the industrial development board of … cannon county, tennessee financial statement and independent...

THE INDUSTRIAL DEVELOPMENT BOARD OF CANNON COUNTY, TENNESSEE

FINANCIAL STATEMENT AND

INDEPENDENT AUDITORS' REPORT YEAR ENDED JUNE 30, 2017


FINANCIAL STATEMENT AND

INDEPENDENT AUDITORS' REPORT YEAR ENDED JUNE 30, 2017

TABLE OF CONTENTS

Roster of Officials - unaudited

INDEPENDENT AUDITORS' REPORT

FINANCIAL STATEMENTS:

Government-Wide Financial Statements Statement of Net Position Statement of Activities

Fund Financial Statements:

Balance Sheet - Governmental Fund

Reconciliation of Balance Sheet to Statement of Net Position of

PAGE

1-2

3 4

5

Governmental Activities 6

Statement of Revenues, Expenditures and Changes in Fund Balance -Governmental Fund 7

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of Governmental Fund to the Statement of Activities 8

Notes to Financial Statements 9-14

SUPPLEMENTARY INFORMATION:

Schedule of Debt Service Requirements 15

Independent Auditors' Report on Internal Control Over Financia l Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 16-17

Schedule of Findings 18

Schedule of Prior Year Findings and Questioned Costs 19

OFFICIAL


ROSTER OF OFFICERS JUNE 30, 2017

Corey Davenport Gref Goff David Faulkner Sean Harwood John Wilkenson Clark Hollis Fred Howell Gayle Morgan David Vance

TITLE

President Vice President Treasurer Vice Treasurer Secretary Board Member Board Member Board Member Board Member

Board of Directors

9 EBD Edmondson, Betzler & Dame

Certified Public Accountants

INDEPENDENT AUDITORS' REPORT

The Industrial Development Board of Cannon County, Tennessee

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and the major fund of The Industrial Development Board of Cannon County, Tennessee (a component unit of Cannon County, Tennessee) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Industrial Development Board'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 conducted our audit in accordance with auditing standards generally accepted in the United States of America and standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

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

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

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Brentwood Location: 12 Cadillac Drive • Suite 210 • Brentwood, Tennessee 37027 • Phone: 615-916-3100 • Fax: 615-916-3161 Murfreesboro Location: 1535 W. Northfield Blvd., Suite 14 Lincoln Square • Murfreesboro, Tennessee 37129 • Phone: 615-916-3100 • Fax: 615-907-3393

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the major fund of The Industrial Development Board of Cannon County, Tennessee as of June 30, 2017, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Management has omitted the Management's Discussion and Analys is that accounting principles generally accepted in the United States of America requires to be presented to supplement the basic financial statements. Such missing 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 the financial reporting for placing the basic financial statements in an appropriate operational , economic, or historic context. Our opinion on the basic financial statements is not affected by this missing information.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise The Industrial Development Board of Cannon County, Tennessee's basic financial statements. The schedule of debt service requirements is presented for purposes of additional analysis and is not a required part of the basic financial statements.

Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements and certain additional procedures, including comparing and reconcil ing such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in, all material respects, in relation to the basic financial statements as a whole.

The roster of officials has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accord ingly, we do not express an opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 13, 2017 on the consideration of the Board's internal control over financial reporting and the tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of the testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opin ion on the 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 entity's internal control over financial reporting and compliance.

October 13, 2017

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STATEMENT OF NET POSITION JUNE 30, 2017

ASSETS

Current Assets:

Cash and cash equivalents Certificate of deposit Note receivable - current portion

Total current assets

Note receivable, net of current portion Capital assets, net of accumulated depreciation

Total assets

LIABILITIES AND NET POSITION

Current Liabilities:

Accounts payable Notes payable - current portion

Total current liabilities

Notes payable, net of current portion

Total liabilities

Net Position: Net investment in capital assets Restricted for industrial development purposes

Total net position

Total liabilities and net position

The accompanying notes are an integral part to these financial statements.

