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CITY OF MIDWAY

AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2017

CITY 0F MIDWAYAUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2016TABLE 0F CONTENTS

Independent Auditors' Report

Management's Discussion and Analysis

BASIC FINANCIAL STATEMENTS

Statement of Net PositionStatement of ActivitiesBalance SheetReconciliation of the Balance Sheet to the Statement of Net PositionStatement of Revenues, Expenditures, and Changes in Fund Balance

Notes to Financial StatementsReconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance ............. 12

REQUIRED SUPPLEMENTARY INFORMATION

Florida Retirement System Pension Plan:Schedule of the City's Proportionate Share of the Net Pension LiabilitySchedule of the City's Contributions

Health Insurance Subsidy Pension Plan:Schedule of the City's Proportionate Share of the Net Pension LiabilitySchedule of the City's Contributions

3233

3435

Schedule of Revenues, Expenditures, and changes in Fund Balance-Budget and Actual ............ 36Note to Required Supplementary Information

COMPLIANCE SECTION

Independent Auditors' Report on Internal Control Over FinancialReporting and on Compliance and Other Matters Based on an AuditOf Financial Statements Performed in Accordance with GovernmentAud iting Standards

Independent Auditors' Report on Compliance with theRequirements of Section 218.415 Statutes

Management Letter in Accordance with Rules of the AuditorGeneral of the State of Florida

Schedule of Findings

MORAV&SMITHLLP

INDEPENDENT AUDITORS' REPORT

15 North Stewart StreetQuincy, FL 32351

850.627.6362

To the Honorable City Council,City of Midway, Florida:

Report on the Financial StatementsWe have audited the accompanying financial statements of the governmental activities and the major fund ofthe City of Midway (the "City"), as of and for the year ended September 30, 2017, and the related notes to thefinancial statements, which collectively comprise the City's basic financial statements as listed in the tat)1e ofcontents.

Mamgement's Responsibility for the Financial Statements

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

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. In making thoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity'spreparationandfairpresentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, butnot 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 usedand the reasonableness of significant accounting estimates made by management, as well as evaluating theoverall presentation of the financial statements.

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

Opinionsln our opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of the governmental activities and the major fund of the City as of September 30, 20] 7, andthe respective changes in financial position thereof for the year then ended in accordance with accounting

principles generally accepted in the United States of America.

INDEPENDENT AUDITORS' REPORT

(concluded)

Other MattersAccounting principles generally accepted in the United States of America require that the management'sdiscussion and analysis and budgetary comparison information, pension schedules of proportionate share ofthe net pension liability, and schedule of contritiution, as listed in the table of contents be presented tosupplement the basic financial statements. Such information, although not a part of the basic financialstatements, 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 informationin accordance with auditing standards generally accepted in the United States of America, which consisted ofinquiries of management about the methods of preparing the information and comparing the information forconsistency with management's responses to our inquiries, the basic financial statements, and otherknowledge 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 sufficientevidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standardsln accordance with Governmen/ ,4edjfz.ng S/o#c7ards, we have also issued our report dated June 25, 2018, onourconsiderationoftheCity'sinternalcontroloverfinancialreportingandonourtestsofitscompliancewithcertainprovisionsoflaws,regulations,contracts,andgrantagreementsandothermatters.Thepurposeofthatreport is to describe the scope of our testing of internal control over financial reporting and compliance andthe results of that testing, and not to provide an opinion on internal control over financial reporting or oncompliance. That report is an integral part of an audit performed in accordance with Governmew ,4wdj./I.#gS/a#darcJs in considering the City's internal control over financial reporting and compliance.

Moron &§Mith LL:P

Moran & Smith LLPJune 25, 2018

Quincy, FL

CITY OF MIDWAYMANAGEMENT'S DISCUSSION AND ANALYSISFOR THE YEAR ENDED SEPTEMBER 30, 2017

OurdiscussionandanalysisoftheCityofMidway'sfinancialperformanceprovidesanoverviewoftheGty'sfinancial activities for the year ended September 30, 2017. Please read it in conjunction with the City'sfinancial statements, which begin on page 7.

FINANCIAL HIGHLIGHT SThe assets of the City as reported in the government-wide financial statements exceeded the liabilities as ofSeptember 30, 2017, by $1,230,343 (net position). This amount represents a decrease of $240,400 from the

prior year due to a reduction in the overall revenue from grants and an increase in expenditures.

OVERVIEW OF THE FINANCIAL STATEMENTSThis annual report consists of a series of financial statements. The Statement of Net Assets and the Statementof Activities (on pages 7 and 8) provide information about the activities of the City as a whole and present alonger-term view of the City's finances. Fund financial statements start on page 9. These statements tell howthese services were financed in the short term as well as what remains for future spending. Fund financialstatements also report the City's operations in more detail than the government-wide statement by providinginformation about the City's most financially significant funds.

Government-wide Financial StatementsOur analysis of the City as a whole begins on page 4. The Statement of Net Assets and the Statement ofActivities report information about the City as a whole and about its activities in a way that helps explain ifthe City as a whole is better off or worse as a result of the year's activities. These statements include all assetsandliabilitiesusingtheaccrualbasisofaccounting,whichissimilartoaccountingusedbymostprivate-sectorcompanies.Accrualofthecurrentyear'srevenuesandexpensesaretakenintoaccountregardlessofwhencashis received or paid.

These two statements report the City's net assets and changes in them. The City's net assets, the differencet)ctween assets and the City's liabilities, is one way to measure the City's financial health. An increase in theCity's net assets is an indicator that the Cjty's financial position is improving and a decrease in the City's netassets is an indicator that the City's financial position is deteriorating.

Fund Financial StatementsThe analysis of the City's major funds begins on page 9. The fund financial statements provide detailedinformationaboutthemostsignificant funds,nottheCityasawhole.SomefundsarerequiredtobeestablishedbyStateorFederallaw;however,theCityestablishesmanyotherfundstohelpcontrolandmanagemoneyforparticular purposes. The City only has governmental funds.

GovemmentalFunds:TheCity'sservicesarereportedinonegovemmentalfund,whichfocusesonhowmoneyflows into and out of those funds and the balances left at year-end that are available for spending. These fundsare reported using an accounting method called modified accrual accounting, which measures cash and allother financial assets that can readily be converted to cash. The governmental fund statements provide adetailed short-term view of the City's operations and the services it provides. Governmental fund informationhelps determine whether there are more or fewer financial resources that can be spent in the near future tofinance the City's programs.

CITY 0F MIDWAYMANAGEMENT'S DISCUSSION ANI) ANALYSISFOR THE YEAR ENDED SEPTBMBER 30, 2017

Overview of the Financial Statements (continued)Notes to the Financial Statements: The notes provide additional information that is essential to a fullunderstanding of the data provided in the government-wide and fund financial statements. The notes to thefinancial statements can be found beginning on page 13 of this report.

Other information: In addition to the basic financial statements and accompanying notes, this report alsocontains additional elements that are required by Governmental Auditing Standards, The Office ofManagement and Budget, and the Rules of the Auditor General of the State of Florida.

FINANCIAL ANALYSIS

Govern in ent-Wide Ana lvsisThegovemment-widestatementsreporttheCity'snetpositionandhowtheyhavechanged.TableA-1presentsnet position to help identif}r differences between the City's assets and liabilities, a way to measure the City'sfinancial health, or position. Our analysis of the Financial Statements begins below.

A summary of the City,'s statements of net position is presented in Table A-I .

Table A-1

Condensed Statement of Net Position

2016 2017

Increase

Ovrease)

Current AssetsCapital Assets, Net

Total Assets

Deferred Outflows of Resources

Current Liabilities

Long-term Liabilities

Total Liabilities

Deferred Inflows of Resources

Net Assets:

Investment in Capital Assets

Unassigned

Total Net Position

$ 94,553 $ 243,463 S 148,910

2,451,423

2,545,976

329,096

474,720796,881

I,271.601

132,729

2,451,423

(980,681 )

$ 1,470,742

2,297,410

2,540,873

456,697

689,871

948,744

I,638,615

136,150

(146,475)

2,435

127,601

229,307

137,707

367,014

3,421

I,988,097 (455,788)

(765292)S I,222,804

215,389

CITY OF MIDWAYMANAGEMENT'S DISCUSSION AND ANALYSISFOR THE YEAR ENDED SEPTEMBER 30, 2017

Financial Analysis (continuedlAs noted earlier, net position may serve over time as a useful indicator of the City's financial position. As ofSeptember30,2017and2016theCity'stotalassetsexceededitstotalliabilitiesbyS1,230,343andS1,470,742

(as restated) respectively, a decrease of $240,400 from 2016.

Unrestricted net position at September 30, 2017 and 2016, were approximately ($765,292) and ($980,681)respectively. The City's increase in net position, although still negative is due primarily the postponement ofdebt payments.

TheCity'snetinvestmentincapitalassetswas$2,304,948and$2,451,423asofSeptember30,2017and2016,respectively.

