the metropolitan government of lynchburg moore county...

ANNUAL FINANCIAL REPORT

THE METROPOLITAN GOVERNMENT OF LYNCHBURG, MOORE COUNTY,

TENNESSEE FOR THE YEAR ENDED JUNE 30, 2016

DIVISION OF LOCAL GOVERNMENT AUDIT

ANNUAL FINANCIAL REPORT

THE METROPOLITAN GOVERNMENT OF LYNCHBURG, MOORE COUNTY, TENNESSEE

FOR THE YEAR ENDED JUNE 30, 2016

COMPTROLLER OF THE TREASURY JUSTIN P. WILSON

DIVISION OF LOCAL GOVERNMENT AUDIT JAMES R. ARNETTE

Director

JEFF BAILEY, CPA, CGFM, CFE Audit Manager

SHERRIE GILL, CFE KENT WHITE, CPA, CGFM, CFE JACOB KENNEDY, CISA Auditor 4 State Auditors

This financial report is available at www.comptroller.tn.gov

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Exhibit Page(s)

Summary of Audit Findings 6

INTRODUCTORY SECTION 7

Metropolitan Government Officials 8

FINANCIAL SECTION 9

Independent Auditor's Report 10-13BASIC FINANCIAL STATEMENTS: 14

Government-wide Financial Statements:Statement of Net Position A 15-17Statement of Activities B 18-19

Fund Financial Statements:Governmental Funds:

Balance Sheet C-1 20-21Reconciliation of the Balance Sheet of Governmental Funds

to the Statement of Net Position C-2 22Statement of Revenues, Expenditures, and Changes in

Fund Balances C-3 23-24Reconciliation of the Statement of Revenues, Expenditures,

and Changes in Fund Balances of Governmental Fundsto the Statement of Activities C-4 25

Statements of Revenues, Expenditures, and Changes in FundBalances – Actual and Budget:

General Fund C-5 26-27Highway/Public Works Fund C-6 28

Proprietary Fund:Statement of Net Position D-1 29Statement of Revenues, Expenses, and Changes in Net Position D-2 30Statement of Cash Flows D-3 31-32

Fiduciary Fund:Statement of Fiduciary Assets and Liabilities E 33

Index and Notes to the Financial Statements 34-92REQUIRED SUPPLEMENTARY INFORMATION: 93

Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on Participation in the Public Employee Pension Planof TCRS – Primary Government F-1 94

Schedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on Participation in the Public Employee Pension Planof TCRS – Discretely Presented Metropolitan School Department − Non-Certified Employees F-2 95

Schedule of Contributions Based on Participation in the Public EmployeePension Plan of TCRS – Primary Government F-3 96

Schedule of Contributions Based on Participation in the Public EmployeePension Plan of TCRS – Discretely Presented MetropolitanSchool Department − Non-Certified Employees F-4 97

THE METROPOLITAN GOVERNMENT OF

TABLE OF CONTENTSLYNCHBURG, MOORE COUNTY, TENNESSEE

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Exhibit Page(s)

Schedule of Contributions Based on Participation in the TeacherRetirement Plan of TCRS – Discretely Presented MetropolitanSchool Department F-5 98

Schedule of Contributions Based on Participation in the TeacherLegacy Pension Plan of TCRS – Discretely Presented MetropolitanSchool Department F-6 99

Schedule of Proportionate Share of the Net Pension Liability (Asset) in theTeacher Pension Plan of TCRS – Discretely PresentedMetropolitan School Department F-7 100

Schedule of Proportionate Share of the Net Pension Liability (Asset) in theTeacher Legacy Pension Plan of TCRS – Discretely PresentedMetropolitan School Department F-8 101

Schedule of Funding Progress – Other Postemployment BenefitsPlan – Discretely Presented Metropolitan School Department F-9 102

Notes to the Required Supplementary Information 103-104COMBINING AND INDIVIDUAL FUND FINANCIAL

STATEMENTS AND SCHEDULES: 105Nonmajor Governmental Funds: 106

Combining Balance Sheet G-1 107Combining Statement of Revenues, Expenditures, and Changes

in Fund Balances G-2 108Schedules of Revenues, Expenditures, and Changes in Fund

Balances – Actual and Budget:Urban Services Fund G-3 109Solid Waste/Sanitation Fund G-4 110Drug Control Fund G-5 111

Major Governmental Fund: 112Schedule of Revenues, Expenditures, and Changes in Fund

Balance – Actual and Budget:General Debt Service Fund H 113

Fiduciary Fund: 114Statement of Changes in Assets and Liabilities –

Agency Fund I 115Component Unit:

Discretely Presented Metropolitan School Department: 116Statement of Activities J-1 117Balance Sheet – Governmental Funds J-2 118Reconciliation of the Balance Sheet of Governmental Funds

to the Statement of Net Position J-3 119Statement of Revenues, Expenditures, and Changes in Fund

Balances – Governmental Funds J-4 120Reconciliation of the Statement of Revenues, Expenditures,

and Changes in Fund Balances of Governmental Fundsto the Statement of Activities J-5 121

Combining Balance Sheet – Nonmajor Governmental Funds J-6 122Combining Statement of Revenues, Expenditures, and Changes

in Fund Balances – Nonmajor Governmental Funds J-7 123Schedules of Revenues, Expenditures, and Changes in Fund

Balances – Actual and Budget:General Purpose School Fund J-8 124School Federal Projects Fund J-9 125Central Cafeteria Fund J-10 126

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Exhibit Page(s)

Miscellaneous Schedules: 127Schedule of Changes in Long-term Notes and Other Loans K-1 128Schedule of Long-term Debt Requirements by Year K-2 129Schedule of Salaries and Official Bonds of Principal Officials –

Primary Government and Discretely Presented MetropolitanSchool Department K-3 130

Schedule of Detailed Revenues – All Governmental Fund Types K-4 131-142Schedule of Detailed Revenues – All Governmental Fund Types –

Discretely Presented Metropolitan School Department K-5 143-145Schedule of Detailed Expenditures – All Governmental Fund Types K-6 146-159Schedule of Detailed Expenditures – All Governmental Fund Types –

Discretely Presented Metropolitan School Department K-7 160-167Schedule of Unaccounted for Water − Water and Sewer

Department Fund K-8 168-169Schedule of Water Rates and Customers − Water and Sewer

Department Fund K-9 170

SINGLE AUDIT SECTION 171

Auditor's Report on Internal Control Over Financial Reporting and onCompliance and Other Matters Based on an Audit of FinancialStatements Performed in Accordance With GovernmentAuditing Standards 172-173

Auditor's Report on Compliance for Each Major Federal Program;Report on Internal Control Over Compliance; and Report on theSchedule of Expenditures of Federal Awards Required byUniform Guidance 174-176

Schedule of Expenditures of Federal Awards and State Grants 177-178Summary Schedule of Prior-year Findings 179Schedule of Findings and Questioned Costs 180-186Management's Corrective Action Plan 187-190Best Practices 191

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Summary of Audit FindingsAnnual Financial Report

Metropolitan Government of Lynchburg, Moore County, Tennessee For the Year Ended June 30, 2016

Scope

We have audited the basic financial statements of the Metropolitan Government of Lynchburg, Moore County as of and for the year ended June 30, 2016.

Results

Our report on the metropolitan government’s financial statements is unmodified.

Our audit resulted in five findings and recommendations, which we have reviewed with the metropolitan government’s management. Detailed findings, recommendations, and management’s responses are included in the Single Audit section of this report.

Findings

The following are summaries of the audit findings:

OFFICE OF METROPOLITAN MAYOR

♦ Competitive bids were not solicited for the purchase of food for inmate meals.♦ The office had deficiencies in budget operations.♦ Amounts withheld for contractor payments were not deposited into an escrow account.

OFFICE OF DIRECTOR OF SCHOOLS

♦ The office had deficiencies in budget operations.

OFFICES OF TRUSTEE; METROPOLITAN CLERK; CIRCUIT, GENERAL SESSIONS, AND JUVENILE COURTS CLERK; CLERK AND MASTER; REGISTER OF DEEDS; AND SHERIFF

♦ Duties were not segregated adequately.

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INTRODUCTORY SECTION

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Metropolitan Lynchburg, Moore County OfficialsJune 30, 2016

Officials

Sloan Stewart, Metropolitan MayorMilton Ferrell, Highway SuperintendentChad Moorehead, Director of SchoolsLynn Harrison, TrusteeDarin Harrison, Assessor of PropertyNancy Hatfield, Metropolitan ClerkChristy Millsaps, Circuit, General Sessions, and Juvenile Courts ClerkTammy Roberts, Clerk and MasterPam Wells, Register of DeedsMark Logan, Sheriff

Metropolitan Council

Coleman March, ChairmanAmy Cashion Wayne RhotonParks Norman Gordon MillsapsTommy Brown Shawn AdamsWayne Hawkins Marty CopelandPatrick Maynard Glenn SearcyArvis Bobo Denning HarderDavid Boyce

Board of Education

Richard Riddle, ChairmanJammie Cashion Lorrie McKenzieEd Cashion Ronnie Smith

Audit Committee

Gordon Millsaps, Chairman Coleman MarchWayne Hawkins Tommy BrownDavid Boyce

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FINANCIAL SECTION

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STATE OF TENNESSEE COMPTROLLER OF THE TREASURY

DEPARTMENT OF AUDIT DIVISION OF LOCAL GOVERNMENT AUDIT

SUITE 1500 JAMES K. POLK STATE OFFICE BUILDING

NASHVILLE, TENNESSEE 37243-1402 PHONE (615) 401-7841

Independent Auditor's Report

Metropolitan Mayor and Metropolitan Council Lynchburg, Moore County, Tennessee

To the Metropolitan Mayor and Metropolitan Council:

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Metropolitan Government of Lynchburg, Moore County, Tennessee, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the county’s basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

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

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Metropolitan Lynchburg – Moore County Water and Sewer Department, which represent 100 percent of the assets, net position, and revenues of the business-type activities and is also a major fund. Those financial statements were audited by other auditors, whose report has been furnished to us, and our opinions on the financial statements, insofar as they relate to the amounts included for the Metropolitan Lynchburg – Moore County Water and Sewer Department are based solely on the report of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable

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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.

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

Opinions

In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Metropolitan Government of Lynchburg, Moore County, Tennessee, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparisons for the General and Highway/Public Works funds for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As described in Note V.B., the metropolitan government has adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application; GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments; GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68; and GASB Statement No. 79, Certain External Investment Pools and Pool Participants. Our opinion is not modified with respect to these matters.

Other Matters

Required Supplementary Information

Management has omitted the management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to

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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 financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. Our opinion on the basic financial statements is not affected by this missing information.

Accounting principles generally accepted in the United States of America require that the schedule of changes in the county’s net pension liability and related ratios, schedules of county and school contributions, schedule of school’s proportionate share of the net pension liability, and schedule of funding progress - other postemployment benefits plan on pages 94-104 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary and Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the metropolitan government’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, budgetary comparison schedules of nonmajor governmental funds and the General Debt Service Fund, combining and individual fund financial statements of the Metropolitan School Department (a discretely presented component unit), and miscellaneous schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The combining and individual nonmajor fund financial statements, budgetary comparison schedules of nonmajor governmental funds and the General Debt Service Fund, combining and individual fund financial statements of the Metropolitan School Department (a discretely presented component unit), and miscellaneous schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling 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, based on our audit and the procedures performed as described above, the combining and individual nonmajor fund financial statements, budgetary comparison schedules of nonmajor governmental funds and the General Debt Service Fund, combining

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and individual fund financial statements of the Metropolitan School Department (a discretely presented component unit), and miscellaneous schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

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

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated January 4, 2017, on our consideration of the metropolitan government’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 metropolitan government’s internal control over financial reporting and compliance.

Very truly yours,

Justin P. Wilson Comptroller of the Treasury Nashville, Tennessee

January 4, 2017

JPW/sb

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BASIC FINANCIAL STATEMENTS

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Exhibit A

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Net PositionJune 30, 2016

Business- MetropolitanGovernmental type School

Activities Activities Total Department

Cash and Cash Equivalents $ 575 $ 671,435 $ 672,010 $ 38,470Equity in Pooled Cash and Investments 4,614,870 0 4,614,870 1,320,330Inventories 0 78,817 78,817 4,600Accounts Receivable 224,187 78,873 303,060 0Allowance for Uncollectibles (18,610) (2,092) (20,702) 0Prepaid Items 0 8,021 8,021 0Other Receivables 0 5,543 5,543 0Due from Other Governments 392,574 0 392,574 167,392Unbilled Charges for Services 0 84,243 84,243 0Net Pension Asset - Agent Plan 35,614 0 35,614 166,269Net Pension Asset - Teacher Retirement Plan 0 0 0 1,944Property Taxes Receivable 3,419,019 0 3,419,019 2,795,663Allowance for Uncollectible Property Taxes (72,552) 0 (72,552) (66,533)Restricted Assets: Customer Deposits 0 520 520 0Capital Assets: Assets Not Depreciated: Land 393,779 92,459 486,238 39,342 Construction in Progress 1,708,000 1,186,027 2,894,027 209,950 Assets Net of Accumulated Depreciation: Buildings and Improvements 1,215,577 0 1,215,577 11,253,608 Other Capital Assets 759,542 0 759,542 642,529 Infrastructure 2,911,983 11,501,432 14,413,415 0Total Assets $ 15,584,558 $ 13,705,278 $ 29,289,836 $ 16,573,564

(Continued)

Primary Government Component Unit

ASSETS

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Exhibit A

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Net Position (Cont.)



Pension Changes in Contributions after Measurement Date $ 60,945 $ 0 $ 60,945 $ 376,727Pension Changes in Experience 5,379 0 5,379 33,655Pension Changes in Proportionate Share of NPL 0 0 0 43,207Total Deferred Outflows of Resources $ 66,324 $ 0 $ 66,324 $ 453,589

Accounts Payable $ 4,774 $ 497,942 $ 502,716 $ 116,673Accrued Payroll 8,279 13,982 22,261 0Payroll Deductions Payable 17,539 0 17,539 309,249Contracts Payable 147,973 0 147,973 0Retainage Payable 77,744 0 77,744 0Accrued Interest Payable 20,000 6,122 26,122 0Other Current Liabilities 0 29,706 29,706 0Accrued Leave - Current 0 17,923 17,923 0Noncurrent Liabilities: Due Within One Year 570,000 179,190 749,190 19,728 Due in More Than One Year 9,741,147 5,303,629 15,044,776 719,782Total Liabilities $ 10,587,456 $ 6,048,494 $ 16,635,950 $ 1,165,432

DEFERRED INFLOWS OF RESOURCES

Deferred Current Property Taxes $ 3,310,738 $ 0 $ 3,310,738 $ 2,693,922Pension Changes in Experience 135,237 0 135,237 708,506Pension Changes in Investment Earnings 14,948 0 14,948 314,466Pension Changes in Proportionate Share of NPL 0 0 0 25,989Total Deferred Inflows of Resources $ 3,460,923 $ 0 $ 3,460,923 $ 3,742,883

(Continued)

LIABILITIES

DEFERRED OUTFLOWS OF RESOURCES


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Exhibit A

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Net Position (Cont.)



Net Investment in Capital Assets $ 3,998,644 $ 7,297,099 $ 11,295,743 $ 12,145,429Restricted for: Finance 0 0 0 0 Administration of Justice 20,131 0 20,131 0 Public Safety 73,629 Public Health and Welfare 321,947 0 321,947 0 Debt Service 1,141,250 0 1,141,250 0 Highway/Public Works 473,933 0 473,933 0 Other Operations 26,759 0 26,759 0 Education 0 0 0 303,620 Other Purposes 51,790 0 51,790 0 Capital Projects 343,556 0 343,556 0Unrestricted (4,849,136) 359,685 (4,489,451) (330,211)

Total Net Position $ 1,602,503 $ 7,656,784 $ 9,259,287 $ 12,118,838

The notes to the financial statements are an integral part of this statement.


NET POSITION

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Exhibit B

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of ActivitiesFor the Year Ended June 30, 2016

Operating Capital MetropolitanCharges for Grants and Grants and Governmental Business-type School

Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Department

Primary Government: Governmental Activities: General Government $ 580,948 $ 50,896 $ 43,359 $ 0 $ (486,693) $ 0 $ (486,693) $ 0 Finance 321,473 222,983 178 0 (98,312) 0 (98,312) 0 Administration of Justice 299,828 96,724 9,000 0 (194,104) 0 (194,104) 0 Public Safety 1,711,172 114,280 124,863 2,817 (1,469,212) 0 (1,469,212) 0 Public Health and Welfare 1,081,145 410,023 173,923 0 (497,199) 0 (497,199) 0 Social, Cultural, and Recreational Services 276,706 9,476 29,733 0 (237,497) 0 (237,497) 0 Agriculture and Natural Resources 94,572 0 0 0 (94,572) 0 (94,572) 0 Highways/Public Works 1,227,121 0 1,336,805 87,834 197,518 0 197,518 0 Interest on Long-term Debt 42,903 0 0 0 (42,903) 0 (42,903) 0 Education 50,654 0 0 0 (50,654) 0 (50,654) 0Total Governmental Activities $ 5,686,522 $ 904,382 $ 1,717,861 $ 90,651 $ (2,973,628) $ 0 $ (2,973,628) $ 0

Business-type Activities: Water and Sewer Department $ 1,847,160 $ 1,813,051 $ 110,479 $ 0 $ 0 $ 76,370 $ 76,370 $ 0 Total Business-type Activities $ 1,847,160 $ 1,813,051 $ 110,479 $ 0 $ 0 $ 76,370 $ 76,370 $ 0

Total Primary Government $ 7,533,682 $ 2,717,433 $ 1,828,340 $ 90,651 $ (2,973,628) $ 76,370 $ (2,897,258) $ 0

Component Unit: Metropolitan School Department $ 9,145,951 $ 336,639 $ 677,807 $ 0 $ 0 $ 0 $ 0 $ (8,131,505)

(Continued)

Primary Government

Net (Expense) Revenue and Changes in Net PositionComponent

Program Revenues Unit

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Exhibit B

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Activities (Cont.)

Operating Capital MetropolitanCharges for Grants and Grants and Governmental Business-type School

Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Department

General Revenues: Taxes: Property Taxes Levied for General Purposes $ 2,562,740 $ 0 $ 2,562,740 $ 2,818,450 Property Taxes Levied for Debt Service 378,262 0 378,262 0 Local Option Sales Tax 442,077 0 442,077 458,400 Wholesale Beer Tax 83,827 0 83,827 0 Business Tax 34,517 0 34,517 0 Litigation Tax - Jail, Workhouse, & Courthouse 20,107 0 20,107 0 Litigation Tax - General 18,275 0 18,275 0 Other Local Taxes 6,743 0 6,743 560 Grants and Contributions Not Restricted to Specific Programs 747,826 0 747,826 4,812,720 Unrestricted Investment Income 34,175 1,476 35,651 136 Miscellaneous 31,862 0 31,862 50,658 Gain on Sale of Capital Assets 0 0 0 10,499Total General Revenues $ 4,360,411 $ 1,476 $ 4,361,887 $ 8,151,423

Change in Net Position $ 1,386,783 $ 77,846 $ 1,464,629 $ 19,918Net Position, July 1, 2015 215,720 7,578,938 7,794,658 12,098,920

Net Position, June 30, 2016 $ 1,602,503 $ 7,656,784 $ 9,259,287 $ 12,118,838


Net (Expense) Revenue and Changes in Net PositionComponent

Program Revenues UnitPrimary Government

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Exhibit C-1

The Metropolitan Government of Lynchburg, Moore County, TennesseeBalance SheetGovernmental FundsJune 30, 2016

OtherHighway / General General Govern- Total

Public Debt Capital mental GovernmentalGeneral Works Service Projects Funds Funds

ASSETS

Cash $ 575 $ 0 $ 0 $ 0 $ 0 $ 575Equity in Pooled Cash and Investments 1,046,969 274,884 2,223,718 566,310 502,989 4,614,870Accounts Receivable 140,588 0 37,943 0 45,656 224,187Allowance for Uncollectibles (18,610) 0 0 0 0 (18,610)Due from Other Governments 96,184 252,662 43,728 0 0 392,574Property Taxes Receivable 2,382,664 34,945 721,803 38,574 241,033 3,419,019Allowance for Uncollectible Property Taxes (48,440) (839) (15,940) (1,654) (5,679) (72,552)

Total Assets $ 3,599,930 $ 561,652 $ 3,011,252 $ 603,230 $ 783,999 $ 8,560,063

LIABILITIES

Accounts Payable $ 0 $ 4,774 $ 0 $ 0 $ 0 $ 4,774Accrued Payroll 0 8,279 0 0 0 8,279Payroll Deductions Payable 7,591 9,948 0 0 0 17,539Contracts Payable 0 0 0 147,973 0 147,973Retainage Payable 0 0 0 77,744 0 77,744Total Liabilities $ 7,591 $ 23,001 $ 0 $ 225,717 $ 0 $ 256,309


Deferred Current Property Taxes $ 2,309,076 $ 33,663 $ 701,778 $ 33,957 $ 232,264 $ 3,310,738Deferred Delinquent Property Taxes 22,814 404 3,797 2,810 2,909 32,734Other Deferred/Unavailable Revenue 74,440 130,036 24,033 0 16,511 245,020Total Deferred Inflows of Resources $ 2,406,330 $ 164,103 $ 729,608 $ 36,767 $ 251,684 $ 3,588,492

(Continued)

Nonmajor Funds

Major Funds

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Exhibit C-1

The Metropolitan Government of Lynchburg, Moore County, TennesseeBalance SheetGovernmental Funds (Cont.)



FUND BALANCES

Restricted:Restricted for Administration of Justice $ 20,131 $ 0 $ 0 $ 0 $ 0 $ 20,131Restricted for Public Safety 6,926 0 0 0 66,703 73,629Restricted for Public Health and Welfare 20,280 0 0 0 285,932 306,212Restricted for Other Operations 26,759 0 0 0 0 26,759Restricted for Highways/Public Works 0 374,548 0 0 0 374,548Restricted for Debt Service 0 0 1,137,217 0 0 1,137,217Restricted for Capital Projects 0 0 0 340,746 0 340,746Restricted for Other Purposes 0 0 0 0 16,075 16,075

Committed:Committed for Public Safety 125,000 0 0 0 0 125,000Committed for Public Health and Welfare 0 0 0 0 163,605 163,605Committed for Social, Cultural, and Recreational Services 2,272 0 0 0 0 2,272Committed for Debt Service 0 0 1,144,427 0 0 1,144,427Committed for Other Purposes 325,853 0 0 0 0 325,853

Assigned:Assigned for Administration of Justice 1,319 0 0 0 0 1,319Assigned for Public Safety 28,570 0 0 0 0 28,570Assigned for Social, Cultural, and Recreational Services 6,500 0 0 0 0 6,500

Unassigned 622,399 0 0 0 0 622,399Total Fund Balances $ 1,186,009 $ 374,548 $ 2,281,644 $ 340,746 $ 532,315 $ 4,715,262

Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 3,599,930 $ 561,652 $ 3,011,252 $ 603,230 $ 783,999 $ 8,560,063


Nonmajor Funds

Major Funds

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Exhibit C-2

The Metropolitan Government of Lynchburg, Moore County, TennesseeReconciliation of the Balance Sheet of Governmental Funds tothe Statement of Net Position

June 30, 2016

Amounts reported for governmental activities in the statementof net position (Exhibit A) are different because:

Total fund balances - balance sheet - governmental funds (Exhibit C-1) $ 4,715,262

(1) Capital assets used in governmental activities are notfinancial resources and therefore are not reported inthe governmental funds.Add: land $ 393,779Add: construction in progress 1,708,000Add: buildings and improvements net of accumulated depreciation 1,215,577Add: other capital assets net of accumulated depreciation 759,542Add: infrastructure net of accumulated depreciation 2,911,983 6,988,881

(2) Long-term liabilities are not due and payable in the currentperiod and therefore are not reported in the governmental funds.

Less: notes payable $ (1,600,000)Less: other loans payable (8,596,980)Less: compensated absences payable (114,167)Less: accrued interest on notes payable (20,000) (10,331,147)

(3) Amounts reported as deferred outflows of resources and deferredinflows of resources related to pensions will be amortized andrecognized as components of pension expense in future years.

Add: deferred outflows of resourses related to pensions $ 66,324 Less: deferred inflows of resources related to pensions (150,185) (83,861)

(4) Net pension assets of the agent plan are not current financialresources and therefore are not reported in the governmental funds. 35,614

(5) Other long-term assets are not available to pay forcurrent-period expenditures and therefore are deferredin the governmental funds. 277,754

Net position of governmental activities (Exhibit A) $ 1,602,503


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Exhibit C-3

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Revenues, Expenditures,

and Changes in Fund BalancesGovernmental FundsFor the Year Ended June 30, 2016



RevenuesLocal Taxes $ 2,589,070 $ 47,658 $ 972,737 $ 225,667 $ 251,399 $ 4,086,531Licenses and Permits 13,354 0 0 0 5,905 19,259Fines, Forfeitures, and Penalties 27,188 0 0 0 8,427 35,615Charges for Current Services 165,817 0 0 0 205,186 371,003Other Local Revenues 81,539 1,529 0 351 32,711 116,130Fees Received From County Officials 314,351 0 0 0 0 314,351State of Tennessee 538,215 1,366,367 0 0 31,517 1,936,099Federal Government 72,330 68,526 0 0 0 140,856Other Governments and Citizens Groups 87,782 0 1,000 0 0 88,782

Total Revenues $ 3,889,646 $ 1,484,080 $ 973,737 $ 226,018 $ 535,145 $ 7,108,626

ExpendituresCurrent:

General Government $ 529,083 $ 0 $ 0 $ 0 $ 20,124 $ 549,207Finance 255,125 0 0 0 64 255,189Administration of Justice 232,725 0 0 0 0 232,725Public Safety 1,395,807 0 0 0 3,979 1,399,786Public Health and Welfare 487,460 0 0 0 431,498 918,958Social, Cultural, and Recreational Services 202,617 0 0 0 0 202,617Agriculture and Natural Resources 78,588 0 0 0 0 78,588Other Operations 621,838 0 0 0 0 621,838Highways 0 1,838,626 0 0 0 1,838,626

Debt Service:Principal on Debt 0 0 377,000 0 0 377,000Interest on Debt 0 0 22,903 0 0 22,903Other Debt Service 0 0 74,502 0 0 74,502

(Continued)

Major FundsNonmajor

Funds

23

Exhibit C-3


and Changes in Fund BalancesGovernmental Funds (Cont.)



Expenditures (Cont.)Capital Projects $ 0 $ 0 $ 0 $ 1,595,234 $ 0 $ 1,595,234

Total Expenditures $ 3,803,243 $ 1,838,626 $ 474,405 $ 1,595,234 $ 455,665 $ 8,167,173

Excess (Deficiency) of RevenuesOver Expenditures $ 86,403 $ (354,546) $ 499,332 $ (1,369,216) $ 79,480 $ (1,058,547)

Other Financing Sources (Uses)Notes Issued $ 0 $ 0 $ 0 $ 1,600,000 $ 0 $ 1,600,000

Total Other Financing Sources (Uses) $ 0 $ 0 $ 0 $ 1,600,000 $ 0 $ 1,600,000

Net Change in Fund Balances $ 86,403 $ (354,546) $ 499,332 $ 230,784 $ 79,480 $ 541,453Fund Balance, July 1, 2015 1,099,606 729,094 1,782,312 109,962 452,835 4,173,809

Fund Balance, June 30, 2016 $ 1,186,009 $ 374,548 $ 2,281,644 $ 340,746 $ 532,315 $ 4,715,262


Major FundsNonmajor

Funds

24

Exhibit C-4

The Metropolitan Government of Lynchburg, Moore County, TennesseeReconciliation of the Statement of Revenues, Expenditures, andChanges in Fund Balances of Governmental Funds to theStatement of Activities

For the Year Ended June 30, 2016

Amounts reported for governmental activities in the statement of activities (Exhibit B) are different because:

Net change in fund balances - total governmental funds (Exhibit C-3) $ 541,453

(1) Governmental funds report capital outlays as expenditures. However,in the statement of activities, the cost of these assets is allocatedover their useful lives and reported as depreciation expense. Thedifference between capital outlays and depreciation is itemized asfollows:

Add: capital assets purchased in the current period $ 2,515,945Less: current-year depreciation expense (456,725) 2,059,220

(2) Revenues in the statement of activities that do not provide currentfinancial resources are not reported in the funds.