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$ 346,039 100,450 200,000

646,489

200,000 828, 153

$1 ,674,642

$ 12,437 52,564 65,001

162,445

227,446

813,144 634,052

1,447, 196

$1,674,642

Operating Revenues: Rent

Operating Expenses: Legal and professional services Travel Miscellaneous


STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017

Operating income before provision for depreciation

Provision for depreciation

Operating loss

Nonoperating revenues (expenses): Interest income Interest expense Loss on disposal of capital assets

Change in net position

Net position , beginning of year - as previously reported

Restatement

Net position, beginning of year - as restated

Net position, end of year


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$ 69,510

32,786 706

1,709

35,201

34,309

47,682

(13,373)

450 (9,331)

{386,115} (394,996)

{408,369}

1,997,798

{142,233)

1,855,565

$ 1,447, 196

Current Assets:

Cash and cash equivalents Certificate of deposit Note receivable

Total assets

Current Liabilities: Accounts payable

Total liabilities

Fund Balance:


BALANCE SHEET GOVERNMENTAL FUND

JUNE 30, 2017

ASSETS

LIABILITIES AND FUND BALANCE

Restricted for industrial development purposes

Total fund balance

Total liabilities and fund balance


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$346,039 100,450 200,000

$646,489

$ 12,437

12,437

634,052

634,052

$646,489


RECONCILATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION OF

GOVERNMENTAL ACTIVITIES JUNE 30, 2017

Amounts reported for fund balance - governmental fund

Amounts reported for governmental activities in the statement of net position are different because the operating funds do not report:

Investment in capital assets Long-term portion of note receivable Long-term debt

Net position of governmental activities in the statement of net position

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$ 634,052

828, 153 200,000

(215,009)

$1,447, 196


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUND

YEAR ENDED JUNE 30, 2017

Revenues: Rent Interest income

Total revenues

Expenditures: Legal and professional services Travel Miscellaneous Debt service Capital outlay

Total expenditures

Net revenues (expenditures)

Other Financiing Sources: Net proceeds from sale of capital assets

Net change in fund balance

Fund balance, beginning of year

Fund balance, end of year


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$ 69,510 450

69,960

32,786 706

1,709 60,012

576

95,789

(25,829)

399,483

373,654

260,398

$ 634,052


RECONCILATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUND

TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017

Net change in fund balances - total governmental funds

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

Operating funds report proceeds from the sale of capital assets as revenues and captial outlays as expenditures. However, in the statement of activities the gain or loss on the sale of capital assets is recorded as nonoperating revenue or expense. The cost of capital outlays is allocated over their estimated useful lives and reported as depreciation expense.

Acquisition of capital assets Disposition of capital assets Long-term note receivable from sale of capital assets Depreciation expense

Revenues and expenses in the operating funds that increase long-term assets or reduce long-term liabilities are not reported in the statement.

Principal payments on long-term debt

Change in net position - governmental activities

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$ 373,654

576 (985,598) 200,000 (47,682)

50,681

$ (408,369)

NOTE 1 -


NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity

The Industrial Development Board of Cannon County, Tennessee (Board) consists of members appointed by the County. As an agency for the County, the Board has been delegated the authority to develop, operate and maintain industrial sites for the benefit of the community. The Board is a component unit of Cannon County, Tennessee. In evaluating the Board as a reporting entity, management follows all applicable GASB statements and has addressed all potential component units (traditionally separate reporting entities) for which the Board may be financially accountable and, as such, should be included within the Board's financial statements. The Board (the primary government) is financially accountable if it appoints a voting majority of the organization's governing board and (1) it is able to impose its will on the organization or (2) there is a potential for the organization to provide specific financial benefit or to impose specific financial burden on the Board. Additionally, the primary government is required to consider other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The Board has no component units at year end.

Basis of Presentation

The accounting policies of The Industrial Development Board of Cannon County, Tennessee conform to generally accepted accounting principles as applicable to governments.

When applicable, the Organization's net position is reported in three categories - net investment in capital assets; restricted for industrial development purposes; and net position - unrestricted. When both restricted and unrestricted resources are available for use, it is the Organization's policy to use restricted resources first, and then unrestricted resources as they are needed.

The Government-wide financial statements are report using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.

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. Expenditures are recorded generally when a liability is incurred

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NOTE 1 -



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED

Basis of Accounting

Under both the accrual and modified accrual basis of accounting, revenues are recognized when they become both measurable and collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The Board considers most governmental revenues as available if received within 60 days of year end. Expenditures are recorded generally 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 only recorded when payment is due.