Table A-2 illustrates the revenues and expenses that caused the change in the City's total net position.

Tal)le A-2

Condensed Statement of Activities

Increase

(Decrease)

RevenuesGeneral Revenues

Property Taxlntergovernmental RevenueOther

Program RevenuesCharges for servicesOperating Grants and ContributionsCapital Grants and Contributions

Total Revenues

ExpensesGeneral GovernmentPublic SafetyPhysical EnvironmentTransportationCulture and Recreation

Total Expenses

Change in Net Position

Net Position, Beginning

Net Position, Ending

$ 602,165 $ 606,525

558,970

I I ,065

141,110

39,228

124,348

I,476,886

856,767

468,201

69,274

94,864

94,386

1,583,492

(106,606)1,577,348

$ 1,470,742

620,228

37,524

191,370

78,766

0

I,534,413

843,843

487,484

139,057

114,245

197,722

1,782,351

$ 4£6061258

26,459

5026039,538

(124,348)

57,527

(12,924)19,283

69,783

19,381

95,798

191,321

(247,938) (133,794)1,470,742

S I,222,804

(106,606)

S (240,400)

CITY OF MIDWAYMANAGEMENT'S I)ISCUSSION AND ANALYSISFOR THE YEAR HNDED SEPTEMBER 30, 2017

±uesofsI,534,413wereanincreaseof$57,527whencomparmgtofiscalyear2016. The increase in revenue was due to an increase of all revenue sources except capital grants.

Total expenditures for the year ended September 30, 2017, were $1,774,813 versus $1,583,492 in 2016, anincrease of S 191,321.

Capital Assets and Debt AdministrationFortheyearsendedSeptember30,2017and20]6,theCityhadapproximately$2,304,948and$2,451,423infixed assets, respectively, net of accumulated depreciation. There was approximately a $ 146,475 decrease tocapital assets for the year ended September 30, 2017.

Egg:;n:#vemmentalfundsactivities,theexplanationsprovidedaboveforthestatementofActivities regarding changes in net position also substantially explain the change in fund balance as a result ofthe Statement of Revenues, Expenditures, and Changes in Fund Balance which are applicable only to theStatement of Activities' presentation.

General Fund Budgetary HighlightsOver the course of the fiscal year, the original budget and several budget amendments were approved at theCity meetings held during the year. The amendments effectively approve any expenditure that had alreadybeen incurred that exceeded its original budgeted amount.

Economic Factors and Next Year's BudgetTheCity'sgrantsarecontingentuponitsrenewalanditsatiilitytoobtainnewgrantsand,therefore,itsrevenuesmay vary from year to year. In setting its budget for fiscal year 2017, various factors, such as delivering atleast the same level of expertise in fiscal year 2016, and adding new programs and grants were considered.

Request for InformationThis financial report is designed to provide a general overview of the City's finances for a]] those with aninterestintheCity'sfinances.Questionsconcerninganyoftheinformationprovidedinthisreportorrequestsfor additional financial information should be addressed to:

City ManagerPost Office Box 438

Midway, Florida 32343

CITY 0F MIDWAY, FLORIDA

BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

CITY 0F MIDWAYSTATEMENT OF NET POSITION

FOR THE YHAR ENDED SEPTEMBER 30, 2017

ASSETSCurrent Assets:

Cash and Cash EquivalentsReceivables (Net)

Due from Other GovernmentsTotal Current AssetsNoncurrent Assets :

Capital Assets, not being depreciated

Capital Assets, being depreciated (Net)Total Noncurrent AssetsTotal Assets

Deferred Outflows of ResourcesPension Related

LIABILITIESCurrent Liabilities:

Accounts Payable and Accrued ExpensesAccrued Wages PayableBank Line of CreditBonds and Notes PayableAccrued Compensated Absences

Total Current Liabilities

Noncurrent Liabilities:

Accrued Compensated AbsencesBonds and Notes PayableNet Pension Liability

Total Noncurrent Liability

Total Liabilities

Deferred Inflows or ResourcesPension Related

NET POSITIONNet Investment in Capital AssetsRestricted for Law Enforcement Trust and ForfeitureUnassigned

Total Net Position

See accompanying notes to Financial Statements

7

GovernmentalActivities

243,463

69,8602,227,550

297,410

456,697

553,118

7, I 44

38,250

81,938

9,421

689,871

136,150

I,988,097

0

(765,292Sl

08ZZZ'

SS

0000

S

994`8£S

04£`161S

S

S

00

S

00099l:8L00

S

0'16`'0090S`96S6`Z6

S

S

S®,!^JasJOJ

s®SJ€VJ

Su6J

uUt'J

Old

CITY 0F MII)WAYBALANCE SHEET - GOVERNMENTAL FUNDS

SEPTEMBER 30, 2017

AssetsCash and Cash EquivalentInvestmentsAccounts Receivables (Net)Due from Other Governments

Total Assets

Liabilities

Accounts Payable and Accrued ExpensesAccrued Wages Payable

Total Liabilities


Fund BalancesNonspendable

RestrictedCormittedAssignedUnassigned

Total Fund Balances

Total Liabilities and Fund Balance


9

General Fund

I I 5,456

00

128,007

243,463

553,118

7, I 44

560,262

5 I ,471

CITY OF MIDWAYRECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT 0F NET POSITION

GOVERNMENTAL FUNDSSEPTEMBER 30, 2017

Total Fund Balances of Governmental Funds

Amounts Reported for Gc)vemmental Activities in the Statement

of Net Position are Different Because:

Capital assets, net of accumulated depreciation, used in governmentalactivities are not financial resources and, therefore, are not reportedas assets in the governmental funds.

Receivables that do not provide current financial resources are reportedas deferred inflows of resources in the governmental funds.

Certain pension related amounts are being deferred and amortized over a

period of years or are being deferred as contributions to the plan madeafter the measurement date:

Deferred Outflows Related to PensionsDeferred Inflows Related to Pensions

Long-term liabilities at year-end consist of;

Bonds and Installment Notes Payable

Bank Line of creditAccrued Compensated AbsensesNet Pension Liability

Total Net Position of Governmental Activities

456,697

(136,150)

(309,313)

(38,250)(37,683)

(693,107)


10

S (368,270)

2,297,409

51,471

320,547

(1,078,353)

S I,222,804

CITY 0F MIDWAYSTATEMENT 0F REVENUES, EXPENDITURES, ANI) CIIANGES IN FUND BALANCE

GOVERNMENTAL FUND SSEPTEMBER 30, 2017

General FundRevenues

TaxesLicenses and Permitslntergovemmental RevenuesCharges for ServicesFines and ForeituresMiscellaneous Revenues

Total Revenues

ExpendituresCurrent:

General GovernmentPublic SafetyPhysical EnvironmentTransportationCulture and Recreation

Debt Service..

Principal

InterestCapital outlayTotal Expenditures

Excess (Deficiency) of Revenues Over (Under) Expenditures

Other Financing Sources (Uses)Sale of Fixed AssetsProceeds from Long-teim Debt

Total Other Financing Sources (Uses)

Net Change in Fund Balance

Fund Balance, Beginning of Year

Fund Balance, End of Year


11

701 ,015

92,954637,006

I,91 I

61,506

37,524I,531,915

758,547

420,744I 39,057

8,857122,270

34,64716,923

75,383

I,576,428

0105,383

105,383

60,870

429, 140

CITY OF MIDWAYRECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCEGOVERNMENTAL FUNDS

SEPTEMBER 30, 2017

Net Change in Fund Balances -Total Governmental Funds.

Amounts Re|)orted for Governmental Activities in tlie Statement of Activities areDifferent Because:

Capltal outlays are reported in governmental funds as expenditures However, inthe statement of activities, the cost of those assets is allocated over theirestimated useful lives as depreciation expense:

Expenditures for Capital Assets

Less: Current Year Depreciation

Repayment of long-ten debt principal is reported as an expenditure in the govemmentalfunds, but as a reduction of long-term liabilities in the statement of net position.

The issuance of long-term debt provides current financial resources to govemmental funds,while it has no effect on the statement of activities.

Change in Deferred Revenues

Certain pension related amounts are being deferred and amortized over a period of years orare being deferred as contributions to the pension plans made after the measurement date:

Deferred Inflows Related to PensionsDeferred Outflows Related to Pensions

Some expenses in the statement of activities do not require the use of current financialresources and, therefore, are not reported as expenditures in the governmental funds:

Compensated AbsencesNet Pension Liability

Cliange in Net Position of Governmental Activities


12

$ 60,870

75,383

(229J96) ( 154,013)

34,647

(]05,383)

2,498

127,60]

(3,421 ) 124, 180

(11,488)

( 199,249) (210,737)

CITY OF MIDWAY, FLORIDA

NOTES T0 BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

CITY 0F MIDWAYNOTES TO BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

Note 1 -Summarv of Sienificant Accounting Policies

Reporting entityThe City of Midway (the "City") is a municipal corporation created under a special act of the Florida Legislaturein 1986 by House Bill 1430, Chapter 86-471, Laws of Florida. It is governed by a five-member council. Theaccompanying financial statements present the government only since there are no component units for whichthe government is considered to be financially accountable.