Add: deferred delinquent property taxes and other deferred June 30, 2016 $ 277,754Less: deferred delinquent property taxes and other deferred June 30, 2015 (313,075) (35,321)

(3) The issuance of long-term debt (e.g., bonds, notes, other loans, leases) providescurrent financial resources to governmental funds, while the repaymentof the principal of long-term debt consumes the current financialresources of governmental funds. Neither transaction, however, hasany effect on net position. Also, governmental funds report the effectof premiums, discounts, and similar items when debt isfirst issued, whereas these amounts are deferred and amortized in thestatement of activities. This amount is the net effect of these differencesin the treatment of long-term debt and related items:

Add: principal payments on other loans $ 377,000Less: note proceeds (1,600,000) (1,223,000)

(4) Some expenses reported in the statement of activities do not requirethe use of current financial resources and therefore are not reportedas expenditures in the governmental funds.

Change in accrued interest payable $ (20,000)Change in net pension asset - agent plan 139,053Change in deferred outflows of resources related to pensions 2,194Change in deferred inflows of resources related to pensions (65,071)Change in compensated absences payable (11,745) 44,431

Change in net position of governmental activities (Exhibit B) $ 1,386,783


25

Exhibit C-5

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Revenues, Expenditures, and Changes

in Fund Balance - Actual and BudgetGeneral FundFor the Year Ended June 30, 2016

Variancewith FinalBudget -Positive

Actual Original Final (Negative)

RevenuesLocal Taxes $ 2,589,070 $ 2,324,544 $ 2,324,544 $ 264,526Licenses and Permits 13,354 16,000 16,000 (2,646)Fines, Forfeitures, and Penalties 27,188 26,760 26,760 428Charges for Current Services 165,817 142,100 142,973 22,844Other Local Revenues 81,539 43,500 53,078 28,461Fees Received From County Officials 314,351 272,000 272,000 42,351State of Tennessee 538,215 539,700 638,731 (100,516)Federal Government 72,330 18,500 22,500 49,830Other Governments and Citizens Groups 87,782 40,894 118,156 (30,374)

Total Revenues $ 3,889,646 $ 3,423,998 $ 3,614,742 $ 274,904

ExpendituresGeneral Government

County Commission $ 154,648 $ 148,250 $ 154,950 $ 302County Mayor/Executive 124,262 130,440 127,440 3,178County Attorney 7,273 7,573 7,398 125Election Commission 83,026 79,349 96,202 13,176Register of Deeds 63,001 66,209 66,209 3,208Planning 8,616 11,976 10,587 1,971County Buildings 75,993 82,518 83,518 7,525Preservation of Records 12,264 11,292 11,292 (972)

FinancePurchasing 30,698 32,500 32,500 1,802Property Assessor's Office 71,954 72,740 72,740 786County Trustee's Office 68,566 69,397 69,575 1,009County Clerk's Office 83,907 84,578 92,419 8,512

Administration of JusticeCircuit Court 75,361 83,531 83,531 8,170General Sessions Court 69,888 69,730 69,888 0Chancery Court 63,806 67,149 67,149 3,343Juvenile Court 9,175 9,000 9,175 0Judicial Commissioners 14,495 15,617 15,459 964

Public SafetySheriff's Department 802,066 839,175 875,219 73,153Special Patrols 1,985 4,000 4,000 2,015Administration of the Sexual Offender Registry 1,331 1,394 1,394 63Jail 421,849 367,351 468,521 46,672Commissary 691 2,550 2,550 1,859Fire Prevention and Control 119,839 241,750 250,898 131,059Other Emergency Management 48,046 31,467 42,427 (5,619)

Public Health and WelfareLocal Health Center 124,304 138,948 148,857 24,553Rabies and Animal Control 5,389 5,000 5,389 0Ambulance/Emergency Medical Services 354,235 361,625 370,054 15,819Alcohol and Drug Programs 1,032 2,430 2,430 1,398Regional Mental Health Center 2,500 2,500 2,500 0

Social, Cultural, and Recreational ServicesSenior Citizens Assistance 8,500 8,500 8,500 0

(Continued)

Budgeted Amounts

26

Exhibit C-5


in Fund Balance - Actual and BudgetGeneral Fund (Cont.)



Expenditures (Cont.)Social, Cultural, and Recreational Services (Cont.)

Libraries $ 115,211 $ 111,188 $ 116,053 $ 842Parks and Fair Boards 78,906 72,301 88,301 9,395

Agriculture and Natural ResourcesAgricultural Extension Service 68,974 67,452 72,948 3,974Forest Service 350 350 350 0Soil Conservation 9,264 5,798 9,448 184

Other OperationsTourism 4,459 5,750 5,750 1,291Veterans' Services 1,827 2,327 2,327 500Other Charges 8,398 7,500 8,398 0Employee Benefits 607,154 681,300 669,904 62,750

Total Expenditures $ 3,803,243 $ 4,002,505 $ 4,226,250 $ 423,007

Excess (Deficiency) of RevenuesOver Expenditures $ 86,403 $ (578,507) $ (611,508) $ 697,911

Other Financing Sources (Uses)Transfers In $ 0 $ 30,000 $ 0 $ 0

Total Other Financing Sources $ 0 $ 30,000 $ 0 $ 0

Net Change in Fund Balance $ 86,403 $ (548,507) $ (611,508) $ 697,911Fund Balance, July 1, 2015 1,099,606 846,631 846,631 252,975

Fund Balance, June 30, 2016 $ 1,186,009 $ 298,124 $ 235,123 $ 950,886


Budgeted Amounts

27

Exhibit C-6


in Fund Balance - Actual and BudgetHighway/Public Works FundFor the Year Ended June 30, 2016



RevenuesLocal Taxes $ 47,658 $ 45,470 $ 45,470 $ 2,188Other Local Revenues 1,529 2,500 2,500 (971)State of Tennessee 1,366,367 1,334,620 1,334,620 31,747Federal Government 68,526 0 1,389 67,137

Total Revenues $ 1,484,080 $ 1,382,590 $ 1,383,979 $ 100,101

ExpendituresHighways

Administration $ 195,017 $ 200,845 $ 200,845 $ 5,828Highway and Bridge Maintenance 586,671 703,150 627,539 40,868Operation and Maintenance of Equipment 121,177 166,695 149,695 28,518Other Charges 47,212 52,100 50,100 2,888Employee Benefits 26,869 39,000 27,000 131Capital Outlay 861,680 330,000 867,000 5,320


Excess (Deficiency) of RevenuesOver Expenditures $ (354,546) $ (109,200) $ (538,200) $ 183,654

Net Change in Fund Balance $ (354,546) $ (109,200) $ (538,200) $ 183,654Fund Balance, July 1, 2015 729,094 545,605 729,094 0

Fund Balance, June 30, 2016 $ 374,548 $ 436,405 $ 190,894 $ 183,654


Budgeted Amounts

28

Exhibit D-1

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Net PositionProprietary FundJune 30, 2016

MajorEnterprise

FundWater

andSewer

Department

ASSETS

Current Assets:Cash and Cash Equivalents $ 671,435Inventories 78,817Accounts Receivable 78,873Allowance for Uncollectibles (2,092)Prepaid Items 8,021Other Receivables 5,543Unbilled Charges for Services 84,243

Total Current Assets $ 924,840

Noncurrent Assets:Restricted Assets:Customer Deposits $ 520

Capital Assets:Assets Not Depreciated:Land 92,459Construction in Progress 1,186,027Assets Net of Accumulated Depreciation:Utility Plant in Service 11,501,432

Total Noncurrent Assets $ 12,780,438Total Assets $ 13,705,278

LIABILITIES

Current Liabilities:Accounts Payable $ 497,942Accrued Payroll 13,982Accrued Leave 17,923Accrued Interest Payable 6,122Current Portion of Long-term Liabilities 179,190Deferred Fees 4,504Customer Deposits 25,202

Total Current Liabilities $ 744,865

Noncurrent Liabilities:Due in More Than One Year $ 5,303,629

Total Noncurrent Liabilities $ 5,303,629Total Liabilities $ 6,048,494

NET POSITION

Net Investment in Capital Assets $ 7,297,099Unrestricted 359,685

Total Net Position $ 7,656,784


29

Exhibit D-2

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Revenues, Expenses, and Changes in Net PositionProprietary FundFor the Year Ended June 30, 2016

Operating Revenues Charges for Current Services $ 1,813,051Total Operating Revenues $ 1,813,051

Operating Expenses Public Health and Welfare $ 1,164,975 Depreciation 499,989Total Operating Expenses $ 1,664,964Operating Income (Loss) $ 148,087

Nonoperating Revenues (Expenses) Investment Income $ 1,476 Interest Expense (181,636) Loss on Disposal of Capital Assets (560)Total Nonoperating Revenues (Expenses) $ (180,720)

Income (Loss) Before Contributions, Grants, and Transfers $ (32,633)Tap Fees in Excess of Costs 17,065Contributions 12,884Grants 80,530

Change in Net Position $ 77,846Net Position, July 1, 2015 7,578,938

Net Position, June 30, 2016 $ 7,656,784


Department

Major Enterprise

FundWaterand

Sewer

30

Exhibit D-3

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Cash FlowsProprietary FundFor the Year Ended June 30, 2016

Cash Flows from Operating Activities Receipts from Customers and Users $ 1,883,871 Payments to Suppliers (651,985) Payments to Employees (600,618)Net Cash Provided By (Used In) Operating Activities $ 631,268

Cash Flows from Capital and Related Financing Activities Purchases of Capital Assets $ (668,842) Loan Proceeds 580,579 Contributions, Grants, and Transfers in Aid of Construction 110,479 Principal Payments on Long-term Debt (410,125) Interest Payments on Long-term Debt (182,099)Net Cash Provided By (Used In) Capital and Related Financing Activities $ (570,008)

Cash Flows from Investing Activities Proceeds from Certificates of Deposit $ 105,000 Investment Income 1,476Net Cash Provided By (Used In) Investing Activities $ 106,476

Increase (Decrease) in Cash $ 167,736Cash, July 1, 2015 501,784

Cash, June 30, 2016 $ 669,520

(Continued)

DepartmentSewer

MajorEnterprise

FundWaterand

31

Exhibit D-3

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Cash FlowsProprietary Fund (Cont.)

Reconciliation of Net Operating Income (Loss) to Net Cash Provided By (Used In) Operating ActivitiesOperating Income (Loss) $ 148,087Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Provided By (Used In) Operating Activities: Depreciation and Amortization Expense 499,989 Changes in Assets and Liabilities: (Increase) Decrease in Accounts Receivable (3,248) (Increase) Decrease in Other Assets 17,909 (Increase) Decrease in Other Accrued Revenue (3,998) (Increase) Decrease in Inventories (21,431) Increase (Decrease) in Accounts Payable (973) Increase (Decrease) in Accrued Wages and Payroll (7,697) Increase (Decrease) in Accrued Vacation Pay 7 Increase (Decrease) in Customer Deposits and Deferred Fees 2,623

Net Cash Provided By (Used In) Operating Activities $ 631,268

Reconciliation of Cash With Statement of Net Position Cash and Cash Equivalents Per Net Position $ 671,435 Certificates of Deposit (1,915)

Cash, June 30, 2016 $ 669,520

Schedule of Capital Activities That Did Not Result in Cash Payments Purchase of Capital Assets on Account-net of prior year's amount $ 423,991


SewerDepartment

MajorEnterprise

FundWaterand

32

Exhibit E

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Fiduciary Assets and LiabilitiesFiduciary FundJune 30, 2016

ASSETS

Cash $ 25,257

Total Assets $ 25,257

LIABILITIES

Due to Litigants, Heirs, and Others $ 25,257

Total Liabilities $ 25,257


AgencyFund

33

Note Page(s)

I. Summary of Significant Accounting PoliciesA. Reporting Entity 35B. Government-wide and Fund Financial Statements 36C. Measurement Focus, Basis of Accounting, and Financial

Statement Presentation 37D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and

Net Position/Fund Balance1. Deposits and Investments 392. Receivables and Payables 403. Inventories 414. Capital Assets 415. Deferred Outflows/Inflows of Resources 426. Compensated Absences 427. Long-term Obligations 438. Net Position and Fund Balance 449. Minimum Fund Balance Policy 45

E. Pension Plans 46II. Reconciliation of Government-wide and Fund Financial Statements

A. Explanation of Certain Differences Between the Governmental FundBalance Sheet and the Government-wide Statement of Net Position 46

B. Explanation of Certain Differences Between the Governmental FundStatement of Revenues, Expenditures, and Changes in Fund Balancesand the Government-wide Statement of Activities 47

III. Stewardship, Compliance, and AccountabilityA. Budgetary Information 47B. Expenditures Exceeded Appropriations 48

IV. Detailed Notes on All FundsA. Deposits and Investments 48B. Capital Assets 49C. Construction Commitments 52D. Long-term Obligations 52E. On-Behalf Payments 56

V. Other InformationA. Risk Management 56B. Accounting Changes 57C. Contingent Liabilities 58D. Joint Ventures 58E. Retirement Commitments 59F. Other Postemployment Benefits (OPEB) 81G. Purchasing Law 84

VI. Other Notes - Water and Sewer Department (Enterprise Fund) 85


Index of Notes to the Financial StatementsLYNCHBURG, MOORE COUNTY, TENNESSEE

34


NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2016

I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Metropolitan Government of Lynchburg, Moore County’s financial statementsare presented in accordance with generally accepted accounting principles (GAAP).The Governmental Accounting Standards Board (GASB) is responsible forestablishing GAAP for state and local governments.

The following are the more significant accounting policies of the metropolitangovernment:

A. Reporting Entity

The Metropolitan Government of Lynchburg, Moore County, is a publicmunicipal corporation governed by an elected 15-member MetropolitanCouncil. As required by GAAP, these financial statements present themetropolitan government (the primary government) and its component units.The financial statements of the Moore County Emergency CommunicationsDistrict, a component unit requiring discrete presentation, were excludedfrom this report due to materiality calculations; therefore, the effect of itsomission did not affect our opinion thereon. The component units discussedbelow are included in the metropolitan government’s reporting entity becauseof the significance of their operational or financial relationships with themetropolitan government.

Discretely Presented Component Units – The following entities meet thecriteria for discretely presented component units of the metropolitangovernment. They are reported in separate columns in the government-widefinancial statements to emphasize that they are legally separate from themetropolitan government.

The Metropolitan School Department operates the public school system in thecounty, and the voters of Moore County elect its board. The SchoolDepartment is fiscally dependent on the metropolitan government because itmay not issue debt, and its budget and property tax levy are subject to theMetropolitan Council’s approval. The School Department’s taxes are leviedunder the taxing authority of the metropolitan government and are includedas part of the metropolitan government’s total tax levy.

The Moore County Emergency Communications District provides a simplifiedmeans of securing emergency services through a uniform emergency numberfor the residents of Moore County, and the Metropolitan Council appoints itsgoverning body. The district is funded primarily through a service chargelevied on telephone services. Before the issuance of most debt instruments,

35

the district must obtain the Metropolitan Council’s approval. The financial statements of the Moore County Emergency Communications District were not material to the component units’ opinion unit and therefore have been omitted from this report.

The School Department does not issue separate financial statements from those of the metropolitan government. Therefore, basic financial statements of the School Department are included in this report as listed in the table of contents. Complete financial statements of the Moore County Emergency Communications District can be obtained from its administrative office at the following address:

Administrative Office:

Moore County Emergency Communications District 1333 Main Street Lynchburg, TN 37352

B. Government-wide and Fund Financial Statements

The government-wide financial statements (i.e., the Statement of NetPosition and the Statement of Activities) report information on all of thenonfiduciary activities of the primary government and its component units.For the most part, the effect of interfund activity has been removed fromthese statements. Governmental activities are normally supported by taxes andintergovernmental revenues. Business-type activities, which rely to asignificant extent on fees and charges, are required to be reported separatelyfrom governmental activities in government-wide financial statements. Theprimary government has one business-type activity to report, theMetropolitan Lynchburg – Moore County Water and Sewer Department.Likewise, the primary government is reported separately from certain legallyseparate component units for which the primary government is financiallyaccountable. The Metropolitan School Department component unit onlyreports governmental activities in the government-wide financial statements.

The Statement of Activities demonstrates the degree to which the directexpenses of a given function are offset by program revenues. Direct expensesare those that are clearly identifiable with a specific function. Programrevenues include (1) charges to customers or applicants who purchase, use, ordirectly benefit from goods, services, or privileges provided by a givenfunction and (2) grants and contributions that are restricted to meeting theoperational or capital requirements of a particular function. Taxes and otheritems not properly included among program revenues are reported instead asgeneral revenues.

36

The Metropolitan Government of Lynchburg, Moore County issues all debt for the discretely presented Metropolitan School Department. There were no debt issues contributed by the metropolitan government to the School Department during the year ended June 30, 2016.

Separate financial statements are provided for governmental funds, the proprietary fund, and the fiduciary fund. The fiduciary fund is excluded from the government-wide financial statements. Major individual governmental funds and the major enterprise fund are reported as separate columns in the fund financial statements.

C. Measurement Focus, Basis of Accounting, and Financial StatementPresentation

The government-wide financial statements are reported using the economicresources measurement focus and the accrual basis of accounting, as are theproprietary and fiduciary funds financial statements, except for agency funds,which have no measurement focus. Revenues are recorded when earned, andexpenses are recorded when a liability is incurred, regardless of the timing ofrelated cash flows. Property taxes are recognized as revenues in the year forwhich they are levied. Grants and similar items are recognized as revenue assoon as all eligibility requirements imposed by the provider have been met.

Fund financial statements of the metropolitan government are organized intofunds, each of which is considered to be a separate accounting entity. Eachfund is accounted for by providing a separate set of self-balancing accountsthat constitute its assets, deferred outflow of resources, liabilities, deferredinflow of resources, fund equity, revenues, and expenditures/expenses. Fundsare organized into three major categories: governmental, proprietary, andfiduciary. An emphasis is placed on major funds within the governmental andproprietary categories. The metropolitan government only reports oneproprietary fund, the Metropolitan Lynchburg – Moore County Water andSewer Department Fund, an enterprise fund.

Separate financial statements are provided for governmental funds, theproprietary fund, and the fiduciary fund. Major individual governmentalfunds and the major enterprise fund are reported as separate columns in thefund financial statements. All other governmental funds are aggregated intoa single column on the fund financial statements. The fiduciary fund isreported in a single column.

Governmental fund financial statements are reported using the currentfinancial resources measurement focus and the modified accrual basis ofaccounting. Revenues are recognized as soon as they become both measurableand available. Revenues are considered to be available when they arecollectible within the current period or soon enough thereafter to payliabilities of the current period. For this purpose, the metropolitangovernment considers revenues other than grants to be available if they arecollected within 30 days after year-end. Grants and similar items are

37

recognized as revenue as soon as all eligibility requirements imposed by the provider have been met and the revenues are available. The metropolitan government considers grants and similar revenues to be available if they are collected within 60 days after year-end. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Principal and interest on long-term debt are recognized as fund liabilities when due or when amounts have been accumulated in the General Debt Service Fund for payments to be made early in the following year.

Property taxes for the period levied, in-lieu-of tax payments, sales taxes, interest, and miscellaneous taxes are all considered to be susceptible to accrual and have been recognized as revenues of the current period. Applicable business taxes, litigation taxes, state-shared excise taxes, fines, forfeitures, and penalties are not susceptible to accrual since they are not measurable (reasonably estimable). All other revenue items are considered to be measurable and available only when the metropolitan government receives cash.

Proprietary fund and fiduciary fund financial statements are reported using the economic resources measurement focus, except for agency funds, which have no measurement focus, and the accrual basis of accounting. Revenues are recognized when earned, and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

The metropolitan government reports the following major governmental funds:

General Fund – This is the metropolitan government’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

Highway/Public Works Fund – This special revenue fund accounts for transactions of the metropolitan government’s Highway Department. Local and state gasoline/fuel taxes are the foundational revenues of this fund.

General Debt Service Fund – This fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds.

General Capital Projects Fund – The General Capital Projects fund accounts for resources accumulated to be used for the acquisition, construction, and/or renovation projects of the metropolitan government.

38

The metropolitan government reports the following major proprietary fund:

Water and Sewer Department Fund – This fund accounts for water and sewer services provided by the metropolitan government.

Additionally, the metropolitan government reports the following fund type:

Agency Fund – This fund accounts for amounts collected in an agency capacity by the constitutional officers. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. They do, however, use the accrual basis of accounting to recognize receivables and payables.

The discretely presented Metropolitan School Department reports the following major governmental fund:

General Purpose School Fund – This fund is the primary operating fund for the School Department. It is used to account for general operations of the School Department.

Additionally, the Metropolitan School Department reports the following fund type:

Special Revenue Funds – These funds account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects.

Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and NetPosition/Fund Balance

1. Deposits and Investments

State statutes authorize the government to make direct investmentsin bonds, notes, or treasury bills of the U.S. government andobligations guaranteed by the U.S. government or any of its agencies;deposit accounts at state and federal chartered banks and savings andloan associations; repurchase agreements; the State Treasurer’sInvestment Pool; bonds of any state or political subdivision rated A orhigher by any nationally recognized rating service; nonconvertibledebt securities of certain federal government sponsored enterprises;and the metropolitan government’s own legally issued bonds or notes.

39

The metropolitan trustee maintains a cash and internal investment pool that is used by all funds (excluding the Water and Sewer Fund, enterprise fund) and the discretely presented Metropolitan School Department. Each fund’s portion of this pool is displayed on the balance sheets or statements of net position as Equity in Pooled Cash and Investments. Most income from these pooled investments is assigned to the General Fund. The metropolitan government and the School Department have adopted a policy of reporting U.S. Treasury obligations, U.S. agency obligations, and repurchase agreements with maturities of one year or less when purchased on the balance sheet at amortized cost. Certificates of deposit are reported at cost. Investments in the State Treasurer’s Investment Pool are reported at amortized cost using a Stable Net Asset Value. State statutes require the state treasurer to administer the pool under the same terms and conditions, including collateral requirements, as prescribed for other funds invested by the state treasurer. All other investments are reported at fair value. No investments required to be reported at fair value were held at the balance sheet date.

2. Receivables and Payables

All ambulance and property taxes receivables are shown withallowances for uncollectibles. Ambulance receivables allowances foruncollectibles are based on historical collection data. The allowance foruncollectible property taxes is equal to .4 percent of total taxes levied.

Property taxes receivable are recognized as of the date an enforceablelegal claim to the taxable property arises. This date is January 1 andis referred to as the lien date. However, revenues from property taxesare recognized in the period for which the taxes are levied, which isthe ensuing fiscal year. Since the receivable is recognized before theperiod of revenue recognition, the entire amount of the receivable, lessan estimated allowance for uncollectible taxes is reported as adeferred inflow of resources as of June 30.

Property taxes receivable are also reported as of June 30 for the taxesthat are levied, collected, and reported as revenue during the currentfiscal year. These property taxes receivable are presented on thebalance sheet as a deferred inflow of resources to reflect amounts notavailable as of June 30. Property taxes collected within 30 days ofyear-end are considered available and accrued. The allowance foruncollectible taxes represents the estimated amount of the receivablethat will be filed in court for collection. Delinquent taxes filed in courtfor collection are not included in taxes receivable since they areneither measurable nor available.

40

Property taxes are levied as of the first Monday in October. Taxes become delinquent and begin accumulating interest and penalty the following March 1. Suit must be filed in Chancery Court between the following February 1 to April 1 for any remaining unpaid taxes. Additional costs attach to delinquent taxes after a court suit has been filed.

3. Inventories

Inventories of the School Department are recorded at cost, determinedon the first-in, first-out method. Inventories of governmental funds arerecorded as expenditures when consumed rather than whenpurchased. Inventories are offset in the nonspendable fund balanceaccount in governmental funds.

4. Capital Assets

Governmental funds do not capitalize the cost of capital outlays; thesefunds report capital outlays as expenditures upon acquisition.

Capital assets, which include property, plant, equipment, andinfrastructure assets (e.g., roads, bridges, and similar items acquiredafter July 1, 2003), are reported in the governmental andbusiness-type columns in the government-wide financial statements.Capital assets are defined by the government as assets with an initial,individual cost of $5,000 or more ($25,000 for infrastructure) and anestimated useful life of more than one year. Such assets are recordedat historical cost or estimated historical cost if purchased orconstructed. Donated capital assets are recorded at estimated fairmarket value at the date of donation.

The costs of normal maintenance and repairs that do not add to thevalue of the asset or materially extend assets’ lives are not capitalized.

Major outlays for capital assets and improvements are capitalized asprojects are constructed.

Property, plant, equipment, and infrastructure of the primarygovernment (excluding the Water and Sewer Fund, enterprise fund)and the discretely presented School Department are depreciated usingthe straight-line method over the following estimated useful lives:

41

Assets Years

Buildings and Improvements 20 - 50Other Capital Assets 5 - 15Infrastructure: Roads 10 - 15 Bridges 40

5. Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Net Position will sometimesreport a separate section for deferred outflows of resources. Thisseparate financial statement element, deferred outflows of resources,represents a consumption of net position that applies to a futureperiod(s) and so will not be recognized as an outflow of resources(expense/expenditure) until then. The government has items thatqualify for reporting in this category. Accordingly, the items arereported in the government-wide Statement of Net Position and thegovernmental funds balance sheet. These items are for pensionchanges in experience, changes in proportionate share of net pensionasset, and employer contributions made to the pension plan after themeasurement date.

In addition to liabilities, the Statement of Net Position will sometimesreport a separate section for deferred inflows of resources. Thisseparate financial statement element, deferred inflows of resources,represents an acquisition of net position that applies to a futureperiod(s) and so will not be recognized as an inflow of resources(revenue) until that time. The government has items that qualify forreporting in this category. Accordingly, the items are reported in thegovernment-wide Statement of Net Position and the governmentalfunds balance sheet. These items are from the following sources:deferred current property taxes, pension changes in experience,pension changes in investment earnings, and changes in proportionateshare of net pension asset. These amounts are deferred andrecognized as an inflow of resources in the period that the amountsbecome available.

6. Compensated Absences

Primary Government

It is the metropolitan government’s policy to permit employees toaccumulate earned but unused vacation and sick pay benefits. Thereis no liability for unpaid accumulated sick leave since the metropolitangovernment does not have a policy to pay any amounts whenemployees separate from service with the government. All vacation

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pay is accrued when incurred for the metropolitan government. A liability for vacation pay is reported in governmental funds only if amounts have matured, for example, as a result of employee resignations and retirements.

Discretely Presented Metropolitan School Department

The general policy of the School Department for all professional personnel (teachers) permits the unlimited accumulation of unused sick leave days. The granting of sick leave for professional personnel has no guaranteed payment attached and therefore requires no accrual or recording. Noncertified personnel of the School Department earn varying amounts of annual and sick leave days. The School Department will only pay for accumulated sick leave balances in excess of 30 days that have accrued during the current year. Sick leave may only be paid in December or June. Therefore, no liability for accrued sick leave exists. A liability for annual leave is reported in governmental funds only if amounts have matured, for example, as a result of employee resignations and retirements.

7. Long-term Obligations

In the government-wide financial statements, long-term debt andother long-term obligations are reported as liabilities in the applicablegovernmental activities Statement of Net Position. Debt premiumsand discounts are deferred and amortized over the life of the new debtusing the straight-line method. Debt issuance costs are expensed inthe period incurred. In refunding transactions, the difference betweenthe reacquisition price and the net carrying amount of the old debt isreported as a deferred outflow of resources or a deferred inflow ofresources and recognized as a component of interest expense in asystematic and rational manner over the remaining life of therefunded debt or the life of the new debt issued, whichever is shorter.

In the fund financial statements, governmental funds recognize debtpremiums and discounts, as well as debt issuance costs, during thecurrent period. The face amount of debt issued is reported as otherfinancing sources. Premiums received on debt issuances are reportedas other financing sources, while discounts on debt issuances arereported as other financing uses. Issuance costs, whether or notwithheld from the actual debt proceeds received, are reported as debtservice expenditures.

Only the matured portion (the portion that has come due for payment)of long-term indebtedness, including notes payable, is recognized as aliability and expenditure in the governmental fund financialstatements. Liabilities and expenditures for other long-termobligations, including compensated absences and other postemployment

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benefits, are recognized to the extent that the liabilities have matured (come due for payment) each period.

