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2021-04-06 Ex 02 City Of Okeechobee, Florida FINANCIAL STATEMENTS September 30, 2020 City of Okeechobee, Florida Table of Contents For the year ended September 30, 2020 - 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 – Governmental Funds 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 63 • Required Pension Supplementary Information 64 • Schedule of Changes in Total OPEB Liability and Related Ratios 70 • Notes to Required Supplementary Information 71 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 75 • Independent Auditors’ Management Letter 77 • Independent Accountants’ Report on Compliance with Local Government Investment Policies 80 City of Okeechobee, Florida City Officials For the year ended September 30, 2020 - 3 - Dowling R. Watford, Jr. Mayor, Chairman Wes Abney Monica Clark Bob Jarriel Bobby Keefe Council Members John F. Fumero 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, 2020, 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. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the City of Okeechobee, Florida Municipal Police Officers’ Pension Trust Fund and City of Okeechobee, Florida Municipal Firefighters’ Pension Trust Fund and the City of Okeechobee 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 City of Okeechobee, Florida Municipal Police Officers’ Pension Trust Fund and City of Okeechobee, Florida Municipal Firefighters’ Pension Trust Fund and the City of Okeechobee 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. The financial statements of the City of Okeechobee, Florida Municipal Police Officers’ Pension Trust Fund, the City of Okeechobee, Florida Municipal Firefighters’ Pension Trust Fund, and the City of Okeechobee Employees’ Retirement System were not audited in accordance with Government Auditing Standards. 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 - 6 - design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our 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, 2020, 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 63 and page 71), and the pension and other postemployment benefits information (pages 64 through 70 and pages 72 through 73) be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We 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 March 29, 2021 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 March 29, 2021 - 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, 2020. 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, 2020: • The City’s total assets exceeded its liabilities at September 30, 2020 by $19,628,412. • The City’s total revenues were $6,857,356 for the year ended September 30, 2020, compared to total expenses of $7,629,895, which resulted in a $772,539 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 20 and 21 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 28 through 60 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 2020 2019_ Current assets $ 11,267,892 $ 11,822,942 Capital assets 8,100,730 8,234,983 Noncurrent assets 1,563,303 1,764,508 Total assets 20,931,915 21,822,433 Deferred outflows 806,791 830,245 Current liabilities 317,048 281,767 Noncurrent liabilities 655,619 593,411 Total liabilities 972,667 875,178 Deferred inflows 1,137,637 1,376,549 Net position: Net investment in capital assets 8,100,730 8,235,624 Restricted 1,062,845 1,111,541 Unrestricted 10,464,837 11,054,427 Total net position $ 19,628,412 $ 20,400,951 Governmental Activities Total net position decreased by $772,539 primarily as a result of $890,518 decrease in total assets, and an increase $97,489 of total liabilities. Deferred inflows related to pensions decreased $238,912 and was offset by decrease of $23,454 of pension outflows. The decrease in total assets was primarily due to a $555,050 decrease in current assets due to a reduction of cash and investments in the current year to fund operations, a $201,205 decrease in noncurrent assets due to a decrease in net pension asset, and a decrease in capital assets of $134,253. The net change in current and noncurrent liabilities was $97,489 as current liabilities increased by $35,281 related to timing of payables and non-current liabilities increased by $62,208 resulting from an increase in the compensated absences by $32,286 and an increase in the OPEB liability obligation of $29,922. 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 2020 2019 REVENUES: Program revenues: Charges for services $ 788,165 $ 785,739 Operating grants and contributions 615,305 672,476 Capital grants and contributions - 183,630 General revenues: Property taxes 2,305,548 2,238,173 Public utility taxes 840,461 860,362 Franchise fees 540,181 568,062 Shared revenues 1,622,322 1,618,950 Investment income 102,982 222,420 Other income 42,392 16,325 Total revenues 6,857,356 7,166,137 EXPENSES: General government 1,738,663 1,415,324 Public safety 4,131,405 3,918,479 Transportation 840,233 732,470 Physical environment 919,594 869,723 Culture and recreation - 6,750 Total expenses 7,629,895 6,942,746 Change in net position (772,539) 223,391 Net position, beginning of year 20,400,951 20,177,560 Net position, end of year $ 19,628,412 $ 20,400,951 City of Okeechobee, Florida Management's Discussion and Analysis - 13 - The City experienced a decrease of 4.3% in total revenues – a $308,781 decrease to $6.85 million. The decrease is primarily due to a $183,630 decrease in Capital Grants and Contributions, $57,171 decrease in Operating Grants and Contributions, and $119,438 decrease in Investment Income. Utility Tax and Franchise fee revenues decreased $19,901 and $27,881 respectfully, primarily based on lower consumer consumption. 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 $67,375 which offset the decrease in revenues. An increase in Miscellaneous revenue $26,067, Shared revenues of $3,372 and $2,426 increase in Charges for Services also shared in the offset of the overall decrease in revenues for the year. The City experienced an increase of 9.9% in total expenses – a $687,149 increase to $7.6 million. The increase is primarily due to a $323,339 increase in expenses for general government. The $107,763 increase in transportation expense and $212,926 increase in public safety also were large contributors to the overall increase in expenditures for the year. The combined increase in expense and decrease in revenues resulted in a decrease in net position of $772,539. 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 $10,901,587 a decrease of $593,536 in comparison with the prior year. Approximately 72% of this total amount $7,890,762, constitutes unassigned fund balance, which is available for spending at the government's discretion. Assigned fund balances include $1,914,755 for subsequent year’s expenditures. Public facilities fund balance of $1,046,855 plus law enforcement $15,990 are restricted funds based on their specific stipulated purpose. The remainder of fund balance is non- spendable inventory of $33,225. 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 $9,543,167 while total fund balance was $10,623,247. 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 125% and 139% respectively of total general fund expenditures. Revenues from grants were used in the construction of infrastructure and other improvements in the City in the prior year. City of Okeechobee, Florida Management's Discussion and Analysis - 14 - General Fund Budgetary Highlights The amount appropriated for expenditures in the original 19/20 budget decreased from $9,401,855 to $7,955,661 in the final 19/20 budget, a decrease of $1,446,194. 