Description of Government Wide and Fund Financial Statements

Government-wide StatementsThe government-wide financial statements (i.e., the statement of net position and the statement of changes in net

position (statement of activities)) report information on all of the activities of the City. Governments typicallyreport activities as either governmental activities, which normally are supported by taxes and intergovemmentalrevenues, or business-type activities, which rely to a significant extent on fees and charges for support. The Cityreports only governmental activities as it has no business-type activities.

Fund Financial StatementsThe fund financial statements provide information about the government's funds.

Basis of presentation of Government Wide and Fund Financial Statements

Government-wide StatementsWhile separate government-wide and fund financial statements are presented, they are interrelated. The

governmental activities column incorporates data from the governmental fund.

Fund Financial StatementsThe fund financial statements provide information about the government's funds.

The City reports the fol]owing major governmental fund:

The General Fund is the City's primary operating fund. It accounts for all financial resources of the general

government.

Measurement Focus and Basis of AccountingBasis of accounting refers to the point at which revenues and expenditures or expenses are recognized in theaccounts and reported in the financial statements. Basis of accounting relates to the timing of the measurementsmade, regardless of the measurement focus applied.

13

CITY OF MIDWAYNOTES TO BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

±Qte I - Summarv of Significant Accounting Policies (continuedj

The goverment-wide financial statements are I.eported using the economic resources measurement focus andthe accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the timeliabilitiesareincurred,regardlessofwhentherelatedcashflowstakeplace.IntergovemmentalandsimilaritemsarerecognizedasrevenueassoonasaHeligibilityrequirementsimposedbytheproviderhavebeenmet.Propertytaxes are recognized as revenues in the year for which they are levied.

GASB Statement No. 54 establishes fund balance classifications that comprise a hierarchy based primarily ontheextenttowhichagovernmentisboundtoobserveconstraintsimposedupontheuseoftheresourcesreportedin government funds.

Thegovemmentfundfinancialstatementsusethecurrentfinancialresourcesmeasurementfocusandthemodifledaccrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.Revenuesareconsideredavailablewhentheyarecollectiblewithinthecurrentperiodorsoonenoughthereafterto pay liabilities of the current period. For this purpose, the government considers revenues to be available ifthey are collected within 60 days of the end of the current fiscal period. Expenditures are recorded whenobligationsareincurred,exceptforexpendituresrelatedtoclaimsandjudgments,whicharerecordedonlywhen

payment is due.

Generalcapitalassetacquisitionsarerepoiledasexpendituresingovernmentalfunds.Issuanceoflong-termdebtand acquisitions under capital leases are reported as other financing sources.

Salestaxes,licenses,andinterestassociatedwithtbecurrentfiscalperiodareallconsideredtobesusceptibletoaccrual and so have been recognized as revenues of the current fiscal period. Entitlements are recorded asrevenues when all eligibility requirements are met, including any time requirements, and the amount is receivedduring the period or within the availability period for this revenue source (within 60 days of year-end).Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred andall other eligibility requirements have been met, and the amount is received during the period or within theavailability period for this revenue source (within 60 days of year-end). All other revenue items are consideredto be measurable and available only when cash is received by the government.

Budgeta ry Inform ationAnnual budgets are adopted on a basis consistent with generally accepted accounting principles for the generalfund.

The appropriated budget is prepared by function and department. The legal level of budgetary control (i.e., thelevel at which expenditures may not legally exceed appropriations) is the fund level.

Appropriations in all budgeted funds lapse at the end of the fiscal year even if they have related encumbrances.Encumbrances are commitments related to unperformed (executory) contracts for goods or services (i.e.,

purchase orders, contracts, and commitments). Encumbrance accounting is utilized to the extent necessary toassureeffectivebudgetarycontrolandaccountabilityandtofacilitateeffectivecashplanningandcontroI.Whileall appropriations and encumbrances lapse at year end, valid outstanding encumbrances (those for which

performance under the executory contract is expected in the next year) are re-appropriated and become part ofthe subsequent year's budget.

14

CITY OF IVIIDWAYNOTES TO BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

Note 1 - Summarv of Sirmificant Accounting Policies (continued`

Accounting EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosures of. contingent assets and lial]ilities at the date of the financialstatements and the amounts of revenues and expenditures/expenses during the reporting period. Actual resultscould differ from those estimates.

Deposits and InvestmentsCash and cash equivalents include cash on hand, amounts in demand deposit accounts and highly liquidinvestments (ineluding restricted assets) with maturity of three months or less when purchased.

State statutes authorize the government to invest in direct obligations of the U.S. Treasury, Local GovernmentSurplus Funds, Trust Funds, SEC registered money market funds with the highest credit quality rating, andsavings and CD accounts in state certified public depositories.

PwiidlteusCertain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaiditems in both government-wide and fund financial statements.

Capital AssetsCcapital assets, which include property, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, andsimilar items), are recorded as capital outlay expenditures in the governmental activities column in the

government-wide financial statements, at the time goods are received and a liability is incurred. For reportingpurposes, capital aLssets are defined by the government as assets with an initial, individual cost of more thanSl ,000 and an estimated useful life in excess of one year. For financial reporting purposes, infrastructure assetsare defined by the government as assets with an initial, individual cost of more than Sl 5,000, and an estimateduseful life in excess of one year. Sueh assets are recorded at historical cost or estimated historical cost if

purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date ofdonation. These assets are then capitalized at cost in the statement of net position. Fixed assets are depreciatedusing the straight-line method over five to thirtymine years for furniture and equipment, and the remaining lease

period for leasehold improvements. The depreciation expense is recorded in the statement of activities.

Assets

Buildings and ImprovementsInfrastructureOffice EquipmentVehicles

Computer Equipment

15

Years

15-39

15

7

5-10

5

CITY OF MIDWAYNOTES T0 BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

Hot. 1 - Sunm.r7 of SJfnfflcaDt AccouDtlne PoncLci /cotitlDuj±±

Long-term ObligationsIn the government-wide financial statements long-term debt and other long-term obligations are reported asliabilities in the applicable governmental activities.

Net Position F]ow AssumptionSometimes the City will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant

proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted-net position andunrestricted-net position in the government-wide financial statements, a flow assumption must be made aboutthe order in which the resources are considered to be applied. It is the City's policy to consider restricted-net

position to have been depleted before unrestricted-net position is applied.

Fund Balance Flow AssumptionsSometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources(the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report asrestricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, aflow assumption must be made about the order in which the resources are considered to be applied. It is theGty's policy to consider restricted fund balance to have been depleted before using any of the components ofunrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same

purpose, committed fund balance is depleted first, followed I)y assigned fund balance. Unassigned fund balanceis applied last.

Fund Balance PoliciesFund balance of govemmental funds is reported in various categories based on the nature of any limitationsrequiring the use of resources for specific purposes. The Gty itself can establish limitations on the use ofresources through either a commitment (committed fund balance) or an assignment (assigned fund balance).

The committed fund balance classification includes amounts that can be used only for the specific purposesdetermined by a formal action of the City's highest level of decision-making authority. The City Council is thehighest level of decision making authority for the City that can, by adoption of an ordinance prior to the end ofthe fiscal year, commit fund balance. Once adopted, the limitation imposed by the ordinance remains in placeuntil a similar action is taken (the adoption of another ordinance) to remove or revise the limitation.

Amounts in the assigned fund balance classification are intended to be used by the City for specific purposes,but do not meet the criteria to be classified as committed. The City Council may assign fund balance as it doeswhenappropriatingfundbalancetocoveragapbetweenestimatedrevenueandappropriationsinthesubsequent

year's appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other words,an additional action does not normally have to be taken for the removal of an assignment. Conversely, asdiscussed above, an additional action is essential to either remove or revise a commitment.

16


SEPTEMBER 30, 2017

Note 1 - Sqmm-rv or ShamcaDt AccounthE Pobe[e. /colc]udLap

General RevenuesAmountsreportedasprogramrevenuesincludechargestocustomersorapplicantswhopurchase,use,ordirectlybenefit from goods, services, or privileges provided by a given function or segment, and grants and contributions

(includingspecialassessments)thatarerestrictedtomeetingtheoperationorcapitalrequirementsofaparticularfunction or segment. All taxes, including those dedicated for special purposes, and other intemally dedicatedresources, are reported as general revenues rather than as program revenues.

Compensated AbsencesTheCity'spolicyistopermitregularemployeestoaccumulateearnedandunusedvacationandsickpaybenefits.All vacation pay and sick pay are accrued when incurred in the government-wide financial statements. Theliability for these amounts is reflected in the statement of net position only if they have matured, for example, asa result of employee resignations and retirements.

Property TaxesProperty taxes are billed and collected for the government by the County Tax Collector according to Florida Statuteunder the following calendar:

Lien Date:Levy Date:Due Date:Del inquency Date :

January 1October INovember IApril I , of the following year

Risk ManagementThe City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errorsand omissions; and natural disasters for which the government carries commercial insurance.