8. Net Position and Fund Balance

In the government-wide financial statements and the proprietary fundin the fund financial statements, equity is classified as net positionand displayed in three components:

a. Net investment in capital assets – Consists of capital assets,including restricted capital assets, net of accumulateddepreciation and reduced by the outstanding balances of anybonds, mortgages, notes, or other borrowings that are attributableto the acquisition, construction, or improvement of those assets.

b. Restricted net position – Consists of net position with constraintsplaced on the use either by (1) external groups such as creditors,grantors, contributors, or laws or regulations of other governmentsor (2) law through constitutional provisions or enablinglegislation.

c. Unrestricted net position – All other net position that does notmeet the definition of restricted or net investment in capitalassets.

As of June 30, 2016, the metropolitan government had $7,206,743 in outstanding debt for capital purposes for the discretely presented Metropolitan School Department. This debt is a liability of the metropolitan government, but the capital assets acquired are reported in the financial statements of the School Department. Therefore, the metropolitan government has incurred a liability significantly decreasing its unrestricted net position with no corresponding increase in the metropolitan government’s capital assets.

It is the metropolitan government’s policy that restricted amounts would be reduced first followed by unrestricted amounts when expenditures are incurred for purposes for which both restricted and unrestricted fund balance is available. Also, it is the metropolitan government’s policy that committed amounts would be reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of these unrestricted fund balance classifications could be used.

In the fund financial statements, governmental funds report fund balance in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in these funds can be spent. These classifications may consist of the following:

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Nonspendable Fund Balance – includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.

Restricted Fund Balance – includes amounts that have constraints placed on the use of the resources that are either (a) externally imposed by creditors, grantors, contributors orlaws and regulations of other governments or (b) imposed bylaw through constitutional provisions or enabling legislation.

Committed Fund Balance – includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal resolutions of the Metropolitan Council, the county’s highest level of decision-making authority and the Board of Education, the School Department’s highest level of decision-making authority, and shall remain binding unless removed in the same manner.

Assigned Fund Balance – includes amounts that are constrained by the metropolitan government’s intent to be used for specific purposes, but are neither restricted nor committed (excluding stabilization arrangements). The Metropolitan Council has by resolution authorized the Budget Committee to make assignments for the general government. The Board of Education makes assignments for the School Department.

Unassigned Fund Balance – the residual classification of the General and General Purpose School funds. This classification represents fund balance that has not been assigned to other funds and has not been restricted, committed, or assigned to specific purposes within the General and General Purpose School funds.

9. Minimum Fund Balance Policy

To provide management with appropriate guidelines and direction toassist in making sound decisions related to managing the fundbalance of certain governmental funds, the following minimum fundbalance policy exists and consists of the sum of committed, assigned,and unassigned fund balance:

General Fund – five percent of current-year appropriations.

General Debt Service Fund – the county will typically have at least75 percent of budgeted annual expenditures as fund balance.

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E. Pension Plans

Primary Government

For purposes of measuring the net pension liability, deferred outflows ofresources and deferred inflows of resources related to pensions, and pensionexpense, information about the fiduciary net position of the MetropolitanGovernment of Lynchburg, Moore County’s participation in the PublicEmployee Retirement Plan of the Tennessee Consolidated RetirementSystem (TCRS), and additions to/deductions from the metropolitangovernment’s fiduciary net position have been determined on the same basisas they are reported by the TCRS for the Public Employee Retirement Plan.For this purpose, benefits (including refunds of employee contributions) arerecognized when due and payable in accordance with the benefit terms of thePublic Employee Retirement Plan of TCRS. Investments are reported at fairvalue.


For purposes of measuring the net pension liability, deferred outflows ofresources and deferred inflows of resources related to pensions, and pensionexpense, information about the fiduciary net position of the TeacherRetirement Plan and the Teacher Legacy Pension Plan in the TennesseeConsolidated Retirement System, and additions to/deductions from fiduciarynet position have been determined on the same basis as they are reported bythe TCRS. For this purpose, benefits (including refunds of employeecontributions) are recognized when due and payable in accordance with thebenefit terms of the Teacher Retirement Plan and the Teacher LegacyPension Plan. Investments are reported at fair value.

II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIALSTATEMENTS

A. Explanation of certain differences between the governmental fundbalance sheet and the government-wide Statement of Net Position

Primary Government

Exhibit C-2 includes explanations of the nature of individual elements ofitems required to reconcile the balance sheet of governmental funds with thegovernment-wide Statement of Net Position.


Exhibit J-3 includes explanations of the nature of individual elements ofitems required to reconcile the balance sheet of governmental funds with thegovernment-wide Statement of Net Position.

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B. Explanation of certain differences between the governmental fundStatement of Revenues, Expenditures, and Changes in FundBalances and the government-wide Statement of Activities

Primary Government

Exhibit C-4 includes explanations of the nature of individual elements ofitems required to reconcile the net change in fund balances – totalgovernmental funds with the change in net position of governmentalactivities reported in the government-wide Statement of Activities.


Exhibit J-5 includes explanations of the nature of individual elements ofitems required to reconcile the net change in fund balances – totalgovernmental funds with the change in net position of governmentalactivities reported in the government-wide Statement of Activities.

III. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

A. Budgetary Information

Annual budgets are adopted on a basis consistent with generally acceptedaccounting principles (GAAP) for all governmental funds except theConstitutional Officers - Fees Fund (special revenue fund), which is notbudgeted, and the capital projects funds, which adopt project length budgets.All annual appropriations lapse at fiscal year end.

The metropolitan government is required by state statute to adopt annualbudgets. Annual budgets are prepared on the basis in which current availablefunds must be sufficient to meet current expenditures. Expenditures andencumbrances may not legally exceed appropriations authorized by theMetropolitan Council and any authorized revisions. Unencumberedappropriations lapse at the end of each fiscal year.

The budgetary level of control is at the major category level established bythe County Uniform Chart of Accounts, as prescribed by the Comptroller ofthe Treasury of the State of Tennessee. Major categories are at thedepartment level (examples of General Fund major categories: CountyCommission, County Mayor/Executive, County Attorney, Election Commission,etc.). Management may make revisions within major categories, but only theMetropolitan Council may transfer appropriations between major categories.During the year, several supplementary appropriations were necessary.

The metropolitan government's budgetary basis of accounting is consistentwith GAAP, except instances in which encumbrances are treated as budgetedexpenditures. The difference between the budgetary basis and GAAP basis ispresented on the face of each budgetary schedule.

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B. Expenditures Exceeded Appropriations

Expenditures exceeded appropriations approved by the Metropolitan Councilin the Preservation of Records and Other Emergency Management majorappropriations categories (the legal level of control) of the General Fund by$972 and $5,619, respectively. Expenditures exceeded appropriations in theHealth Services and Other Student Support major appropriations categories(the legal level of control) of the General Purpose School Fund by $4,200 and$37,137, respectively. Expenditures that exceed appropriations are aviolation of state statutes. These expenditures in excess of appropriationswere funded by greater than anticipated revenues in the General andGeneral Purpose School funds.

IV. DETAILED NOTES ON ALL FUNDS

A. Deposits and Investments

The metropolitan government (excluding the Water and Sewer Fund,enterprise fund) and the Metropolitan School Department participate in aninternal cash and investment pool through the Office of Trustee. Themetropolitan trustee is the treasurer of the metropolitan government and inthis capacity is responsible for receiving, disbursing, and investing mostmetropolitan government funds. Each fund's portion of this pool is displayedon the balance sheets or statements of net position as Equity in Pooled Cashand Investments. Cash reflected on the balance sheets or statements of netposition represents nonpooled amounts held separately by individual funds.

Deposits

Legal Provisions. All deposits with financial institutions must be securedby one of two methods. One method involves financial institutions thatparticipate in the bank collateral pool administered by the state treasurer.Participating banks determine the aggregate balance of their public fundaccounts for the State of Tennessee and its political subdivisions. The amountof collateral required to secure these public deposits must equal at least105 percent of the average daily balance of public deposits held. Collateralsecurities required to be pledged by the participating banks to protect theirpublic fund accounts are pledged to the state treasurer on behalf of the bankcollateral pool. The securities pledged to protect these accounts are pledged inthe aggregate rather than against each account. The members of the poolmay be required by agreement to pay an assessment to cover any deficiency.Under this additional assessment agreement, public fund accounts covered bythe pool are considered to be insured for purposes of credit risk disclosure.

For deposits with financial institutions that do not participate in the bankcollateral pool, state statutes require that all deposits be collateralized withcollateral whose market value is equal to 105 percent of the uninsuredamount of the deposits. The collateral must be placed by the depository bank

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in an escrow account in a second bank for the benefit of the metropolitan government.

Investments

Legal Provisions. Counties are authorized to make direct investments in bonds, notes, or treasury bills of the U.S. government and obligations guaranteed by the U.S. government or any of its agencies; deposits at state and federal chartered banks and savings and loan associations; bonds of any state or political subdivision rated A or higher by any nationally recognized rating service; nonconvertible debt securities of certain federal government sponsored enterprises; and the metropolitan government’s own legally issued bonds or notes. These investments may not have a maturity greater than two years. The metropolitan government may make investments with longer maturities if various restrictions set out in state law are followed. Counties are also authorized to make investments in the State Treasurer’s Investment Pool and in repurchase agreements. Repurchase agreements must be approved by the state Comptroller’s Office and executed in accordance with procedures established by the State Funding Board. Securities purchased under a repurchase agreement must be obligations of the U.S. government or obligations guaranteed by the U.S. government or any of its agencies. When repurchase agreements are executed, the purchase of the securities must be priced at least two percent below the fair value of the securities on the day of purchase.

The metropolitan government had no pooled and nonpooled investments as of June 30, 2016.

B. Capital Assets

Capital assets activity for the year ended June 30, 2016, was as follows:

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Primary Government

Governmental Activities:

Balance Balance7-1-15 Increases Decreases 6-30-16

Capital Assets Not Depreciated:Land $ 393,779 $ 0 $ 0 $ 393,779Construction in Progress 88,639 1,753,088 (133,727) 1,708,000Total Capital Assets Not Depreciated $ 482,418 $ 1,753,088 $ (133,727) $ 2,101,779

Capital Assets Depreciated:Buildings and Improvements $ 2,390,846 $ 12,993 $ 0 $ 2,403,839Other Capital Assets 4,217,814 36,169 (97,343) 4,156,640Infrastructure 3,091,796 847,422 0 3,939,218Total Capital Assets Depreciated $ 9,700,456 $ 896,584 $ (97,343) $ 10,499,697

Less Accumulated Depreciation For:Buildings and Improvements $ 1,135,599 $ 52,663 $ 0 $ 1,188,262Other Capital Assets 3,306,064 188,377 (97,343) 3,397,098Infrastructure 811,550 215,685 0 1,027,235Total Accumulated Depreciation $ 5,253,213 $ 456,725 $ (97,343) $ 5,612,595

Total Capital Assets Depreciated, Net $ 4,447,243 $ 439,859 $ 0 $ 4,887,102

Governmental Activities Capital Assets, Net $ 4,929,661 $ 2,192,947 $ (133,727) $ 6,988,881

Depreciation expense was charged to functions of the primary government as follows:

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General Government $ 14,613 Public Safety 77,312 Public Health and Welfare 58,738 Social, Cultural, and Recreational Services 60,621 Highway/Public Works 245,441

Total Depreciation Expense - Governmental Activities $ 456,725



Balance Balance7-1-15 Increases Decreases 6-30-16

Capital Assets Not Depreciated:Land $ 39,342 $ 0 $ 0 $ 39,342Construction in Progress 102,245 209,950 (102,245) 209,950Total Capital Assets Not Depreciated $ 141,587 $ 209,950 $ (102,245) $ 249,292

Capital Assets Depreciated:Buildings and Improvements $ 19,649,496 $ 205,441 $ 0 $ 19,854,937Other Capital Assets 1,435,869 85,252 (100,573) 1,420,548Total Capital Assets Depreciated $ 21,085,365 $ 290,693 $ (100,573) $ 21,275,485

Less Accumulated Depreciation For:Buildings and Improvements $ 8,186,000 $ 415,329 $ 0 $ 8,601,329Other Capital Assets 790,841 74,895 (87,717) 778,019Total Accumulated Depreciation $ 8,976,841 $ 490,224 $ (87,717) $ 9,379,348

Total Capital Assets Depreciated, Net $ 12,108,524 $ (199,531) $ (12,856) $ 11,896,137

Governmental Activities Capital Assets, Net $ 12,250,111 $ 10,419 $ (115,101) $ 12,145,429

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Depreciation expense was charged to functions of the School Department as follows:


Instruction $ 393,990Support Services 95,887Operation of Non-instructional Services 347

Total Depreciation Expense - Governmental Activities $ 490,224

C. Construction Commitments

At June 30, 2016, the General Capital Projects Fund had uncompletedconstruction contracts of approximately $147,973 for the construction of thejail expansion. Funding has been received for these future expenditures.

D. Long-term Obligations

Primary Government

Notes and Other Loans

The metropolitan government issues other loans to provide funds for theconstruction of major capital facilities for the primary government and thediscretely presented School Department. A capital outlay note was alsoissued to fund capital facilities.

Capital outlay notes and other loans are direct obligations and pledge the fullfaith and credit of the government. The capital outlay note and other loansoutstanding were issued for original terms of up to 12 years for notes and upto 28 years for other loans. Repayment terms are generally structured withincreasing amounts of principal maturing as interest requirements decreaseover the term of the debt. The note and other loans included in long-termdebt as of June 30, 2016, will be retired from the General Debt Service Fund.

Capital outlay notes and other loans outstanding as of June 30, 2016, forgovernmental activities are as follows:

OriginalInterest Final Amount Balance

Type Rate Maturity of Issue 6-30-16

Capital Outlay Notes 2.75 % 1-11-28 $ 1,600,000 $ 1,600,000Other Loans variable 5-25-35 11,271,980 8,596,980

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During the 2007-08 year, the metropolitan government entered into two loan agreements with the Montgomery County Public Building Authority. Under these loan agreements, the authority loaned $8,300,000 and $2,971,980 to the metropolitan government for various capital projects. These loans are repayable at interest rates that are tax-exempt variable rates determined by the remarketing agent daily or weekly, depending on the particular program. In addition, the metropolitan government pays various other fees (trustee, letter of credit, and debt remarketing) in connection with these loans. At June 30, 2016, the variable interest rate was .53 percent, and other fees totaled approximately .55 percent (letter of credit), .08 percent (remarketing), and $85 per month (trustee) for the $8,300,000 loan. At June 30, 2016, the variable interest rate was .52 percent, and other fees totaled approximately .54 percent (letter of credit), .08 percent month (remarketing), and $85 per month (trustee) for the $2,971,980 loan.

The annual requirements to amortize notes and other loans outstanding as of June 30, 2016, including interest payments and other loan fees, are presented in the following tables:

Year EndingJune 30 Principal Interest Total

2017 $ 133,333 $ 44,000 $ 177,3332018 133,333 40,333 173,6662019 133,334 36,667 170,0012020 133,333 33,000 166,3332021 133,333 29,333 162,6662022-2026 666,667 91,667 758,3342027-2028 266,667 11,000 277,667

Total $ 1,600,000 $ 286,000 $ 1,886,000

Notes

Year EndingJune 30 Principal Interest Other Fees Total

2017 $ 391,000 $ 45,298 $ 55,578 $ 491,8762018 405,000 43,243 53,149 501,3922019 421,000 41,115 50,634 512,7492020 435,000 38,903 48,019 521,9222021 451,000 36,617 45,317 532,9342022-2026 2,518,000 145,719 182,415 2,846,1342027-2031 2,263,980 78,649 99,995 2,442,6242032-2035 1,712,000 23,039 31,221 1,766,260

Total $ 8,596,980 $ 452,583 $ 566,328 $ 9,615,891

Other Loans

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There is $2,281,644 available in the General Debt Service Fund to service long-term debt. Debt per capita, including notes and other loans totaled $1,603, based on the 2010 federal census.

Changes in Long-term Obligations

Long-term obligations activity for the year ended June 30, 2016, was as follows:

Governmental Activities:Other

Notes Loans

Balance, July 1, 2015 $ 0 $ 8,973,980Additions 1,600,000 0Reductions 0 (377,000)

Balance, June 30, 2016 $ 1,600,000 $ 8,596,980

Balance Due Within One Year $ 133,333 $ 391,000

Compensated Absences

Balance, July 1, 2015 $ 102,422Additions 124,724Reductions (112,979)

Balance, June 30, 2016 $ 114,167

Balance Due Within One Year $ 45,667

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Analysis of Noncurrent Liabilities Presented on Exhibit A:

Total Noncurrent Liabilities, June 30, 2016 $ 10,311,147Less: Balance Due Within One Year (570,000)

Noncurrent Liabilities - Due in More Than One Year - Exhibit A $ 9,741,147

Compensated absences will be paid from the employing funds, primarily the General and Highway/Public Works funds.


Changes in Long-term Obligations

Long-term obligations activity for the School Department for the year ended June 30, 2016, was as follows:

Governmental Activities: OtherCompensated Postemployment

Absences Benefits

Balance, July 1, 2015 $ 17,888 $ 627,104Additions 15,230 153,905Reductions (13,390) (103,162)

Balance, June 30, 2016 $ 19,728 $ 677,847

Balance Due Within One Year $ 19,728 $ 0

Net PensionLiability -

Legacy Plan*

Balance, July 1, 2015 $ (15,977)Additions 1,419,733Reductions (1,361,821)

Balance, June 30, 2016 $ 41,935

Balance Due Within One Year $ 0

*The Legacy Plan had a Net Pension Asset balance on July 1, 2015.

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Analysis of Noncurrent Liabilities Presented on Exhibit A:

Total Noncurrent Liabilities, June 30, 2016 $ 739,510Less: Balance Due Within One Year (19,728)

Noncurrent Liabilities - Due in More Than One Year - Exhibit A $ 719,782

Compensated absences and other postemployment benefits will be paid from the employing funds, primarily the General Purpose School and School Federal Projects funds.

E. On-Behalf Payments

The State of Tennessee pays health insurance premiums for retired teacherson-behalf of the Metropolitan School Department. These payments are madeby the state to the Local Education Group Insurance Plan and the MedicareSupplement Plan. Both of these plans are administered by the State ofTennessee and reported in the state’s Comprehensive Annual FinancialReport. Payments by the state to the Local Education Group Insurance Planand the Medicare Supplement Plan for the year ended June 30, 2016, were$33,647 and $8,700, respectively. The School Department has recognizedthese on-behalf payments as revenues and expenditures in the GeneralPurpose School Fund.

V. OTHER INFORMATION

A. Risk Management

The metropolitan government and the discretely presented MetropolitanSchool Department participate in the Tennessee Risk Management Trust(TN-RMT), which is a public entity risk pool created under the auspices of theTennessee Governmental Tort Liability Act to provide governmentalinsurance coverage. The metropolitan government and the SchoolDepartment pay an annual premium to the TN-RMT for its general liability,property, casualty, and workers’ compensation insurance coverage. Thecreation of the TN-RMT provides for it to be self-sustaining through memberpremiums.

Employee Health Insurance

The metropolitan government continues to carry commercial insurance forrisks associated with the employees’ health insurance plan. Retirees do notparticipate in this plan. Settled claims have not exceeded this commercialcoverage in any of the past three fiscal years.

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The discretely presented Metropolitan School Department participates in the Local Education Group Insurance Fund (LEGIF), a public entity risk pool established to provide a program of health insurance coverage for employees of local education agencies. In accordance with Section 8-27-301, Tennessee Code Annotated (TCA), all local education agencies are eligible to participate. The LEGIF is included in the Comprehensive Annual Financial Report of the State of Tennessee, but the state does not retain any risk for losses by this fund. Section 8-27-303, TCA, provides for the LEGIF to be self-sustaining through member premiums.

B. Accounting Changes

Provisions of Governmental Accounting Standards Board (GASB) StatementNo. 72, Fair Value Measurement and Application; Statement No. 73,Accounting and Financial Reporting for Pensions and Related Assets that arenot within the Scope of GASB Statement No. 68, and Amendments to CertainProvisions of GASB Statements No. 67 and No. 68; Statement No. 76, TheHierarchy of Generally Accepted Accounting Principles for State and LocalGovernments; Statement No. 79, Certain External Investment Pools and PoolParticipants became effective for the year ended June 30, 2016.

GASB Statement No. 72, establishes general principles for measuring fairvalue and standards of accounting and financial reporting for assets andliabilities measured at fair value. This standard supersedes previousstatements as they relate to measuring fair value of certain assets andliabilities.

GASB Statement No. 73, established accounting and reporting requirementsfor pensions that are not administered through a trust account and alsoaddresses changes made to Statements No. 67 and No. 68. The changes toStatements No. 67 and No. 68 require new RSI disclosures concerning planinvestments and address specific payables to defined benefit plans.

GASB Statement No. 76, addresses changes made to the hierarchy ofgenerally accepted accounting principles. This standard supersedesStatement No. 55 and reduces the hierarchy from four to two categories.

GASB Statement No. 79, addresses issues related to certain externalinvestment pools and pool participants because of changes in Security andExchange rules relative to money market funds. This standard establishescriteria for an external investment pool to qualify for making the election tomeasure all of its investments at amortized cost rather than fair value forfinancial reporting purposes standards.

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C. Contingent Liabilities

The metropolitan government is involved in several pending lawsuits. Thecounty attorney estimates that the potential claims against the metropolitangovernment not covered by insurance resulting from such litigation would notmaterially affect the metropolitan government’s financial statements.

D. Joint Ventures

The Seventeenth Judicial District Drug Task Force (DTF) is a joint ventureformed by an interlocal agreement between the district attorney general ofthe Seventeenth Judicial District, Marshall, Lincoln, Moore, and Bedfordcounties, and various cities within these counties. The purpose of the DTF isto provide multi-jurisdictional law enforcement to promote the investigationand prosecution of drug-related activities. Funds for the operations of theDTF come primarily from federal grants, drug fines, and the forfeiture ofdrug-related assets to the DTF. The DTF is overseen by the district attorneygeneral and is governed by a board of directors, including the districtattorney general, sheriffs, and police chiefs of participating law enforcementagencies within the judicial district. The metropolitan government did notcontribute to the DTF for the year ended June 30, 2016.

The Interlocal Solid Waste Authority was formed by joint resolution of thecounties of Bedford, Franklin, Moore, and Lincoln and the municipalities ofTullahoma and Fayetteville to develop a solid waste regional plan. Eachparticipating County Commission or City Council appointed the authority’sboard for varying terms of office. The metropolitan government made nocontribution to the Interlocal Solid Waste Authority for the year ended June30, 2016.

The metropolitan government does not retain an equity interest in any of theabove-noted joint ventures.

Complete financial statements for the Seventeenth Judicial District DrugTask Force and the Interlocal Solid Waste Authority can be obtained fromtheir administrative offices at the following addresses:

Administrative Offices:

Office of District Attorney General Seventeenth Judicial District Drug Task Force P.O. Box 878 Fayetteville, TN 37334

Interlocal Solid Waste Authority c/o City of Tullahoma P.O. Box 807 Tullahoma, TN 37388

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E. Retirement Commitments

1. Tennessee Consolidated Retirement System (TCRS)

Primary Government

General Information About the Pension Plan

Plan Description. Certain employees of the metropolitan governmentare provided a defined benefit pension plan through the PublicEmployee Retirement Plan, an agent multiple-employer pension planadministered by the TCRS. The TCRS was created by state statuteunder Tennessee Code Annotated (TCA), Title 8, Chapters 34-37. TheTCRS Board of Trustees is responsible for the proper operation andadministration of the TCRS. The Tennessee Treasury Department, anagency in the legislative branch of state government, administers theplans of the TCRS. The TCRS issues a publicly available financialreport that can be obtained at www.treasury.tn.gov/tcrs.

Benefits Provided. TCA, Title 8, Chapters 34-37 establish the benefitterms and can be amended only by the Tennessee General Assembly.The chief legislative body may adopt the benefit terms permitted bystatute. Members are eligible to retire with an unreduced benefit atage 60 with five years of service credit or after 30 years of servicecredit regardless of age. Benefits are determined by a formula usingthe member’s highest five consecutive year average compensation andthe member’s years of service credit. Reduced benefits for earlyretirement are available to vested members at age 55. Members vestwith five years of service credit. Service related disability benefits areprovided regardless of length of service. Five years of service isrequired for non-service related disability eligibility. The servicerelated and non-service related disability benefits are determined inthe same manner as a service retirement benefit but are reduced tenpercent and include projected service credits. A variety of deathbenefits is available under various eligibility criteria.

Member and beneficiary annuitants are entitled to an automatic costof living adjustment (COLA) after retirement. A COLA is grantedeach July for annuitants retired prior to the second of July of theprevious year. The COLA is based on the change in the consumerprice index (CPI) during the prior calendar year, capped at threepercent, and applied to the current benefit. No COLA is granted if thechange in the CPI is less than one-half percent. A one percent COLAis granted if the CPI change is between one-half percent and onepercent. A member who leaves employment may withdraw theiremployee contributions plus any accumulated interest.

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Employees Covered by Benefit Terms. At the measurement date of June 30, 2015, the following employees were covered by the benefit terms:

Inactive Employees or Beneficiaries Currently Receiving Benefits 5Inactive Employees Entitled to But Not Yet Receiving Benefits 4Active Employees 8

Total 17

Contributions. Contributions for employees are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Employees contribute five percent of their salary. The metropolitan government makes employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. For the year ended June 30, 2015, the Actuarial Determined Contribution (ADC) for the metropolitan government was $57,406 based on a rate of 10.44 percent of covered payroll. By law, employer contributions are required to be paid. The TCRS may intercept the metropolitan government’s state shared taxes if required employer contributions are not remitted. The employer’s ADC and member contributions are expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

Net Pension Liability (Asset)

The metropolitan government’s net pension liability (asset) was measured as of June 30, 2015, and the total pension liability (asset) used to calculate net pension liability (asset) was determined by an actuarial valuation as of that date.

Actuarial Assumptions. The total pension liability as of the June 30, 2015, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

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Inflation 3%Salary Increases Graded Salary Ranges from 8.97%

to 3.71% Based on Age, Including Inflation, Averaging 4.25%

Investment Rate of Return 7.5%, Net of Pension Plan Investment Expenses, Including Inflation

Cost of Living Adjustment 2.5%

Mortality rates were based on actual experience from the June 30, 2012, actuarial experience study, adjusted for some of the expected future improvement in life expectancy.

The actuarial assumptions used in the June 30, 2015, actuarial valuation were based on the results of an actuarial experience study performed for the period July 1, 2008, through June 30, 2012. The demographic assumptions were adjusted to more closely reflect actual and expected future experience.

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012, actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best-estimate ranges of expected future real rate of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market projection established the long-term expected rate of return by weighting the expected future real rate of return by the target asset allocation percentage and by adding inflation of three percent. The target allocation and best estimate of arithmetic real rates of return for each major asset class are summarized in the following table:

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PercentageLong-termExpected PercentageReal Rate Target

Asset Class of Return Allocations

U.S. Equity 6.46 % 33 %Developed Market International Equity 6.26 17Emerging Market International Equity 6.40 5Private Equity and Strategic Lending 4.61 8U.S. Fixed Income 0.98 29Real Estate 4.73 7Short-term Securities 0.00 1

Total 100 %

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees as 7.5 percent based on a blending of the three factors described above.

Discount Rate. The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumes that employee contributions will be made at the current rate and that contributions from the metropolitan government will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

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Changes in the Net Pension Liability (Asset)

Total Plan NetPension Fiduciary PensionLiability Net Position Liability

(a) (b) (a)-(b)

Balance, July 1, 2014 $ 1,475,766 $ 1,372,327 $ 103,439

Changes for the Year: Service Cost $ 45,336 $ 0 $ 45,336 Interest 111,497 0 111,497 Differences Between Expected and Actual Experience (169,046) 0 (169,046) Contributions-Employer 0 57,406 (57,406) Contributions-Employees 0 27,494 (27,494) Net Investment Income 0 42,397 (42,397) Benefit Payments, Including Refunds of Employee Contributions (68,943) (68,943) 0 Administrative Expense 0 (457) 457 Other Changes 0 0 0Net Changes $ (81,156) $ 57,897 $ (139,053)

Balance, June 30, 2015 $ 1,394,610 $ 1,430,224 $ (35,614)

Increase (Decrease)

Sensitivity of the Net Pension Liability (Asset) to Changes in the Discount Rate. The following presents the net pension liability (asset) of the metropolitan government calculated using the discount rate of 7.5 percent, as well as what the net pension liability (asset) would be if it was calculated using a discount rate that is one percentage point lower (6.5%) or one percentage point higher (8.5%) than the current rate:

Current1% Discount 1%

Decrease Rate Increase6.5% 7.5% 8.5%

Net Pension Liability $ 138,134 $ (35,614) $ (182,662)

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Pension Expense (Income) and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Pension Expense. For the year ended June 30, 2016, the metropolitan government recognized pension expense of $15,231.