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. CAPITAL ASSETS AND LONG-TERM LIABILITIES Capital assets. The City’s investment in capital assets as of September 30, 2020, amounted to $8,100,730, (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 decreased $134,253. The City’s major additions of $582,891 to capital assets during the current fiscal year included the following: • Replacement computers for (4)-Police Department • Replace (3) police vehicles including equipment for Police Department; (1) Administrative SUV; (2) Pickups for Public Works • Tasers (1) including harnesses, etc.; (1) Radar • Evidence recording software • Picnic (6) tables for Centennial Park • Centennial Park playground equipment and picnic (6) tables • Replacement computers (2) Police Department; (4) laptops for Police Department; (2) laptops for Public Works; (1) Finance department; (1) laptop for Code Enforcement • Added (11) laptops for council and various departments for use in council chambers • GPS Opticom vehicle equipment for Fire Department • City Hall remodel and ADA access doors • Security Access controls for City Hall and added doors to Police Department • Replacement computers (2) General Services; (1) Clerk; (1) Public Works City of Okeechobee, Florida Management's Discussion and Analysis - 15 - • Replacement Network Server at Police Department • Replacement Server for Laser Fisch • Resurfacing of various City streets • NW 10th Avenue concrete work • General Services desk, bookshelves, chair • City Hall (Finance side) split air conditioning system • Replacement gas detector • Landscaping for medians • Utility trailer for Public Works • Construction in progress included in Centennial Park restroom & pavilion and fiber optic cable installation City’s Capital Assets (net of depreciation) 2020 2019 Land $ 1,378,744 $ 1,378,744 Construction in progress 142,615 - Buildings 1,093,014 1,143,049 Improvements other than buildings 3,846,839 4,154,231 Equipment 1,639,518 1,558,959 Total $ 8,100,730 $ 8,234,983 Additional information on the City’s capital assets can be found in Note 3.C. on page 40 of this report. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET The City Council adopted a millage rate of 7.6018 for budget year 2021. The adopted millage rate is the same as the roll-back rate of 7.6018. A $202,250 increase in budgeted ad valorem revenue is largely due to the increase in new construction added to this year’s assessed tax rolls and increase in taxable values from the prior year. Revenues for the fiscal year 2021 adopted budget for all funds of the City total approximately $7,603,698, a decrease from the prior year final budget of approximately $179,798. These revenues include the General, Public Facility, Capital Projects and Special Law Enforcement fund revenues. City of Okeechobee, Florida Management's Discussion and Analysis - 16 - The change in revenue is based mostly on the expected increase in Ad Valorem Tax revenue and expected Grant revenue. However an expected decrease in Intergovermental revenues offsets the budgeted increase. Expenditures for the fiscal year 2021 adopted budget for all funds of the City total approximately $9,226,319, a decrease of 3% or $396,274 from the prior year budget. The decrease in expenditures is based mostly on the decrease in budgeted capital expenditures, general government and transportation related expenditures. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City of Okeechobee’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City of Okeechobee, 55 S.E. Third Avenue, Okeechobee, Florida 34974. - 17 - BASIC FINANCIAL STATEMENTS - 18 - THIS PAGE IS INTENTIONALLY LEFT BLANK. City of Okeechobee, Florida Statement of Net Position - Governmental Activities The accompanying notes are an integral part of these financial statements. - 19 - September 30, 2020 ASSETS Cash and cash equivalents 2,692,101$ Investments 8,170,821 Accounts receivable 144,568 Due from other governments 227,177 Inventory 33,225 Capital assets: Nondepreciable Land 1,378,744 Construction in progress 142,615 Depreciable, net of accumulated depreciation Buildings 1,093,014 Improvements other than buildings 3,846,839 Equipment 1,639,518 Net pension asset 1,563,303 Total assets 20,931,925 DEFERRED OUTFLOWS OF RESOURCES Deferred outflow - pensions 806,791 Total deferred outflows of resources 806,791 LIABILITIES Accounts payable 218,386 Accrued expenses 98,662 Noncurrent liabilities: Due within one year - compensated absences 86,387 Due in more than one year Compensated absences 381,351 OPEB liability 187,881 Total liabilities 972,667 DEFERRED INFLOWS OF RESOURCES Deferred inflow - business tax receipts 49,257 Deferred inflow - pensions 1,088,380 Total deferred inflows of resources 1,137,637 NET POSITION Net investment in capital assets 8,100,730 Restricted for: Law enforcement 15,990 Public facilities 1,046,855 Unrestricted 10,464,837 Total net position 19,628,412$ - City of Okeechobee, Florida Statement of Activities - Governmental Activities 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 1,738,663$ 637,522$ -$ -$ (1,101,141)$ Public safety 4,131,405 122,755 - - (4,008,650) Transportation 840,233 27,888 615,305 - (197,040) Physical environment 919,594 - - - (919,594) Total governmental activities 7,629,895$ 788,165$ 615,305$ -$ (6,226,425) General revenues: Property taxes 2,305,548 Public utility taxes 840,461 Franchise fees 540,181 Shared revenues not restricted to specific programs 1,622,322 Unrestricted investment earnings 102,982 Miscellaneous 42,392 Total general revenues 5,453,886 Change in net position (772,539) Net position, beginning of year 20,400,951 Net position, end of year 19,628,412$ Year ended September 30, 2020 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, 2020 General Capital Project Funds Funds ASSETS Cash and cash equivalents 2,405,458$ 261,757$ 24,886$ 2,692,101$ Investments 8,170,821 - - 8,170,821 Accounts receivable 144,568 - - 144,568 Due from other funds 8,303 - - 8,303 Due from other governments 227,177 - - 227,177 Inventory 33,225 - - 33,225 Total assets 10,989,552$ 261,757$ 24,886$ 11,276,195$ LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES Liabilities Accounts payable 218,386$ -$ -$ 218,386$ Accrued expenses 98,662 - - 98,662 Due to other funds - - 8,303 8,303 Total liabilities 317,048 - 8,303 325,351 Deferred inflows of resources: Deferred revenue - business tax revenue 49,257 - - 49,257 Fund balances: Nonspendable for: Inventory 33,225 - - 33,225 Restricted for: Public facilities 1,046,855 - - 1,046,855 Law enforcement - - 15,990 15,990 Assigned for: Subsequent year's expenditures 1,783,903 - - 1,783,903 Unassigned 7,759,264 261,757 593 8,021,614 Total fund balances 10,623,247 261,757 16,583 10,901,587 Total liabilities, deferred inflows of resources and fund balances 10,989,552$ 261,757$ 24,886$ Amounts reported for governmental activities in the statement of net position are different because: Deferred outflows of resources related to pensions are not recognized in the governmental funds; however, they are recorded in the statement of net position under full accrual accounting.806,791 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.(1,088,380) Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.8,100,730 Net pension assets used in governmental activities are not financial resources and, therefore, are not reported in the funds.1,563,303 Long-term liabilities, including the net OPEB obligation of $187,881 and compensated absences of $467,738 are not due and payable in the current period and, therefore, are not reported in the funds.(655,619) Net position of governmental activities 19,628,412$ 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, 2020 General Capital Project Funds Funds Revenues Taxes 3,134,696$ -$ -$ 3,134,696$ Intergovernmental 2,552,546 - - 2,552,546 Charges for services 425,957 - - 425,957 Permits and fees 675,977 - - 675,977 Fines and forfeitures 57,048 - 9,011 66,059 Investment earnings 102,982 - - 102,982 Miscellaneous 42,392 - - 42,392 Total revenues 6,991,598 - 9,011 7,000,609 Expenditures Current: General government 1,585,025 - - 1,585,025 Public safety 4,070,108 - 1,166 4,071,274 Transportation 1,198,140 - - 1,198,140 Physical environment 222,630 - - 222,630 Capital outlay 582,891 - - 582,891 Total expenditures 7,658,794 - 1,166 7,659,960 Excess of revenues over expenditures (667,196) - 7,845 (659,351) Other financing sources (uses) Transfers in 392,298 - - 392,298 Transfers out (392,298) - - (392,298) Proceeds from sale of capital assets 65,815 - - 65,815 Total other financing sources (uses)65,815 - - 65,815 Net change in fund balances (601,381) - 7,845 (593,536) Fund balances, beginning of year 11,224,628 261,757 8,738 11,495,123 Fund balances, end of year 10,623,247$ 261,757$ 16,583$ 10,901,587$ 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, 2020 Net change in fund balances - total governmental funds (593,536)$ Amounts reported for governmental activities in the statement of activities are different because: Capital assets used in government activities are not financial resources and, therefore, are not reported in the funds. Capital outlay 582,891$ Depreciation expense (647,829) (64,938) 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.(69,315) Pension contributions are reported as expenditures in the fund financial statements and the change in net position asset and related outflows (inflows) are reported on the statement of activities.17,458 Other post employment benefits are reported as expenditures in the fund financial statements and the change in net position asset and related outflows (inflows) are reported on the statement of activities.