Note 2 -Cash and Cash Ecluivalents

DepositsC'us/od!.c}/ crec7i./ rj.s4s-c7epasz.ts- In the case of deposits, this is the risk that in the event of a bank failure, theCjty's deposits may not be returned to it. As of September 30, 2017, the City's bank balance was Sl 15,456. Ofthe bank balance, Sl 15,456 was covered by Federal depository insurance or by collateral held by the City'scustodial bank which is pledged to a state trust fund that provides security for amounts held in excess of FDICcoverage in accordance with the Florida Security for Public Deposits Act Chapter 280, Florida Statutes.

17

CITY 0F MIDWAYNOTES T0 BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

Note2-Caph.ndcuhEaulvale.ti(concluded_i_

The Florida Security for Public Deposits Act established guidelines for qualification and participation by banksand savings associations, procedures for the administration of the collateral requirements and characteristics ofeligible collateral.

AtSeptember30,2017,theCouncil'scashandinvestmentsconsistedofthefollowing:

Genei.al FundCash and cash equivalents- Unrestricted

Full Analysis

Total unrestricted cash and cash equivalents

Total cash and cash equivalents

The caiTying value of the above cash and investments equals fair value.

Note 3 - Receivables

Intergovemmental Receivables

Net Total Receivables

18

115,456

1 I 5,456

115,456

General Fund

128,007

I 28,007


SEPTEMBER 30, 2017

BeginningBa lance lnc rease Decrease

EndingBalance

Note 4 - Capital Assets

Governmental ActivitiesCapital Assets, Not Being Depreciated:

LandConstruction Work in Progress

Total Capital Assets, Not Being Depreciated

Capital Assets, Being Depreciated:Building and ImprovementsRoadsEquipment, Furniture, Fixtures and Vehicles

Total Capital Assets, Being Depreciated

Less Accumulated Depreciation for:Buildings and ImprovementsRoadsEquipment, Furnrfure, Fixtures, and Vehicles

Total Accumulated DepreciationTotal Capital Assets, Being Depreciated, Net

$ 69,860 $ 0 S

69,860

2,640,924I,345,208

721,509 75,383

4,707,641 75,383

(I,055,681 ) (93,689)

(773,150) (89,681)

(497247) (46. 026)(2j26,078) (229,396)2,381,563

GovernmentalActivities, Capital Assets,Net $ 2,451,423

Depreciation expense was cl]arged tofunctions/programs as follows:

General GovernmentPublic SafetyTransportationCulture and RecreationTotal

0 $ 69,860000 69,860

0 2,640,9240 I,345,208

796,8920 4,783,024

0 (1,149,370)

0 (862,831)

(543273)(2,555,474)

0 2,227,5500 $ 2,297,410

$ 33,750

21,73 I

98,463

75,452

$ 229,396

19


SEPTEMBER 30, 2017

Note 5 -Pavables

The City had numerous payables from the end of 2015, that were still payables at the end of 2017. Included inthose payables are unpaid payroll taxes, unpaid retirement contributious, and a substantial IRS penalty. The Cityhad recorded a payable related to a contingency for potential lawsuits in 2013, this contingeney was reversed in2017. As of February 2018, all of the City's past unpaid payables were paid, except for the unpaid payroll taxes,unpaid retirement contributions, and the IRS penalty.

Note 6 - Long-term Liabilities

Note Payable-State Revolving LoanThe City attained a State Revolving Loan at 1.095% note payable with the State of Florida. Semiannual paymentsof $2,405, to begin November ]5, 2016, collateralized by general revenues. The loan will be repaid in 40senriannual loan payments. Yearrend balance was $101,6] I with capitalized interest of Slo,776. As ofSeptember 30, 2017, the City has made annual interest only payments of $2,409.

Note PayableL Line of CreditsThe City borrowed $95,600 on a S] 00,000 line of credit note with Capital City Bank. Loan #225877050 has aninterest rate of 5% with interest accruing monthly. This loan has been paid down to a balance of se250. Thisloan was converted to a new loan with Capital City Bank. On July 24, 2017, the City borrowed $30,000 onanother line of credit of $90,000 with Capital City Bank with an interest rate of 4.25% pledging their first

payment of ad valorem revenues for repayment.

Note Payable -Equipment Loan - Police carsThe City financed three Police vehicles on November 10, 2015 for a total obligation of $64,561. The notes arefinanced with Community Partners Funding lnc, @BA - BancLease Acceptance Corp.) The interest rate is at6.5% with eighteen Scheduled quarterly payments of $ 3,777. Note the City no longer has one of the pledgedvehicles, but did not pay off the loan with the insurance proceeds. The City is significantly behind schedule onmaking payments.

Note Payable -Equipment Loan - Red Light Camera equipmentThe City financed some Red Light camera License Plate Reader System equipment on October 202015 for atotal obligation of Sl9,701. The Notes are financed by KS StateBank. The imerest rate is 5% with 4 annual

payments scheduled of $ 5,560.

Note Payable -Equipment Lease Purchase -John Deere BackhoeThe City financed on August 25, 20]6 the lease purchase of John Deere 310L Loader Backhoe

(lT0310LXHGF300669) The Lease is with Deere Credit lnc. (0065099) with an interest rate of 4.25% with 5annual payments of s 15,182 with the first payment due August 25, 2017. This payment was not made during theaudit year.

Note Payable - Equipment Lease Purchase -John Deere 5085E Utility Tractor and MowerTThe City financed on September 29, 2016 the lease purchase of John Deere 5085E Utility Tractor

(lLV5085EKFY440604) and a mower. The Lease is with Deere Creclit Ire. (0042472) with an interest rate of4.25% with 5 annual payments of $ 12,980 with the first payment due September 29 2017. This payment was rotmade during the audit year.

20


SEPTEMBER 30, 2017

Note6-I.o|E-t¢rmlLhblLltlci(concluded_)_

NotePayable-EquipmentLeasePurchase-JohnDeere(2)HPXGator4x4UtilityVehiclesTheCityfinancedonDecember20,2016theleasepurchaseoftwoJohnDeereHPXGator4x4UtilityVehicles(1MOHPXGSLGM140947) and (1MOHPXGSCGM141298). The Lease is with Deere Credit lnc. (0042472-002) with an interest rate of 4.50% with an initial payment of $3,500 and four annual payments of $4,088 withthe first payment due December 21, 2016.

Governmental Activiti esNotes Payable State RevolvingLoanNotes Payable Line of CreditNotes Payable Line of creditEquipment Loan JD TractorEquip. Loan JD 4x4 Gator (2)Equipment Loan JD BackhoeEquip. Loan Plate ScannersEquipment Loan Police CarCompensated AbsencesNet Pension Liability

Total General Long-term Debt

Balance10/01/16 Additions

S 101,611 $

23,993000

66,96119,70 I

64.561

26,195

493,858

$ 796,880

(Deductions) _

0$0

30,00057,24718, I 36

000

I 1,488

199,249

$316,120

Balance9/30/]7

0 S 101,611

15,743

0000

4,56914,335

00

$ 34,647

8,25030,00057,247I 8,136

66,961

15,132

50,22637,683

693,107

Sl,078,353

DuetothefacttheCitymissedcurrentyeardebtpaymentsonseveralequipmentloansandtheCapitalCityBankNote Payables (LOC) are considered due in one year, the current portion of long term debt has increased toS129,609., which includes 25% of the compensated absences.

al InterestS 120,189 $

44,35647,66933,740

I 0 I,61 I

16,539

6,0325,9233,6262,405

39,336$ 347,564 S

ELote 7 - Contingencies

Grant ProgramsAmounts received or receivables from grant agencies are subject to audit and adjustment by grantor agencies,principally the Federal and State governments. Any disallowed claims, including amounts already collected,may constitute a liability of.the applicable funds.

Related Party TransactionWenotedthatacouncilmemberalsoownsabusinessthatwasuti]izedasavendorbytheCityduringtheyearended September 30, 2017. And the city had an outside contract with the former City Manager.

21


SEPTEMBER 30, 2017

Note 8 - EmD]ovee Benefit plans

General Information about the Florida Retirement SystemTheFRSwascreatedinChapter121,FloridaStatutes,toprovideadefinedbenef"pensionplanforparticipating

public employees. The FRS was amended in 1998 to add the Deferred Retirement Option Program (DROP)under the defined benefit plan and amended in 2000 to provide a defined contribution plan alternative to thedefined benefit plan for FRS members effective July 1, 2002. This integrated defined contribution pension planis the FRS Investment Plan. Chapter 112, Florida Statutes, established the Retiree Health Insurance Subsidy

(HIS) Program, a cost-sharing multiple-employer defined benefit pension plan, to assist retired members of anystate-administered retirement system in paying the costs of health insurance.