Deferred Outflows of Resources and Deferred Inflows of Resources. For the year ended June 30, 2016, the metropolitan government reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred DeferredOutflows Inflows

of of Resources Resources

Difference Between Expected and Actual Experience $ 5,379 $ 135,237Net Difference Between Projected and Actual Earnings on Pension Plan Investments 48,887 63,835Contributions Subsequent to the Measurement Date of June 30, 2015 (1) 60,945 N/A

Total $ 115,211 $ 199,072

(1) The amount shown above for “Contributions Subsequent to theMeasurement Date of June 30, 2015,” will be recognized as a reduction(increase) to net pension liability (asset) in the following measurementperiod.

Amounts reported as deferred outflows of resources, with theexception of contributions subsequent to the measurement date, anddeferred inflows of resources related to pensions will be recognized inpension expense as follows:

Year EndingJune 30 Amount

2017 $ (41,521)2018 (41,521)2019 (41,521)2020 (20,242)2021 0Thereafter 0

In the table shown above, positive amounts will increase pension expense while negative amounts will decrease pension expense.

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Discretely Presented Metropolitan Government School Department

Non-certified Employees


Plan Description. Non-certified employees of the discretely presented metropolitan government School Department, are provided a defined benefit pension plan through the Public Employee Retirement Plan, an agent multiple-employer pension plan administered by the TCRS. The TCRS was created by state statute under Tennessee Code Annotated (TCA), Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publicly available financial report that can be obtained at www.treasury.tn.gov/tcrs.

Benefits Provided. TCA, Title 8, Chapters 34-37 establish the benefit terms and can be amended only by the Tennessee General Assembly. The chief legislative body may adopt the benefit terms permitted by statute. Members are eligible to retire with an unreduced benefit at age 60 with five years of service credit or after 30 years of service credit regardless of age. Benefits are determined by a formula using the member’s highest five consecutive year average compensation and the member’s years of service credit. Reduced benefits for early retirement are available to vested members at age 55. Members vest with five years of service credit. Service related disability benefits are provided regardless of length of service. Five years of service is required for non-service related disability eligibility. The service related and non-service related disability benefits are determined in the same manner as a service retirement benefit but are reduced ten percent and include projected service credits. A variety of death benefits is available under various eligibility criteria.

Member and beneficiary annuitants are entitled to an automatic cost of living adjustment (COLA) after retirement. A COLA is granted each July for annuitants retired prior to the second of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at three percent, and applied to the current benefit. No COLA is granted if the change in the CPI is less than one-half percent. A one percent COLA is granted if the CPI change is between one-half percent and one percent. A member who leaves employment may withdraw their employee contributions plus any accumulated interest.

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http://www.treasury.tn.gov/tcrs

Employees Covered by Benefit Terms. At the measurement date of June 30, 2015, the following employees were covered by the benefit terms:

Inactive Employees or Beneficiaries Currently Receiving Benefits 28Inactive Employees Entitled to But Not Yet Receiving Benefits 53Active Employees 57

Total 138

Contributions. Contributions for employees are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Employees contribute five percent of their salary. The metropolitan government School Department makes employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. For the year ended June 30, 2015, the Actuarial Determined Contribution (ADC) for the metropolitan government was $25,086 based on a rate of 2.23 percent of covered payroll. By law, employer contributions are required to be paid. The TCRS may intercept the metropolitan government School Department’s state shared taxes if required employer contributions are not remitted. The employer’s ADC and member contributions are expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

Net Pension Liability (Asset)

The metropolitan government School Department’s net pension liability (asset) was measured as of June 30, 2015, and the total pension liability (asset) used to calculate net pension liability (asset) was determined by an actuarial valuation as of that date.

Actuarial Assumptions. The total pension liability as of the June 30, 2015, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

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Mortality rates were based on actual experience from the June 30, 2012, actuarial experience study, adjusted for some of the expected future improvement in life expectancy.


The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012, actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best-estimate ranges of expected future real rate of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market projection established the long-term expected rate of return by weighting the expected future real rate of return by the target asset allocation percentage and by adding inflation of three percent. The target allocation and best estimate of arithmetic real rates of return for each major asset class are summarized in the following table:

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Total 100 %


Discount Rate. The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumes that employee contributions will be made at the current rate and that contributions from the metropolitan government School Department will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

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Changes in the Net Pension Liability (Asset)

Total Plan NetPension Fiduciary PensionLiability Net Position Liability

(a) (b) (a)-(b)

Balance, July 1, 2014 $ 3,299,817 $ 3,603,142 $ (303,325)

Changes for the Year: Service Cost $ 95,048 $ 0 $ 95,048 Interest 249,499 0 249,499 Differences Between Expected and Actual Experience (18,827) 0 (18,827) Contributions-Employer 0 25,086 (25,086) Contributions-Employees 0 56,246 (56,246) Net Investment Income 0 110,225 (110,225) Benefit Payments, Including Refunds of Employee Contributions (136,435) (136,435) 0 Administrative Expense 0 (2,893) 2,893 Other Changes 0 0 0Net Changes $ 189,285 $ 52,229 $ 137,056

Balance, June 30, 2015 $ 3,489,102 $ 3,655,371 $ (166,269)

Increase (Decrease)

Sensitivity of the Net Pension Liability (Asset) to Changes in the Discount Rate. The following presents the net pension liability (asset) of the metropolitan government School Department calculated using the discount rate of 7.5 percent, as well as what the net pension liability (asset) would be if it was calculated using a discount rate that is one percentage point lower (6.5%) or one percentage point higher (8.5%) than the current rate:

Current1% Discount 1%

Decrease Rate Increase6.5% 7.5% 8.5%

Net Pension Liability $ 277,234 $ (166,269) $ (537,488)

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Pension Expense (Income) and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Pension Expense. For the year ended June 30, 2016, the metropolitan government School Department recognized pension expense of $19,139.

Deferred Outflows of Resources and Deferred Inflows of Resources. For the year ended June 30, 2016, the metropolitan government School Department reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:



Difference Between Expected and Actual Experience $ 0 $ 55,141Net Difference Between Projected and Actual Earnings on Pension Plan Investments 126,269 170,144Contributions Subsequent to the Measurement Date of June 30, 2015 (1) 25,654 N/A

Total $ 151,923 $ 225,285

(1) The amount shown above for “Contributions Subsequent to theMeasurement Date of June 30, 2015,” will be recognized as areduction (increase) to net pension liability (asset) in the followingmeasurement period.

Amounts reported as deferred outflows of resources, with theexception of contributions subsequent to the measurement date, anddeferred inflows of resources related to pensions will be recognized inpension expense as follows:


2017 $ (42,272)2018 (42,272)2019 (42,272)2020 27,8022021 0Thereafter 0

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In the table shown above, positive amounts will increase pension expense while negative amounts will decrease pension expense.

Certified Employees

Teacher Retirement Plan


Plan Description. Teachers of the metropolitan government School Department with membership in the TCRS before July 1, 2014, are provided with pensions through the Teacher Legacy Pension Plan, a cost-sharing multiple-employer pension plan administered by the TCRS. The Teacher Legacy Pension Plan is closed to new membership. Teachers with membership in the TCRS after June 30, 2014, are provided with pensions through a legally separate plan referred to as the Teacher Retirement Plan, a cost-sharing multiple-employer pension plan administered by the TCRS. The TCRS was created by state statute under Tennessee Code Annotated (TCA), Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of all employer pension plans in the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publically available financial report that can be obtained at www.treasury.tn.gov/tcrs.

Benefits Provided. TCA, Title 8, Chapters 34-37 establish the benefit terms and can be amended only by the Tennessee General Assembly. Members are eligible to retire with an unreduced benefit at age 65 with five years of service credit or pursuant to the rule of 90 in which the member’s age and service credit total 90. Benefits are determined by a formula using the member’s highest five consecutive year average compensation and the member’s years of service credit. A reduced early retirement benefit is available to vested members at age 60 or pursuant to the rule of 80. Members are vested with five years of service credit. Service related disability benefits are provided regardless of length of service. Five years of service is required for non-service related disability eligibility. The service related and non-service related disability benefits are determined in the same manner as a service retirement benefit but are reduced ten percent and include projected service credits. A variety of death benefits is available under various eligibility criteria. Member and beneficiary annuitants are entitled to an automatic cost of living adjustment (COLA) after retirement. A COLA is granted each July for annuitants retired prior to the second of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at three percent, and applied to the current benefit. No COLA is granted if the change in the CPI is less than one-half percent. A one percent COLA is granted if the CPI

71

change is between one-half percent and one percent. Members who leave employment may withdraw their employee contributions, plus any accumulated interest. Under the Teacher Retirement Plan, benefit terms and conditions, including COLA, can be adjusted on a prospective basis. Moreover, there are defined cost controls and unfunded liability controls that provide for the adjustment of benefit terms and conditions on an automatic basis.

Contributions. Contributions for teachers are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly or by automatic cost controls set out in law. Teachers are required to contribute five percent of their salary to the plan. The Local Education Agencies (LEAs) make employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. Per the statutory provisions governing TCRS, the employer contribution rate cannot be less than four percent, except in years when the maximum funded level, approved by the TCRS Board of Trustees, is reached. By law, employer contributions for the Teacher Retirement Plan are required to be paid. The TCRS may intercept the state shared taxes of the sponsoring governmental entity of the LEA if the required employer contributions are not remitted. Employer contributions for the year ended June 30, 2016, to the Teacher Retirement Plan were $14,216, which is four percent of covered payroll. The employer rate, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Pension Liabilities (Assets). At June 30, 2016, the metropolitan government School Department reported an asset of $1,944 for its proportionate share of the net pension asset. The net pension asset was measured as of June 30, 2015, and the total pension liability used to calculate the net pension asset was determined by an actuarial valuation as of that date. The metropolitan government School Department’s proportion of the net pension asset was based on the metropolitan government School Department’s share of contributions to the pension plan relative to the contributions of all participating LEAs. At the measurement date of June 30, 2015, the metropolitan government School Department’s proportion was .048314 percent.

Pension Expense. For the year ended June 30, 2016, the metropolitan government School Department recognized pension expense of $2,547.

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Deferred Outflows of Resources and Deferred Inflows of Resources. For the year ended June 30, 2016, the metropolitan government School Department reported deferred outflows of resources related to pensions from the following sources:



Difference Between Expected and Actual Experience $ 0 $ 633Net Difference Between Projected and Actual Earnings on Pension Plan Investments 157 0LEA's Contributions Subsequent to the Measurement Date of June 30, 2015 14,216 N/A

Total $ 14,373 $ 633

The metropolitan government School Department’s employer contributions of $14,216, reported as pension related deferred outflows of resources subsequent to the measurement date, will be recognized as an increase of net pension liability (asset) in the year ending June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:


2017 $ (13)2018 (13)2019 (13)2020 (13)2021 (53)Thereafter (369)

In the table above, positive amounts will increase pension expense, while negative amounts will decrease pension expense.

Actuarial Assumptions. The total pension liability in the June 30, 2015, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

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Mortality rates are customized based on the June 30, 2012, actuarial experience study and some included adjustment for expected future improvement in life expectancy.


The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012, actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best-estimate ranges of expected future real rate of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market projection established the long-term expected rate of return by weighting the expected future real rate of return by the target asset allocation percentage and by adding inflation of three percent. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

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Total 100 %


Discount Rate. The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumes that employee contributions will be made at the current rate and that contributions from all the LEAs will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Proportionate Share of Net Pension Liability (Asset) to Changes in the Discount Rate. The following presents the metropolitan government School Department’s proportionate share of the net pension liability (asset) calculated using the discount rate of 7.5 percent, as well as what the metropolitan government School Department’s proportionate share of the net pension liability (asset) would be if it was calculated using a discount rate that is one percentage point lower (6.5%) or one percentage point higher (8.5%) than the current rate:

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School Department's Current Proportionate Share of 1% Discount 1% the Net Pension Decrease Rate Increase Liability (Asset) 6.5% 7.5% 8.5%

Net Pension Liability $ 345 $ (1,944) $ (3,622)

Pension Plan Fiduciary Net Position. Detailed information about the pension plan’s fiduciary net position is available in a separately issued TCRS financial report.

Teacher Legacy Pension Plan


Plan Description. Teachers of the metropolitan government School Department with membership in the TCRS before July 1, 2014, are provided with pensions through the Teacher Legacy Pension Plan, a cost-sharing multiple-employer pension plan administered by the TCRS. The Teacher Legacy Pension Plan closed to new membership on June 30, 2014, but will continue providing benefits to existing members and retirees. Beginning July 1, 2014, the Teacher Retirement Plan became effective for teachers employed by LEAs after June 30, 2014. The Teacher Retirement Plan is a separate cost-sharing, multiple-employer defined benefit plan. The TCRS was created by state statute under Tennessee Code Annotated (TCA), Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of all employer pension plans in the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publically available financial report that can be obtained at www.treasury.tn.gov/tcrs.

Benefits Provided. TCA, Title 8, Chapters 34-37 establish the benefit terms and can be amended only by the Tennessee General Assembly. Members of the Teacher Legacy Pension Plan are eligible to retire with an unreduced benefit at age 60 with five years of service credit or after 30 years of service credit regardless of age. Benefits are determined by a formula using the member’s highest five consecutive year average compensation and the member’s years of service credit. A reduced early retirement benefit is available to vested members at age 55. Members are vested with five years of service credit. Service related disability benefits are provided regardless of length of service. Five years of service is required for non-service related disability eligibility. The service related and non-service related disability benefits are determined in the same manner as a service retirement benefit but are reduced ten percent and include projected service credits. A variety of death benefits is available under various

76

eligibility criteria. Member and beneficiary annuitants are entitled to an automatic cost of living adjustment (COLA) after retirement. A COLA is granted each July for annuitants retired prior to the second of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at three percent, and applied to the current benefit. No COLA is granted if the change in the CPI is less than one-half percent. A one percent COLA is granted if the CPI change is between one-half and one percent. A member who leaves employment may withdraw their employee contributions, plus any accumulated interest. Under the Teacher Legacy Pension Plan, benefit terms and conditions, including COLAs can be adjusted on a prospective basis. Moreover, there are defined cost controls and unfunded liability controls that provide for the adjustment of benefit terms and conditions on an automatic basis.

Contributions. Contributions for teachers are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Teachers are required to contribute five percent of their salaries. The Local Education Agencies (LEAs) make employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. By law, employer contributions for the Teacher Legacy Pension Plan are required to be paid. The TCRS may intercept the state shared taxes of the sponsoring governmental entity of the LEA if the required employer contributions are not remitted. Employer contributions by the metropolitan government School Department for the year ended June 30, 2016, to the Teacher Legacy Pension Plan were $336,857, which is 9.04 percent of covered payroll. The employer rate, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

Pension Liabilities (Assets), Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Pension Liability (Assets). At June 30, 2016, the metropolitan government School Department reported a liability of $41,935 for its proportionate share of the net pension liability (asset). The net pension liability (asset) was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability (asset) was determined by an actuarial valuation as of that date. The metropolitan government School Department’s proportion of the net pension liability (asset) was based on the metropolitan government School Department’s long-term share of contributions to the pension plan relative to the contributions of all participating LEAs. At the measurement date of June 30, 2015, the metropolitan government School Department’s proportion was .102373 percent. The proportion measured at June 30, 2014, was .098332 percent.

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Negative Pension Expense. For the year ended June 30, 2016, the metropolitan government School Department recognized negative pension expense of $31,960.

Deferred Outflows of Resources and Deferred Inflows of Resources. For the year ended June 30, 2016, the metropolitan government School Department reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:



Difference Between Expected and Actual Experience $ 33,655 $ 652,732Net Difference Between Projected and Actual Earnings on Pension Plan Investments 757,224 1,027,972Changes in Proportion of Net Pension Liability (Asset) 43,207 25,989LEA's Contributions Subsequent to the Measurement Date of June 30, 2015 336,857 N/A

Total $ 1,170,943 $ 1,706,693

The metropolitan government School Department’s employer contributions of $336,857 reported as pension related deferred outflows of resources subsequent to the measurement date, will be recognized as an increase in net pension asset in the year ending June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:


2017 $ (273,723)2018 (273,723)2019 (273,723)2020 68,9342021 (120,372)Thereafter 0

In the table above, positive amounts will increase pension expense, while negative amounts will decrease pension expense.

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Actuarial Assumptions. The total pension liability in the June 30, 2015, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:





Mortality rates are customized based on the June 30, 2012, actuarial experience study and some included adjustments for expected future improvement in life expectancy.


The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012, actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best-estimate ranges of expected future real rate of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market projection established the long-term expected rate of return by weighting the expected future real rate of return by the target asset allocation percentage and by adding inflation of three percent. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

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Total 100 %


Discount Rate. The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumes that employee contributions will be made at the current rate and that contributions from all the LEAs will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the Proportionate Share of Net Pension Liability (Asset) to Changes in the Discount Rate. The following presents the metropolitan government School Department’s proportionate share of the net pension liability (asset) calculated using the discount rate of 7.5 percent, as well as what the metropolitan government School Department’s proportionate share of the net pension liability (asset) would be if it was calculated using a discount rate that is one percentage point lower (6.5%) or one percentage point higher (8.5%) than the current rate:

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School Department's Current Proportionate Share of 1% Discount 1% the Net Pension Decrease Rate Increase Liability (Asset) 6.5% 7.5% 8.5%

Net Pension Liability $ 2,859,021 $ 41,935 $ (2,290,279)

Pension Plan Fiduciary Net Position. Detailed information about the pension plan’s fiduciary net position is available in a separately issued TCRS financial report.

2. Deferred Compensation

The metropolitan government offers its employees a deferredcompensation plan established pursuant to IRC Section 457. Themetropolitan government contributes 2.38 percent of the costs ofadministering and funding this program. All other costs ofadministering and funding this program are the responsibility of planparticipants. The Section 457 plan assets remain the property of thecontributing employees and are not presented in the accompanyingfinancial statements. IRC Section 457 establishes participation,contribution, and withdrawal provisions for the plan.

F. Other Postemployment Benefits (OPEB)

Plan Description

The metropolitan School Department participates in the state-administeredLocal Education Group Insurance Plan for healthcare benefits. Foraccounting purposes, the plan is an agent multiple-employer defined benefitOPEB plan. Benefits are established and amended by an insurancecommittee created by Section 8-27-302, Tennessee Code Annotated (TCA).Prior to reaching the age of 65, all members have the option of choosingbetween the standard or partnership preferred provider organization (PPO)plan for healthcare benefits. Subsequent to age 65, members who are also inthe state’s retirement system may participate in a state-administeredMedicare Supplement Plan that does not include pharmacy. The plans arereported in the State of Tennessee Comprehensive Annual Financial Report(CAFR). The CAFR is available on the state’s websiteat http://www.tn.gov/finance/article/fa-accfin-cafr.

Funding Policy

The premium requirements of plan members are established and may beamended by the insurance committee. The plan is self-insured and financedon a pay-as-you-go basis with the risk shared equally among the participants.Claims liabilities of the plan are periodically computed using actuarial andstatistical techniques to establish premium rates. The employers in each plan

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http://www.tn.gov/finance/article/fa-accfin-cafr.

develop a contribution policy in terms of subsidizing active employees or retired employees’ premiums since the committee is not prescriptive on that issue. The state does not provide a subsidy for local government participants; however, the state does provides a partial subsidy to Local Education Agency pre-65 teachers and a full subsidy based on years of service for post-65 members in the Medicare Supplement Plan. The School Department recognized expenditures of $103,162 for postemployment health care during the year ended June 30, 2016.

Annual OPEB Cost and Net OPEB Obligation

LocalEducation

GroupInsurance

Plan

ARC $ 154,000Interest on the NOPEBO 23,516Adjustment to the ARC (23,611)Annual OPEB cost $ 153,905Amount of contribution (103,162)Increase/decrease in NOPEBO $ 50,743Net OPEB obligation, 7-1-15 627,104

Net OPEB obligation, 6-30-16 $ 677,847

PercentageFiscal Annual of Annual Net OPEBYear OPEB OPEB Cost Obligation

Ended Plan Cost Contributed at Year End

6-30-14 Local Education Group $ 134,584 84% $ 588,0696-30-15 " 138,606 72 627,1046-30-16 " 153,905 67 677,847

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Funded Status and Funding Progress

The funded status of the plan as of July 1, 2015, was as follows:

(dollars in thousands) LocalEducation

GroupInsurance

Plan

Actuarial valuation date 7-1-15Actuarial accrued liability (AAL) $ 1,496Actuarial value of plan assets $ 0Unfunded actuarial accrued liability (UAAL) $ 1,496Actuarial value of assets as a % of the AAL 0%Covered payroll (active plan members) $ 4,835UAAL as a % of covered payroll 31%

Actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future, and actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits.

Actuarial Methods and Assumptions

Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of each valuation and on the pattern of sharing of costs between the employer and plan members to that point. Actuarial calculations reflect a long-term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets.

In the July 1, 2015, actuarial valuation for the Local Education Plan, the projected unit credit actuarial cost method was used. The actuarial assumptions included a 3.75 percent investment rate of return (net of administrative expenses) and an annual healthcare cost trend rate of 6.5 percent initially. The trend rate will decrease to six percent in fiscal year 2016, and then be reduced by decrements to an ultimate rate of 4.7 percent by fiscal year 2050. Both rates include a 2.5 percent inflation assumption. The unfunded actuarial accrued liability is being amortized as a level percentage of payroll on a closed basis over a 30-year period beginning with July 1, 2007. Payroll is assumed to grow at a rate of three percent.

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G. Purchasing Law

The metropolitan government follows the Metropolitan Charter, whichprovides for all purchases and contracts for goods or services to be madethrough a consolidated Metropolitan Purchasing Department. The charterfurther provides for the metropolitan mayor to manage/conduct theMetropolitan Purchasing Department according to the procedures adopted bythe Metropolitan Council. The Metropolitan Council is required by thecharter to establish a three-member oversight committee to oversee theactivity of the Metropolitan Purchasing Department.

The Metropolitan Council has not created a consolidated MetropolitanPurchasing Department. However, effective June 21, 1999, (amendedOctober 18, 2004) the council adopted the following purchasing procedures tobe administered by the metropolitan mayor assisted by the director of schoolsand the highway superintendent:

1. Purchase orders are required for all purchases estimated to exceed$500.

2. Purchase orders shall be approved by the metropolitan mayor for thegeneral metropolitan government, the director of schools for theSchool Department, and the highway superintendent for the HighwayDepartment.

3. Evidence of receiving goods or services should be noted on all invoicesprior to payment.

4. The Metropolitan Council set the bid requirements for the Office ofMetropolitan Mayor to follow the general statutes of the CountyPurchasing Law of 1983, Sections 5-14-201 through 5-14-206,Tennessee Code Annotated (TCA), which provide for competitive bidson all purchases exceeding $10,000.

5. The Metropolitan Council set the bid requirements for the Office ofHighway Superintendent to follow the general statutes of the CountyPurchasing Law of 1983, Sections 5-14-201 through 5-14-206, TCA,and the Uniform Road Law, Section 54-7-113, TCA, which provide forpurchases exceeding $10,000 to be made after public advertisementand solicitation of competitive bids.

6. The Metropolitan Council set the bid requirements for the Office ofDirector of Schools to follow the general statutes applicable to schoolsas set forth in Section 49-2-203, TCA, which provides for the Board ofEducation, through its executive committee (director of schools andchairman of the Board of Education), to make all purchases. Thisstatute also requires that competitive bids be solicited throughnewspaper advertisement on all purchases exceeding $10,000.

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VI. OTHER NOTES – WATER AND SEWER DEPARTMENT (ENTERPRISE FUND)

A. General

The financial statements include the accounts of the Metropolitan Lynchburg– Moore County Water and Sewer Department, which is owned byMetropolitan Lynchburg – Moore County, Tennessee, (the primarygovernment) and governed by the Metropolitan Council and a Utility Boardcomposed of members of the council. The department does not represent aseparate legal entity separate and apart from the primary government.

B. Summary of Significant Accounting Policies

The accounting policies of the department conform to generally acceptedaccounting principles as applicable to enterprise funds. The following is asummary of significant policies:

Measurement Focus and Basis of Accounting – These financial statements have been prepared 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. The department accrues the unbilled revenue from the dates of the most recent meter readings to the balance sheet date.

Utility Plant and Depreciation – Utility plant in service is reported at cost and includes improvements, with a cost in excess of $3,000 that significantly adds to the utility plant or extends useful lives. Cost of maintenance and repairs are charged to expense, as are tap connection costs.

Depreciation is calculated by the straight-line method to allocate the cost of the assets over their estimated useful lives using guidelines set forth by the Utility Review Board. The estimated useful lives are as follows:

Assets Years

Structures 20 - 50Utility Plant Other Than Structure and Equipment 25 - 50Equipment 5 - 10

Allowance for Uncollectible Accounts – The department provides an allowance for uncollectible accounts equal to estimated losses that will be incurred in collection of all receivables. The estimated losses are based on historical collection experience and a review of the current status of the outstanding receivables.

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Inventories – Inventories are stated at cost, first-in, first-out method.

Compensated Absences – The costs of vacation pay granted to employees are recorded as expenditures when earned.

Cash Equivalents – For purposes of the Statement of Cash Flows, the department considers all highly liquid investments (including restricted assets) purchased with an original maturity of three months or less to be cash equivalents.

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent 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.

Capitalized Interest – Net interest cost incurred on borrowed funds during the period of construction of capital assets is capitalized as a component of the cost of acquiring those assets.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the department are charges to customers for sales and services. The department also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for proprietary funds include the cost of sales and services, administrative and maintenance expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

As a general rule, when both restricted and unrestricted resources are available for use, it is the department’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

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C. Utility Plant Additions and Retirements

Business-type Activities:Balance Balance7-1-15 Additions Deductions 6-30-16

Capital Assets Not Depreciated or Amortized: Land and Land Rights $ 92,459 $ 0 $ 0 $ 92,459 Construction in Progress 130,431 1,055,596 0 1,186,027Total Capital Assets Not Depreciated or Amortized $ 222,890 $ 1,055,596 $ 0 $ 1,278,486

Other Capital Assets: General $ 345,767 $ 1,755 $ (1,506) $ 346,016 Water 13,812,380 32,079 (1,717) 13,842,742 Sewer 2,627,299 3,500 (4,935) 2,625,864 Maintenance 146,315 0 (3,460) 142,855 Acquistion Adjustment 301,099 0 0 301,099

Utility Plant $ 17,232,860 $ 37,334 $ (11,618) $ 17,258,576

Less Accumulated Depreciation/ Amortization for: General $ 180,292 $ 17,810 $ (1,506) $ 196,596 Water 3,689,193 388,775 (1,717) 4,076,251 Sewer 1,168,278 71,228 (4,375) 1,235,131 Maintenance 115,541 7,121 (3,460) 119,202 Acquistion Adjustment 114,909 15,055 0 129,964Total Accumulated Depreciation/ Amortization $ 5,268,213 $ 499,989 $ (11,058) $ 5,757,144

Other Capital Assets, Net $ 11,964,647 $ (462,655) $ (560) $ 11,501,432

Business-type Activities Capital Assets, Net $ 12,187,537 $ 592,941 $ (560) $ 12,779,918

D. Cash and Restricted Funds

The following is a summary of cash and restricted funds at June 30, 2016:

Cash CertificatesEquivalents of Deposit Total

Cash for General Use $ 623,572 $ 1,915 $ 625,487Restricted for Construction 45,948 0 45,948

Total $ 669,520 $ 1,915 $ 671,435

The department has also designated $498,634 to be used to fund capital asset replacements.

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Legal Provisions: All deposits with financial institutions must be secured by one of two methods depending on whether the financial institution participates in the bank collateral pool administered by the state treasurer. Participating banks determine the aggregate balance of their public fund accounts for the State of Tennessee and its political subdivisions. The amount of collateral required to secure these public deposits must equal at least 105 percent of the average daily balance of public deposits held. Collateral securities required to be pledged by the participating banks to protect their public fund accounts are pledged to the state treasurer on behalf of the bank collateral pool. The securities pledged to protect these accounts are pledged in the aggregate rather than against each account. The members of the pool may be required by agreement to pay an assessment to cover any deficiency. Under this additional assessment agreement, public fund accounts covered by the pool are considered to be insured for purposes of credit risk disclosure. For deposits with financial institutions that do not participate in the bank collateral pool, state statutes require that all deposits be collateralized with collateral whose market value is equal to 105 percent of the uninsured amount of the deposits. The collateral must be placed by the depository bank in an escrow account in a second bank for the benefit of the department.

