The Honorable Mayor and Members of the City Council of the City of Okeechobee, Florida We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund and the aggregate remaining fund information of the City of Okeechobee, Florida, as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the City of Okeechobee, Florida’s basic financial statements, and have issued our report thereon dated June 15, 2017. Other auditors audited the financial statements of the Police Officers’ and Firefighters’ Pension Trust Funds and the City of Okeechobee and Okeechobee Utilities Authority Employees’ Retirement System, as described in our report on the City of Okeechobee, Florida’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Okeechobee, Florida’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Okeechobee, Florida’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Okeechobee, Florida‘s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. - 72 - Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Okeechobee, Florida’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Melbourne, Florida June 8, 2018 - 73 - Carr, Riggs & Ingram, LLC 215 Baytree Drive Melbourne, Florida 32940 (321) 255-0088 (321) 259-8648 (fax) www.cricpa.com INDEPENDENT AUDITORS’ MANAGEMENT LETTER The Honorable Mayor and Members of the City Council of the City of Okeechobee, Florida Report on the Financial Statements We have audited the financial statements of the City of Okeechobee, Florida as of and for the fiscal year ended September 30, 2017, and have issued our report thereon dated June 7, 2018. Auditors’ Responsibility We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and Chapter 10.550, Rules of the Auditor General. Other Reporting Requirements We have issued our Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards and our Independent Accountants’ Report on an examination conducted in accordance with AICPA Professional Standards, AT-C Section 315, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Florida Auditor General. Disclosures in those reports, which are dated June 8, 2018, should be considered in conjunction with this management letter. Prior Audit Findings Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report. There were no findings or recommendations in the preceding annual financial audit report to correct. Official Title and Legal Authority Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The legal authority of the City of Okeechobee, Florida and its component units are disclosed in the footnotes. - 74 - Financial Condition and Management Section 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require us to apply appropriate procedures and communicate the results of our determination as to whether or not the City of Okeechobee, Florida has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific condition(s) met. In connection with our audit, we determined that the City of Okeechobee, Florida did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Pursuant to Sections 10.554(1)(i)5.c. and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures for the City of Okeechobee, Florida. It is management's responsibility to monitor the City of Okeechobee, Florida's financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. Section 10.554(1)(i)2., Rules of the Auditor General, requires that we communicate any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations. Annual Financial Report Section 10.554(1)(i)5.b. and 10.556(7), Rules of the Auditor General, require us to apply appropriate procedures and communicate the results of our determination as to whether the annual financial report for the City of Okeechobee, Florida for the fiscal year ended September 30, 2017, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2017. In connection with our audit, we determined that these two reports were in agreement. Additional Matters Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. In connection with our audit, we did not have any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the members of the City Council, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties. Melbourne, Florida June 8, 2018 - 75 - Carr, Riggs & Ingram, LLC 215 Baytree Drive Melbourne, Florida 32940 (321) 255-0088 (321) 259-8648 (fax) www.cricpa.com INDEPENDENT ACCOUNTANTS’ REPORT ON COMPLIANCE WITH LOCAL GOVERNMENT INVESTMENT POLICIES The Honorable Mayor and Members of the City Council Of the City of Okeechobee, Florida We have examined the City of Okeechobee, Florida’s compliance with the requirements of Section 218.415, Florida Statutes, Local Government Investment Policies, during the year ended September 30, 2017. Management of the City of Okeechobee, Florida is responsible for the City of Okeechobee, Florida’s compliance with the specified requirements. Our responsibility is to express an opinion on the City of Okeechobee, Florida’s compliance with the specified requirements based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the City of Okeechobee, Florida complied, in all material respects, with the specified requirements referenced above. An examination involves performing procedures to obtain evidence about whether the City of Okeechobee, Florida complied with the specified requirements. The nature, timing, and extent of the procedures selected depend on our judgment, including as assessment of the risks of material noncompliance, whether due to fraud or error. We believe that the evidence obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Our examination does not provide a legal determination on the City of Okeechobee, Florida’s compliance with specified requirements. In our opinion, the City of Okeechobee, Florida complied, in all material respects, with the requirements of Section 218.415, Florida Statutes, Local Government Investment Policies, for the year ended September 30, 2017. This report is intended solely for the information and use of management and the State of Florida Auditor General, is not intended to be, and should not be used by anyone other than these specified parties. Melbourne, Florida June 8, 2018