Essentially all regular employees of the City are eligible to enroll as members of the State-administered FRS.Provisions relating to FRS are established by Chapters 121 and 122, Florida Statutes; Chapter 112 Part IV,Florida Statutes; Chapter 238 Florida Statutes; and FRS Rules, Chapter 60S, Florida Administrative Code;wherein eligibility, contributions, and benefits are defined and described in detail. Such provisions may beamended at any time by further action from the Florida Legislature. The FRS is a single retirement system andconsists of two cost-sharing, multiple-employer defined-benefit plans and other nonintegrated programs.Comprehensive annual financial report of the FRS, which includes its financial statements, requiredsupplementary information, actuarial report, and other relevant information, is available from the FloridaDepartment of Management Servjces' website (www.dms.my florida.com).

FRS Pension Plan

Plan DescriptionThe FRS Pension Plan (Plan) is a cost-sharing multiple-employer defined benefit pension plan, with a DROPfor eligible employees. The general classes of membership applicable to the City are as follows:

• Regular class-Members of the FRS who do not qualify for membership in other classes.• Elected city officer class-Members who hold specified elective offices in local government.

• Senior Management service class (SMSC)-Members in senior management level positions.• Special Risk Class- Members who are employed as law enforcement officers and meet the criteria to

qualify for this class.

Employees enrolled in the Plan prior to July 1, 2011, vest at six years of creditable service and employeesenrolledinthePlanonorafterJuly],2011,vestateightyearsofcreditableserviceexceptformembersclassifiedas special risk who are eligible for normal retirement benefits at age 55 or at any age after 25 years of service.AllvestedmembersenrolledpriortoJuly1,2011,areeligiblefornormalretirementbenefitsatage62oratanyage after 30 years of service, except for members classified as special risk who are eligible for normal retirementbenefits at age 55 or at any age after 25 years of service. All members enrolled in the plan on or after July 1,2011, once vested, are eligible for normal retirement benefits at age 65 or any time after 33 years of creditableservice, except for members classified as special risk who are eligible for normal retirement benefits at age 60or at any age after 30 years of service. Members of the Plan may include lip to four years of credit for militaryservicetowardcreditableservice.Theplanalsoincludesanearlyretirementprovision;however,thereisabenefitreduction for each year a member retires before his or her normal retirement date. The Plan provides retirement,disability, death benefits, and annual cost-of-living adjustments to eligible participants.

22


SEPTEMBER 30, 2017

Note 8 - EmDlovee Benefit Plans /continued`

DROP, subject to provisions of Section 121.091, Florida Statutes, permits employees eligible for normalretirement under the Plan to defer receipt of monthly benefit payments while continuing employment with anFRS employer. An employee may participate in DROP for a period not to exceed 60 months after electing to

ppailicipate, except that certain instructional personnel may participate for up to 96 months. During the period ofDROP participation, deferred monthly benefits are held in the FRS Trust Fund and accrue interest. The net

pension liability does not include amounts for DROP participants, as these members are considered retired andare not accruing additional pension benefits.

Ben efits ProvidedBenefits under the Plan are computed on the basis of age and/or years of service, average final compensation,and service credit. Credit for each year of service is expressed as a percentage of the average final compensation.For members initially enrolled before July 1, 2011, the average final compensation is the average of the fivehighest fiscal years' earnings; for members initially eurolled on or after July I, 2011, the average finalcompensation is the average of the eight highest fiscal years' earnings. The total percentage value of the benefitreceived is determined by calculating the total value of all service, which is based on the retirement class towhich the member belonged when the service credit was earned. Members are eligible for in-line-ofLduty orregular disability and survivors' benefits. The following chart shows the percentage value for each year of servicec~eamed.

Class, Initial Bnrollment, andRetirement Age/Years or Service

Ilegular Class Members Initially Enrolled Bofore July 1, 201 I :Retirement up to age 62 or up to 30 years of serviceRetirement at age 63 or with 31 years of serviceRetirement at age 64 or with 32 years of serviceRetirement at age 65 or with 33 or more years of service

Regular Class Members Initially Enrolled on or After July I, 2011iRetirement up to age 65 or up to 33 years of serviceRetirement at age 66 or with 34 years of serviceRetirement at age 67 or with 35 years of serviceRetirement at age 68 or with 36 or more years of service

Elected City OfI ilcers

Senior Management Service Class

S|ieclal Risk RegularService from December I,1970 through September 30,1974Service on and after October I, 1974

23

PercentValue


SEPTEMBER 30, 2017

E2±£ 8 - EtnpLOTe±Jken¢nt Pl.ne (coDdlit]ap

As provided in Section 121.101, Florida Statutes, if the member is initially enrolled in the FRS before July 1,2011,andallservicecreditwasaccruedbeforeJuly1,2011,theannualcost-of-1ivingadjustmentis3%peryear.IfthemeifroerisinitiallyenrolledbeforeJuly1,201I,andhasservicecreditonorafterJuly1,2011,thereisanindividually calculated cost-of-living adj ustment. The annual cost-of-living adjustment is a proportion of 3%determined by dividing the sum of the pre-July 2011 service credit tiy the total service credit at retirementmultiplied by 3%. Plan members initially enrolled on or after July 1, 2011, will not have a cost-of-livingadjustment after retirement.

ContributionsThe Florida Legislature establishes contribution rates for participating employers and employees. Contributionrates during the City's 2016-2017 fiscal year were as follows:

Year Ended June 30, 2017

Percent of Gross SalaClass

FRS, Regular

FRS, Elected City OfficialsFRS, Senior ManagementService

FRS, Special Risk Regular

. Employee._ _. Employer _3.00

3.00

3.00

3.00

DROP-Applicable to Members

from All of the Above classes 0.00

FRS, Reemployment Retiree ( I )

5.80

40.75

20.05

20.85

11.33

(I)

Year Ended June 30, 2018

Percent of Gross Sala

Employee._ _. Employer _

3.00

3.00

3.00

3.00

0.00

(I)Notes: ( 1) Contritiution rates are dependent upon retireme;t 'class in which reemployed.

6.20

43.78

20.99

21.55

I I .60

in

The City's contributions (employer) to the FRS Plan totaled $46,621 for the fiscal year ended September 30,2017. This excludes the HIS defined benefit pension plan contributions.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows orResources Related to Pensions.At September 30, 2017, the City reported a liability of $538,099 for its proportionate share of the net pensionliability. The net pension liability was measured as of June 30, 2017, and the total pension liability used tocalculate the net pension liability was determined by an actuarial valuation as of July 1, 2017. The City's

proportionate share of the net pension liability was based on the City's 2015-16 fiscal year contributions of allparticipating members. At June 30, 2017, the City's proportion was .0001819] 72%, which was a decrease of.00037983300% from its proportion measured as of June 30, 2016.

FortheyearendedSeptember30,2017,theCityrecognizedpensionexpenseofS115,516relatedtothePlan.

24


SEPTEMBER 30, 2017

mie 8 - EmDlovee Benefit Plans /continueL±±

Actuarial AssumptionsThe total pension liability in the July I, 2016 actuarial valuation was determined using the following actuarialassumptions, applied to all periods included in the measurement:

Inflation

Salary IncreasesInvestment Rate of Return

2.60%

3.25%Average,Includinglnflation7.10% Net of Pension planInvestment Expense, IncludingInflation

Mortality rates were based on the Generational RP-2000 with Projection Scale 88, with adjustments formortality improvements based on Scale AA.

TheactuarialassumptionsusedintheJuly1,20]7,valuationweret)asedontheresultsofanactuarialexperiencestudy for the period July I , 2008, through June 30, 2013.

Thelong-termexpectedrateofretumonpensionplaninvestmentswasnotbasedonhistoricalretums,butiusteadisbasedonaforward-Iookingcapitalmarketeconomicmodel.Theallocationpolicy'sdescriptionofeachassetclass was used to map the target allocation to the asset classes shown below. Each asset class assumption isbased on a consistent set of underlying assumptions, and includes an adjustment for the inflation assumption.Thetargetallocationandbestestimatesofarithmeticandgeometricrealratesofreturnforeachmajorassetclassare summarized in the following table:

Annual AnnualTa rget A rith metjc Geometric Standa rd

AIlocationCash

Fixed Income

Global Equity

Real Estate (Property)Private Equity

1%

18%

53%10%

6%Strategic Investments 12%

Total I oo%

Assumed Inflation-Mean

Return (I)

3.0%

4.7%

7.8%

6.6%

I I .5%

6.1%

Retu rn Deviation3.0% 1.8%

4.4% 4.2%

6.6% 17.0%

5.9% 12.8%

7.8% 30.0%

5.6% 9.7%

2.6% I.9%

Note: (I) As outlined in the Plan's Investment Policy

Discount RateThe discount rate used to measure the total pension liability was 7.10%. The Plan's fiduciary net position was

projectedtobeavailabletomakeaHprojectedfuturebenefitpaymentsofcurrentactiveandinactiveemployees.Therefore,thediscountrateforcalculatingthetotalpensionliabilityisequaltothelong-termexpectedrateofreturn. The discount rate was 7.60% in the July I , 2016 valuation.