Types of Investments Authorized: State statutes authorize the entity to make direct investments in bonds, notes, or treasury bills of the U.S. government and obligations guaranteed by the U.S. government or any of its agencies; bonds of any state or political subdivision rated A or higher by any nationally recognized rating service; the metropolitan government’s own legally issued bonds or notes; the State Treasurer’s Investment Pool; and repurchase agreements. The entity has no policy that would further limit its investments.

E. Revenue Bonds

A summary of revenue bond transactions for the year ended June 30, 2016,includes the following:

Bonds

Balance, July 1, 2015 $ 3,943,045Reductions (350,011)

3,593,034

Less current maturities (67,581)

Balance, less current maturities, June 30, 2016 $ 3,525,453

Details of water and sewer revenue bonds are as follows:

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Series 1997 Water Revenue and Tax Bonds, 4.875%, payable $1,459 per month including principal and interest with final maturity in 2036 $ 216,328Series 2001 Water Revenue and Tax Bonds, 4.75%, payable $1,012 per month including principal and interest with final maturity in 2040 171,109Series 2006 Water Revenue and Tax Bonds, 4.25%, payable $4,652 per month including principal and interest with final maturity in 2045 920,421Series 2008 Water Revenue and Tax Bonds, 4.12%, payable $8,700 per month including principal and interest with final maturity in 2046 1,772,235Series 2008 Water Revenue and Tax Bonds, 4.625%, payable $2,606 per month including principal and interest with final maturity in 2047 512,941

Total $ 3,593,034

The bonds are payable from and secured primarily by a pledge of the net revenues of the department; in the event such revenues are insufficient, the bonds are further secured by the taxing power of the Metropolitan Government.

The annual requirements to amortize principal and interest for all revenue bonds as of June 30, 2016, are as follows:

Year Principal Interest

2017 $ 67,581 $ 153,4832018 70,556 150,5082019 73,659 147,4052020 76,903 144,1612021 80,288 140,7762022-2026 457,701 647,6192027-2031 567,738 537,5822032-2036 685,228 403,9932037-2041 752,864 246,7932042-2046 731,086 79,4652047 29,430 848

Total $ 3,593,034 $ 2,652,633

Under provisions of the bond agreements, the department is required to establish and maintain various funds as follows:

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Revenue Fund – All revenues are to be deposited in this fund and shall be disbursed for the establishment of the other required funds.

Operation and Maintenance Fund – The money transferred from the Revenue Fund is to be deposited to this fund for payment of current expenses. The maximum balance of this fund shall not exceed one-fourth of the amount budgeted for current expenses for the fiscal year.

As required by provisions of the bond agreements, the beginning and ending year balances of the required funds are as follows:

Balance Balance6-30-15 6-30-16

Revenue $ 556,600 $ 556,600Operation and Maintenance 1,915 1,915Bond 50,184 0

Principal and interest payments for these revenue bonds, as a percentage of pledged revenue, totaled 29 percent for the year.

In anticipation of a bond issue completed in fiscal year 2017, the department drew $258,460 during the year ended June 30, 2016.

F. Notes Payable

Metropolitan Lynchburg, Moore County, Tennessee, (the primarygovernment) has borrowed funds under the State of Tennessee’s revolvingloan program for the department’s construction projects. The principal andinterest payments required under the terms of the first loan, which is securedby the department’s revenues and has a stated interest rate of 2.95 percent,are as follows:

Year Principal Interest Total

2017 $ 47,013 $ 12,435 $ 64,5962018 48,419 11,029 64,5962019 49,867 9,581 64,5962020 51,358 8,090 64,5962021 52,893 6,555 64,5962022-2026 190,247 10,172 322,9802027-2031 0 0 322,9802032-2035 0 0 222,588

Total $ 439,797 $ 57,862 $ 1,191,528

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Principal and interest payments, as a percentage of pledged revenue, totaled three percent for the year for these loans.

Notes payable activity for the year ended June 30, 2016, is as follows:

Balance Balance 7-1-15 Draws Repayments 6-30-16

$ 1,369,320 $ 322,118 $ (60,113) $ 1,631,325

The department incurred $181,732 in interest costs during the current year, none of which was capitalized.

G. Risk Management

The department is exposed to various risks of losses related to torts; theft of,damage to, and destruction of assets, errors and omissions; injuries toemployees; and natural disasters. The department obtains insurancecoverage covering the above risks of loss through a public risk entity pool,Tennessee Risk Management Trust (TRMT), which is a public entity risk poolcreated under the auspices of the Tennessee Governmental Tort Liability Actto provide governmental insurance coverage. The creation of the TRMTprovides for it to be self-sustaining through member premiums.

Settled claims in the past three years have not exceeded the coverage.

H. Income Taxes

As a governmental entity, the department is exempt from federal, state andlocal income taxes.

I. Significant Concentrations

The department operates principally to distribute water to residents of MooreCounty, Tennessee. The department grants credit to its customers, which atJune 30, 2016, totaled $78,873. Deposits from these customers, totaling$25,202 at June 30, 2016, are held as security for these accounts receivable.

Water and sewer revenues from the Jack Daniels Distillery account forapproximately 24 percent of the department’s total water and sewerrevenues.

J. Environmental Contingency

The department’s facilities and operations are subject to a wide range ofenvironmental protection laws related to the use and disposal of hazardousmaterials. As a result, there is the possibility that environmental conditionsmay arise, which would require the department to incur clean-up costs. As in

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prior years, management continues its efforts to comply, and to determine compliance with all applicable environmental protection laws and does not believe such costs, if any, would materially affect the department’s financial position or its future cash flows.

K. Sewer System Improvements

The department has been awarded loan/grant funding from the United StatesDepartment of Agriculture – Rural Development in the amount of $2,200,000.The loan portion of the award is $1,436,000, with an interest rate of 2.75percent and a term of 38 years. The remaining amount of $764,000 will be agrant. Draws of this funding totaled $258,460 as of June 30, 2016. OnOctober 26, 2016, the $1,436,000 bond was issued.

In October 2015, the utility board awarded a contract for the project in theamount of $3,056,000 to J. Cumby Construction, Inc. As of June 30, 2016,the department has incurred $859,826 of contract costs.

L. Deferred Compensation

The department offers its employees a deferred compensation planestablished pursuant to IRC Section 457. The plan provides that thedepartment match employee contributions up to 2.38 percent ofcompensation. The Section 457 plan assets remain the property of thecontributing employees and are not presented in the accompanying financialstatements. IRC Section 457 establishes participation, contribution, andwithdrawal provisions for the plan.

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REQUIRED SUPPLEMENTARY INFORMATION

93

Exhibit F-1

The Metropolitan Government of Lynchbury, Moore County, TennesseeSchedule of Changes in Net Pension Liability (Asset) and Related Ratios Based onParticipation in the Public Employee Pension Plan of TCRS

Primary GovernmentFor the Fiscal Year Ending June 30

2014 2015

Total Pension Liability (Asset)Service Cost $ 43,773 $ 45,336Interest 104,800 111,497Changes in Benefit Terms 0 0Differences Between Actual and Expected Experience 8,069 (169,046)Changes in Assumptions 0 0Benefit Payments, Including Refunds of Employee Contributions (68,860) (68,943)Net Change in Total Pension Liability (Asset) $ 87,782 $ (81,156)Total Pension Liability (Asset), Beginning 1,387,984 1,475,766

Total Pension Liability (Asset), Ending (a) $ 1,475,766 $ 1,394,610

Plan Fiduciary Net PositionContributions - Employer $ 54,991 $ 57,406Contributions - Employee 26,286 27,494Net Investment Income 194,294 42,397Benefit Payments, Including Refunds of Employee Contributions (68,860) (68,943)Administrative Expense (384) (457)Net Change in Plan Fiduciary Net Position $ 206,327 $ 57,897Plan Fiduciary Net Position, Beginning 1,166,000 1,372,327

Plan Fiduciary Net Position, Ending (b) $ 1,372,327 $ 1,430,224

Net Pension Liability (Asset), Ending (a - b) $ 103,439 $ (35,614)

Plan Fiduciary Net Position as a Percentage of Total Pension Liability 92.99% 102.55%Covered Payroll $ 525,725 $ 549,868Net Pension Liability (Asset) as a Percentage of Covered Payroll 19.68% 6.48%

Note: ten years of data will be presented when available.

94

Exhibit F-2

The Metropolitan Government of Lynchbury, Moore County, TennesseeSchedule of Changes in Net Pension Liability (Asset) and Related Ratios Based on

Participation in the Public Employee Pension Plan of TCRSDiscretely Presented Metropolitan School Department − Non-Certified EmployeesFor the Fiscal Year Ending June 30

2014 2015

Total Pension Liability (Asset)Service Cost $ 89,333 $ 95,048Interest 240,127 249,499Changes in Benefit Terms 0 0Differences Between Actual and Expected Experience (66,797) (18,827)Changes in Assumptions 0 0Benefit Payments, Including Refunds of Employee Contributions (150,417) (136,435)Net Change in Total Pension Liability (Asset) $ 112,246 $ 189,285Total Pension Liability (Asset), Beginning 3,187,571 3,299,817

Total Pension Liability (Asset), Ending (a) $ 3,299,817 $ 3,489,102

Plan Fiduciary Net PositionContributions - Employer $ 30,992 $ 25,086Contributions - Employee 55,743 56,246Net Investment Income 517,468 110,225Benefit Payments, Including Refunds of Employee Contributions (150,417) (136,435)Administrative Expense (2,135) (2,893)Net Change in Plan Fiduciary Net Position $ 451,651 $ 52,229Plan Fiduciary Net Position, Beginning 3,151,491 3,603,142

Plan Fiduciary Net Position, Ending (b) $ 3,603,142 $ 3,655,371

Net Pension Liability (Asset), Ending (a - b) $ (303,325) $ (166,269)

Plan Fiduciary Net Position as a Percentage of Total Pension Liability 109.19% 104.77%Covered Payroll $ 1,114,845 $ 1,124,926Net Pension Liability (Asset) as a Percentage of Covered Payroll (27.21)% (14.78)%


95

Exhibit F-3

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Contributions Based on Participation in the Public Employee Pension Plan of TCRSPrimary GovernmentFor the Fiscal Year Ended June 30

2014 2015 2016

Contractually Required Contribution $ 54,991 $ 57,406 $ 60,945Less Contributions in Relation to the Contractually Required Contribution (54,991) (57,406) (60,945)

Contribution Deficiency (Excess) $ 0 $ 0 $ 0

Covered Payroll $ 525,725 $ 549,868 $ 583,769

Contributions as a Percentage of Covered Payroll 10.46% 10.44% 10.44%


96

Exhibit F-4

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Contributions Based on Participation in the Public Employee Pension Plan of TCRSDiscretely Presented Metropolitan School Department − Non-Certified EmployeesFor the Fiscal Year Ended June 30

2014 2015 2016



Covered Payroll $ 1,114,845 $ 1,124,926 $ 1,150,357



97

Exhibit F-5

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Contributions Based on Participation in the Teacher Retirement Plan of TCRSDiscretely Presented Metropolitan School DepartmentFor the Fiscal Year Ended June 30

2015 2016

Contractually Required Contribution $ 2,510 $ 8,884Less Contributions in Relation to the Contractually Required Contribution 4,015 (14,216)

Contribution Deficiency (Excess) $ (1,505) $ (5,332)

Covered Payroll $ 100,386 $ 355,379

Contributions as a Percentage of Covered Payroll 4.00% 4.00%


98

Exhibit F-6

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Contributions Based on Participation in the Teacher Legacy Pension Plan of TCRSDiscretely Presented Metropolitan School DepartmentFor the Fiscal Year Ended June 30

2014 2015 2016



Covered Payroll $ 3,859,535 $ 3,832,343 $ 3,726,272



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Exhibit F-7

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Proportionate Share of the Net Pension Liability (Asset) in the Teacher Pension Plan of TCRSDiscretely Presented Metropolitan School DepartmentFor the Fiscal Year Ended June 30 *

2016

School Department's Proportion of the Net Pension Liability (Asset) 0.048314%

School Department's Proportionate Share of the Net Pension Liability (Asset) $ (1,944)

Covered Payroll $ 100,386

School Department's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered Payroll (1.94)%

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 127.46%

* The amounts presented were determined as of June 30 of the prior fiscal year.


100

Exhibit F-8

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Proportionate Share of the Net Pension Liability (Asset) in the Teacher Legacy Pension Plan of TCRSDiscretely Presented Metropolitan School DepartmentFor the Fiscal Year Ended June 30 *

2015 2016

School Department's Proportion of the Net Pension Liability (Asset) 0.098332% 0.102373%

School Department's Proportionate Share of the Net Pension Liability (Asset) $ (15,979) $ 41,935

Covered Payroll $ 3,859,537 $ 3,832,343

School Department's Proportionate Share of the Net Pension Liability (Asset) as a Percentage of its Covered Payroll (.414002)% 1.094252%

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 100.08% 99.81%

* The amounts presented were determined as of June 30 of the prior fiscal year.


101

Exhibit F-9

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Funding Progress – Other Postemployment Benefits PlanDiscretely Presented Metropolitan School DepartmentJune 30, 2016

(Dollar amounts in thousands)

ActuarialAccrued Liability

(AAL)Actuarial Projected Unfunded

Actuarial Value of Unit AAL Covered Valuation Assets Credit (UAAL) Payroll

Plan Date (a) (b) (b)-(a) (c)

Local Education Group 7-1-11 $ 0 $ 1,137 $ 1,137 0 % $ 4,809 24 %" 7-1-13 0 1,352 1,352 0 4,814 28" 7-1-15 0 1,496 1,496 0 4,835 31

FundedRatio(a/b)

UAAL as a Percentage

((b-a)/c)

of CoveredPayroll

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NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2016

TENNESSEE CONSOLIDATED RETIREMENT SYSTEM

Valuation Date: Actuarially determined contribution rates for 2016 were calculated based on the July 1, 2013, actuarial valuation.

Methods and assumptions used to determine contribution rates:

Metropolitan Government:

Actuarial Cost Method Frozen Initial LiabilityAmortization Method Level Dollar, Closed (Not to Exceed 20 Years)Remaining Amortization Period 7 YearsAsset Valuation 10-Year Smoothed Within a 20%

Corridor to Market ValueInflation 3%Salary Increases Graded Salary Ranges from 8.97% to

3.71% Based on Age, Including InflationInvestment Rate of Return 7.5%, Net of Investment Expense,

Including InflationRetirement Age Pattern of Retirement Determined by

Experience StudyMortality Customized Table Based on Actual

Experience Including an Adjustment for Some Anticipated Improvement


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Metropolitan School Department:

Actuarial Cost Method Frozen Initial LiabilityAmortization Method Level Dollar, Closed (Not to Exceed 20 Years)Remaining Amortization Period 1 YearAsset Valuation 10-Year Smoothed Within a 20%

Corridor to Market ValueInflation 3%Salary Increases Graded Salary Ranges from 8.97% to

3.71% Based on Age, Including InflationInvestment Rate of Return 7.5%, Net of Investment Expense,

Including InflationRetirement Age Pattern of Retirement Determined by

Experience StudyMortality Customized Table Based on Actual

Experience Including an Adjustment for Some Anticipated Improvement

Cost of Living Adjustments 2.5%

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COMBINING AND INDIVIDUAL FUNDFINANCIAL STATEMENTS AND SCHEDULES

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Nonmajor Governmental Funds

Special Revenue Funds ________________________________________

Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects.

________________________________________

Urban Services Fund – The Urban Services Fund represents financial activity for the Urban Services District.

Solid Waste/Sanitation Fund – The Solid Waste/Sanitation Fund is used to account for household garbage pick-up and the convenience center operations.

Drug Control Fund – The Drug Control Fund is used to account for revenues received from drug-related fines, forfeitures, and seizures.

Constitutional Officers - Fees Fund – The Constitutional Officers - Fees Fund is used to account for operating expenses paid directly from the fee and commission accounts of the trustee, clerks, register of deeds, and sheriff.

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Exhibit G-1

The Metropolitan Government of Lynchburg, Moore County, TennesseeCombining Balance SheetNonmajor Governmental FundsJune 30, 2016

TotalSolid Nonmajor

Urban Waste / Drug GovernmentalServices Sanitation Control Funds

ASSETS

Equity in Pooled Cash and Investments $ 16,075 $ 420,211 $ 66,703 $ 502,989Accounts Receivable 0 45,656 0 45,656Property Taxes Receivable 6,103 234,930 0 241,033Allowance for Uncollectible Property Taxes (118) (5,561) 0 (5,679)

Total Assets $ 22,060 $ 695,236 $ 66,703 $ 783,999


Deferred Current Property Taxes $ 5,884 $ 226,380 $ 0 $ 232,264Deferred Delinquent Property Taxes 101 2,808 0 2,909Other Deferred/Unavailable Revenue 0 16,511 0 16,511Total Deferred Inflows of Resources $ 5,985 $ 245,699 $ 0 $ 251,684

FUND BALANCES

Restricted:Restricted for Public Safety $ 0 $ 0 $ 66,703 $ 66,703Restricted for Public Health and Welfare 0 285,932 0 285,932Restricted for Other Purposes 16,075 0 0 16,075

Committed:Committed for Public Health and Welfare 0 163,605 0 163,605

Total Fund Balances $ 16,075 $ 449,537 $ 66,703 $ 532,315

Total Deferred Inflows of Resources and Fund Balances $ 22,060 $ 695,236 $ 66,703 $ 783,999

Special Revenue Funds

107

Exhibit G-2

The Metropolitan Government of Lynchburg, Moore County, TennesseeCombining Statement of Revenues, Expenditures,

and Changes in Fund BalancesNonmajor Governmental FundsFor the Year Ended June 30, 2016

Constitu- TotalSolid tional Nonmajor

Urban Waste / Drug Officers - GovernmentalServices Sanitation Control Fees Funds

RevenuesLocal Taxes $ 14,083 $ 237,316 $ 0 $ 0 $ 251,399Licenses and Permits 5,905 0 0 0 5,905Fines, Forfeitures, and Penalties 0 0 8,427 0 8,427Charges for Current Services 0 205,122 0 64 205,186Other Local Revenues 0 28,623 4,088 0 32,711State of Tennessee 0 31,517 0 0 31,517

Total Revenues $ 19,988 $ 502,578 $ 12,515 $ 64 $ 535,145


General Government $ 20,124 $ 0 $ 0 $ 0 $ 20,124Finance 0 0 0 64 64Public Safety 0 0 3,979 0 3,979Public Health and Welfare 0 431,498 0 0 431,498

Total Expenditures $ 20,124 $ 431,498 $ 3,979 $ 64 $ 455,665

Excess (Deficiency) of RevenuesOver Expenditures $ (136) $ 71,080 $ 8,536 $ 0 $ 79,480

Net Change in Fund Balances $ (136) $ 71,080 $ 8,536 $ 0 $ 79,480Fund Balance, July 1, 2015 16,211 378,457 58,167 0 452,835

Fund Balance, June 30, 2016 $ 16,075 $ 449,537 $ 66,703 $ 0 $ 532,315


108

Exhibit G-3

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Revenues, Expenditures, and Changes

in Fund Balance - Actual and BudgetUrban Services FundFor the Year Ended June 30, 2016



RevenuesLocal Taxes $ 14,083 $ 10,800 $ 10,800 $ 3,283Licenses and Permits 5,905 3,000 3,000 2,905Other Local Revenues 0 85 85 (85)

Total Revenues $ 19,988 $ 13,885 $ 13,885 $ 6,103

ExpendituresGeneral Government

Other General Administration $ 20,124 $ 20,200 $ 20,124 $ 0Total Expenditures $ 20,124 $ 20,200 $ 20,124 $ 0

Excess (Deficiency) of RevenuesOver Expenditures $ (136) $ (6,315) $ (6,239) $ 6,103

Net Change in Fund Balance $ (136) $ (6,315) $ (6,239) $ 6,103Fund Balance, July 1, 2015 16,211 13,723 13,723 2,488


Budgeted Amounts

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Exhibit G-4


in Fund Balance - Actual and BudgetSolid Waste/Sanitation FundFor the Year Ended June 30, 2016



RevenuesLocal Taxes $ 237,316 $ 222,750 $ 222,750 $ 14,566Charges for Current Services 205,122 188,000 188,000 17,122Other Local Revenues 28,623 25,000 25,000 3,623State of Tennessee 31,517 33,700 33,700 (2,183)

Total Revenues $ 502,578 $ 469,450 $ 469,450 $ 33,128

ExpendituresPublic Health and Welfare

Waste Pickup $ 29,743 $ 33,700 $ 33,700 $ 3,957Recycling Center 401,755 412,885 440,885 39,130

Total Expenditures $ 431,498 $ 446,585 $ 474,585 $ 43,087

Excess (Deficiency) of RevenuesOver Expenditures $ 71,080 $ 22,865 $ (5,135) $ 76,215

Net Change in Fund Balance $ 71,080 $ 22,865 $ (5,135) $ 76,215Fund Balance, July 1, 2015 378,457 275,022 275,022 103,435


Budgeted Amounts

110

Exhibit G-5


in Fund Balance - Actual and BudgetDrug Control FundFor the Year Ended June 30, 2016



RevenuesFines, Forfeitures, and Penalties $ 8,427 $ 6,600 $ 6,600 $ 1,827Other Local Revenues 4,088 0 0 4,088

Total Revenues $ 12,515 $ 6,600 $ 6,600 $ 5,915

ExpendituresPublic Safety

Drug Enforcement $ 3,979 $ 16,250 $ 16,250 $ 12,271Total Expenditures $ 3,979 $ 16,250 $ 16,250 $ 12,271


Net Change in Fund Balance $ 8,536 $ (9,650) $ (9,650) $ 18,186Fund Balance, July 1, 2015 58,167 45,857 45,857 12,310


Budgeted Amounts

111

Major Governmental Fund

General Debt Service Fund________________________________________

The General Debt Service Fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest.

________________________________________

112

Exhibit H


in Fund Balance - Actual and BudgetGeneral Debt Service FundFor the Year Ended June 30, 2016



RevenuesLocal Taxes $ 972,737 $ 759,200 $ 759,200 $ 213,537Other Governments and Citizens Groups 1,000 0 0 1,000

Total Revenues $ 973,737 $ 759,200 $ 759,200 $ 214,537

ExpendituresPrincipal on Debt

General Government $ 87,100 $ 87,100 $ 87,100 $ 0Education 289,900 289,900 289,900 0

Interest on DebtGeneral Government 3,758 59,075 59,075 55,317Education 19,145 299,874 299,874 280,729

Other Debt ServiceGeneral Government 23,848 29,000 29,000 5,152Education 50,654 60,000 60,000 9,346



Net Change in Fund Balance $ 499,332 $ (65,749) $ (65,749) $ 565,081Fund Balance, July 1, 2015 1,782,312 1,360,437 1,360,437 421,875

Fund Balance, June 30, 2016 $ 2,281,644 $ 1,294,688 $ 1,294,688 $ 986,956

Budgeted Amounts

113

Fiduciary Fund____________________________________

Agency Funds are used to account for assets held by the metropolitan government as an agent for individuals, private organizations, other governments, and/or other funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.

____________________________________

Constitutional Officers - Agency Fund – The Constitutional Officers - Agency Fund is used to account for amounts collected in an agency capacity by the metropolitan clerk; circuit, general sessions, and juvenile courts clerk; clerk and master; register of deeds; and sheriff. Such collections include amounts due the state, cities, other metropolitan funds, litigants, heirs, and others.

114

Exhibit I

The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of Changes in Assets and Liabilities - Agency FundFor the Year Ended June 30, 2016

Beginning EndingBalance Additions Deductions Balance

Constitutional Officers - Agency Fund Assets Cash $ 21,839 $ 1,146,995 $ 1,143,577 $ 25,257

Total Assets $ 21,839 $ 1,146,995 $ 1,143,577 $ 25,257

Liabilities Due to Litigants, Heirs, and Others $ 21,839 $ 1,146,995 $ 1,143,577 $ 25,257

Total Liabilities $ 21,839 $ 1,146,995 $ 1,143,577 $ 25,257

115

Metropolitan School Department ________________________________________

This section presents combining and individual fund financial statements for the Metropolitan School Department, a discretely presented component unit. The School Department uses a General Fund, two Special Revenue Funds, and one Capital Projects Fund.

________________________________________

General Purpose School Fund – The General Purpose School Fund is used to account for general operations of the School Department.

School Federal Projects Fund – The School Federal Projects Fund is used to account for restricted federal revenues, which must be expended on specific education programs.

Central Cafeteria Fund – The Central Cafeteria Fund is used to account for the cafeteria operations in each of the schools.

116

Exhibit J-1The Metropolitan Government of Lynchburg, Moore County, TennesseeStatement of ActivitiesDiscretely Presented Metropolitan School DepartmentFor the Year Ended June 30, 2016

Net (Expense)Revenue andChanges in

Operating Net PositionCharges Grants Total

for and GovernmentalFunctions/Programs Expenses Services Contributions Activities

Governmental Activities: Instruction $ 5,213,962 $ 15,900 $ 259,900 $ (4,938,162) Support Services 3,328,350 86,719 39,310 (3,202,321) Operation of Non-instructional Services 603,639 234,020 378,597 8,978

Total Governmental Activities $ 9,145,951 $ 336,639 $ 677,807 $ (8,131,505)

General Revenues: Taxes: Property Taxes Levied for General Purposes $ 2,818,450 Local Option Sales Tax 458,400 Other Local Taxes 560 Grants and Contributions Not Restricted to Specific Programs 4,812,720 Unrestricted Investment Income 136 Miscellaneous 50,658 Gain on Sale of Capital Assets 10,499Total General Revenues $ 8,151,423

Change in Net Position $ 19,918Net Position, July 1, 2015 12,098,920

Net Position, June 30, 2016 $ 12,118,838

Program Revenues

117

Exhibit J-2

The Metropolitan Government of Lynchburg, Moore County, TennesseeBalance Sheet - Governmental FundsDiscretely Presented Metropolitan School DepartmentJune 30, 2016

OtherGeneral Govern- TotalPurpose mental GovernmentalSchool Funds Funds

ASSETS

Cash $ 0 $ 38,470 $ 38,470Equity in Pooled Cash and Investments 1,211,678 108,652 1,320,330Inventories 0 4,600 4,600Due from Other Governments 134,730 32,662 167,392Property Taxes Receivable 2,795,663 0 2,795,663Allowance for Uncollectible Property Taxes (66,533) 0 (66,533)

Total Assets $ 4,075,538 $ 184,384 $ 4,259,922

LIABILITIES

Accounts Payable $ 111,207 $ 5,466 $ 116,673Payroll Deductions Payable 282,342 26,907 309,249Total Liabilities $ 393,549 $ 32,373 $ 425,922


Deferred Current Property Taxes $ 2,693,922 $ 0 $ 2,693,922Deferred Delinquent Property Taxes 32,015 0 32,015Other Deferred/Unavailable Revenue 40,355 0 40,355Total Deferred Inflows of Resources $ 2,766,292 $ 0 $ 2,766,292

FUND BALANCES

Nonspendable:Inventory $ 0 $ 4,600 $ 4,600

Restricted:Restricted for Education 3,396 127,411 130,807

Committed:Committed for Education 314,283 20,000 334,283

Unassigned 598,018 0 598,018Total Fund Balances $ 915,697 $ 152,011 $ 1,067,708

Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 4,075,538 $ 184,384 $ 4,259,922

Nonmajor Funds

Major Fund

118

Exhibit J-3

The Metropolitan Government of Lynchburg, Moore County, TennesseeReconciliation of the Balance Sheet of Governmental Funds to

the Statement of Net PositionDiscretely Presented Metropolitan School DepartmentJune 30, 2016

Amounts reported for governmental activities in the statement of net position (Exhibit A) are different because:

Total fund balances - balance sheet - governmental funds (Exhibit J-2) $ 1,067,708

(1) Capital assets used in governmental activities are notfinancial resources and therefore are not reported inthe governmental funds.

Add: land $ 39,342Add: construction in progress 209,950Add: buildings and improvements net of accumulated depreciation 11,253,608Add: other capital assets net of accumulated depreciation 642,529 12,145,429

(2) Long-term liabilities are not due and payablein the current period and therefore are not reportedin the governmental funds. Less: other postemployment benefits liability $ (677,847) Less: net pension liability - teacher legacy plan (41,935) Less: compensated absences payable (19,728) (739,510)

(3) Amounts reported as deferred outflows of resources and deferredinflows of resources related to pensions will be amortized andrecognized as components of pension expense in future years. Add: deferred outflows of resources related to pensions $ 453,589 Less: deferred inflows of resources related to pensions (1,048,961) (595,372)

(4) Net pension assets of the agent and teacher retirement plans arenot current financial resources and therefore are not reported inthe governmental funds.