(29,922) 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.(32,286) Change in net position of governmental activities (772,539)$ - 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, 2019 Trust Funds ASSETS Cash equivalents 263,639$ Investments: Mutual funds 20,601,076 Receivables 101,728 Total assets 20,966,443 LIABILITIES Accounts payable 27,509 Total liabilities 27,509 NET POSITION Restricted for pension benefits 20,938,934$ - 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, 2019 Trust Funds ADDITIONS Contributions: State 143,320$ City 331,788 Employees 150,297 Total contributions 625,405 Investment earnings: Net appreciation in the fair value of investments 1,827,979 Interest and dividends 515,876 Total investment earnings 2,343,855 Less investment expenses (61,972) Net investment earnings 2,281,883 Total additions 2,907,288 DEDUCTIONS Benefits paid to participants 644,808 Refunds on termination 39,793 DROP payments 230,000 Administrative expenses 122,846 Total deductions 1,037,447 Change in net position 1,869,841 Net position, beginning of year 19,069,093 Net position, end of year 20,938,934$ - The accompanying notes are an integral part of these financial statements. - 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 2020 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 expenditures 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. The appropriations grant capital projects fund accounts for the financial resources related to the construction of infrastructure and other improvements in the City provided by specific grants and matching funds. 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. Therefore, general revenues include all taxes. Expenditures 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 I50: Investments 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 be 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. 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, 2020 was 7.6018 mills, which is 4.89% 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 acquisition 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 $1,088,380, and total deferred outflows were $806,791 for the year ended September 30, 2020. 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. Other post-employment benefits The City participates in a single employer, defined benefit, other post-employment plan. The City does not have a trust for the plan, and there is no actuarially determined contribution. The OPEB liability is determined in accordance with GASBC P52: Other Post-employment Benefits. 11. 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. 12. Recently Issued and Implemented Accounting Pronouncements The Governmental Accounting Standards Board has issued statements that will become effective in future years. These statements are as follows: In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. This Statement seeks to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. GASB 84 will be effective for the fiscal years beginning after December 15, 2019. City of Okeechobee, Florida Notes to Financial Statements - 35 - Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, DEFERRED INFLOWS AND NET POSITION OR EQUITY (Continued) 12. Recently Issued and Implemented Accounting Pronouncements (Continued) In June 2017, the GASB issued Statement No. 87, Leases. The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments' leasing activities. The requirements of this Statement are effective for reporting periods beginning after June 15, 2021. In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period. The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. The requirements of this Statement are effective for reporting periods beginning after December 15, 2020. In May 2020, the GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right- to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended. The requirements of this Statement are effective for reporting periods beginning after June 15, 2022. In June 2020, the GASB issued Statement No. 97, Certain Component Unit Criteria. The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component City of Okeechobee, Florida Notes to Financial Statements - 36 - Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. ASSETS, LIABILITIES, DEFERRED INFLOWS AND NET POSITION OR EQUITY (Continued) 12. Recently Issued and Implemented Accounting Pronouncements (Continued) units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. The requirements of this Statement are effective for reporting periods beginning after June 15, 2021. The City is evaluating the requirements of the above statements and the impact on reporting. Note 2: 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 3: DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS As of September 30, 2020, $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. At the close of the fiscal year, the City held investments in the Local Government Surplus Funds Trust Fund (“Florida PRIME”) external investment pool. The Florida PRIME is administered by the Florida State Board of Administration (“SBA”), who provides regulatory oversight. Florida PRIME currently meets all of the necessary criteria set forth in Section I50: Investment Pools (External) of the GASB Codification to measure its investments at amortized cost; therefore, the City’s account balance in the SBA is also reported at amortized cost. City of Okeechobee, Florida Notes to Financial Statements - 37 - Note 3: DETAILED NOTES ON ALL FUNDS (Continued) A. DEPOSITS AND INVESTMENTS (Continued) Fair Value GASBC I50: Investments, 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 GASBC I50 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, 2020. 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. Mutual funds – equities are valued at quoted market prices. City of Okeechobee, Florida Notes to Financial Statements - 38 - Note 3: DETAILED NOTES ON ALL FUNDS (Continued) A. DEPOSITS AND INVESTMENTS (Continued) Mutual funds – fixed income are valued using price models maximizing the use of observable inputs for similar securities. This includes basing value on yield currently available on comparable securities of issues with similar credit ratings. At September 30, 2020, the City had the following investments and effective duration presented in terms of years and levels: Investment type Fair Value Less than 1 1 - 5 6 - 10 More than 10 Rating Agency Level Primary government: SBA (Florida Prime)8,170,821 8,170,821$ -$ -$ -$ AAAm S&P - Primary government total 8,170,821$ 8,170,821$ -$ -$ -$ Pension trust funds: Mutual funds- equities 13,728,987 - - 13,728,987 - Not rated -L1 Mutual funds- fixed income 6,872,089 - - 6,872,089 - BBB - AA S&P L2 20,601,076$ -$ -$ 20,601,076$ -$ Cash Equivalents, at amortized cost Money Market Fund 263,639 Total Cash Equivalents, at cost 263,639 Pension trust fund total 20,864,715$ Credit risk Credit risk for fixed income securities is the risk that the issuer will not fulfill its obligations. The City’s investment policy does not address credit risk; however, investments are limited to state sponsored investment pools, which are diversified in their underlying portfolios so that potential losses will be minimized. 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. City of Okeechobee, Florida Notes to Financial Statements - 39 - Note 3: DETAILED NOTES ON ALL FUNDS (Continued) A. DEPOSITS AND INVESTMENTS (Continued) 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. B. RECEIVABLES Receivables as of September 30, 2020 are as follows: General Fund Municipal Police Officers’ Pension Trust Municipal Firefighters’ Pension Trust General Employees Pension Trust Franchise/Utility taxes 106,747$ -$ -$ -$ Contributions - 37,748 25,423 38,557 Other 37,821 - - - Receivables, net 144,568$ 37,748$ 25,423$ 38,557$ City of Okeechobee, Florida Notes to Financial Statements - 40 - Note 3: DETAILED NOTES ON ALL FUNDS (Continued) C. CAPITAL ASSETS Capital asset activity for the year ended September 30, 2020 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 - 142,615 - 142,615 Total capital assets, not being depreciated 1,378,744 142,615 - 1,521,359 Capital assets, being depreciated: Buildings 2,303,123 28,731 (3,650) 2,328,204 Improvements other than buildings 8,074,423 149,526 - 8,096,745 Equipment 3,839,202 262,019 (127,204) 4,101,221 Total capital assets, being depreciated 14,216,748 440,276 (130,854) 14,526,170 Less accumulated depreciation for: Buildings (1,160,074) (76,321) 1,205 (1,235,190) Improvements other than buildings (3,920,192) (329,714) - (4,249,906) Equipment (2,280,243) (241,794) 60,334 (2,461,703) Total accumulated depreciation (7,360,509)(647,829) 61,539 (7,946,799) Total capital assets, being depreciated, net 6,856,239 (207,553) (69,315) 6,579,371 Governmental activities capital assets, net $ 8,234,983 (64,938)$ (69,315)$ 8,100,730$ Depreciation expense was charged to functions/programs of the government as follows: Governmental activities: General government 111,239$ Public safety 226,274 Physical environment 310,316 Total depreciation expense - governmental activities $ 647,829 City of Okeechobee, Florida Notes to Financial Statements - 41 - Note 3: DETAILED NOTES ON ALL FUNDS (Continued) D. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund loans for short-term operating purposes resulted in a due to the General fund from the Law Enforcement Trust fund of $8,303. All amounts are expected to be repaid within one year. E. CHANGES IN LONG-TERM LIABILITIES Long-term liability activity for the year ended September 30, 2020, was as follows: Beginning Balance Additions Reductions Ending Balance Due Within One Year Governmental activities: Compensated absences $ 435,452 217,454$ (185,168)$ 467,738$ 86,387$ Net OPEB liability 157,959 29,922 - 187,881 - Long-term liabilities 593,411$ 247,376$ (185,168)$ 655,619$ 86,387$ For the governmental activities, compensated absences are generally liquidated by the general fund. Note 4: 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 excess insurance, aggregate excess insurance and multiple loss coverage from commercial carriers and underwriters. City of Okeechobee, Florida Notes to Financial Statements - 42 - Note 4: OTHER INFORMATION (Continued) 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, 2020, the Police Officers’ plan included 11 retirees or beneficiaries either receiving or entitled to receive benefits, plus 4 survivor beneficiaries. The Police Officers’ plan also includes 1 terminated member with vested benefits, and has 3 DROP participants. There are 20 active current employees of which 8 are vested and 12 are non-vested. At September 30, 2020, the Firefighters’ plan included 5 retirees receiving or entitled to receive benefits, plus 1 beneficiary receiving benefits. The Plan also included 2 DROP participants. There are 10 active current employees of which 4 are vested and 6 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 11.9% for the Police Officers’ plan and 20.4% 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 $90,650 and $52,670, respectively. These contributions are funded by an excise tax upon certain casualty insurance companies on their gross receipts of premiums from policy holders. City of Okeechobee, Florida Notes to Financial Statements - 43 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS The City and employees contributions for the year ended September 30, 2020, are as follows: City Employees Police Officers'126,811$ 53,051$ Firefighters'86,196$ 20,552$ 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, 2020, and the current target and actual allocation of these investments at market, per the performance analysis report, is as follows as of September 30, 2020: Actual Target Investments Percent Percent Domestic Equity 49.1%50.0% International Equity 14.9%10.0% Fixed Income 34.6%40.0% Cash Equivalents 1.4%0.0% Total 100.0%100.0% Actual Target Investments Percent Percent Domestic Equity 49.9%50.0% International Equity 14.6%10.0% Fixed Income 35.1%40.0% Cash Equivalents 0.4%0.0% Total 100.0%100.0% Firefighters' Police Officers' Money-Weighted Rate of Return - For the year ended September 30, 2020, the annual money- weighted rate of return on the Police Officers’ pension plan investments was 11.78% and on the Firefighters’ pension plan investments was 10.61%. 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 - 44 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Net Pension Liability (Asset) – The City’s net pension liability (asset) was measured as of September 30, 2019, and the total pension liability (asset) used to calculate net pension liability (asset) was determined by an actuarial valuation as of September 30, 2020 for the Police Officers’ and Firefighters pension plan. Total Pension Liability Police Officers'Firefighters' Service cost 254,066$ 145,856$ Interest 607,391 271,341 Difference between actual & expected experience (153,927) (132,896) Benefit payments, including refunds (515,688) (150,433) Net change in total pension liability 191,842 133,868 Total pension liability - beginning 8,859,560 3,939,558 Total pension liability - ending (a)9,051,402$ 4,073,426$ Plan Fiduciary Net Position Police Officers'Firefighters' Contributions - employer (from City)130,389$ 83,988$ Contributions - employer (from State)90,650 52,810 Contributions - members 50,359 23,945 Net investment income 330,227 140,894 Benefit payments, including refunds (515,688) (150,433) Administrative expense (47,116) (43,675) Net change in plan fiduciary net position 38,821 107,529 Plan fiduciary net position - beginning 9,617,497 4,279,305 Plan fiduciary net position - ending (b)9,656,318 4,386,834 Net pension liability (asset) - Ending (a) - (b)(604,916)$ (313,408)$ Plan fiduciary net position as a percentage or Total Pension Liability (Asset)106.68%107.69% For the year ending September 30, 2020, the City recognized a pension expense of $153,362 for the Police Officers’ Plan and $143,077 for the Firefighters’ Plan. On September 30, 2020, the Sponsor reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: City of Okeechobee, Florida Notes to Financial Statements - 45 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Deferred Deferred Outflow of Inflow of Resources Resources Difference between expected and actual experience 29,279$ 417,441$ Change in assumptions 16,854 - Net difference between projected and actual earnings on pension plan investments 51,848 - Contributions subsequent to the measurement date 217,461 - Total 315,442$ 417,441$ Deferred Deferred Outflow of Inflow of Resources Resources Difference between expected and actual experience 27,097$ 298,319$ Change in assumptions 19,057 7,923 Net difference between projected and actual earnings on pension plan investments 41,517 - Contributions subsequent to the measurement date 138,866 - Total 226,537$ 306,242$ Police Officers' Firefighters' Deferred outflows relating to subsequent contributions of $217,461 and $138,866 for the Police Officers’ and Firefighters’ Pension Plans, respectively will be recognized as a reduction in net pension liability in the fiscal year ending September 20, 2021. Amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows: Year ended September 30: 2021 (157,980)$ 2022 (140,044) 2023 (35,375) 2024 27,931 2025 (13,992) Total (319,460)$ Police Officers' City of Okeechobee, Florida Notes to Financial Statements - 46 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Year ended September 30: 2021 (50,156)$ 2022 (46,754) 2023 (15,513) 2024 (14,791) 2025 (41,708) Thereafter (49,649) Total (218,571)$ Firefighters' Net Pension Liability of the City of Okeechobee – The components of the net pension liability of the City at September 30, 2020, 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, 2019 which is allowed by GASB Statement No. 68. Police Fire Total pension liability 9,099,623$ 4,131,657$ Plan fiduciary net position (10,495,809) (4,861,814) City's net pension asset (1,396,186)$ (730,157)$ Plan fiduciary net position as a percentage of total pension liability 115.34%117.67% 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 expenses. 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, 2020 are summarized as follows: City of Okeechobee, Florida Notes to Financial Statements - 47 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Percent Long-Term Investments Target Rate of Return* Domestic Equity 50.0%7.5% International Equity 10.0%8.5% Fixed Income 40.0%2.5% Cash Equivalents 0.0%0.0% Total 100.0% *Net of long-term inflation assumption of 2.5% Percent Long-Term Investments Target Rate of Return* Domestic Equity 50.0%7.5% International Equity 10.0%8.5% Fixed Income 40.0%2.5% Cash Equivalents 0.0%0.0% Total 100.0% *Net of long-term inflation assumption of 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: City of Okeechobee, Florida Notes to Financial Statements - 48 - Note 4: OTHER INFORMATION (Continued) C. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) 1% Decrease Current Discount 1% Increase 6.00%7.00%8.00% Sponsor's net pension liability (asset)(317,758)$ (1,396,186)$ (2,295,869)$ 1% Decrease Current Discount 1% Increase 6.00%7.00%8.00% Sponsor's net pension liability (asset)(246,029)$ (730,157)$ (1,135,553)$ Police Officers' Firefighters' 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, 2020, the Plan included 17 retirees and/or beneficiaries currently receiving benefits plus 4 terminated employees entitled to benefits but not yet receiving them, and 1 DROP participant. There are 34 active current employees in the Plan, of which 16 are vested and 18 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 9.3% of covered payroll. The City’s contributions for the year ended September 30, 2020, was $118,781, which was $94 less than the actuarially required contribution for the year of $118,875. Net Pension Liability (Asset) - For the year ending September 30, 2020, the City reported an asset of $(644,979) for the Pension Plan’s net pension (asset). The net pension liability (asset) was measured as of September 30, 2020, and the total pension liability (asset) used to calculate the net pension liability (asset) was determined by an actuarial valuation as of October 1, 2020. City of Okeechobee, Florida Notes to Financial Statements - 49 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Total Pension Liability Service cost 152,255$ Interest 295,453 Difference between actual & expected experience (141,938) Benefit payments, including refunds (259,809) Net change in total pension liability 45,961 Total pension liability - beginning 4,337,157 Total pension liability - ending (a)4,383,118 Plan Fiduciary Net Position Contributions - employer (from City)115,324 Contributions - members 66,020 Net investment income 155,830 Benefit payments, including refunds (259,809) Administrative expense (53,249) Net change in plan fiduciary net position 24,116 Plan fiduciary net position - beginning 5,003,981 Plan fiduciary net position - ending (b)5,028,097 Net pension liability (asset) - Ending (a) - (b)(644,979)$ Plan fiduciary net position as a percentage of Total Pension Liability (Asset)114.72% General The City and employees contributions for the year ended September 30, 2020, are as follows. City Employees General 118,781$ 76,694$ City of Okeechobee, Florida Notes to Financial Statements - 50 - Note 4: 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 11.37% for the year ended September 30, 2020. 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, 2020 the City recognized a pension expense of $161,211 for the General Employees’ Retirement Plan. On September 30, 2020, the Sponsor reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflow of Inflow of Resources Resources Difference between expected and actual experience 24,817$ 342,457$ Change in assumptions 121,214 - Net difference between projected and actual earnings on pension plan investments - 22,240 Contributions subsequent to the measurement date 118,781 - Total 264,812$ 364,697$ General Deferred outflows relating to subsequent contributions of $118,781 for the General Pension Plan will be recognized as a reduction in net pension liability in the fiscal year ending September 20, 2021. Amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows: Year ended September 30: 2021 (92,724)$ 2022 (72,414) 2023 (50,936) 2024 16,986 2025 (19,578) Total (218,666)$ General Net Pension Liability of the City of Okeechobee – The components of the net pension liability of the City at September 30, 2020, 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, 2019 which is allowed by GASB Statement No. 68. City of Okeechobee, Florida Notes to Financial Statements - 51 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) General Total pension liability 4,726,458$ Plan fiduciary net position (5,584,559) City's net pension asset (858,101)$ Plan fiduciary net position as a percentage of total pension liability 118.16% 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 56.7%50.0% International Equity 10.5%10.0% Fixed Income 30.7%40.0% Cash Equivalents 2.1%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, 2020 are summarized in the following table: Percent Long-Term Investments Target Rate of Return* Domestic Equity 50.0%7.5% International Equity 10.0%8.5% Fixed Income 40.0%2.5% Cash Equivalents 0.0%0.0% Total 100.0%5.6% *Net of long-term inflation assumption of 2.5% General City of Okeechobee, Florida Notes to Financial Statements - 52 - Note 4: 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% 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%) or one percentage point higher (8%) than the current rate: 1% Decrease Current Discount 1% Increase 6.00%7.00%8.00% Sponsor's net pension liability (asset)(350,863)$ (858,101)$ (1,285,645)$ General Actuarial Assumptions – The total pension liability was determined by an actuarial valuation as of October 1, 2020 using the following actuarial assumptions applied to all measurement periods. Fire Police General Actuarial Cost Method Aggregate Aggregate Aggregate Inflation 2.50%2.50%2.50% Salary Increases 7.00%6.00%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 Cost of Living .05% every odd year .05% every odd year None City of Okeechobee, Florida Notes to Financial Statements - 53 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Fire Police General Mortality For healthy participants during employment, PUB- 2010 Headcount Weighted General Below Median Employee Mortality Table, separate rates for males and females, set back 1 year for males, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For healthy participants post employment, PUB- 2010 Headcount Weighted General Below Median Healthy Retiree Mortality Table, separate rates for males and females, set back 1 year for males, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For disabled participants, PUB-2010 Headcount Weighted General Disabled Retiree Mortality Table, separate rates for males and females, both set forward 3 years, without projected mortality improvements. For healthy participants during employment, PUB- 2010 Headcount Weighted Safety Employee Female Mortality Table and Safety Below Median Employee Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For healthy participants postemployment, PUB- 2010 Headcount Weighted Safety Healthy Retiree Female Mortality Table and Safety Below Median Healthy Retiree Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For disabled participants, 80% PUB-2010 Headcount Weighted General Disabled Retiree Mortality Table/20% PUB-2010 Headcount Weighted Safety Disabled Retiree Mortality Table, separate rates for males and females, without projected mortality improvements. For healthy participants during employment, PUB- 2010 Headcount Weighted Safety Employee Female Mortality Table and Safety Below Median Employee Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For healthy participants postemployment, PUB- 2010 Headcount Weighted Safety Healthy Retiree Female Mortality Table and Safety Below Median Healthy Retiree Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For disabled participants, 80% PUB-2010 Headcount Weighted General Disabled Retiree Mortality Table/20% PUB-2010 Headcount Weighted Safety Disabled Retiree Mortality Table, separate rates for males and females, without projected mortality improvements. City of Okeechobee, Florida Notes to Financial Statements - 54 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Pension trust funds fiduciary net position activity as of September 30, 2020 was as follows: Firefighters' Pension Police Officers' Pension General Employees' Pension Total Pension Trust Funds ASSETS Cash equivalents 19,480$ 129,121$ 115,038$ 263,639$ Investments: Mutual funds 4,824,323 10,339,014 5,437,739 20,601,076 Receivables 25,423 37,748 38,557 101,728 Total assets 4,869,226 10,505,883 5,591,334 20,966,443 LIABILITIES Accounts payable 7,411 13,323 6,775 27,509 Total liabilities 7,411 13,323 6,775 27,509 NET POSITION Restricted for pension benefits 4,861,815$ 10,492,560$ 5,584,559$ 20,938,934$ City of Okeechobee, Florida Notes to Financial Statements - 55 - Note 4: OTHER INFORMATION (Continued) B. RETIREMENT COMMITMENTS – DEFINED BENEFIT PLANS (Continued) Pension trust funds increase in fiduciary net position activity as of September 30, 2020 was as follows: Firefighters' Pension Police Officers' Pension General Employees' Pension Total Pension Trust Funds ADDITIONS Contributions State 52,670$ 90,650$ -$ 143,320$ City 86,196 126,811 118,781 331,788 Employees 20,552 53,051 76,694 150,297 Total contributions 159,418 270,512 195,475 625,405 Investment earnings: Net appreciation in the fair value of investments 408,526 930,206 489,247 1,827,979 Interest and dividends 119,851 261,853 134,172 515,876 Total investment earnings 528,377 1,192,059 623,419 2,343,855 Less investment expenses (21,000) (21,472) (19,500) (61,972) Net investment earnings 507,377 1,170,587 603,919 