25

clTy OF rmwAyNOTES T0 BASIC FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

Note 8 -EmDlovee Benefit Plans (continued`

SensitivityoftheCity'sProportionateShareoftheNetPositionLiabilitytoChangesintheDiscountRateThe following presents the City's proportionate share of the net pension liability calculated using the discountrate of 7.10%, as well as what the City's proportionate share of the net pension liability would be if it werecalculated using a discount rate that is I -percentage-point lower (6.10%) or 1-percentage-point higher (8.10%)than the current rate:

FRS-City:

City's Proportionate Share

Cunent1% Discount |%

Decrease Rate In c rease

(6.10%) (7.10%) ,8.,0%,

of the Net pension Liability $ 973,926 $ 538,099 S 176,262

Pension Plan Fiduciary Net PositionDetailed information about the Plan's fiduciary net position is available in the separately issued FRS PensionPlan and Other State Administered Systems Comprehensive Annual Financial Report.

HIS Pension Plan

Plan DescriptionThe HIS Pension Plan (HIS Plan) is a cost-sharing multiple-employer defined benefit pension plan establishedunder Section 112.363, Florida Statutes, and may be amended by the Florida Legislature at any time. The benefitis a monthly payment to assist retirees of State-administered retirement systems in paying their health insurancecosts and is administered by the Division of Retirement within the Florida Department of Management Services.

Benefits ProvidedForthefiscalyearendedSeptember30,2017,eligibleretireesandbeneficiariesreceivedamonthlyHISpaymentof $5 for each year of creditable service completed at the time of retirement, with a minimum HIS payment of$30 and a maximum HIS payment of $150 per month, pursuant to Section 112.363, Florida Statutes. To beeligible to receive a HIS Plan benefit, a retiree under a State-administered retirement system must provide proofof health insurance coverage, which may include Medicare.

ContributionsThe ms Plan is funded by required contributions from FRS participating employers as set by the FloridaLegislature. Employer contributions are a percentage of gross compensation for all active FRS members. Forthe Plan fiscal years ended June 30, 2017 and 2016, the contribution rates were 1.66% and 1.66% of payrollrespectively, pursuant to Section 112.363, Florida Statutes. The City contributed 100% of its statutorily requiredcontributions for the current and preceding three years. HIS Plan contributions are deposited in a separate trustfund from which payments are authorized. HIS Plan benefits are not guaranteed and are subject to annuallegislative appropriation. In the event the legislative appropriation or availatile funds fail to provide full subsidybenefits to all participants, benefits may be reduced or canceled.

The City's contributions to the HIS Plan totaled $ 7,505 for the fiscal year ended September 30, 2017.

26


SEPTEMBER 30, 2017

H2±£J} - Enbe±e€ Ehaeflt PL.ne (co]]tlELujE

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows ofResources Related to PensionsAt September 30, 2017, the City reported a net pension liability of $155,008 for its proportionate share of theHISPlan'snetpensionliabi]ity.ThenetpensionliabilitywasmeasuredasofJune30,2017,andthetotalpensionliabilityusedtoca]culatethenetpensionliabilitywasdeterminedbyanactuarialvaluationasofJuly1,2017.The City's proportionate share of the net pension liability was based on the City's 2016-17 fiscal yearcontributions relative to the total 2015-16 fiscal year contributions of aH participating members. At June 30,2017, the City's proportionate share was .001449690%, which was a decrease of .00033069% from its

proportionate share measured as of June 30, 2016.

For the fiscal year ended September 30, 2017, the City recognized pension expense of $ 13,687 related to theHIS Plan.

Actuarial AssumptionsThetotalpensionliabilityfortheHISPensionPlanwasdeterminedbyanactuarialvaluationasofJuly1,2016,andrecalculatedasofJune30,2017,usingastandardactuarialroll-forwardtechnique.Thefollowingactuarialassumptions, applied to all periods included in the measurement, were used to determine the total pensionliability:

Inflation

Salary IncreasesInvestment Rate of Return

2.60%3.25% Average, Including Inflation3.58% Net or Pension Plan Investment Expense,

Including Inflation

Mortality rates were based on the Generational RP-2000 with Projected Scale 88.

TheactuarialassumptionsusedtodeterminethetotalpensionliabilityasofJune30,2017,werebasedoncertainresults of an actuarial experience study of the FRS for the period July I, 2008, through June 30, 2013.

Discount RateThe discount rate used to measure the total pension liability was 3.58%. In general, the discount rate forcalculating the total pension liability is equal to the single rate equivalent to discounting at the long-termexpected rate of return for benefit payments prior to the projected depletion date. Because the HIS benefit isessentially funded on a pay-as-you-go basis, the depletion date is considered to be immediate, and the singleequivalentdiscountrateisequaltothemunicipalbondrateselectedbytheHISPlansponsor.TheBondBuyerGeneral Obligation 20-Bond Municipal Bond Index was adopted as the applicable municipal bond index.

27


SEPTEMBER 30, 2017

Note 8 - EmDlovee Benefit plans (continuedt

Sensitivity of the City's Proportionate Share of the Net Peuston Liability to Changes in the Discount RateThe following presents the City's proportionate share of the net pension liability calculated using the discountrate of 3.58%, as well as what the City's proportionate share of the net pension liability would be if it werecalculated using a discount rate that is I -percentage-point lower (2.58%) or I -percentage-point higher (4.58%)than the current rate:

CurrentI % Discount I %

Dec Tea se Rate I ne I.ea se

(2.58%) a.58%) (458%)City's Proportionate Shae

of the Net pension Liability S 176.884 S 155,007 S 136,785

Peuston Plan Fiduciary Net PositionDetailed information about the HIS Plan's fidueiary net position is available in the separately issued FRS PensionPlan and Other State Administered Systems Comprehensive Annual Financial Report.

Additional Disclosures- Defined Benefit plans

Net Pension Liability

FRS HIS TotalNet Pension Liability

Deferred Outflows of Resources

Employer Contributions After

Measurement DateDifference Between Expected and

Actual Experience

Changes in AssumptionsChanges in Proportion

Net Difference Between Projectedand Actual Earnings on Investments

$ 538,099 S 155,008

FRS HIS

$ 693,107

Total

S 10,919 S I,571 S 12,490

49,385 0 49,385

180,839 21,789 202,628

146,290 45,818 192,108

86 86Total Deferred outflows of Resources $ 387,433

28

$ 69,264 $ 456,697


SEPTEMBER 30, 2017

Note 8 - Eml}Iovee B¢tleflt I1.u (cotltlJ)t!gD


FRS HIS TotalDifference Between Expected and

Actual Experience

Changes in ProportionChanges in Assumptions

Total Deferred Inflows of Resources

$ 2,98 I $ 323

64,943 41,164

13,335

$ 81,259

13,404

$ 54,891

$ 3,304

106,107

26,739

$ 136,150

Deferred outflows of resources related to pensions resulting from City contributions subsequent to themeasurement date totaling $12,490 will be recognized as a reduction of the net pension liability in the yearending September 30, 2018. Other amounts reported as deferred outflows and deferred inflows of resourcesrelated to pensions will be recognized in pension expense as follows:

Fiscal Year

Ending

2018

2019

20202021

2022

Thereafter

F RS H IS Total

$ 53,812 $ 4,436 $ 58,248

100,102 4,420 104,522

72,758 4,4]2 77,170

12,324 (663) 11,661

39,151 (3,168) 35,983

17,I 08

$ 295,255 S

3,365

12,802

20,473

$ 308,057

There were certain changes in assumptions from the previous valuation related to the two plans described above.The assumption changes include the following:

• FRS -In the July I, 2017 actuarial valuation, the discount rate used to determine total pension liability

decreased from 7.60% to 7.10%.• HIS -In the July 1, 2016 actuarial valuation, the discount rate used to determine total pension liability

decreased from 2.85% to 3.58%.

FRS-Defined Contribution Pension planThe City contributes to the FRS Investment Plan (Investment Plan), a defined contribution pension plan, for itseligible employees electing to participate in the Investment Plan. The Investment plan is administered by theSBA,andisreportedintheSBA'sannualfinancialstatementsandintheStateofFloridaComprehensiveAnnualFinancialReport.Serviceretirementbenefitsarebaseduponthevalueofthemember'saccountuponretirement.