Fund Balance Policy

Fund balance is reported in the financial statements as restricted for industrial development purposes as specified by applicable enabling legislation.

Equity Classification

In the government-wide financial statements, equity is shown as net position and is classified as restricted for industrial development purposes.

Cash and Cash Equivalents

The Board is authorized to invest funds in financial institutions. Cash consists of deposits with financial institutions including demand deposits. Funds not immediately needed are invested in certificates of deposits.

Capital Assets

Capital assets, which include property, plant and equipment, and infrastructure assets consisting of certain improvements other than buildings are reported in the applicable governmental activities columns in the government-wide financial statements. Capital assets are defined by the Board as assets generally exceeding individual cost of $5,000 and an estimated useful life in excess of three years. Donated fixed assets are valued at their estimated fair value on the date donated. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.

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NOTE 1 -




Depreciation is provided over the estimated useful lives using the straight line method.

The estimated useful lives are as follows:

Land improvements Buildings Machinery and equipment

Budget and Budgetary Accounting

10 - 15 years 25 - 40 years 5 - 10 years

The Board is not legally required to adopt a budget; therefore, no budget comparison is presented in these financial statements.

Income Tax Status

No provision for income taxes has been made in the accompanying financial statements as the Board is exempt from income taxes.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Credit Risk

Financial instruments that potentially subject the Board to significant concentrations of credit risk consist principally of cash and cash equivalents. The Board places its cash with federally-insured financial institutions or institutions participating in the State collateral pool.

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NOTE 1 -

NOTE 2-

NOTE 3-




Long-term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds and are presented in the accompanying financial statements as other assets.

CASH AND CASH EQUIVALENTS

The Board is authorized to invest funds in Federal treasury bills and notes, State of Tennessee Local Government Investment Pool and financial institution demand deposit accounts and certificates of deposit. Deposits in financial institutions are required by State Statute to be secured and collateralized by the institutions. The Board has deposit policies to minimize custodial credit risks. The collateral must meet certain requirements and be deposited in an escrow account in a second bank for the benefit of the Board and must total a minimum 105% of the value of the deposits placed in the institutions less the amount protected by federal depository insurance. The Board's deposits with financial institutions are fully insured or collateral ized by securities held in the Board's name.

CAPITAL ASSETS

A summary of changes in general capital assets as presented in the government-wide financial statements is as follows:

Balance Balance June 30, 2016 Increases Decreases June 30, 2017

Capital assets: Land $ 372,500 $ $ (202,833) $ 169,667 Buildings and improvements 3,622,429 (2, 188,569) 1,433,860 Equipment 5,200 576 5,776

Total capital assets 4,000, 129 576 (2,391,402) 1,609,303

Less Accumulated depreciation for: Buildings and improvements 1,991,839 47,586 (1,263,571) 775,854 Equipment 5,200 96 5,296

Total accumulated depreciation 1,997,039 47,682 (1,263,571) 781 ,150

Total capital assets depreciated, net $ 2,003,090 $(47,106) $(1,127,831) $ 828, 153

Depreciation expense for the year was $4 7 ,682.

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NOTE 4-


NOTES TO FINANCIAL STATEMENTS YEAR' ENDED JUNE 30, 2017

LONG-TERM DEBT

A summary of changes in long-term debt as presented in the government-wide financial statements is as follows:

Balance Balance June 30, 2016 Additions Deletions June 30, 2017

Loan from State of Tennessee $ 119,576 $ $ (34, 146) $ 85,430 Loan from Cumberland Area Investment 146, 114 (16,535) 129,579

Total $ 265,690 {50,681} $ 215,009

The Industrial Development Board of Cannon County, Tennessee borrowed funds for the acquisition and construction of major capital facilities.

Principal and interest requirements to maturity on all outstanding bonds, loans and obligations as of June 30, 2017, are as follows:

Year Ending June 30, Principal Interest

2018 $ 52,564 $ 8,563 2019 54,353 5,735 2020 32,882 3,975 2021 19,795 2,980 2022 20,705 2,070

2023-2024 34,710 1,309

Total $215,009 $ 24,632

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NOTE 5-

NOTE 6-

NOTE 7-

NOTE 8-



COMMITMENTS AND CONTINGENCIES

Litigation

There are no pending lawsuits in which the Board is involved which are material to the financial statements.