2,281,883 Total additions 666,795 1,441,099 799,394 2,907,288 DEDUCTIONS Benefits paid to participants 150,688 315,573 178,547 644,808 Refunds on termination 1,506 15,461 22,826 39,793 DROP payments - 228,310 - 228,310 Administrative expenses 40,273 41,667 40,906 122,846 Total deductions 192,467 601,011 242,279 1,035,757 Change in net position 474,328 840,088 557,115 1,871,531 Net position, beginning of year 4,387,487 9,654,162 5,027,444 19,069,093 Net position, end of year 4,861,815$ 10,494,250$ 5,584,559$ 20,940,624$ City of Okeechobee, Florida Notes to Financial Statements - 56 - Note 4: 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 1 retiree receiving benefits and has a total of 63 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. Contributions of plan members for the year ended September 30, 2020 totaled $1,830. Plan membership. Plan membership as of September 30, 2019 (the measurement date) was: Number of covered individuals Inactive members currently receiving benefits 1 Inactive members entitled to but not yet receiving benefits - Active members 63 Total 64 The OPEB liability was determined based on the following assumptions and information: Employer’s reporting date: September 30, 2020 Measurement date: September 20, 2019 Valuation date: September 20, 2019 City of Okeechobee, Florida Notes to Financial Statements - 57 - Note 4: OTHER INFORMATION (Continued) C. POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued) Actuarial assumptions and other inputs. On the September 30, 2019 measurement date, the actuarial assumptions and other inputs applied include the following: Inflation 2.25 percent Salary increases 6.00 percent Discount rate 2.75 percent Healthcare cost trend rates 6.50 percent for FY beginning 2020, 6.25 percent for FY beginning 2021 and then gradually decreasing to an ultimate trend of 4.00 percent Mortality RP-2000 Generational Combined Healthy Participant, projected from the year 2000 using Projection Scale AA Changes Include the change in the discount rate from 3.83% as of the beginning of the measurement period to 2.75% as of September 30, 2020. Change in Total OPEB Liability Total OPEB Liability (a) Balance as of September 30, 2018 157,959$ Changes for the year: Service cost 12,015 Interest 6,320 Difference between expected and actual experience 6,792 Changes in assumptions and other inputs 14,710 Benefit payments (9,915) Net changes 29,922 Balance as of September 30, 2019 187,881$ Increase (Decrease) City of Okeechobee, Florida Notes to Financial Statements - 58 - Note 4: OTHER INFORMATION (Continued) C. POSTEMPLOYMENT BENEFITS OTHER THAN PENSION (Continued) Sensitivity of the Total OPEB Liability – The following table represents the City’s total OPEB liability calculated using the discount rate of 2.75%, as well as what the City’s net OPEB liability would be if it were calculated using a discount rate that is one percentage point lower (1.75%) or one percentage point higher (3.75%) than the current rate: Current 1% Decrease Discount Rate 1% Increase (1.75%)(2.75%)(3.75%) Total OPEB Liability 193,524$ 187,881$ 176,866$ The following table represents the City’s total OPEB liability calculated using the ultimate health care cost trend rate of 4.00%, as well as what the City’s total OPEB liability would be if it were calculated using a health care cost trend that is one percentage point lower (3.00%) or one percentage point higher (5.00%) than the current rate: 1% Decrease Ultimate Trend 1% Increase (3.00%)(4.00%)(5.00%) Total OPEB Liability 160,370$ 187,881$ 221,614$ 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. E. ASSET RETIREMENT OBLIGATIONS Asset retirement obligations generally apply to legal obligations associated with the retirement of a tangible long-lived asset that result from the acquisition, construction, or development and the normal operation of a long-lived asset. The City assesses asset retirement obligations on a periodic basis. If a reasonable estimate of fair value can be made, the fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred or a change in estimate occurs. The City has an above ground fuel storage tank which is regulated by Florida Administrative Code (FAC) 62-762, and requires certain activities if use of the fuel storage tank is discontinued. The City has determined it cannot reasonably estimate the fair value of the liability for disposal of this item and, accordingly, has not recorded an asset retirement obligation for this matter. City of Okeechobee, Florida Notes to Financial Statements - 59 - Note 5: UNCERTAINTIES In March 2020, the World Health Organization made the assessment that the outbreak of a novel coronavirus (COVID-19) can be characterized as a pandemic. As a result, broad domestic and international stock market indices have declined and the City’s fair value of investments has declined similarly. Such declines in the fair value of investments held by the City may materially and adversely impact the City’s ability to achieve its investment objectives and therefore, its operational objectives. In addition, the extent to which these events will affect the amounts reported in future financial statements remains uncertain. Note 6: SUBSEQUENT EVENTS Management evaluated all events or transactions that occurred after September 30, 2020 through March 29, 2021, the date the current year’s financial statements were available to be issued. The following events occurred: In October 2020, the City approved School Resource Office (SRO) Agreement with the Okeechobee County School Board for Central Elementary and Okeechobee Freshman Campus for $95,110. In October 2020, as a result of the fire department merging with the County, the City approved to offer fire employees with 0 to 10 years of service one week of gross pay for every one-year of service, and those with over 10 years of service a lump sum equal to 20 weeks gross pay. The total gross payout is $165,276. In December 2020, the City approved a bid to a Company in the amount of $139,849 for the Southeast 3rd Street Pavement Improvements. In addition, the City approved a bid to another Company for the Southeast 6th Street Pavement Improvements in the amount of $38,924. In February 2021, the City approved a bid to a Company in the amount of $184,814 for the Southeast 8th Avenue Stormwater Conveyance. - 60 - THIS PAGE IS INTENTIONALLY LEFT BLANK. - 61 - REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT’S DISCUSSION AND ANALYSIS - 62 - THIS PAGE IS INTENTIONALLY LEFT BLANK. City of Okeechobee, Florida Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual – General Fund The accompanying notes to required supplementary information are an integral part of this schedule. - 63 - Actual Variance with Original Final (on Budgetary Final Budget Year ended September 30, 2019 Budget Budget Basis)Positive (Negative) Revenues Taxes 2,972,309$ 3,131,800$ 3,134,696$ 2,896$ Intergovernmental 2,972,148 2,432,140 2,552,546 120,406 Charges for services 483,314 487,328 425,957 (61,371) Permits and fees 589,550 670,995 675,977 4,982 Fines and forfeitures 14,775 30,675 57,048 26,373 Investment earnings 171,500 102,000 102,982 982 Miscellaneous 43,900 50,935 42,392 (8,543) Total revenues 7,247,496 6,905,873 6,991,598 85,725 Expenditures Current: General government: Legislative 339,722 299,952 244,066 55,886 Executive 250,970 233,589 232,919 670 City clerk 282,475 268,775 204,651 64,124 Financial services 350,975 326,445 316,402 10,043 Legal council 170,125 116,780 111,701 5,079 General services 591,467 442,300 421,767 20,533 Total general government 1,985,734 1,687,841 1,531,506 156,335 Public safety: Fire 1,710,651 1,588,440 1,598,801 (10,361) Police 2,809,734 2,559,850 2,503,727 56,123 Total public safety 4,520,385 4,148,290 4,102,528 45,762 Transportation 1,787,390 1,210,880 1,198,140 12,740 Physical environment 515,500 379,050 372,909 6,141 Capital outlay 592,846 529,600 589,174 (59,574) Total expenditures 9,401,855 7,955,661 7,794,257 161,404 Excess (deficiency) of revenues under (over) expenditures (2,154,359) (1,049,788) (802,659) 247,129 Other financing sources (uses) Sale of capital assets 84,000 65,700 65,815 115 Net other financing sources (uses)84,000 65,700 65,815 115 Excess (deficiency) of revenues and other financing sources over (under) expenditures and other financing sources (uses)(2,070,359) (984,088) (736,844) 247,244 Fund balances, beginning of year 11,224,628 11,224,628 11,224,628 - Fund balances, end of year 9,154,269$ 10,240,540$ 10,487,784 247,244$ Reconciliation of budgetary to GAAP basis Current year encumbrances 272,236 Prior year encumbrances (136,773) Fund balance on GAAP basis 10,623,247$ - City of Okeechobee, Florida Required Pension Supplementary Information The accompanying notes to required supplementary information are an integral part of this schedule. - 64 - 2020 2019 2018*2017 2016 2015 2014 Total Pension Liability Service cost 279,173$ 254,066$ 258,622$ 235,345$ 264,445$ 247,353$ 251,499$ Interest 615,045 607,391 580,995 573,285 543,946 506,147 479,146 Difference between actual & expected experience (76,855) (153,927) (276,621) (270,100) 126,875 (219,850) (784) Assumption changes (211,356) - - 22,143 - 94,065 - Benefit payments (557,786) (502,852) (281,028) (255,731) (468,694) (203,855) (201,397) Refunds - (12,836) 72,669 - (25,003) (321) (26,953) Net change in total pension liability 48,221 191,842 354,637 304,942 441,569 423,539 501,511 Total pension liability - beginning 9,051,402 8,859,560 8,504,923 8,199,981 7,758,412 7,334,873 6,833,362 Total pension liability - ending (a)9,099,623 9,051,402 8,859,560 8,504,923 8,199,981 7,758,412 7,334,873 Plan Fiduciary Net Position Contributions - employer (from City)126,811 130,886 151,492 169,789 147,312 192,581 200,210 Contributions - employer (from State)90,650 90,153 81,690 78,659 73,960 70,807 67,639 Contributions - members 53,051 50,359 46,212 45,863 45,554 47,740 43,135 Net investment income 1,170,587 330,227 727,699 903,712 607,763 (95,964) 694,790 Benefit payments (542,324) (502,852) (281,028) (255,731) (468,694) (203,855) (201,397) Refunds (15,462) (12,836) - - (25,003) (321) (26,953) Administrative expense (41,667) (47,116) (45,827) (41,855) (32,120) (30,198) (18,097) Other (2,155) - - (3,284) (6) 3,886 - Net change in plan fiduciary net position 839,491 38,821 680,238 897,153 348,766 (15,324) 759,327 Plan fiduciary net position - beginning 9,656,318 9,617,497 8,937,259 8,040,106 7,691,340 7,706,664 6,947,337 Plan fiduciary net position - ending (b)10,495,809 9,656,318 9,617,497 8,937,259 8,040,106 7,691,340 7,706,664 Net pension liability (asset) - Ending (a) - (b)(1,396,186)$ (604,916)$ (757,937)$ (432,336)$ 159,875$ 67,072$ (371,791)$ Plan fiduciary net position as a percentage of Total Pension Liability 115.34%106.68%108.56%105.08%98.05%99.14%105.07% Covered payroll**1,061,193$ 1,007,180$ 924,250$ 917,260$ 970,646$ 911,189$ 862,700$ Net pension liability as a percentage of covered payroll -131.57%-60.06%-82.01%-47.13%16.47%7.36%-43.10% Assumption changes: 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%. - 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. * -The net pension liability recognized by the City in the current year financial statements represents the net position liability as of September 30, 2019, 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. - 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. City of Okeechobee, Florida Required Pension Supplementary Information The accompanying notes to required supplementary information are an integral part of this schedule. - 65 - 2020 2019 2018*2017 2016 2015 2014 Total Pension Liability Service cost 117,980$ 145,856$ 136,825$ 156,989$ 156,107$ 144,773$ 130,539$ Interest 275,148 271,341 257,407 255,218 235,684 213,154 196,106 Benefit changes (945) - - - Difference between actual & expected experience (85,233) (132,896) (162,443) (91,659) 56,393 (19,771) (741) Assumption changes (96,526) - - (13,449) - 49,797 - Benefit payments (152,193) (141,381) (107,105) (106,572) (102,590) (96,939) (142,060) Refund - (9,052) (16,027) (20,437) - - - Other - - 19,828 - 3,256 - - Net change in total pension liability 58,231 133,868 128,485 180,090 348,850 291,014 183,844 Total pension liability - beginning 4,073,426 3,939,558 3,811,073 3,630,983 3,282,133 2,991,119 2,807,275 Total pension liability - ending (a)4,131,657 4,073,426 3,939,558 3,811,073 3,630,983 3,282,133 2,991,119 Plan Fiduciary Net Position Contributions - employer (from City)86,196 83,988 115,253 107,123 97,709 92,863 82,058 Contributions - employer (from State)52,670 52,810 52,793 50,589 49,889 52,662 53,235 Contributions - members 20,552 23,945 23,446 25,409 27,433 26,324 23,854 Net investment income 507,378 140,894 308,920 404,267 246,381 (44,021) 318,708 Benefit payments (150,688) (141,381) (107,105) (106,572) (102,590) (96,939) (142,060) Refunds (1,505) (9,052) (16,027) (20,437) - - - Administrative expense (40,275) (43,675) (59,878) (34,933) (31,639) (27,132) (16,233) Other 652 - - (6,375) (1,766) - - Net change in plan fiduciary net position 474,980 107,529 317,402 419,071 285,417 3,757 319,562 Plan fiduciary net position - beginning 4,386,834 4,279,305 3,961,903 3,542,832 3,257,415 3,253,658 2,934,096 Plan fiduciary net position - ending (b)4,861,814 4,386,834 4,279,305 3,961,903 3,542,832 3,257,415 3,253,658 Net pension liability (asset) - Ending (a) - (b)(730,157)$ (313,408)$ (339,747)$ (150,830)$ 88,151$ 24,718$ (262,539)$ Plan fiduciary net position as a percentage of Total Pension Liability 117.67%107.69%108.62%103.96%97.57%99.25%108.78% Covered payroll**411,033 478,900 468,920$ 508,180$ 563,285$ 523,119$ 477,080$ Net pension liability as a percentage of covered payroll -177.64%-65.44%-72.45%-29.68%15.65%4.73%-55.03% Assumption changes: 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%. * -The net pension liability recognized by the City in the current year financial statements represents the net position liability as of September 30, 2019, 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. City of Okeechobee, Florida Required Pension Supplementary Information The accompanying notes to required supplementary information are an integral part of this schedule. - 66 - Schedule of Changes in Net Pension Liability and Related Ratios Last Five Fiscal Years 2020 2019 2018*2017 2016 Total Pension Liability Service cost 184,223$ 152,255$ 154,529$ 136,373$ 421,387$ Interest 315,828 295,453 284,633 91,058 763,785 Benefit changes 90,157 - - Difference between actual & expected experience 2,277 (141,938) 20,956 - (524,849) Assumption changes (47,772) - - 133,790 - Benefit payments (201,373) (259,463) (164,189) (336,740) (331,215) Refunds - (346) (16,592) (17,378) (18,267) Other ***- - - 2,641,019 - Net change in total pension liability 343,340 45,961 279,337 2,648,122 310,841 Total pension liability - beginning 4,383,118 4,337,157 4,057,820 1,409,698 11,400,112 Transfer of pension liability for Okeechobee Utility Authority *****- - - - (10,301,255) Total pension liability - ending (a)4,726,458 4,383,118 4,337,157 4,057,820 1,409,698 Plan Fiduciary Net Position Contributions - employer 118,781 115,324 75,793 94,009 446,184 Contributions - members 76,693 66,020 60,312 56,405 183,145 Net investment income 603,919 155,830 394,042 477,649 825,935 Benefit payments (178,547) (259,463) (164,189) (336,740) (331,215) Refunds (22,826) (346) (16,592) (17,378) (18,267) Administrative expense (40,906) (53,249) (46,328) (48,490) (57,186) Other****(652) - - 3,117,018 (2,208) Net change in plan fiduciary net position 556,462 24,116 303,038 3,342,473 1,046,388 Plan fiduciary net position - beginning 5,028,097 5,003,981 4,700,943 1,358,470 10,238,992 Transfer plan fiduciary net position to Okeechobee Utility Authority*****- - - - (9,926,910) Plan fiduciary net position - ending (b)5,584,559 5,028,097 5,003,981 4,700,943 1,358,470 Net pension liability (asset) - Ending (a) - (b)(858,101)$ (644,979)$ (666,824)$ (643,123)$ 51,228$ Plan fiduciary net position as a percentage of Total Pension Liability 118.16%114.72%115.37%115.85%96.37% Covered payroll**1,278,231$ 1,100,333$ 1,005,204$ 940,083$ 911,233$ Net pension liability as a percentage of covered payroll -67.13%-58.62%-66.34%-68.41%5.62% General Employees' City of Okeechobee, Florida Required Pension Supplementary Information The accompanying notes to required supplementary information are an integral part of this schedule. - 67 - Schedule of Changes in Net Pension Liability and Related Ratios Last Five Fiscal Years Assumption changes: *** 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). * The net pension liability recognized by the City in the current year financial statements represents the net position liability as of September 30, 2019, which is allowed by GASB 68. - 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. **** Due to the change in nature of the Plan, from a cost sharing to a single employer plan (effective October 1, 2016). Also reflects $59, 910 post-valuation adjustment to match audited financial statements. Note: This schedule is presented to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is complied, the City presents information for those years for which information is available. - Effective 10/1/2016, the mortality rates were changed from the RP-2000 Combined