29


SEPTEMBER 30, 2017

Note 8 - EmDlovee Benerit Plans fconcluded`

As provided in Section 121.4501, Florida Statutes, eligible FRS members may elect to participate in theInvestment Plan in lieu of the FRS defined-benefit plan. City employees participating in DROP are not eligibleto participate in the Investment plan. Employer and employee contrit)utions, including amounts contributed toindividual member's accounts, are defined by law, but the ultimate benefit depends in part ctn the perfomianceof investment funds. Benefit terms, including contribution requirements, for the Investment Plan are establishedand may be amended by the Florida Legislature. The Investment Plan is funded with the same employer andemployeecontributionratesthatarebasedonsalaryandmembershipclass(RegularClass,ElectedCityOfficers,etc.), as the FRS defined benefit plan. Contributions are directed to individual member accounts, and theindividual members allocate contributions and account balances amount various approved investment choices.Allocations to the investment member's accounts during the 2016-17 fiscal year were as follows:

Class

FRS, Regular

FRS, Elected City Officials

FRS, Senior Management Service

FRS, Special Risk Regular

Percent

of Gross

Compensation

630

11.34

7.67

14.00

For all membership classes, employees are immediately vested in their own contributions and are vested afterone year of service for employer contributions and investment earnings.1f an accumulated benefit obligation forservice credit originally earned under the FRS Pension Plan is transferred to the Investment Plan, the membermust have the years of service required for FRS Pension Plan vesting (including the service credit representedby the transferred funds) to be vested for these funds and the earnings on the funds. Nonvested employercontributions are placed in a suspense account for up to five years. If the employee returns to FRS-coveredemployment within the five-year period, the employee win regain control over their account. If the employeedoes not return within the five-year period, the employee will forfeit the accumulated account balance. Costs ofadministering the Investment Plan, including the FRS Financial Guidance Program, are funded through anemployer contribution of o.06% of payroll and by forfeited benefits of Investment Plan members. For the fiscal

year ended September 30, 2017, the information for the amount of forfeitures was unavailable from the SBA;however, management believes that these amounts, if any, would be immaterial to the City.

After termination and applying to receive benefits, the member may rollover vested funds to another qualified

plan, structure a periodic payment under the Investment Plan, receive a lump-sum distribution, leave the fundsinvestedforfuturedistribution,oranycombinationoftheseoptions.Disabilitycoverageisprovided;themembermay either transfer the account balance to the FRS Pension Plan when approved for disability retirement toreceive guaranteed lifetime monthly benefits under the FRS Pension Plan, or remain in the Investment Plan andrely upon that account balance for retirement income.

30


SEPTEMBER 30, 2017

Note 9 - State of Financial Emergenov

The City met the requirements of Florida Statutes Section 218.503(I) and has been listed in a state ofdeteriorating financial condition. They met the definition in the 2012-2013 fiscal year, as well as the 2013-2014fiscal year. However, the City has managed to pay down a significant amount of their outstanding ob]igatiousduring the 2014-2015 fiscal year, as well as the 2015-2016 year.

Note 10 -Sut)seauent Events

Subsequent events are events or transactions that occur after the balance sheet date but before the financialstatements are issued or are available to be issued. Subsequent events should be disclosed in the financialsstatements if exclusion of such disclosure would cause the financial statements to be misleading. Managementhhas evaluated subsequent events through June 25, 2018, the date the financial statements were available to beissued, and does not believe that there are any such events or transactions tliat require disclosure.

Note 11 -Fund Balance

In accordance with GASB 54, Fund Balance Reporting and Governmental Fund Type Definitions, the Cityclassifies governmental fund balances as follows:

• Restricted-includes fund balance amounts that are constrained for specific purposes which are externa]lyimposed by providers, such as creditors, or amounts constrained due to constitutional provisions orenabling legislation. The amoiint is restricted for law enforcement trust and forfeiture.

• Unassigned- includes residual positive fund balance within the General Fund which has not been

classified within the other above mentioned categories. Unassigned fund balance may also includenegative balances for any governmental fund if expenditures exceed amounts restricted, committed, orassigned for those specific purposes.

The City spends restricted amounts first when both restricted and unrestricted fund balance is available unlessthere are legal documents/contracts that prohibit doing this, such as in grant agreements requiting dollar fordollar spending. Additionally, the City would first use committed, then assigned, and lastly unassigned amountsof unrestricted fund balance when expenditures are made. The City does not have a formal fund balance policy.

31


REQUIRED SUPPLEMENTARY INFORMATION

SEPTEMBER 30, 2017

CITY 0F MIDWAYSTATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

BUDGET AND ACTUALGENERAL FUND


eted Amounts Actual

RevenuesTaxesLicenses and PermitsIntergovemmental RevenuesCharges for ServicesFines and ForfeituresOther Income

Total Revenues

BxpendituresGeneral GovernmentPublic SafetyTransportationCulture and Recreation

(Total Expenditures)

Excess (Deficiency) of Revenues Over

(Under) Expenditures

Other Financing Sources (Uses)Proceeds from Long-term Debt

Total Other Financing Sources (Uses)

Net Change in Fund Balance

Fund Balance, Beginning of Year

Fund Balance, End of Year

OrifroI

$ 721,512

55200456,60635,000

I 3 I ,000

8,861

I,408,179

964,847333,835

79,963

59.534

I,43 8,179

Final Amounts

721,512 $ 701,015

55,200 92,954456,606 637,006

35,000 I,911

131,000 6],506

8,861

I.408,17937,524

1,531,915

964,847 877,078333,835 429,165

79,963 147,915

59,534I ,43 8,179

122,270

I,576,428

Variance WithFinal Budget

Positive

INegative)

S (20,497)37,754

180,400

(33,089)(69,494)28,663

123,736

(87,769)95,330

67,95262,736

138,249

(30,000) (30,000) (44,512) ( 14,512)

(30,000)

30,000

SOS

36

0 105,383

105,383

(30,000) 60,870

30,000

105,383

105,383

90,870

(391,139) (421,139)

CITY OF MIDWAYNOTE T0 REQUIRED SUPPLEMENTARY INFORMATION


Note I-Budgetarv Requirements

TThe City of Midway ("the City) prepares an annual operating budget for the general fund which js adoptedon a basis consistent with accounting principles generally accepted in the United States of America. An annualappropriations lapse at fiscal yearrend.

The City follows these procedures in establishing the budgetary data reflected in the financial statements:

• Prior to October 1, the City Council prepares a proposed operating budget for the fiscal yearcommencing the following October I. The operating budget includes proposed expenditures and themeans of financing them.

• Public hearings are condueted to obtain taxpayer comments.• Prior to october 1, the budget is legally enacted through passage of an ordinance.• Revisions that alter the total expenditures of any fund must be approved by the city council.• Formal budgetary integration is employed as a management control device during the year for the

General Fund. The legal level of bndgetary control js the fund level.• The budget for the General Fund is adopted on a basis consistent with accounting principles generally

accepted in the United States of America.

37


COMPLIANCE SECTION

SEPTEMBER 30, 2017

MOEN&SMITHLLP 15 North Stewart StreetQuincy, FL 32351

850.627.6362

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCH AND OTHER MATTERS BASED

ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVEIINMENT AU DITING STANDARDS


We have audited, in accordance with the auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Govemme#/ 4„cJz./z.#g S/czHdczrds issued by theComptroller General of the United States, the financial statements of the governmental activities and majorfund of city of Midway, as of and for the year ended September 30, 2016, and the related notes to the financialstatements, and have issued our report thereon dated June 25, 2018.

Internal Control over Financial Reporting

ln planning and performing our audit of the financial statements, we considered City of Midway's internalcontrol over financial reporting to determine the audit procedures that are appropriate in the circumstancesfor the purpose of expressing our opinion on the financial statements, but not for the purpose of expressingan opinion on the effectiveness of the City of Midway's internal control. Accordingly, we do not express anopinion on the effectiveness of the City of Midway's internal control.

Our consideration of internal control over financial reporting was for the limited purpose described in the

preceding paragraph and was not designed to identify all deficiencies in internal control over financialreporting that might be material weaknesses or significant deficiencies and therefore, material weaknesses orsignificant deficiencies may exist that were not identified. However, as described below, we identified adeficiency in internal control that we consider to be a material weakness and significant deficiency.

A deficiency in internal control exists when the design or operation of a control does not allow managementor 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, ininternal control` such that there is a reasonable possibility that a material misstatement of the entity'sfinancial statements will not be prevented, or detected and corrected on a timely basis. We consider thedeficiency noted in the attached schedule of findings, to be a material weakness: prior year finding 13-01.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City's financial statements are free from materialmisstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and

grant agreements, noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with those provisions was not anobjective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed noinstances of noncompliance or other matters that are required to be reported under Govemme#f 4nditi.ngSlc[ndards.

38

INDEPENDENT AUDITORS' REPORT 0N INTERNAL CONTROL OVERFINANCIAL

REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON ANAUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

COVE RNM ENT AU DITING STANDARDS(concluded)

Purpose of This Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance andthe results of that testing, and not to provide an opinion on the effectiveness of the City's internal control oroncompliance.ThisrepolfisanintegralpailofanauditperformedinaccordancewithGover#me#f4ndj./z.zgS/a#alords in considering the entity's intemal control and compliance. Accordingly, this communication is notsuitable for any other purpose.

Moran &§mith Ll:P


Quincy, FL

39

MORAN &SMITH LLP15 North Stewart Street

Quincy, FL 32351850.627.6362

INI)EPENDENT AUDITORS' REPORT ON COMPLIANCE WITH THEREQUIREMENTS OF SECTION 218.415 FLORIDA STATUTES


WehaveexaminedtheCityofMidway's(the"City")`compliancewiththerequirementsofSection218.415,Florida Statutes, as of and for the year ended September 30, 2017, as required by Section 10.556(10)(a),jI%/es o/Jfee 4nd!./or Ge#ercz. Management is responsible for the City's compliance with those requirements.Our responsibility is to express an opinion on the City's compliance based on our examination.