Add: net pension asset - agent plan $ 166,269Add: net pension asset - teacher retirement plan 1,944 168,213

(5) Other long-term assets are not available to pay forcurrent-period expenditures and therefore are deferredin the governmental funds. 72,370

Net position of governmental activities (Exhibit A) $ 12,118,838

119

Exhibit J-4


and Changes in Fund Balances -Governmental Funds

Discretely Presented Metropolitan School DepartmentFor the Year Ended June 30, 2016

OtherGeneral Govern- TotalPurpose mental GovernmentalSchool Funds Funds

RevenuesLocal Taxes $ 3,287,699 $ 0 $ 3,287,699Licenses and Permits 504 0 504Charges for Current Services 48,761 196,246 245,007Other Local Revenues 73,160 989 74,149State of Tennessee 4,864,872 4,913 4,869,785Federal Government 0 711,870 711,870

Total Revenues $ 8,274,996 $ 914,018 $ 9,189,014


Instruction $ 4,734,067 $ 342,914 $ 5,076,981Support Services 3,262,405 84,054 3,346,459Operation of Non-instructional Services 125,207 486,093 611,300Capital Outlay 391,795 0 391,795

Total Expenditures $ 8,513,474 $ 913,061 $ 9,426,535

Excess (Deficiency) of RevenuesOver Expenditures $ (238,478) $ 957 $ (237,521)

Net Change in Fund Balances $ (238,478) $ 957 $ (237,521)Fund Balance, July 1, 2015 1,154,175 151,054 1,305,229

Fund Balance, June 30, 2016 $ 915,697 $ 152,011 $ 1,067,708

Nonmajor Funds

Major Fund

120

Exhibit J-5

The Metropolitan Government of Lynchburg, Moore County, TennesseeReconciliation of the Statement of Revenues, Expenditures, and

Changes in Fund Balances of Governmental Funds to theStatement of Activities


Amounts reported for governmental activities in the statement of activities (Exhibit B) are different because:

Net change in fund balances - total governmental funds (Exhibit J-4) $ (237,521)

(1) Governmental funds report capital outlays as expenditures. However,in the statement of activities, the cost of these assets is allocatedover their useful lives and reported as depreciation expense. Thedifference between capital outlays and depreciation is itemized asfollows:

Add: capital assets purchased in the current period $ 398,398Less: current-year depreciation expense (490,224) (91,826)

(2) The net effect of various miscellaneous transactions involving capitalassets (sales, trade-ins, and donations) is to decrease net assets.

Less: book value of capital assets disposed (12,856)

(3) Revenues in the statement of activities that do not provide currentfinancial resources are not reported as revenues in the funds.

Add: deferred delinquent property taxes and other deferred June 30, 2016 $ 72,370Less: deferred delinquent property taxes and other deferred June 30, 2015 (82,659) (10,289)

(4) Some expenses reported in the statement of activities do not requirethe use of current financial resources and therefore are not reportedas expenditures in the governmental funds.

Change in other postemployment benefits liability $ (50,743)Change in net pension asset - agency pension plan (137,056)Change in net pension asset - teacher retirement pension plan 1,944Change in net pension liability - teacher legacy pension plan (57,912)Change in deferred outflows of resources related to pensions 38,965Change in deferred inflows of resources related to pensions 579,052Change in compensated absences payable (1,840) 372,410

Change in net position of governmental activities (Exhibit B) $ 19,918

121

Exhibit J-6

The Metropolitan Government of Lynchburg, Moore County, TennesseeCombining Balance Sheet - Nonmajor Governmental FundsDiscretely Presented Metropolitan School DepartmentJune 30, 2016

TotalSchool NonmajorFederal Central GovernmentalProjects Cafeteria Funds

ASSETS

Cash $ 0 $ 38,470 $ 38,470Equity in Pooled Cash and Investments 31,508 77,144 108,652Inventories 0 4,600 4,600Due from Other Governments 9,031 23,631 32,662

Total Assets $ 40,539 $ 143,845 $ 184,384

LIABILITIES

Accounts Payable $ 4,981 $ 485 $ 5,466Payroll Deductions Payable 14,845 12,062 26,907Total Liabilities $ 19,826 $ 12,547 $ 32,373

FUND BALANCES

Nonspendable:Inventory $ 0 $ 4,600 $ 4,600

Restricted:Restricted for Education 713 126,698 127,411

Committed:Committed for Education 20,000 0 20,000

Total Fund Balances $ 20,713 $ 131,298 $ 152,011

Total Liabilities and Fund Balances $ 40,539 $ 143,845 $ 184,384


122

Exhibit J-7

The Metropolitan Government of Lynchburg, Moore County, TennesseeCombining Statement of Revenues, Expenditures,

and Changes in Fund Balances -Nonmajor Governmental Funds


TotalSchool NonmajorFederal Central GovernmentalProjects Cafeteria Funds

RevenuesCharges for Current Services $ 0 $ 196,246 $ 196,246Other Local Revenues 0 989 989State of Tennessee 0 4,913 4,913Federal Government 429,088 282,782 711,870

Total Revenues $ 429,088 $ 484,930 $ 914,018


Instruction $ 342,914 $ 0 $ 342,914Support Services 84,054 0 84,054Operation of Non-instructional Services 0 486,093 486,093

Total Expenditures $ 426,968 $ 486,093 $ 913,061

Excess (Deficiency) of RevenuesOver Expenditures $ 2,120 $ (1,163) $ 957

Net Change in Fund Balances $ 2,120 $ (1,163) $ 957Fund Balance, July 1, 2015 18,593 132,461 151,054

Fund Balance, June 30, 2016 $ 20,713 $ 131,298 $ 152,011


123

Exhibit J-8


in Fund Balance - Actual and BudgetDiscretely Presented Metropolitan School DepartmentGeneral Purpose School FundFor the Year Ended June 30, 2016



RevenuesLocal Taxes $ 3,287,699 $ 3,016,575 $ 3,231,398 $ 56,301Licenses and Permits 504 600 465 39Charges for Current Services 48,761 56,316 42,196 6,565Other Local Revenues 73,160 21,185 71,898 1,262State of Tennessee 4,864,872 4,788,620 4,870,770 (5,898)

Total Revenues $ 8,274,996 $ 7,883,296 $ 8,216,727 $ 58,269

ExpendituresInstruction

Regular Instruction Program $ 3,914,299 $ 3,959,448 $ 3,965,909 $ 51,610Alternative Instruction Program 63,610 63,837 63,837 227Special Education Program 437,532 479,077 476,894 39,362Vocational Education Program 318,626 334,068 340,950 22,324

Support ServicesAttendance 8,474 8,612 9,379 905Health Services 57,200 18,030 53,000 (4,200)Other Student Support 324,273 316,856 287,136 (37,137)Regular Instruction Program 389,075 416,180 405,704 16,629Special Education Program 57,485 57,476 57,977 492Vocational Education Program 33,894 34,517 34,517 623Other Programs 42,347 0 42,347 0Board of Education 219,321 237,910 233,295 13,974Director of Schools 178,949 200,588 196,588 17,639Office of the Principal 592,961 583,737 602,300 9,339Fiscal Services 103,124 103,836 103,836 712Operation of Plant 631,134 686,352 690,127 58,993Maintenance of Plant 169,948 183,889 178,620 8,672Transportation 454,220 404,564 481,802 27,582

Operation of Non-instructional ServicesCommunity Services 28,468 33,312 29,731 1,263Early Childhood Education 96,739 99,479 100,121 3,382

Capital OutlayRegular Capital Outlay 391,795 300,000 400,000 8,205



Net Change in Fund Balance $ (238,478) $ (638,472) $ (537,343) $ 298,865Fund Balance, July 1, 2015 1,154,175 886,235 1,154,175 0


Budgeted Amounts

124

Exhibit J-9


in Fund Balance - Actual and BudgetDiscretely Presented Metropolitan School Department School Federal Projects FundFor the Year Ended June 30, 2016



RevenuesFederal Government $ 429,088 $ 445,544 $ 496,289 $ (67,201)

Total Revenues $ 429,088 $ 445,544 $ 496,289 $ (67,201)

ExpendituresInstruction

Regular Instruction Program $ 141,225 $ 149,311 $ 172,345 $ 31,120Special Education Program 187,060 202,742 203,554 16,494Vocational Education Program 14,629 14,281 14,632 3

Support ServicesHealth Services 15,059 15,468 16,036 977Other Student Support 8,725 9,299 9,966 1,241Regular Instruction Program 50,965 44,394 70,426 19,461Special Education Program 8,921 9,749 8,946 25Vocational Education Program 384 300 384 0


Excess (Deficiency) of RevenuesOver Expenditures $ 2,120 $ 0 $ 0 $ 2,120

Net Change in Fund Balance $ 2,120 $ 0 $ 0 $ 2,120Fund Balance, July 1, 2015 18,593 0 0 18,593

Fund Balance, June 30, 2016 $ 20,713 $ 0 $ 0 $ 20,713

Budgeted Amounts

125

Exhibit J-10


in Fund Balance - Actual and BudgetDiscretely Presented Metropolitan School DepartmentCentral Cafeteria FundFor the Year Ended June 30, 2016



RevenuesCharges for Current Services $ 196,246 $ 262,000 $ 262,000 $ (65,754)Other Local Revenues 989 500 500 489State of Tennessee 4,913 5,600 5,600 (687)Federal Government 282,782 237,000 265,433 17,349

Total Revenues $ 484,930 $ 505,100 $ 533,533 $ (48,603)

ExpendituresOperation of Non-instructional Services

Food Service $ 486,093 $ 515,260 $ 543,693 $ 57,600Total Expenditures $ 486,093 $ 515,260 $ 543,693 $ 57,600


Net Change in Fund Balance $ (1,163) $ (10,160) $ (10,160) $ 8,997Fund Balance, July 1, 2015 132,461 111,381 111,381 21,080


Budgeted Amounts

126

MISCELLANEOUS SCHEDULES

127

Exhibit K-1

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Changes in Long-term Notes and Other LoansFor the Year Ended June 30, 2016

Paid and/orOriginal Date Last Issued MaturedAmount Interest of Maturity Outstanding During During Outstanding

Description of Indebtedness of Issue Rate Issue Date 7-1-15 Period Period 6-30-16

NOTES PAYABLE

Payable through General Debt Service Fund Jail Expansion $ 1,600,000 2.75 % 1-11-16 1-11-28 $ 0 $ 1,600,000 $ 0 $ 1,600,000

Total Notes Payable $ 0 $ 1,600,000 $ 0 $ 1,600,000

OTHER LOANS PAYABLE

Payable through General Debt Service Fund School Construction 8,300,000 Variable 7-17-07 5-25-35 $ 6,769,000 $ 0 $ 247,000 $ 6,522,000 School Construction/Public Water 2,971,980 Variable 6-9-08 5-25-28 2,204,980 0 130,000 2,074,980

Total Other Loans Payable $ 8,973,980 $ 0 $ 377,000 $ 8,596,980

128

Exhibit K-2

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Long-term Debt Requirements by Year

YearEndingJune 30 Principal Interest Total

2017 $ 133,333 $ 44,000 $ 177,3332018 133,333 40,333 173,6662019 133,334 36,667 170,0012020 133,333 33,000 166,3332021 133,333 29,333 162,6662022 133,334 25,667 159,0012023 133,333 22,000 155,3332024 133,333 18,333 151,6662025 133,334 14,667 148,0012026 133,333 11,000 144,3332027 133,333 7,333 140,6662028 133,334 3,667 137,001

Total $ 1,600,000 $ 286,000 $ 1,886,000

YearEndingJune 30 Principal Interest Other Fees Total

2017 $ 391,000 $ 45,298 $ 55,578 $ 491,8762018 405,000 43,243 53,149 501,3922019 421,000 41,115 50,634 512,7492020 435,000 38,903 48,019 521,9222021 451,000 36,617 45,317 532,9342022 469,000 34,248 42,516 545,7642023 485,000 31,784 39,604 556,3882024 503,000 29,236 36,592 568,8282025 521,000 26,594 33,469 581,0632026 540,000 23,857 30,234 594,0912027 560,000 21,021 26,882 607,9032028 552,980 18,080 23,320 594,3802029 372,000 15,174 18,950 406,1242030 383,000 13,202 16,621 412,8232031 396,000 11,172 14,222 421,3942032 408,000 9,074 11,742 428,8162033 421,000 6,911 9,187 437,0982034 435,000 4,680 6,550 446,2302035 448,000 2,374 3,742 454,116

Total $ 8,596,980 $ 452,583 $ 566,328 $ 9,615,891

Other Loans

Note

129

Exhibit K-3

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Salaries and Official Bonds of Principal OfficialsPrimary Government and Discretely Presented Metropolitan School DepartmentFor the Year Ended June 30, 2016

SalaryPaid

DuringOfficial Authorization for Salary Period Bond Surety

Metropolitan Mayor Section 8-24-102, TCA, and $ 67,386 $ 100,000 RLI Insurance Company Metropolitan Council

Highway Superintendent Section 8-24-102, TCA 67,386 100,000 "Director of Schools State Board of Education

and Metropolitan Board of Education 86,051 50,000 Western Surety Company

Trustee Section 8-24-102, TCA 58,343 358,933 Auto-Owners (Mutual) InsuranceAssessor of Property Section 8-24-102, TCA 58,343 50,000 RLI Insurance CompanyMetropolitan Clerk Section 8-24-102, TCA 58,343 50,000 "Circuit, General Sessions, and Juvenile Courts Clerk Section 8-24-102, TCA 58,343 50,000 "Clerk and Master Section 8-24-102, TCA

and Chancery Court Judge 58,343 50,000 "Register of Deeds Section 8-24-102, TCA 58,343 50,000 "Sheriff Section 8-24-102, TCA 64,178 (1) 100,000 "

Employee Bonds Metropolitan Employees 150,000 Tennessee Risk Management Trust School Department Employees 150,000 "

(1) Does not include a law enforcement training supplement of $600.

130

Exhibit K-4

The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Detailed Revenues -

All Governmental Fund TypesFor the Year Ended June 30, 2016

Constitu-Solid tional

Urban Waste / Drug Officers -General Services Sanitation Control Fees

Local TaxesCounty Property Taxes

Current Property Tax $ 2,024,756 $ 6,672 $ 232,727 $ 0 $ 0Trustee's Collections - Prior Year 31,393 103 3,212 0 0Circuit Clerk/Clerk and Master Collections - Prior Years 5,974 0 687 0 0Interest and Penalty 6,002 29 690 0 0Payments in-Lieu-of Taxes - T.V.A. 104,837 7,279 0 0 0

County Local Option TaxesLocal Option Sales Tax 229,200 0 0 0 0Hotel/Motel Tax 6,146 0 0 0 0Litigation Tax - General 18,275 0 0 0 0Litigation Tax - Special Purpose 81 0 0 0 0Litigation Tax - Jail, Workhouse, or Courthouse 20,107 0 0 0 0Business Tax 22,517 0 0 0 0Mineral Severance Tax 0 0 0 0 0

Statutory Local TaxesBank Excise Tax 35,440 0 0 0 0Wholesale Beer Tax 83,827 0 0 0 0Interstate Telecommunications Tax 515 0 0 0 0Other Statutory Local Taxes 0 0 0 0 0

Total Local Taxes $ 2,589,070 $ 14,083 $ 237,316 $ 0 $ 0

Licenses and PermitsLicenses

Cable TV Franchise $ 9,554 $ 5,905 $ 0 $ 0 $ 0Permits

Building Permits 3,800 0 0 0 0Total Licenses and Permits $ 13,354 $ 5,905 $ 0 $ 0 $ 0

(Continued)


131

Exhibit K-4


All Governmental Fund Types (Cont.)



Fines, Forfeitures, and PenaltiesCircuit Court

Fines $ 2,413 $ 0 $ 0 $ 0 $ 0Officers Costs 2,202 0 0 0 0Drug Control Fines 0 0 0 5,425 0Drug Court Fees 200 0 0 0 0Jail Fees 276 0 0 0 0Data Entry Fee - Circuit Court 436 0 0 0 0

Criminal CourtDUI Treatment Fines 428 0 0 0 0Courtroom Security Fee 39 0 0 0 0

General Sessions CourtFines 6,608 0 0 0 0Officers Costs 6,831 0 0 0 0Game and Fish Fines 808 0 0 0 0Drug Control Fines 0 0 0 1,952 0Drug Court Fees 1,264 0 0 0 0Jail Fees 1,807 0 0 0 0DUI Treatment Fines 1,140 0 0 0 0Data Entry Fee - General Sessions Court 1,450 0 0 0 0Courtroom Security Fee 165 0 0 0 0

Juvenile CourtFines 588 0 0 0 0Drug Control Fines 0 0 0 1,050 0

Chancery CourtOfficers Costs 321 0 0 0 0Data Entry Fee - Chancery Court 212 0 0 0 0

Total Fines, Forfeitures, and Penalties $ 27,188 $ 0 $ 0 $ 8,427 $ 0

(Continued)


132

Exhibit K-4





Charges for Current ServicesGeneral Service Charges

Solid Waste Disposal Fee $ 0 $ 0 $ 205,122 $ 0 $ 0Patient Charges 149,921 0 0 0 0Other General Service Charges 121 0 0 0 0

FeesRecreation Fees 7,906 0 0 0 0Copy Fees 191 0 0 0 0Library Fees 1,570 0 0 0 0Greenbelt Late Application Fee 150 0 0 0 0Vending Machine Collections 84 0 0 0 0Constitutional Officers' Fees and Commissions 0 0 0 0 64Data Processing Fee - Register 2,182 0 0 0 0Data Processing Fee - Sheriff 815 0 0 0 0Sexual Offender Registration Fee - Sheriff 1,800 0 0 0 0Data Processing Fee - County Clerk 1,077 0 0 0 0

Total Charges for Current Services $ 165,817 $ 0 $ 205,122 $ 0 $ 64

Other Local RevenuesRecurring Items

Investment Income $ 34,175 $ 0 $ 0 $ 0 $ 0Lease/Rentals 4,594 0 0 0 0Commissary Sales 3,488 0 0 0 0Sale of Recycled Materials 0 0 28,216 0 0E-Rate Funding 1,955 0 0 0 0Miscellaneous Refunds 19,453 0 407 0 0

(Continued)


133

Exhibit K-4



Constitu -Solid tional


Other Local Revenues (Cont.)Nonrecurring Items

Sale of Property $ 4,300 $ 0 $ 0 $ 4,088 $ 0Damages Recovered from Individuals 1,734 0 0 0 0Contributions and Gifts 11,450 0 0 0 0

Other Local RevenuesOther Local Revenues 390 0 0 0 0

Total Other Local Revenues $ 81,539 $ 0 $ 28,623 $ 4,088 $ 0

Fees Received From County OfficialsFees In-Lieu-of Salary

County Clerk $ 58,059 $ 0 $ 0 $ 0 $ 0Circuit Court Clerk 19,672 0 0 0 0General Sessions Court Clerk 24,579 0 0 0 0Clerk and Master 14,319 0 0 0 0Juvenile Court Clerk 2,539 0 0 0 0Register 27,188 0 0 0 0Sheriff 4,362 0 0 0 0Trustee 163,633 0 0 0 0

Total Fees Received From County Officials $ 314,351 $ 0 $ 0 $ 0 $ 0

State of TennesseeGeneral Government Grants

Juvenile Services Program $ 18,000 $ 0 $ 0 $ 0 $ 0Public Safety Grants

Law Enforcement Training Programs 7,200 0 0 0 0

(Continued)


134

Exhibit K-4





State of Tennessee (Cont.)Health and Welfare Grants

Health Department Programs $ 119,588 $ 0 $ 0 $ 0 $ 0Public Works Grants

State Aid Program 0 0 0 0 0Litter Program 0 0 31,517 0 0

Other State RevenuesIncome Tax 59,425 0 0 0 0Beer Tax 18,488 0 0 0 0Vehicle Certificate of Title Fees 4,566 0 0 0 0Alcoholic Beverage Tax 15,706 0 0 0 0State Revenue Sharing - T.V.A. 106,533 0 0 0 0Contracted Prisoner Boarding 103,341 0 0 0 0Gasoline and Motor Fuel Tax 0 0 0 0 0Petroleum Special Tax 0 0 0 0 0Registrar's Salary Supplement 15,164 0 0 0 0State Shared Sales Tax - Cities 47,044 0 0 0 0Other State Grants 5,879 0 0 0 0Other State Revenues 17,281 0 0 0 0

Total State of Tennessee $ 538,215 $ 0 $ 31,517 $ 0 $ 0

Federal GovernmentFederal Through State

Disaster Relief $ 0 $ 0 $ 0 $ 0 $ 0Homeland Security Grants 24,006 0 0 0 0Other Federal through State 45,507 0 0 0 0

(Continued)


135

Exhibit K-4





Federal Government (Cont.)Direct Federal Revenue

Other Direct Federal Revenue $ 2,817 $ 0 $ 0 $ 0 $ 0Total Federal Government $ 72,330 $ 0 $ 0 $ 0 $ 0

Other Governments and Citizens GroupsOther Governments

Contributions $ 30,000 $ 0 $ 0 $ 0 $ 0Citizens Groups

Donations 57,782 0 0 0 0Total Other Governments and Citizens Groups $ 87,782 $ 0 $ 0 $ 0 $ 0

Total $ 3,889,646 $ 19,988 $ 502,578 $ 12,515 $ 64

(Continued)


136

Exhibit K-4



Highway / General GeneralPublic Debt CapitalWorks Service Projects Total


Current Property Tax $ 34,910 $ 372,367 $ 221,076 $ 2,892,508Trustee's Collections - Prior Year 541 5,765 3,283 44,297Circuit Clerk/Clerk and Master Collections - Prior Years 103 1,106 652 8,522Interest and Penalty 103 1,104 656 8,584Payments in-Lieu-of Taxes - T.V.A. 0 0 0 112,116

County Local Option TaxesLocal Option Sales Tax 0 229,200 0 458,400Hotel/Motel Tax 0 0 0 6,146Litigation Tax - General 0 0 0 18,275Litigation Tax - Special Purpose 0 0 0 81Litigation Tax - Jail, Workhouse, or Courthouse 0 0 0 20,107Business Tax 12,000 0 0 34,517Mineral Severance Tax 1 0 0 1

Statutory Local TaxesBank Excise Tax 0 0 0 35,440Wholesale Beer Tax 0 0 0 83,827Interstate Telecommunications Tax 0 0 0 515Other Statutory Local Taxes 0 363,195 0 363,195

Total Local Taxes $ 47,658 $ 972,737 $ 225,667 $ 4,086,531


Cable TV Franchise $ 0 $ 0 $ 0 $ 15,459Permits

Building Permits 0 0 0 3,800Total Licenses and Permits $ 0 $ 0 $ 0 $ 19,259

(Continued)

Special Revenue

FundDebt Service

FundCapital

Projects Fund

137

Exhibit K-4




Fines, Forfeitures, and PenaltiesCircuit Court

Fines $ 0 $ 0 $ 0 $ 2,413Officers Costs 0 0 0 2,202Drug Control Fines 0 0 0 5,425Drug Court Fees 0 0 0 200Jail Fees 0 0 0 276Data Entry Fee - Circuit Court 0 0 0 436

Criminal CourtDUI Treatment Fines 0 0 0 428Courtroom Security Fee 0 0 0 39

General Sessions CourtFines 0 0 0 6,608Officers Costs 0 0 0 6,831Game and Fish Fines 0 0 0 808Drug Control Fines 0 0 0 1,952Drug Court Fees 0 0 0 1,264Jail Fees 0 0 0 1,807DUI Treatment Fines 0 0 0 1,140Data Entry Fee - General Sessions Court 0 0 0 1,450Courtroom Security Fee 0 0 0 165

Juvenile CourtFines 0 0 0 588Drug Control Fines 0 0 0 1,050

Chancery CourtOfficers Costs 0 0 0 321Data Entry Fee - Chancery Court 0 0 0 212

Total Fines, Forfeitures, and Penalties $ 0 $ 0 $ 0 $ 35,615

(Continued)

Special Revenue

FundDebt Service

FundCapital

Projects Fund

138

Exhibit K-4




Charges for Current ServicesGeneral Service Charges

Solid Waste Disposal Fee $ 0 $ 0 $ 0 $ 205,122Patient Charges 0 0 0 149,921Other General Service Charges 0 0 0 121

FeesRecreation Fees 0 0 0 7,906Copy Fees 0 0 0 191Library Fees 0 0 0 1,570Greenbelt Late Application Fee 0 0 0 150Vending Machine Collections 0 0 0 84Constitutional Officers' Fees and Commissions 0 0 0 64Data Processing Fee - Register 0 0 0 2,182Data Processing Fee - Sheriff 0 0 0 815Sexual Offender Registration Fee - Sheriff 0 0 0 1,800Data Processing Fee - County Clerk 0 0 0 1,077

Total Charges for Current Services $ 0 $ 0 $ 0 $ 371,003


Investment Income $ 0 $ 0 $ 0 $ 34,175Lease/Rentals 0 0 0 4,594Commissary Sales 0 0 0 3,488Sale of Recycled Materials 0 0 0 28,216E-Rate Funding 0 0 0 1,955Miscellaneous Refunds 1,529 0 351 21,740

(Continued)

Special Revenue

FundDebt Service

FundCapital

Projects Fund

139

Exhibit K-4




Other Local Revenues (Cont.)Nonrecurring Items

Sale of Property $ 0 $ 0 $ 0 $ 8,388Damages Recovered from Individuals 0 0 0 1,734Contributions and Gifts 0 0 0 11,450

Other Local RevenuesOther Local Revenues 0 0 0 390

Total Other Local Revenues $ 1,529 $ 0 $ 351 $ 116,130

Fees Received From County OfficialsFees In-Lieu-of Salary

County Clerk $ 0 $ 0 $ 0 $ 58,059Circuit Court Clerk 0 0 0 19,672General Sessions Court Clerk 0 0 0 24,579Clerk and Master 0 0 0 14,319Juvenile Court Clerk 0 0 0 2,539Register 0 0 0 27,188Sheriff 0 0 0 4,362Trustee 0 0 0 163,633

Total Fees Received From County Officials $ 0 $ 0 $ 0 $ 314,351


Juvenile Services Program $ 0 $ 0 $ 0 $ 18,000Public Safety Grants

Law Enforcement Training Programs 0 0 0 7,200

(Continued)

Special Revenue

FundDebt Service

FundCapital

Projects Fund

140

Exhibit K-4




State of Tennessee (Cont.)Health and Welfare Grants

Health Department Programs $ 0 $ 0 $ 0 $ 119,588Public Works Grants

State Aid Program 96,426 0 0 96,426Litter Program 0 0 0 31,517

Other State RevenuesIncome Tax 0 0 0 59,425Beer Tax 0 0 0 18,488Vehicle Certificate of Title Fees 0 0 0 4,566Alcoholic Beverage Tax 0 0 0 15,706State Revenue Sharing - T.V.A. 0 0 0 106,533Contracted Prisoner Boarding 0 0 0 103,341Gasoline and Motor Fuel Tax 1,258,505 0 0 1,258,505Petroleum Special Tax 5,754 0 0 5,754Registrar's Salary Supplement 0 0 0 15,164State Shared Sales Tax - Cities 0 0 0 47,044Other State Grants 5,682 0 0 11,561Other State Revenues 0 0 0 17,281

Total State of Tennessee $ 1,366,367 $ 0 $ 0 $ 1,936,099


Disaster Relief $ 68,526 $ 0 $ 0 $ 68,526Homeland Security Grants 0 0 0 24,006Other Federal through State 0 0 0 45,507

(Continued)

Special Revenue

FundDebt Service

FundCapital

Projects Fund

141

Exhibit K-4




Federal Government (Cont.)Direct Federal Revenue

Other Direct Federal Revenue $ 0 $ 0 $ 0 $ 2,817Total Federal Government $ 68,526 $ 0 $ 0 $ 140,856

Other Governments and Citizens GroupsOther Governments

Contributions $ 0 $ 0 $ 0 $ 30,000Citizens Groups

Donations 0 1,000 0 58,782Total Other Governments and Citizens Groups $ 0 $ 1,000 $ 0 $ 88,782

Total $ 1,484,080 $ 973,737 $ 226,018 $ 7,108,626

Special Revenue

FundDebt Service

FundCapital

Projects Fund

142

Exhibit K-5


All Governmental Fund TypesDiscretely Presented Metropolitan School DepartmentFor the Year Ended June 30, 2016

General SchoolPurpose Federal CentralSchool Projects Cafeteria Total


Current Property Tax $ 2,769,471 $ 0 $ 0 $ 2,769,471Trustee's Collections - Prior Year 42,886 0 0 42,886Circuit Clerk/Clerk and Master Collections - Prior Years 8,171 0 0 8,171Interest and Penalty 8,210 0 0 8,210

County Local Option TaxesLocal Option Sales Tax 458,401 0 0 458,401

Statutory Local TaxesInterstate Telecommunications Tax 560 0 0 560

Total Local Taxes $ 3,287,699 $ 0 $ 0 $ 3,287,699


Marriage Licenses $ 504 $ 0 $ 0 $ 504Total Licenses and Permits $ 504 $ 0 $ 0 $ 504

Charges for Current ServicesEducation Charges

Tuition - Regular Day Students $ 15,900 $ 0 $ 0 $ 15,900Lunch Payments - Children 0 0 121,345 121,345Lunch Payments - Adults 0 0 2,136 2,136Income from Breakfast 0 0 64,302 64,302A la Carte Sales 0 0 8,463 8,463Community Service Fees - Children 32,861 0 0 32,861

Total Charges for Current Services $ 48,761 $ 0 $ 196,246 $ 245,007

(Continued)


143

Exhibit K-5


All Governmental Fund TypesDiscretely Presented Metropolitan School Department (Cont.)