Healthy Participant Mortality Tables, using projection scale AA to the mortality rates used by the Florida Retirement System (FRS) for Special Risk Class members. This change was made in compliance with Florida House Bill 1309, which requires all public pension plans in Florida to use the same mortality rates used in either of the last two actuarial valuation reports of FRS effective no later than 10/1/2016. ** Covered Payroll was calculated by dividing the total member contributions for the fiscal year by the member contribution rate of 6%. City of Okeechobee, Florida Required Pension Supplementary Information The accompanying notes to required supplementary information are an integral part of this schedule. - 68 - Schedule of Contributions Last Seven Fiscal Years 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Actuarially determined contributions 192,448$ 204,611$ 212,571$ 251,591$ 219,093$ 263,240$ 267,849$ Contributions in relation to the actuarially determined contributions 217,461 221,039 233,182 248,448 221,272 263,388 267,849 Contribution deficiency (excess)(25,013)$ (16,428)$ (20,611)$ 3,143$ (2,179)$ (148)$ -$ Covered payroll*1,061,193$ 1,007,180$ 924,250$ 917,260$ 970,646$ 911,189$ 862,700$ Contributions as a percentage of covered payroll 20.49%21.95%25.23%27.09%22.80%28.91%31.05% 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Actuarially determined contributions 157,372$ 139,143$ 167,871$ 170,269$ 143,632$ 138,914$ 122,212$ Contributions in relation to the actuarially determined contributions 138,866 136,798 168,046 157,712 147,598 145,525 135,293 Contribution deficiency (excess)18,506$ 2,345$ (175)$ 12,557$ (3,966)$ (6,611)$ (13,081)$ Covered payroll*411,033$ 478,900$ 468,920$ 508,180$ 563,285$ 523,119$ 477,080$ Contributions as a percentage of covered payroll 33.78%28.57%35.84%31.03%26.20%27.82%28.36% 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Actuarially determined contributions 118,875$ 114,875$ 75,793$ 42,774$ 49,115$ 379,111$ 379,099$ Contributions in relation to the actuarially determined contributions 118,781 115,324 75,793 94,009 110,448 379,111 379,099 Contribution deficiency (excess)94$ (449)$ -$ (51,235)$ (61,333)$ -$ -$ Covered payroll 1,278,231$ 1,100,333$ 1,005,204$ 940,083$ 911,233$ 3,135,961$ 2,945,717$ Contributions as a percentage of covered payroll 9.29%10.48%7.54%10.00%12.12%12.09%12.87% 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 The accompanying notes to required supplementary information are an integral part of this schedule. - 69 - Schedule of Investment Returns Last Seven Fiscal Years 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Annual money-weighted rate of return net of investment expense 11.78%3.10%8.73%10.68%7.59%-1.65%9.96% 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Annual money-weighted rate of return net of investment expense 10.61%2.39%6.11%10.76%6.83%-2.19%10.43% 9/30/2020 9/30/2019 9/30/2018 9/30/2017 9/30/2016 9/30/2015 9/30/2014 Annual money-weighted rate of return net of investment expense 11.37%2.23%7.55%9.78%7.78%-1.38%10.60% 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 Schedule of Changes in Total OPEB Liability and Related Ratios - 70 - Year Ending September 30,2020 2019 2018 Total OPEB liability Service cost 12,015$ 12,580$ 13,441$ Interest 6,320 5,640 4,977 Difference between expected and actual experience 6,792 - - Changes of assumptions or other inputs 14,710 (4,290) (3,808) Benefit payments (9,915) (9,081) (17,198) Net change in total OPEB liability 29,922 4,849 (2,588) Total OPEB liability - beginning 157,959 153,110 155,698 Total OPEB liability - ending 187,881$ 157,959$ 153,110$ Covered employee payroll 3,041,518$ 2,984,722$ 2,809,503$ Total OPEB liability as a percentage of covered employee payroll 6.18%5.29%5.45% years which information is available. * The following discount rate was used in each period: 9/30/2018 - 3.50% 9/30/2019 - 3.83% 9/30/2020 - 2.75% * GASB 75 requires an employer to disclose a 10-year history. full 10-year trend is compiled, information will be presented only City of Okeechobee, Florida Notes to Required Supplementary Information - 71 - 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 - 72 - B. ADDITIONAL ACTUARIAL INFORMATION Valuation Date: 10/01/2020 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%6.00% Inflation:2.50%2.50%2.50% 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:For healthy participants during employment, PUB-2010 Headcount Weighted Safety Employee Female Mortality Table and Safety Below Median Employee Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For healthy participants during employment, PUB-2010 Headcount Weighted Safety Employee Female Mortality Table and Safety Below Median Employee Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For healthy participants during employment, PUB-2010 Headcount Weighted General Below Median Employee Mortality Table, separate rates for males and females, set back 1 year for males, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. City of Okeechobee, Florida Notes to Required Supplementary Information - 73 - Police Officers’ Pension Plan Firefighters' Pension Plan General Pension Plan Mortality (Continued): For healthy participants post employment, PUB- 2010 Headcount Weighted General Below Median Healthy Retiree Mortality Table, separate rates for males and females, set back 1 year for males, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For disabled participants, PUB-2010 Headcount Weighted General Disabled Retiree Mortality Table, separate rates for males and females, both set forward 3 years, without projected mortality improvements. For healthy participants postemployment, PUB- 2010 Headcount Weighted Safety Healthy Retiree Female Mortality Table and Safety Below Median Healthy Retiree Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For disabled participants, 80% PUB-2010 Headcount Weighted General Disabled Retiree Mortality Table/20% PUB-2010 Headcount Weighted Safety Disabled Retiree Mortality Table, separate rates for males and females, without projected mortality improvements. For healthy participants postemployment, PUB- 2010 Headcount Weighted Safety Healthy Retiree Female Mortality Table and Safety Below Median Healthy Retiree Male Mortality Table, both set forward 1 year, with fully generational mortality improvements projected to each future decrement date with Scale MP-2018. For disabled participants, 80% PUB-2010 Headcount Weighted General Disabled Retiree Mortality Table/20% PUB-2010 Headcount Weighted Safety Disabled Retiree Mortality Table, separate rates for males and females, without projected mortality improvements. - 74 - THIS PAGE IS INTENTIONALLY LEFT BLANK. - 75 - 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, 2020, 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 March 29, 2021. Other auditors audited the financial statements of the City of Okeechobee, Florida Municipal Police Officers’ Pension Trust Fund and City of Okeechobee, Florida Municipal Firefighters’ Pension Trust Fund and the City of Okeechobee 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) as a basis for designing 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. - 76 - 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 and therefore, material weaknesses or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 financial statements. 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 results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Melbourne, Florida March 29, 2021 - 77 - 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, 2020, and have issued our report thereon dated March 29, 2021. 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 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 Auditor General. Disclosures in those reports, which are dated March 29, 2021, 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 financial audit report. There were no recommendations made in the preceding financial audit report. 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. - 78 - 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 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.b. 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 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. 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 note 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 March 29, 2021 - 79 - 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, 2020. 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 an 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, 2020. 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 March 29, 2021