Our examination was conducted in accordance with attestation standards established by the AmericanInstitute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidenceabout the City's compliance with those requirements and performing such other procedures as we considerednecessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion.Our.examination does not provide a legal determination on the City's compliance with specifiedrequirements.

]n our opinion, the City complied, in all material respects, with the aforementioned requirements for thefiscal year ended September 30, 2017.

This report is intended solely for the information and use of the Legislative Auditing Committee, members ofthe Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other

granting agencies, the City Commissioners, and management and is not intended to be and should not be usedby anyone other than these specified parties.

Moron 9< SMith LL:P


Quincy, FL

40

MORAN&SMITHLLP

MANAGEMENT LETTER IN ACCORDANCE WITHRULES OF TIIE AUDITOR GENERAL 0F THE

STATE OF FLORIDA


15 North Stewart StreetQuincy, FL 32351

850.627.6362

Report on the Financial StatementsWe have audited the financial statements of the City of Midway (the "City") as of and for the fiscal yearended September 30, 2017, and have issued our report thereon dated June 25, 2018.

Auditor's ResponsibilityWe conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica; the standards applicable to financial audits contained in Gover»me#f ,4%d;.fJ.ng S/a#c7ards, issuedby the Comptroller General of the United States and Chapter 10.550, Rules of the Florida Auditor General

Other Reports and ScheduleWe have issued our Independent Auditors' Report on lntemal Control over Financial Reporting andComplianceandOtherMattersBasedonanAuditoftheFinancialStatementsPerformedinAccordancewithGoverm"ew 4%cJ„#g Sfanc7ords; and Independent Accountants' Report on an examination conducted inaccordance with j4JCP4 Pro/esf;.tjma/ Sfa#cJards, Section 601, regarding compliance requirements inaccordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports and schedule,which are dated June 25, 2018, should be considered in conjunction with this management letter.

Prior Audit FindingsSection 10.554(I )(i)1., Rules of the Auditor General, requires that we determine whether or not correctiveactions have been taken to address findings and recommendations made in the preceding annual financialaudit report. Corrective actions have been taken to address findings and recommendations made in the

preceding annual financial audit report except as noted in the table below.

Description20]2-13 FYFindings

Prepare Financial Statements in Accordance

I 3 -0 Iwith GAAP and significant Adj ustmentsGeneralFixedAssets

13-08

41

MANAGEMENT LETTER IN ACCORDANCE WITHRULES 0F THE AUDITOR GENERAL OF THE

STATE OF FLORIDA(continued)

Ofricial Title and Legal AuthoritySectionI0.554(1)(i)4,RulesoftheAuditorGeneral,requiresthatthenameorofficialtitleandlegalauthorityfortheprimarygovernmentandeachcomponentunitofthereportingentitybedisclosedinthemanagementletter,unlessdisclosedinthenotestothefinancialstatements.Thenameorofficialtitleandlegalauthorityof the primary government and component unit are disclosed in the notes to the financial statements.

Financial ConditionSection 10.554(1)(i)5.a.and 10.556(7), jig//es o//fie %.for Ge#era/, require that we apply appropriate

procedures and report the results of our determination as to whether or not the City has met one or more oftheconditionsdescribedinSection218.503(1),FloridaStatutes,andidentificationofthespecificconditionsmet. In connection with our audit, we determined that the City met several of the conditions described inSection 218.503(I), Florida Statutes. The following conditions resulted from a deteriorating financialcondition:

• The city failed to pay uncontested claims from creditors within 90 after the claim was presented, asa result of a lack of funds.

• The city failed to transfer at the appropriate time, due to a lack offunds: payroll taxes withheld andemployer contributions for payroll taxes.

• The city failed to transfer at the appropriate time, due to a lack offunds: retirement contributions.

WerecommendthecityestabJishafinancialplantopayallitspastduepayablesandstaycurrentonamountsdue.

Management ResponseThe City has cut numerous costs during the 2015 and the 2016 fiscal years, and has focused on paying ourvendors in a timely manner. We have made great progress in getting current with our payat)les and we areconfidentthatintheupcomingbudgetyearwewillnolongerbeinastateofdeterioratingfinancialconditionas described in Section 218.503(I ) Florida Statute.

Pursuant to Sections ]0.554(i)5.c. and 10.556(8), ji%/cs a/ /Ae Awd7./or Ge#era/, we applied financialconditionassessmentprocedui.es.Itismanagement'sresponsibilitytomonitortheCity'sfinancialcondition,and our financial condition assessment was based in part on representations made by management and thereview of financial infomatjon provided by the same.

42

MANAGEMENT LETTER IN ACCORI)ANCE WITHRULES OF THE AUDITOR GENERAL OF THE

STATE OF FLORIDA(concluded)

Annual Financial ReportSection ]0.554(1)(i)5.b. and 10.556(7) Rules of the Auditor General, requires that we apply appropriate

procedures and report the results of our deterinination as to whether the annual financial report for the Cityfor the fiscal year ended September 30, 2017, filed with the Florida Department of Financial Services

pursuant to Section 218.32(I)(a), Florida Statutes, is in agreement with the annual financial audit report forthefiscalyearendedSeptember30,20]7.Inconnectionwithouraudit,wedeterminedthatthesetworeportswere in agreement.

Other MattersSection lo.554(1)(i)2., Rules of the Auditor General, requires that we address in the management letter anyrecommendations to improve financial management. In connection with our audit, we did not have any suchrecommendations. There were however, several recommendations made in the prior year audit report thathavenotbeenimplementedandarestillapplicableforthe2016year.SeetheattachedScheduleofFindings.

Section 10.554(1)(i)e., Rules of the Auditor General, requires that we address noncompliance with

provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, thathave an effect on the financial statements that is less than material but which warrants the attention of thosecharged with governance. In connection with our audit, we did not have any such findings.

Purpose of tliis LetterOurmanagementletterisintendedsolelyfortheinformationanduseoftheLegislativeAuditingCommittee,members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General,Federal and other granting agencies, members of the City and management and is not intended to be andshould not be used by anyone other than these specified parties.

Moron 9< Smith LL:P


Quincy, FL

43

CITY OF MIDWAYSCHEDULE OF FINDINGS


Section I: FiindinesThere were no major Federal or State Awards Programs during the year ended September 30, 2016.

Prior year FindingsFinding 13J)I: Prepare Financial Statements in Accordance with GAAP and Significant AdjustmentsThe intemal control structure of the City of Midway has focused primarily on the objective of effectivenessand efficiency of operations (i.e., performance and mission goals and safeguarding of resources). However,the system of intemal control over the objectives of reliabilfty of financial reporting contains certaindeficieneies. A key element of financial reporting is the ability of management to select and apply the

appropriate accounting prineiples to prepare the financial statements in accordance with generally acceptedaccountingprinciples.Therewerecertainmaterialadjustmentsthatwererequiredtobemadetotlreaccountingrecordssubsequenttothestartoftheauditprocess.Sincetheseadjustmentsresultedinamaterialmisstatementof the financial statements, this deficiency is deemed to be a material weakness.

Management ResponseThe City hired an outside CPA firm to assist in preparing monthly financial statements, filing of payroll taxreturns, the preparation of monthly retirement reports and the paying of bills. They were not engaged untilafter the start of the 20 I 4-2015 year. The city required extensive work from the outside CPA firm, and it wasnot possible to correct all deficiencies in their first full year. They have met with our outside audit firm andthe problems have been corrected for the 2016-2017 year.

Status of Prior Year FindingA similar finding was noted during the current year.

Finding 13-08 General Fixed AssetsThe City of Midway had rot taken a complete physical inventory of property and equipment This physicalinventory serves to account for the physical existence of assets and allows for updating of fixed assetsrecords. The City also did not include an ID number for each item. We recommend each property andequipment item be tagged with an ID number and the ID number be included on the physical inventory listThe inventory should be compared to the City's property records and differences should be communicatedto the City Council for proper disposition. After the property records are updated and reconeiled, a reportshould be made annually to the City Council noting any discrepancies between physical inventory anddetailed property records.

Section 10.554("i)3„ Rules of the Auditor General, requii.es that we address noncomplianee with

provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, thathave an effect on the financial statements that is less than material but which warrants the attention of thosecharged with governance. In cormection with our audit, we did not have any such findings.

Management ResponseThe City hired an outside CPA firm to assist in preparing monthly financial statements and performingnumerous other accounting functions. As part of this, we have started the process of reconciling fixed assetrecords with actual physical inventones for a complete inventory reconciliation. During the 2016-2017 yearour city employees completed the physical inventory section, and the information is now being reconciled tothe financial records, and tlie required reports will be available for the 2017 armual audit.

Status of prior Year FindingA similar finding was noted during the current year.

44

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