Grants

Amounts received from Granter agencies are subject to audit and adjustment by Granter agencies, principally the Federal government. Any disallowed claims including amounts already collected, could become a liability of the applicable fund.

INSURANCE

The District is exposed to various risks of loss related to torts: theft of, damage to, and destruction of assets, and natural disasters. The District requires its renters to purchase commercial financial bonded insurance for its properties. For all other risks, the District is self-insured. There have been no claims during the last three years.

PRIOR PERIOD ADJUSTMENT

During 2017, the Board noted that the value assigned to land was overstated. The error was a result of land previously disposed of not being correctly removed from the books of the Board. This error resulted in the previously reported land and net investment in capital assets being overstated by $142,233.

SUBSEQUENT EVENT

Subsequent to June 30, 2017, the Board entered into a "Settlement Agreement and General Release" with the tenant of a property owned by the Board. As part of the agreement, the Board took immediate possession of the property and was required to pay the tenant the sum of $250,000.

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SUPPLEMENTAL INFORMATION


SCHEDULE OF DEBT SERVICE REQUIREMENTS JUNE 30, 2017

Year Principal Interest

2018 $ 52,564 $ 8,563 2019 54,353 5,735 2020 32,882 3,975 2021 19,795 2,980 2022 20,705 2 ,070 2023 21 ,656 1 , 119 2024 13,054 190

Total $215,009 $ 24,632

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9 EBD Edmondson, Betzler & Dame

Certified Public Accountants

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

To the Board of Directors The Industrial Development Board of Cannon County, Tennessee

We have audited, in accordance with the 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 of The Industrial Development Board of Cannon County, Tennessee (Board) as of and for the year ended June 30, 2017 and the related notes to the financial statements, which collectively comprise the Board's basic financial statements, and have issued our report thereon dated October 13, 2017.

Internal Control Over Financial Reporting

In planning and performing our audit of the fi nancial statements, we considered the Board's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the fi nancial statements, but not for the purpose of expressing an opin ion on the effectiveness of the Board's internal control. Accord ingly, we do not express an opin ion on the effectiveness of the Board'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 combination of deficiencies, in internal control , such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of the internal contro l 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 were not identified. We did identify a deficiency in internal control, described in the accompanying schedule of findings and questioned costs as item 2017-001 that we consider to be a material weakness.

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Brentwood Location: 12 Cadillac Drive • Suite 210 • Brentwood, Tennessee 37027 • Phone: 615-916-3100 • Fax: 615-916-3161 Murfreesboro Location: 1535 W. Northfield Blvd., Suite 14 Lincoln Square • Murfreesboro, Tennessee 37129 • Phone: 615-916-3100 • Fax: 615-907-3393

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 (CONTINUED)

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Board's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

The Industrial Development Board of Cannon County, Tennessee's Response to Findings

The Industrial Development Board of Cannon County, Tennessee's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The Board's response was not subjected to the auditing procedures applied in the audit of the financial statements and accordingly, we express no opinion on it.

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 Board's internal control or on compliance. This report is an integral part of an audit performed in Government Auditing Standards in considering the Board's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

~ -Z-eL i_J)~ -fLL~ I 'o I

October 13, 2017

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SCHEDULE OF YEAR FINDINGS JUNE 30, 2017

2017-001 Capital Asset Inventory

Condition, Criteria, Cause and Effect: During our review of capital assets owned by the Board, we noted that the Board did not maintain a complete subsidiary ledger listing for capital assets and the related value. It was determined that the value for land recorded on the general ledger was overstated and required a material adjustment to the financial records of the Board.

Recommendation: A physical inventory of all capital assets of the Board should be performed and the general ledger should be adjusted to accurately reflect the physical inventory.

Management Response: We concur with the finding and have already taken measures to comply with the recommendation.

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SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS JUNE 30, 2017

There were no prior year report findings .

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the industrial development board of … cannon county, tennessee financial statement and independent...

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