Investment Income $ 0 $ 0 $ 136 $ 136Sale of Materials and Supplies 159 0 0 159Sale of Recycled Materials 59 0 0 59E-Rate Funding 15,122 0 0 15,122Miscellaneous Refunds 49,077 0 853 49,930

Nonrecurring ItemsSale of Property 7,215 0 0 7,215Damages Recovered from Individuals 1,187 0 0 1,187

Other Local RevenuesOther Local Revenues 341 0 0 341

Total Other Local Revenues $ 73,160 $ 0 $ 989 $ 74,149


On-behalf Contributions for OPEB $ 42,347 $ 0 $ 0 $ 42,347State Education Funds

Basic Education Program 4,538,570 0 0 4,538,570Early Childhood Education 95,815 0 0 95,815Other State Education Funds 86,719 0 4,913 91,632Career Ladder Program 24,509 0 0 24,509

Other State RevenuesBeer Tax 57,879 0 0 57,879Alcoholic Beverage Tax 16,033 0 0 16,033Other State Grants 3,000 0 0 3,000

Total State of Tennessee $ 4,864,872 $ 0 $ 4,913 $ 4,869,785

(Continued)


144

Exhibit K-5





USDA School Lunch Program $ 0 $ 0 $ 194,864 $ 194,864USDA - Commodities 0 0 28,433 28,433Breakfast 0 0 59,485 59,485Vocational Education - Basic Grants to States 0 18,078 0 18,078Title I Grants to Local Education Agencies 0 157,387 0 157,387Special Education - Grants to States 0 206,162 0 206,162Special Education Preschool Grants 0 11,151 0 11,151Eisenhower Professional Development State Grants 0 36,310 0 36,310

Total Federal Government $ 0 $ 429,088 $ 282,782 $ 711,870

Total $ 8,274,996 $ 429,088 $ 484,930 $ 9,189,014


145

Exhibit K-6

Moore County, TennesseeSchedule of Detailed Expenditures -

All Governmental Fund TypesFor the Year Ended June 30, 2016

General FundGeneral Government

County CommissionOther Per Diem and Fees $ 8,500Audit Services 1,909Dues and Memberships 1,000Liability Insurance 47,794Trustee's Commission 51,821Workers' Compensation Insurance 43,624

Total County Commission $ 154,648

County Mayor/ExecutiveCounty Official/Administrative Officer $ 67,386Accountants/Bookkeepers 37,154Longevity Pay 2,000Communication 1,442Data Processing Services 6,060Dues and Memberships 5,547Legal Notices, Recording, and Court Costs 2,555Printing, Stationery, and Forms 999Other Charges 691Office Equipment 428

Total County Mayor/Executive 124,262

County AttorneyCounty Official/Administrative Officer $ 7,273

Total County Attorney 7,273

Election CommissionCounty Official/Administrative Officer $ 52,509Part-time Personnel 6,295Other Salaries and Wages 1,750Election Commission 1,000Election Workers 2,200In-service Training 705Communication 770Dues and Memberships 51Legal Notices, Recording, and Court Costs 3,250Maintenance and Repair Services - Office Equipment 2,975Postal Charges 404Printing, Stationery, and Forms 625Travel 2,832Other Contracted Services 7,294Office Supplies 301Office Equipment 65

Total Election Commission 83,026

Register of DeedsCounty Official/Administrative Officer $ 58,343Part-time Personnel 790

(Continued)

146

Exhibit K-6



General Fund (Cont.)General Government (Cont.)

Register of Deeds (Cont.)Communication $ 412Dues and Memberships 95Maintenance Agreements 2,118Printing, Stationery, and Forms 1,032Office Equipment 211

Total Register of Deeds $ 63,001

PlanningCounty Official/Administrative Officer $ 5,226Communication 477Consultants 1,432Legal Notices, Recording, and Court Costs 304Travel 150Office Supplies 1,027

Total Planning 8,616

County BuildingsCustodial Personnel $ 21,214Legal Notices, Recording, and Court Costs 147Maintenance and Repair Services - Buildings 21,772Pest Control 391Postal Charges 5,197Custodial Supplies 3,128Electricity 11,259Natural Gas 3,055Office Supplies 4,468Water and Sewer 4,233Other Supplies and Materials 1,129

Total County Buildings 75,993

Preservation of RecordsPart-time Personnel $ 6,724Communication 640Data Processing Services 237Maintenance Agreements 386Office Supplies 4,277

Total Preservation of Records 12,264

FinancePurchasing

Purchasing Personnel $ 28,864Office Supplies 1,834

Total Purchasing 30,698

Property Assessor's OfficeCounty Official/Administrative Officer $ 58,343Part-time Personnel 6,062

(Continued)

147

Exhibit K-6



General Fund (Cont.)Finance (Cont.)

Property Assessor's Office (Cont.)In-service Training $ 174Other Per Diem and Fees 125Communication 661Data Processing Services 1,637Printing, Stationery, and Forms 127Travel 1,581Other Contracted Services 2,942Office Equipment 302

Total Property Assessor's Office $ 71,954

County Trustee's OfficeCounty Official/Administrative Officer $ 58,343Part-time Personnel 2,194In-service Training 495Communication 461Data Processing Services 5,954Dues and Memberships 100Legal Notices, Recording, and Court Costs 368Office Equipment 651

Total County Trustee's Office 68,566

County Clerk's OfficeCounty Official/Administrative Officer $ 58,343Part-time Personnel 14,933Communication 494Data Processing Services 7,363Maintenance and Repair Services - Office Equipment 2,000Printing, Stationery, and Forms 349Office Equipment 425

Total County Clerk's Office 83,907

Administration of JusticeCircuit Court

County Official/Administrative Officer $ 58,343Part-time Personnel 6,288Jury and Witness Expense 496In-service Training 600Communication 463Data Processing Services 7,052Dues and Memberships 448Legal Notices, Recording, and Court Costs 79Maintenance Agreements 1,179Printing, Stationery, and Forms 247Office Equipment 166

Total Circuit Court 75,361

(Continued)

148

Exhibit K-6



General Fund (Cont.)Administration of Justice (Cont.)

General Sessions CourtJudge(s) $ 68,730Travel 1,158

Total General Sessions Court $ 69,888

Chancery CourtCounty Official/Administrative Officer $ 58,343Part-time Personnel 1,906In-service Training 125Communication 381Dues and Memberships 474Printing, Stationery, and Forms 755Travel 97Periodicals 664Premiums on Corporate Surety Bonds 532Office Equipment 529

Total Chancery Court 63,806

Juvenile CourtSupervisor/Director $ 9,000Other Contracted Services 175

Total Juvenile Court 9,175

Judicial CommissionersCounty Official/Administrative Officer $ 14,332Communication 13Dues and Memberships 150

Total Judicial Commissioners 14,495

Public SafetySheriff's Department

County Official/Administrative Officer $ 64,178Assistant(s) 42,312Supervisor/Director 40,998Deputy(ies) 169,022Investigator(s) 74,264Sergeant(s) 71,577Dispatchers/Radio Operators 137,031Longevity Pay 36,000Overtime Pay 7,887Other Salaries and Wages 20,040In-service Training 13,244Communication 9,894Contracts with Private Agencies 2,000Dues and Memberships 1,070Maintenance and Repair Services - Equipment 717Maintenance and Repair Services - Vehicles 27,597Medical and Dental Services 141

(Continued)

149

Exhibit K-6



General Fund (Cont.)Public Safety (Cont.)

Sheriff's Department (Cont.)Postal Charges $ 683Printing, Stationery, and Forms 2,792Travel 1,676Other Contracted Services 1,532Gasoline 27,187Office Supplies 2,703Uniforms 7,598Other Supplies and Materials 26,040Other Charges 98Data Processing Equipment 1,720Law Enforcement Equipment 6,047Motor Vehicles 6,018

Total Sheriff's Department $ 802,066

Special PatrolsOffice Supplies $ 248Uniforms 188Other Charges 101Law Enforcement Equipment 1,448

Total Special Patrols 1,985

Administration of the Sexual Offender RegistryContracts with Government Agencies $ 50Other Contracted Services 500Office Supplies 222Other Supplies and Materials 559

Total Administration of the Sexual Offender Registry 1,331

JailInstructional Computer Personnel $ 7,339Foremen 31,358Guards 129,876Secretary(ies) 26,928Longevity Pay 8,000Overtime Pay 883Other Salaries and Wages 6,001In-service Training 958Contracts with Government Agencies 400Maintenance and Repair Services - Buildings 48,909Maintenance and Repair Services - Equipment 234Medical and Dental Services 83,412Pest Control 126Custodial Supplies 3,974Drugs and Medical Supplies 21Electricity 17,752Food Preparation Supplies 283Food Supplies 37,609

(Continued)

150

Exhibit K-6



General Fund (Cont.)Public Safety (Cont.)

Jail (Cont.)Natural Gas $ 1,758Prisoners Clothing 1,993Uniforms 1,995Water and Sewer 11,814Other Charges 226

Total Jail $ 421,849

CommissaryPrinting, Stationery, and Forms $ 192Office Supplies 28Other Supplies and Materials 471

Total Commissary 691

Fire Prevention and ControlPart-time Personnel $ 15,000In-service Training 4,781Communication 2,078Maintenance Agreements 13,384Maintenance and Repair Services - Buildings 6,751Maintenance and Repair Services - Vehicles 20,078Medical and Dental Services 1,093Pest Control 656Electricity 4,191Gasoline 2,692Natural Gas 3,543Office Supplies 49Water and Sewer 687Excess Risk Insurance 3,810Motor Vehicles 8,500Other Equipment 32,546

Total Fire Prevention and Control 119,839

Other Emergency ManagementSupervisor/Director $ 13,367In-service Training 150Communication 11,323Dues and Memberships 55Maintenance and Repair Services - Equipment 1,000Maintenance and Repair Services - Vehicles 5,309Gasoline 1,262Office Supplies 106Other Supplies and Materials 14,974Other Equipment 500

Total Other Emergency Management 48,046

(Continued)

151

Exhibit K-6



General Fund (Cont.)Public Health and Welfare

Local Health CenterMedical Personnel $ 76,219Longevity Pay 2,000Communication 2,387Contracts with Government Agencies 13,933Contracts with Private Agencies 15,197Maintenance and Repair Services - Buildings 1,054Pest Control 138Travel 1,055Other Contracted Services 200Office Supplies 88Utilities 4,886Other Supplies and Materials 282Other Charges 6,865

Total Local Health Center $ 124,304

Rabies and Animal ControlOther Supplies and Materials $ 5,389

Total Rabies and Animal Control 5,389

Ambulance/Emergency Medical ServicesSupervisor/Director $ 40,102Paraprofessionals 172,417Part-time Personnel 22,296Longevity Pay 11,000Overtime Pay 28,882Other Salaries and Wages 10,823In-service Training 1,544Communication 1,914Data Processing Services 12,541Dues and Memberships 1,490Maintenance and Repair Services - Buildings 3,535Maintenance and Repair Services - Equipment 4,149Maintenance and Repair Services - Vehicles 4,690Medical and Dental Services 1,680Pest Control 126Drugs and Medical Supplies 13,552Electricity 2,976Equipment and Machinery Parts 12,548Gasoline 3,490Natural Gas 638Office Supplies 680Uniforms 1,285Water and Sewer 1,004Refunds 873

Total Ambulance/Emergency Medical Services 354,235

(Continued)

152

Exhibit K-6



General Fund (Cont.)Public Health and Welfare (Cont.)

Alcohol and Drug ProgramsDrug Treatment $ 750Other Supplies and Materials 282

Total Alcohol and Drug Programs $ 1,032

Regional Mental Health CenterContracts with Other Public Agencies $ 2,500

Total Regional Mental Health Center 2,500

Social, Cultural, and Recreational ServicesSenior Citizens Assistance

Contributions $ 8,500Total Senior Citizens Assistance 8,500

LibrariesAssistant(s) $ 20,196Supervisor/Director 30,900Part-time Personnel 16,997Longevity Pay 4,000In-service Training 74Communication 2,880Data Processing Services 1,714Dues and Memberships 225Maintenance and Repair Services - Buildings 5,750Pest Control 150Postal Charges 291Printing, Stationery, and Forms 120Travel 476Custodial Supplies 610Electricity 3,950Instructional Supplies and Materials 2,085Library Books/Media 4,547Natural Gas 1,139Office Supplies 1,488Periodicals 630Water and Sewer 906Other Supplies and Materials 1,736Other Charges 5,421Office Equipment 8,926

Total Libraries 115,211

Parks and Fair BoardsAssistant(s) $ 3,418Supervisor/Director 5,571Attendants 5,801Communication 1,618Maintenance and Repair Services - Buildings 11,849Maintenance and Repair Services - Equipment 18,020

(Continued)

153

Exhibit K-6



General Fund (Cont.)Social, Cultural, and Recreational Services (Cont.)

Parks and Fair Boards (Cont.)Electricity $ 15,473Gasoline 2,344Natural Gas 608Water and Sewer 11,882Chemicals 2,304Other Supplies and Materials 18

Total Parks and Fair Boards $ 78,906

Agriculture and Natural ResourcesAgricultural Extension Service

Salary Supplements $ 42,415Part-time Personnel 10,008Longevity Pay 2,110Employee and Dependent Insurance 5,496Communication 1,051Data Processing Services 2,000Travel 5,418Office Supplies 301Other Charges 175

Total Agricultural Extension Service 68,974

Forest ServiceContracts with Government Agencies $ 350

Total Forest Service 350

Soil ConservationPart-time Personnel $ 5,000Communication 614Other Supplies and Materials 3,650

Total Soil Conservation 9,264

Other OperationsTourism

Dues and Memberships $ 3,000Maintenance and Repair Services - Buildings 99Custodial Supplies 537Electricity 423Natural Gas 47Water and Sewer 353

Total Tourism 4,459

Veterans' ServicesCounty Official/Administrative Officer $ 1,827

Total Veterans' Services 1,827

Other ChargesOther Charges $ 8,398

Total Other Charges 8,398

(Continued)

154

Exhibit K-6



General Fund (Cont.)Other Operations (Cont.)

Employee BenefitsSocial Security $ 151,578Pensions 53,910Employee and Dependent Insurance 379,440Unemployment Compensation 5,037Local Retirement 17,189

Total Employee Benefits $ 607,154

Total General Fund $ 3,803,243

Urban Services FundGeneral Government

Other General AdministrationElectricity $ 19,877Trustee's Commission 247

Total Other General Administration $ 20,124

Total Urban Services Fund 20,124

Solid Waste/Sanitation FundPublic Health and Welfare

Waste PickupCounty Official/Administrative Officer $ 2,494Laborers 18,723Social Security 1,623Unemployment Compensation 82Maintenance and Repair Services - Vehicles 490Gasoline 1,130Instructional Supplies and Materials 4,923Other Supplies and Materials 278

Total Waste Pickup $ 29,743

Recycling CenterAssistant(s) $ 3,085Laborers 72,523Part-time Personnel 35,534Longevity Pay 4,000Other Salaries and Wages 6,007Social Security 8,718Medical Insurance 23,074Unemployment Compensation 236Communication 558Contracts with Private Agencies 160,991Maintenance and Repair Services - Buildings 116Maintenance and Repair Services - Vehicles 23,118Other Contracted Services 14,939Diesel Fuel 13,904Tires and Tubes 5,053

(Continued)

155

Exhibit K-6



Solid Waste/Sanitation Fund (Cont.)Public Health and Welfare (Cont.)

Recycling Center (Cont.)Utilities $ 1,145Trustee's Commission 6,784Vehicle and Equipment Insurance 8,602Workers' Compensation Insurance 5,748Solid Waste Equipment 7,620

Total Recycling Center $ 401,755

Total Solid Waste/Sanitation Fund $ 431,498

Drug Control FundPublic Safety

Drug EnforcementIn-service Training $ 80Communication 1,913Maintenance and Repair Services - Vehicles 277Gasoline 53Law Enforcement Supplies 508Uniforms 123Other Charges 46Other Equipment 979

Total Drug Enforcement $ 3,979

Total Drug Control Fund 3,979

Constitutional Officers - Fees FundFinance

County Clerk's OfficeBank Charges $ 64

Total County Clerk's Office $ 64

Total Constitutional Officers - Fees Fund 64

Highway/Public Works FundHighways

AdministrationCounty Official/Administrative Officer $ 67,386Assistant(s) 44,728Secretary(ies) 41,272Longevity Pay 5,000Social Security 9,732Pensions 9,065Employee and Dependent Insurance 5,656Life Insurance 267Unemployment Compensation 480Employer Medicare 2,276Data Processing Services 6,645Postal Charges 147

(Continued)

156

Exhibit K-6



Highway/Public Works Fund (Cont.)Highways (Cont.)

Administration (Cont.)Printing, Stationery, and Forms $ 49Travel 832Office Supplies 241Other Charges 1,241

Total Administration $ 195,017

Highway and Bridge MaintenanceEquipment Operators $ 126,383Truck Drivers 121,123Laborers 107,958Temporary Personnel 1,067Longevity Pay 28,000Social Security 22,477Pensions 3,945Employee and Dependent Insurance 75,768Life Insurance 862Unemployment Compensation 2,184Employer Medicare 5,257Contracts with Private Agencies 21,773Dues and Memberships 1,980Asphalt 8,141Crushed Stone 13,083Riprap 14,610Pipe 2,701Road Signs 6,434Salt 3,416Other Charges 18,843Communication Equipment 386Maintenance Equipment 280

Total Highway and Bridge Maintenance 586,671

Operation and Maintenance of EquipmentMechanic(s) $ 33,450Longevity Pay 3,000Social Security 1,971Pensions 788Employee and Dependent Insurance 17,156Life Insurance 99Unemployment Compensation 240Employer Medicare 461Custodial Supplies 251Diesel Fuel 18,457Equipment and Machinery Parts 10,275Garage Supplies 2,772Gasoline 6,369Lubricants 3,198Tires and Tubes 4,224

(Continued)

157

Exhibit K-6



Highway/Public Works Fund (Cont.)Highways (Cont.)

Operation and Maintenance of Equipment (Cont.)Vehicle Parts $ 4,988Other Charges 12,316Maintenance Equipment 1,162

Total Operation and Maintenance of Equipment $ 121,177

Other ChargesAdvertising $ 903Communication 2,661Electricity 2,591Propane Gas 535Water and Sewer 282Liability Insurance 13,382Trustee's Commission 13,476Vehicle and Equipment Insurance 13,382

Total Other Charges 47,212

Employee BenefitsWorkers' Compensation Insurance $ 26,869

Total Employee Benefits 26,869

Capital OutlayBridge Construction $ 399Highway Equipment 7,319State Aid Projects 140,267Other Capital Outlay 713,695

Total Capital Outlay 861,680

Total Highway/Public Works Fund $ 1,838,626

General Debt Service FundPrincipal on Debt

General GovernmentPrincipal on Other Loans $ 87,100

Total General Government $ 87,100

EducationPrincipal on Other Loans $ 289,900

Total Education 289,900

Interest on DebtGeneral Government

Interest on Other Loans $ 3,758Total General Government 3,758

EducationInterest on Other Loans $ 19,145


(Continued)

158

Exhibit K-6



General Debt Service Fund (Cont.)Other Debt Service

General GovernmentTrustee's Commission $ 13,483Other Debt Service 10,365

Total General Government $ 23,848

EducationOther Debt Service $ 50,654


Total General Debt Service Fund $ 474,405

General Capital Projects FundCapital Projects

Administration of Justice ProjectsBuilding Construction $ 1,582,623

Total Administration of Justice Projects $ 1,582,623

Social, Cultural, and Recreation ProjectsTrustee's Commission $ 4,541Building Improvements 7,820Motor Vehicles 250

Total Social, Cultural, and Recreation Projects 12,611

Total General Capital Projects Fund 1,595,234

Total Governmental Funds - Primary Government $ 8,167,173

159

Exhibit K-7


All Governmental Fund TypesDiscretely Presented Metropolitan School DepartmentFor the Year Ended June 30, 2016

General Purpose School FundInstruction

Regular Instruction ProgramTeachers $ 2,443,816Career Ladder Program 17,584Career Ladder Extended Contracts 860Homebound Teachers 767Educational Assistants 86,144Other Salaries and Wages 4,984Certified Substitute Teachers 9,520Non-certified Substitute Teachers 61,132Social Security 152,809Pensions 224,242Medical Insurance 466,810Employer Medicare 35,737Instructional Supplies and Materials 51,529Textbooks 2,073Other Supplies and Materials 10,547Other Charges 1,050Regular Instruction Equipment 344,695

Total Regular Instruction Program $ 3,914,299

Alternative Instruction ProgramTeachers $ 50,250Social Security 3,007Pensions 4,560Medical Insurance 5,090Employer Medicare 703

Total Alternative Instruction Program 63,610

Special Education ProgramTeachers $ 260,907Homebound Teachers 5,025Educational Assistants 70,971Certified Substitute Teachers 210Non-certified Substitute Teachers 89Social Security 20,003Pensions 25,515Medical Insurance 49,026Employer Medicare 4,679Instructional Supplies and Materials 1,107

Total Special Education Program 437,532

Vocational Education ProgramTeachers $ 226,486Career Ladder Program 1,000Social Security 13,092Pensions 20,380Medical Insurance 49,313

(Continued)

160

Exhibit K-7



General Purpose School Fund (Cont.)Instruction (Cont.)

Vocational Education Program (Cont.)Employer Medicare $ 3,062Instructional Supplies and Materials 2,272Other Charges 3,021

Total Vocational Education Program $ 318,626

Support ServicesAttendance

Supervisor/Director $ 6,327Career Ladder Program 100Social Security 380Pensions 581Medical Insurance 997Employer Medicare 89

Total Attendance 8,474

Health ServicesMedical Personnel $ 46,441Social Security 2,805Pensions 4,194Medical Insurance 2,643Employer Medicare 656Other Supplies and Materials 197Other Charges 264

Total Health Services 57,200

Other Student SupportGuidance Personnel $ 93,950Clerical Personnel 22,620Other Salaries and Wages 32,976Social Security 8,934Pensions 11,979Medical Insurance 19,699Employer Medicare 2,089Contracts with Government Agencies 56,558Evaluation and Testing 39,115Other Contracted Services 16,000Other Supplies and Materials 7,805In Service/Staff Development 4,290Other Charges 8,258

Total Other Student Support 324,273

Regular Instruction ProgramSupervisor/Director $ 133,187Career Ladder Program 500Librarians 94,383Educational Assistants 16,385

(Continued)

161

Exhibit K-7



General Purpose School Fund (Cont.)Support Services (Cont.)

Regular Instruction Program (Cont.)Other Salaries and Wages $ 45,921Social Security 17,006Pensions 22,007Medical Insurance 44,204Employer Medicare 3,977Travel 1,880Library Books/Media 8,735In Service/Staff Development 890

Total Regular Instruction Program $ 389,075

Special Education ProgramSupervisor/Director $ 39,604Clerical Personnel 2,000Social Security 2,425Pensions 3,628Medical Insurance 8,500Employer Medicare 567Travel 761


Vocational Education ProgramSupervisor/Director $ 25,709Social Security 1,520Pensions 2,324Medical Insurance 3,986Employer Medicare 355

Total Vocational Education Program 33,894

Other ProgramsOn-behalf Payments to OPEB $ 42,347

Total Other Programs 42,347

Board of EducationBoard and Committee Members Fees $ 2,695Social Security 167Medical Insurance 20,920Unemployment Compensation 3,287Employer Medicare 39Audit Services 4,400Dues and Memberships 3,278Travel 250Liability Insurance 16,403Premiums on Corporate Surety Bonds 488Trustee's Commission 73,282Workers' Compensation Insurance 87,439In Service/Staff Development 2,915Other Charges 3,758

Total Board of Education 219,321

(Continued)

162

Exhibit K-7




Director of SchoolsCounty Official/Administrative Officer $ 86,051Social Security 5,030Pensions 7,779Medical Insurance 13,496Employer Medicare 1,176Communication 42,986Travel 3,339Office Supplies 3,258Other Charges 10,502Administration Equipment 5,332

Total Director of Schools $ 178,949

Office of the PrincipalPrincipals $ 135,735Career Ladder Program 2,000Assistant Principals 171,354Secretary(ies) 67,736Clerical Personnel 68,222Social Security 25,830Pensions 30,947Medical Insurance 81,636Employer Medicare 6,040Communication 461Other Charges 3,000

Total Office of the Principal 592,961

Fiscal ServicesAccountants/Bookkeepers $ 81,964Social Security 4,844Pensions 1,828Medical Insurance 13,355Employer Medicare 1,133

Total Fiscal Services 103,124

Operation of PlantCustodial Personnel $ 161,485Social Security 9,078Pensions 3,602Medical Insurance 46,313Employer Medicare 2,123Custodial Supplies 33,974Electricity 248,303Natural Gas 21,548Water and Sewer 41,125Other Supplies and Materials 14,370Building and Contents Insurance 49,213

Total Operation of Plant 631,134

(Continued)

163

Exhibit K-7




Maintenance of PlantMaintenance Personnel $ 70,801Social Security 4,194Pensions 1,579Medical Insurance 5,191Employer Medicare 981Maintenance and Repair Services - Buildings 4,650Maintenance and Repair Services - Equipment 31,540Pest Control 2,010Other Supplies and Materials 37,434Other Charges 2,429Maintenance Equipment 9,139

Total Maintenance of Plant $ 169,948

TransportationMechanic(s) $ 32,459Bus Drivers 204,144Social Security 14,390Pensions 5,759Medical Insurance 9,975Employer Medicare 3,365Medical and Dental Services 3,045Diesel Fuel 43,546Tires and Tubes 5,233Vehicle Parts 23,475Other Supplies and Materials 5,027Vehicle and Equipment Insurance 14,404Other Charges 8,251Transportation Equipment 81,147

Total Transportation 454,220

Operation of Non-instructional ServicesCommunity Services

Other Salaries and Wages $ 19,911Social Security 1,161Pensions 725Medical Insurance 3,235Employer Medicare 272Other Supplies and Materials 2,563Other Charges 601

Total Community Services 28,468

Early Childhood EducationSupervisor/Director $ 6,045Teachers 43,850Educational Assistants 16,232Social Security 3,636

(Continued)

164

Exhibit K-7



General Purpose School Fund (Cont.)Operation of Non-instructional Services (Cont.)

Early Childhood Education (Cont.)Pensions $ 4,872Medical Insurance 21,254Employer Medicare 850

Total Early Childhood Education $ 96,739

Capital OutlayRegular Capital Outlay

Building Improvements $ 391,795Total Regular Capital Outlay 391,795

Total General Purpose School Fund $ 8,513,474

School Federal Projects FundInstruction

Regular Instruction ProgramTeachers $ 73,600Certified Substitute Teachers 65Non-certified Substitute Teachers 1,278Social Security 4,513Pensions 6,654Medical Insurance 8,638Employer Medicare 1,055Maintenance and Repair Services - Equipment 60Instructional Supplies and Materials 18,427Regular Instruction Equipment 26,935

Total Regular Instruction Program $ 141,225

Special Education ProgramTeachers $ 39,334Educational Assistants 76,526Social Security 6,437Pensions 5,019Medical Insurance 35,568Employer Medicare 1,505Instructional Supplies and Materials 17,869Special Education Equipment 4,802


Vocational Education ProgramInstructional Supplies and Materials $ 3,004Other Charges 18Vocational Instruction Equipment 11,607

Total Vocational Education Program 14,629

(Continued)

165

Exhibit K-7



School Federal Projects Fund (Cont.)Support Services

Health ServicesMedical Personnel $ 10,679Social Security 602Pensions 961Medical Insurance 2,676Employer Medicare 141

Total Health Services $ 15,059

Other Student SupportEvaluation and Testing $ 5,168Travel 2,025Other Supplies and Materials 491In Service/Staff Development 1,041

Total Other Student Support 8,725

Regular Instruction ProgramSupervisor/Director $ 16,488Social Security 989Pensions 1,490Medical Insurance 2,141Employer Medicare 231In Service/Staff Development 29,626

Total Regular Instruction Program 50,965

Special Education ProgramClerical Personnel $ 2,000Social Security 124Pensions 45Employer Medicare 29Other Supplies and Materials 723In Service/Staff Development 6,000


Vocational Education ProgramTravel $ 384

Total Vocational Education Program 384

Total School Federal Projects Fund $ 426,968

Central Cafeteria FundOperation of Non-instructional Services

Food ServiceCafeteria Personnel $ 190,438Social Security 10,636Pensions 3,746Medical Insurance 51,307Employer Medicare 2,488

(Continued)

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Exhibit K-7



Central Cafeteria Fund (Cont.)Operation of Non-instructional Services (Cont.)

Food Service (Cont.)Maintenance and Repair Services - Equipment $ 7,318Transportation - Other than Students 974Travel 1,870Food Supplies 167,258Office Supplies 889USDA - Commodities 28,433Other Supplies and Materials 14,854Other Charges 3,392Food Service Equipment 2,490

Total Food Service $ 486,093

Total Central Cafeteria Fund $ 486,093

Total Governmental Funds - Metropolitan School Department $ 9,426,535

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Exhibit K-8

The Metropolitan Cogernment of Lynchburg, Moore County, TennesseeSchedule of Unaccounted for WaterWater and Sewer Department FundFor the Year Ended June 30, 2016

168

Exhibit K-8

The Metropolitan Cogernment of Lynchburg, Moore County, TennesseeSchedule of Unaccounted for WaterWater and Sewer Department FundFor the Year Ended June 30, 2016

169

Exhibit K-9

The Metropolitan Cogernment of Lynchburg, Moore County, TennesseeSchedule of Water Rates and CustomersWater and Sewer Department FundFor the Year Ended June 30, 2016

170

SINGLE AUDIT SECTION

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Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance With Government Auditing Standards



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, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Metropolitan Government of Lynchburg, Moore County, Tennessee, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the metropolitan government’s basic financial statements, and have issued our report thereon dated January 4, 2017. Our report includes a reference to other auditors who audited the financial statements of the Metropolitan Lynchburg Moore County Water and Sewer Department, as described in our report on the metropolitan government’s financial statements. This report does not include the results of the other auditors testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the metropolitan government’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the metropolitan government’s internal control. Accordingly, we do not express an opinion on the effectiveness of the metropolitan government’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency,

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or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify a certain deficiency in internal control, described in the accompanying Schedule of Findings and Questioned Costs that we consider to be a significant deficiency: 2016-005.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the metropolitan government’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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and are described in the accompanying Schedule of Findings and Questioned Costs as items: 2016-001, 2016-002, 2016-003, and 2016-004.

Metropolitan Government of Lynchburg, Moore County’s Responses to the Findings

Metropolitan Government of Lynchburg, Moore County’s responses to the findings identified in our audit are described in the accompanying Schedule of Findings and Questioned Costs. The responses were not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the metropolitan government’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Very truly yours,


January 4, 2017

JPW/sb

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Independent Auditor’s Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance and on the Schedule of Expenditures of

Federal Awards Required by the Uniform Guidance



Report on Compliance for Each Major Federal Program

We have audited the Metropolitan Government of Lynchburg, Moore County, Tennessee’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the metropolitan government’s major federal programs for the year ended June 30, 2016. The metropolitan government’s major federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of the metropolitan government’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the

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Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the metropolitan government’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the metropolitan government’s compliance.

Opinion on Each Major Federal Program

In our opinion, the Metropolitan Government of Lynchburg, Moore County, Tennessee, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016.

Report on Internal Control Over Compliance

Management of the metropolitan government is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the metropolitan government’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the metropolitan government’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we

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consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance

We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Metropolitan Government of Lynchburg, Moore County, Tennessee, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the metropolitan government’s basic financial statements. We issued our report thereon dated January 4, 2017, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by the Uniform Guidance 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. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling 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 Schedule of Expenditures of Federal Awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

Very truly yours,


January 4, 2017

JPW/sb

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The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Expenditures of Federal Awards and State Grants (1) (2)For the Year Ended June 30, 2016

Federal Pass-throughFederal/Pass-through Agency/State CFDA Entity IdentifyingGrantor Program Title Number Number

U.S. Department of Agriculture: Direct Program: Water and Waste Disposal System for Rural Communities 10.781 N/A $ 258,460 Passed-through State Department of Education: Child Nutrition Cluster: School Breakfast Program 10.553 (3) 59,485 National School Lunch Program 10.555 (3) 194,864 (4) Passed-through State Department of Agriculture: National School Lunch Program (Commodities - Noncash Assistance) 10.555 (3) 28,433 (4)Total U.S. Department of Agriculture $ 541,242

U.S. Department of Justice: Direct: Bulletproof Vest Partnership Program 16.607 N/A $ 2,817Total U.S. Department of Justice $ 2,817

U.S. Department of Transportation: Passed-through State Department of Transportation: State and Community Highway Safety 20.600 (5) $ 20,199 Alcohol Open Container Requirements 20.607 (6) 12,259 Interagency Hazardous Materials Public Sector Training and Planning Grants 20.703 (3) 7,200Total U.S. Department of Transportation $ 39,658

U.S. Institute of Museum and Library Services: Passed-through Tennessee Library and Archives: Grants to States 45.310 (3) $ 1,435Total U.S. Institute of Museum and Library Services $ 1,435

U.S. Environmental Protection Agency: Passed-through State Department of Environment and Conservation: Capitalization Grant for Clean Water State Revolving Funds 66.458 (3) $ 4,532Total U.S. Environmental Protection Agency $ 4,532

U.S. Department of Education: Passed-through State Department of Education: Title I Grants to Local Educational Agencies 84.010 N/A $ 173,778 Special Education Cluster: Special Education Grants to States 84.027 N/A 205,043 Special Education Preschool Grants 84.173 N/A 12,842 Career and Technical Education - Basic Grants to States 84.048 N/A 16,365 Improving Teacher Quality State Grants 84.367 N/A 39,631Total U.S. Department of Education $ 447,659

U.S. Department of Homeland Security: Passed-through State Department of Military: Disaster Grants Public Assistance (Presidentially Declared Disasters) 97.036 N/A $ 72,940 Emergency Management Performance Grants 97.042 N/A 7,500 Homeland Security Grant Program 97.067 N/A 16,506Total U.S. Department of Homeland Security $ 96,946

Total Expenditures of Federal Grants $ 1,134,289

(Continued)

Expenditures

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The Metropolitan Government of Lynchburg, Moore County, TennesseeSchedule of Expenditures of Federal Awards and State Grants (1) (2) (Cont.)

FederalFederal/Pass-through Agency/State CFDA ContractGrantor Program Title Number Number

State Grants Rural Local Health Services - State Department of Health N/A (3) $ 119,588 Archive Grant - Tennessee Secretary of State N/A (3) 3,000 Litter Program - State Department of Transportation N/A (3) 31,517 Pilot-Lottery for Pre-K Classrooms - Early Childhood Education - State Department of Education N/A (3) 95,815 Coordinated School Health - State Department of Education N/A (3) 84,956 Soil Conservation District Operational Grant - State Department of Agriculture N/A (3) 2,100 Disaster Grant - Public Assistance - State Department of Military N/A (3) 6,461 Capitalization Grants for Clean Water State Revolving Funds - State Department of Environment and Conservation N/A (3) 398,116 Student Ticket Subsidy Grant - Tennessee Arts Commission N/A (3) 3,000 Juvenile Justice and Delinquency Prevention - State Commission on Children and Youth N/A (3) 18,000

Total State Grants $ 762,553

CFDA = Catalog of Federal Domestic AssistanceN/A = Not Applicable

(3) Information not available.(4) Total for CFDA No. 10.555 is $223,297.(5) Z15GHS237: $82; Z16GHS233: $14,431; Z16GHS234: $5,591; Z16GHS236: $95.(6) Z15GHS238: $7,279; Z16GHS235: $4,980.

Expenditures

(1) Presented in conformity with generally accepted accounting principles using the modified accrual basis of accounting.(2) Metropolitan Moore County elected not to use the 10% de minimus cost rate permitted in the Uniform Guidance.

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The Metropolitan Government of Lynchburg, Moore County, TennesseeSummary Schedule of Prior-year FindingsFor the Year Ended June 30, 2016

Fiscal Page Finding CFDAYear Number Number Number

2015 182 2015-001

2015 183 2015-002 N/A Corrected

2015 183 2015-003 N/A Corrected

2015 183 2015-004 N/A

2015 184 2015-005 N/A Corrected

2015 184 2015-005 N/A

2015 184 2015-006 N/A

There were no prior-year federal award findings to report.

Government Auditing Standards require auditors to report the status of uncorrected findings fromprior audits. In addition, OMB's Uniform Guidance requires auditees to report the status of allprior-year findings whether corrected or not. Presented below are financial statement findingsalong with their current status from the Annual Financial Report of the Metropolitan Governmentof Lynchburg, Moore County, Tennessee, for the year ended June 30, 2016.

Title of Finding Current Status

Prior-year Financial Statement Findings

Prior-year Federal Awards Findings

General Ledger Payroll Liability Accounts were not Reconciled with Payroll Reports and Payments in the General Fund

The Office of Circuit, General Sessions, and Juvenile Courts had Deficiencies in Computer System Backup Procedures

N/A

Corrected

Not Corrected - See Explanation on Corrective Action Plan

Not Corrected - See Explanation on Corrective Action Plan

Duties were not Segregated Adequately in the Offices of Trustee; Metropolitan Clerk; Circuit, General Sessions, and Juvenile Courts Clerk; Clerk and Master; Register of Deeds; and Sheriff

Duties were not Segregated Adequately in the Office of Metropolitan Mayor

The Office of Metropolitan Mayor had Purchasing Deficiencies

The School Federal Projects Fund had a Cash Overdraft of $12,242 at June 30, 2015

The Metropolitan Council's Audit Committee is not a Functioning Committee

Corrected

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Financial Statements:

1. Our report on the financial statements of the Metropolitan Government ofLynchburg, Moore County, Tennessee, is unmodified.

2. Internal Control Over Financial Reporting:

* Material weakness identified? NO

* Significant deficiency identified? YES

3. Noncompliance material to the financial statements noted? NO

Federal Awards:

4. Internal Control Over Major Federal Programs:

* Material weakness identified? NO

* Significant deficiency identified? NONE REPORTED

5. Type of report auditor issued on compliance for major programs: UNMODIFIED

6. Any audit findings disclosed that are required to be reported inaccordance with 2 CFR 200.516(a)? NO

7. Identification of Major Federal Programs:

* CFDA Numbers: 10.553, 10.555, and 10.559 Nutrition Cluster: School BreakfastProgram, National School Lunch Program, and Summer Food ServiceProgram for Children

8. Dollar threshold used to distinguish between Type A and Type B Programs: $750,000

9. Auditee qualified as low-risk auditee? YES

LYNCHBURG, MOORE COUNTY, TENNESSEE

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

For the Year Ended June 30, 2016

PART I, SUMMARY OF AUDITOR'S RESULTS


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PART II, FINDINGS RELATING TO THE FINANCIAL STATEMENTS

Findings and recommendations, as a result of our audit, are presented below. We reviewed these findings and recommendations with management to provide an opportunity for their response. Written responses are paraphrased and presented following each finding and recommendation. The trustee; metropolitan clerk; circuit, general sessions, and juvenile courts clerk; clerk and master; register of deeds; sheriff; and director of schools provided corrective action plans, which are paraphrased and presented separately in the Management’s Corrective Action Plan in the Single Audit Section of this report. In some cases, management did not provide responses and/or corrective action plans for inclusion in the report.

Findings relating specifically to the audit of federal awards, if any, are separately presented under Part III, Findings and Questioned Costs for Federal Awards.

OFFICE OF METROPOLITAN MAYOR

FINDING 2016-001 COMPETITIVE BIDS WERE NOT SOLICITED FOR THE PURCHASE OF FOOD FOR INMATE MEALS (Noncompliance Under Government Auditing Standards)

The metropolitan government did not solicit competitive bids for the purchase of food for inmate meals totaling $23,074 during the fiscal year ended June 30, 2016. The metropolitan government follows the Metropolitan Charter, which provides for all purchases and contracts for goods or services to be made through a consolidated Metropolitan Purchasing Department. The Metropolitan Council has not created a consolidated Metropolitan Purchasing Department. However, effective June 21, 1999, (amended October 18, 2004) the Metropolitan Council provided for the Office of Metropolitan Mayor to follow the bid requirements set forth in the County Purchasing Law of 1983, Sections 5-14-201 through 5-14-206, Tennessee Code Annotated. These statutes provide for competitive bids on allpurchases exceeding $10,000. The failure to solicit competitive bids could result in themetropolitan government paying more than the most competitive price. This finding resultedfrom management’s failure to correct the finding noted in the prior-year audit report.

RECOMMENDATION

Competitive bids should be solicited for purchases exceeding $10,000 as required by the Metropolitan Charter.

_________________________________________

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FINDING 2016-002 THE OFFICE HAD DEFICIENCIES IN BUDGET OPERATIONS (Noncompliance Under Government Auditing Standards)

Some budget amendments were approved by the Metropolitan Council after year-end, but were posted to the General Fund prior to June 30. Accurate budgetary statements are necessary to provide county officials and departments with available spending limits. We have recognized only those budget amendments approved by the Metropolitan Council prior to year-end in the financial statements of this report. As a result, expenditures exceeded appropriations approved by the Metropolitan Council in the following major appropriation categories (the legal level of control) of the General Fund:

RECOMMENDATION

Expenditures should be held within appropriations approved by the Metropolitan Council. Only those budget amendments approved by the Metropolitan Council prior to year-end should be posted to the accounting records.

_________________________________________

FINDING 2016-003 AMOUNTS WITHHELD FROM CONTRACTOR PAYMENTS WERE NOT DEPOSITED INTO AN ESCROW ACCOUNT (Noncompliance Under Government Auditing Standards)

The county did not deposit amounts withheld from contractor payments into an escrow account related to a $1,580,204 construction contract for jail expansion. Section 66-34-104, Tennessee Code Annotated, requires that funds withheld from contractor payments be deposited into an escrow account for contracts of $500,000 or more. This deficiency was the result of a lack of management oversight that could result in the loss of interest earnings for the contractor.

RECOMMENDATION

Amounts withheld from contractor payments on contracts of $500,000 or more should be deposited into an escrow account in compliance with state statute.

_________________________________________

AmountMajor Appropriation Category Overspent

Preservation of Records $ 972Other Emergency Management 5,619

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FINDING 2016-004 THE OFFICE HAD DEFICIENCIES IN BUDGET OPERATIONS (Noncompliance Under Government Auditing Standards)

Some budget amendments were approved by the Metropolitan Council after year-end, but were posted to the General Purpose School Fund prior to June 30. Accurate budgetary statements are necessary to provide county officials and departments with available spending limits. We have recognized only those budget amendments approved by the Metropolitan Council prior to year-end in the financial statements of this report. As a result, expenditures exceeded appropriations approved by the Metropolitan Council in the following major appropriation categories (the legal level of control) of the General Purpose School Fund:

RECOMMENDATION

Expenditures should be held within appropriations approved by the Metropolitan Council. Only those budget amendments approved by the Metropolitan Council prior to year-end should be posted to the accounting records.

MANAGEMENT’S RESPONSE – DIRECTOR OF SCHOOLS

We concur with the finding. In the area overspent regarding “Health Services” the percentage match for retirement pensions was calculated at a lower rate than required for licensed nurses. In the area overspent titled “Other Student Support,” we failed to anticipate the correct expenditures remaining for the fiscal year when preparing the year end budget amendment. As Director of Schools I am responsible for each of these miscalculations.

_________________________________________


FINDING 2016-005 DUTIES WERE NOT SEGREGATED ADEQUATELY (Internal Control – Significant Deficiency Under Government Auditing Standards)

Duties were not segregated adequately among officials and employees in the Offices of Trustee; Metropolitan Clerk; Circuit, General Sessions, and Juvenile Courts Clerk; Clerk and Master; Register of Deeds; and Sheriff. Officials and employees responsible for maintaining the accounting records in these offices were also involved in receipting, depositing, and/or

AmountMajor Appropriation Category Overspent

Health Services $ 4,200Other Student Support 37,137

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disbursing funds. Sound business practices dictate that management is responsible for designing internal controls to give reasonable assurance of the reliability in financial reporting and of the effectiveness and efficiency of operations. This lack of segregation of duties is the result of management’s decisions based on the availability of financial resources and is a significant deficiency in internal controls that increases the risk of unauthorized transactions.

RECOMMENDATION

Officials should segregate duties to the extent possible using available resources.

MANAGEMENT’S RESPONSE – TRUSTEE

I am the only person in my office; therefore, segregation of duties is impossible. I, as manager of my office, feel that asking to hire a full time employee to remove this audit finding would be a failure to the citizens of Moore County; as my office can be managed by one person. My office books are open for review at any time. The State does not seem to consider small counties and the burdens mandates place upon them. I did comply with the mandate that an internal control policy be written, however there is no way to remove this audit finding from my yearly audit. I am open for any suggestions that your office may have but again segregating duties is not possible in my office. I do not have a detailed corrective action plan because this audit finding is impossible to correct for my office.

MANAGEMENT’S RESPONSE – METROPOLITAN CLERK

With only part time help, segregation of duties is not easy to accomplish. However, with the description of duties that was supplied by your audit division that would accomplish segregation of duties for a two person office, we have greatly improved the structure of duties in this office.

MANAGEMENT’S RESPONSE – CIRCUIT, GENERAL SESSIONS, AND JUVENILE COURTS CLERK

This office has only one part time employee along with myself. My budget only allows her to work a total of 800 hours per year. She will work when I am unable to be in the office due to sickness or training, etc. She works one day a week during General Sessions court. She is able to receipt money and take the deposit to the bank. I am not sure how this office can avoid this finding. My policy and daily operations are outlined in my internal control policy.

MANAGEMENT’S RESPONSE – CLERK AND MASTER

In addition to myself, I have one part time employee that works on an as needed basis at an annual salary of $2,076. This employee usually works when I am out of the office for vacation, sickness, training, etc. Given the current budget made for the part time employee in this office, I am not sure how to avoid this finding. When I am out of the office she is responsible for receipting any fees coming into the office along with making deposits. My office does not keep petty cash on hand and all money is deposited into the bank within three days from the date the receipt is written. This policy along with all daily operations has been outlined in the internal control policy for this office.

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MANAGEMENT’S RESPONSE – REGISTER OF DEEDS

As the Register of Deeds for Moore County, I have deemed that this office is able to efficiently, run with one person. I feel this management decision is the most cost effective for the taxpayer’s of Moore County, Tennessee. Therefore, I strongly disagree with the finding and the fact that there is no other type of solution, which could remedy this matter. The Register of Deeds financial books are always open to the auditor and for public review.

I want this finding to be corrected, so much so, back in 2014 two members of your team came and sat with me, at my office, to discuss ways for me to resolve this finding. However, during this meeting, I was told there was no way for me to resolve this finding, since the Register of Deeds office is a one person office. I am willing to do whatever possible, as long as it is cost effective for the taxpayer’s of Moore County.

Now, I ask you to please give me a checklist of what you expect from an office run solely by one person, so that I can ensure the segregation of duties will not be a finding in the future.

AUDITOR’S COMMENT

We have stated that “this lack of segregation of duties is the result of management’s decisions based on the availability of financial resources and is a significant deficiency in internal controls….” We realize that correcting this issue in a one-person office is extremely difficult. That is why we include the language “based on availability of financial resources.” However, our auditing standards require that we report weaknesses in internal control that we identify while performing our audit procedures. Furthermore, we have never recommended hiring additional employees solely to correct this finding. Officials can also contact County Technical Assistance Service to seek assistance in exploring alternative methods to implement compensating controls in small offices.

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PART III, FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS

There were no findings and questioned costs related to federal awards for the year ended June 30, 2016.

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The Metropolitan Government of Lynchburg, Moore County, Tennessee

Management’s Corrective Action Plan For the Year Ended June 30, 2016

We reviewed the financial statement and federal award findings and recommendations with management to provide an opportunity for their response as required by the auditee requirements within Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Metropolitan Mayor did not provide management reponses or corrective action plans to the findings and recommendations applicable to his office. The management’s corrective action plans received for the remaining financial statement findings and federal award findings are presented below:

Corrective Action - Financial Statement Findings


FINDING 2016-004 THE OFFICE HAD DEFICIENCIES IN BUDGET OPERATIONS

Response and Corrective Action Plan Prepared by: Chad Moorehead, Director of Schools

Person Responsible for Implementing the Corrective Action: Same Anticipated Completion Date of Corrective Action: June 2017 Repeat Finding: No Reason Why Corrective Action was Not Taken – PY: N/A

Planned Corrective Action:

Corrected percentage match of retirement pension has already occurred for the 2016-17 budget within the budget preparation documents. The correction has been made to the 2017-18 budget draft, as well. This will carry over from one year to the next from this point forward. In order to ensure a more accurate year end budget amendment, all invoices for the remainder of the fiscal year will be included in the process to prepare the amendment. In cases that the invoice cannot be prepared before the amendment is completed, an estimate will be developed using invoices from past budgets, as well as requesting an estimated amount from vendors, or those contracted to perform services.

_______________________________________

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FINDING 2016-005 DUTIES WERE NOT SEGREGATED ADEQUATELY

Response and Corrective Action Plan Prepared by: Lynn Harrison, Trustee; Nancy Hatfield, Metropolitan Clerk; Christy Milsaps, Circuit, General Sessions, and Juvenile Courts Clerk; Tammy Roberts, Clerk and Master; Pam Wells, Register of Deeds; and Mark Logan, Sheriff

Persons Responsible for Implementing the Corrective Action: Same Anticipated Completion Date of Corrective Action: Various Repeat Finding: Yes Reason Why Corrective Action was Not Taken – PY:

Trustee: I am the only person in my office; therefore, segregation of duties is impossible. I, as manager of my office, feel that asking to hire a full time employee to remove this audit finding would be a failure to the citizens of Moore County; as my office can be managed by one person. My office books are open for review at any time. The State does not seem to consider small counties and the burdens mandates place upon them. I did comply with the mandate that an internal control policy be written, however there is no way to remove this audit finding from my yearly audit. I am open for any suggestions that your office may have but again segregating duties is not possible in my office. I do not have a detailed corrective action plan because this audit finding is impossible to correct for my office.

Metropolitan Clerk: With only part time help, segregation of duties is not easy to accomplish. However, with the description of duties that was supplied by your audit division that would accomplish segregation of duties for a two person office, we have greatly improved the structure of duties in this office.

Circuit, General Sessions, and Juvenile Courts Clerk: This office has only one part time employee along with myself. My budget only allows her to work a total of 800 hours per year. She will work when I am unable to be in the office due to sickness or training, etc. She works one day a week during General Sessions court. She is able to receipt money and take the deposit to the bank. I am not sure how this office can avoid this finding. My policy and daily operations are outlined in my internal control policy.

Clerk and Master: In addition to myself, I have one part time employee that works on an as needed basis at an annual salary of $2,076. This employee usually works when I am out of the office for vacation, sickness, training, etc. Given the current budget made for the part time employee in this office, I am not sure how to avoid this finding. When I am out of the office she is responsible for receipting any fees coming into the office along with making deposits. My office does not

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keep petty cash on hand and all money is deposited into the bank within three days from the date the receipt is written. This policy along with all daily operations has been outlined in the internal control policy for this office.

Planned Corrective Action:

Trustee: I do not have a detailed corrective action plan because this audit finding is impossible to correct for my office.

Metropolitan Clerk: As of 7/1/2016, we each have our own cash drawer and we are following the outline for segregation of duties that was given to us by your audit division. Hopefully in the coming year this office will not receive this or any other finding.

Circuit, General Sessions, and Juvenile Courts Clerk: I am not sure how this office can avoid this finding.

Clerk and Master: As stated previously, I am not sure how to avoid this finding.

Register of Deeds: The following guidelines have been implemented in the daily duties of the Register of Deeds office:

• Internal Control policy and procedures implemented• Computerized accounting system for receipting and accounting• Individual computer passwords must be changed every 90 days• All mail is individually opened, processed, immediately receipted and checks are

stamped “for deposit only” with the Register of Deeds bank account #, for eachtransaction before starting another transaction.

• Computerized system receipts are posted automatically and money for the day isverified and the deposit is posted in the computer system daily, the bank deposit slipis completed at the end of the day. The bank deposit is verified, initialed and datedagainst the computerized deposit ticket and then verified again by what the bankshows was deposited, by initials and date on the deposit slip. Deposits are made daily.

• Cash-on-hand is verified daily, initialed and dated• Monthly, the audit logs are reviewed, verified, signed and dated and if explanation is

needed this is all done on the log• All debits and credits are reviewed to ensure they balance• Monthly, the bank statement is opened and reviewed• Monthly, the bank statement is reconciled• Monthly, the cash journal is reviewed, verified, signed and dated

All of the above was implemented as of June 30, 2016, and is current policy.

Back in 2014 two members of your team came and sat with me, at my office, to discuss ways for me to resolve this finding. However, during this meeting, I was told there was no way for me to resolve this finding, since the Register of Deeds office is a one person office. I really,

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feel the steps I have implemented could be accepted by your audit team to resolve the segregation of duties findings, if we were all willing to try to find a way. I am willing to do whatever possible, as long as it is cost effective for the taxpayer’s of Moore County.

Now, I ask you to please give me a checklist of what you expect from an office run solely by one person, so that I can ensure the segregation of duties will not be a finding in the future.

Sheriff: The corrective action plan includes that there are two jailors that take in money on bonds at our department. Jailor number 1 is to count the money and jailor number 2 is to count it and receipt it and put it in the lock box for the secretary to pick up. After the secretary has picked the money up she then logs the money in and the sheriff deposits the money.

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BEST PRACTICES

Accounting literature describes a best practice as a recommended policy, procedure, or technique that aids management in improving financial performance. Historically, a best practice has consistently shown superior results over conventional methods.

The Division of Local Government Audit strongly believes that the items noted below are best practices that should be adopted by the governing body as a means of significantly improving accountability and the quality of services provided to the citizens of Metropolitan Moore County.

METROPOLITAN MOORE COUNTY SHOULD ADOPT A CENTRAL SYSTEM OF ACCOUNTING AND BUDGETING

Metropolitan Moore County does not have a central system of accounting and budgeting. Sound business practices dictate that establishing a central system would significantly improve internal controls over the accounting and budgeting processes. The absence of a central system of accounting and budgeting has been a management decision by the Metropolitan Council resulting in decentralization and some duplication of effort. We recommend the adoption of the County Financial Management System of 1981 or a private act, which would provide for a central system of accounting and budgeting covering all county departments.

METROPOLITAN MOORE COUNTY SHOULD IMPLEMENT THE PROVISIONS OF THE CHARTER THAT PROVIDE FOR A

CONSOLIDATED PURCHASING DEPARTMENT

The metropolitan government follows the Metropolitan Charter, which provides for all purchases and contracts for goods or services to be made through a consolidated Metropolitan Purchasing Department. The charter further provides for the metropolitan mayor to manage/conduct the Metropolitan Purchasing Department according to the procedures adopted by the Metropolitan Council. The Metropolitan Council is required by the charter to establish a three-member oversight committee to oversee the activity of the Metropolitan Purchasing Department. However, the Metropolitan Council has not created a consolidated Metropolitan Purchasing Department. We recommend the government implement the provisions of the charter that provide for a consolidated Purchasing Department.

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