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Home My Public Portal About20-9757 Completed 2017-2018 Audited Financial StatementSponsored by: City Manager RESOLUTION NO. 20-9757 A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF OPA-LOCKA, FLORIDA, APPROVING THE COMPLETED 2017- 2018 AUDITED FINANCIAL STATEMENT; PROVIDING FOR INCORPORATION OF RECITALS; PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the 2017-2018 audited financial statement has been considered by the to the City Commission; and WHEREAS, pursuant to Section 218.39, Florida Statutes, a local government entity shall prepare an annual financial audit of its accounts and records completed for its fiscal year by an independent certified public accountant; and WHEREAS, the City Commission finds that it is in the best interest of the City Commission to approve the presented audited financial statement for the fiscal year ended September 30, 2018. NOW, THEREFORE, BE IT DULY RESOLVED BY THE CITY COMMISSION OF THE CITY OF OPA-LOCKA, FLORIDA: Section 1. Recitals Adopted The recitals to the preamble are hereby incorporated by reference. Section 2. Authorization The City Commission hereby approves audited financial statement for the fiscal year ended September 30, 2018. Section 3. Scrivener's Errors Sections of this Resolution may be renumbered or re -lettered and corrections of typographical errors which do not affect the intent may be authorized by the City Manager or the City Manager's designee, without the need of a public hearing, by filing a corrected copy of same with the City Clerk. Section 4. Effective Date This Resolution shall take effect immediately upon adoption and is subject to the approval of the Governor or his designee. PASSED AND ADOPTED this 14th day of May, 2020. Resolution No. 20-9757 Attest to: a Flores City Clerk Moved by: Seconded by: MATTHEW PIGATT, MAYOR Approved as to form and legal sufficiency: Burnadette Norris -Weeks, P.A. City Attorney VICE MAYOR DAVIS COMMISSIONER BASS VOTE: 5-0 Commissioner Bass YES Commissioner Burke YES Commissioner Kelley YES Vice -Mayor Davis YES Mayor Pigatt YES 2 Matthew A. Pigatt Mayor Chris Davis Vice Mayor Sherelean Bass Commissioner Alvin Burke Commissioner Joseph L. Kelley Commissioner John E. Pate City Manager Joanna Flores City Clerk Burnadette Norris - Weeks, Esq. City Attorney iirf(J ,97krula Date: May 14, 2020 To: John E. Pate, City Manager From: Gerri Lazarre, CPA, Finance Department Consultant Re: Annual Financial Report for the Fiscal Year Ended September 30, 2018 In the Special Commission meeting being conducted on May 14, 2020, the Annual Financial Report audited by external audit firm Anthony Brunson, P.A. will be presented by Resolution to the City's Commission for the fiscal year ended September 30, 2018: Annual Audited Financial Report End Finance Department 780 Fisherman Street, 4th Floor, Opa-locka, FL 33054 Phone 305-953-2868 City of Opa-Iocka, Florida For the Fiscal Year Ended September 30, 2018 The City of Opa-locka Mission Statement The Mission of the City of Opa-locka is to enhance the quality of life, environment, and safety of our customers and employees in an atmosphere of courtesy, integrity, and quality service. CITY OF OPA-LOCKA, FLORIDA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018 TABLE OF CONTENTS PAGE I. INTRODUCTORY SECTION Letter of Transmittal List of Principals Organisational Chart iv II. FINANCIAL SECTION INDEPENDENT AUDITORS' REPORT 1-2 MANAGEMENT'S DISCUSSION AND ANALYSIS (Required Supplementary Information) 3-15 BASIC FINANCIAL STATEMENTS: Government -wide Financial Statements Statement of Net Position 16 Statement of Activities 17 Fund Financial Statements: Balance Sheet — Governmental Funds 18 Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position 19 Statement of Revenues, Expenditures and Changes in Fund Balances —Governmental Funds 20 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of — Governmental Funds to the Statement of Activities 21 Statement of Net Position -Proprietary Funds 22 Statement of Revenues, Expenses and Changes in Net Position —Proprietary Funds 23 Statement of Cash Flows -Proprietary Funds 24 Notes to Basic Financial Statements 25-63 REQUIRED SUPPLEMENTARY INFORMATION (OTHER THAN MD&A): Required Supplementary Information Budgetary Comparison Schedule: General Fund 64 People's Transportation Tax Fund 65 Capital Improvement Debt Service 66 Notes to Budgetary Comparison Schedule 67 Schedule of the City's Proportionate Share of the Net Pension Liability — Florida Retirement System Pension Plan 68 Schedule of the City's Contributions — Florida Retirement System Pension Plan 69 Schedule of the City's Proportionate Share of the Net Pension Liability — Health Insurance Subsidy Pension Plan 70 Schedule of the City's Contributions — Health Insurance Subsidy Pension Plan 71 Schedule of Changes in the City's Total Other Post Employment Benefits Liability and Related Ratios 72 CITY OF OPA-LOCKA, FLORIDA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2018 TABLE OF CONTENTS II. FINANCIAL SECTION (Continued) OTHER SUPPLEMENTARY INFORMATION: Combining and Individual Fund Statements Combining Balance Sheet - Non -Major Governmental Funds 73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance — Non -Major Governmental Funds 74 Combining Statement of Net Position Balances - Non -Major Enterprise Funds 75 Combining Statement of Revenues, Expenditures, and Changes in Net Position — Non -Major Enterprise Fund 76 Combining Statement of Cash Flows - Non -Major Enterprise Fund 77 III. COMPLIANCE SECTION PAGE Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 78-79 Schedule of Findings and Questioned Costs 80-96 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida 97-98 Independent Accountant's Report on Compliance with Requirements of Section 218.415, Florida Statutes 99 Nod' ggkeitia May 13, 2020 To the Citizens, the Honorable Mayor, Vice Mayor, City C'unnnissioners, City Manager and Assistant City Manager of the City ofOpa-locka: It is my pleasure to submit the Audited Financial Report for the City of Opa-locka, Florida, for the fiscal year ended September 30, 2018, pursuant to Section 218.39 of the Florida Statutes, Chapter 10.550 of the Rules of the Auditor General of the State of Florida and the City Charter. The financial statements included in this report conform to accounting principles generally accepted in the United States of America prescribed by the Governmental Accounting Standards Board (GASB). This report is published to fulfill that requirement for the fiscal year ended September 30, 2018. Management assumes full responsibility for the completeness and reliability of the information contained in this report, based upon a framework of internal controls that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute assurance that the financial statements are free of any material misstatements. The financial statements have been audited by Anthony Brunson, P.A., a firm of licensed certified public accountants. The independent auditors have issued a qualified opinion on the City's financial statements for the year ended September 30, 2018. The independent auditors' report is located at the front of the financial section of the report. The Management's Discussion and Analysis (MD&A) segment immediately follows the independent auditor's report and provides narrative introduction, overview and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. Profile of the Government The City of Opa-locka was incorporated in 1926 and operates under the Commission/City Manager form of government. The City Commission is comprised of the Mayor, Vice Mayor and three Commissioners, who are responsible for enacting ordinances, resolutions and regulations governing the City and appointing the members of various advisory boards. Additionally, the City Commission appoints the City Manager, the City Attorney and the City Clerk. As Chief Administrative Officer, the City Manager is responsible for the enforcement of laws and ordinances and the appointment and supervision of the City's Department hcads. The City provides a full range of services including police, construction and maintenance of highways and streets and other infrastructure, recreational and cultural activities. water and wastewater, storm water, planning and zoning and general administrative services. For additional services concerning our City, please visit our website at www.opalockafl.gov. The financial reporting entity under which the financial statements are prepared includes all activities and functions for which the City is financially accountable. The City is required to .prepare, approve, adopt and execute an annual budget. This annual budget serves as the foundation for the City's financial planning and control. Budgetary control is maintained at the departmental and fund level, with the finance department providing support to departments in the administration of their budgets. Budget to actual comparisons are provided in this report for all of the City's funds that have'an appropriated annual budget. Local Economy The City of Opa-locka comprises approximately 4.5 square miles and has a population of approximately 16,000 residents. It is located in the northern portion of Miami -Dade County. The City is a mix of residential, commercial and industrial zones including the Miami -Dade Opa-locka Airport, which is owned and operated by Miami -Dade County. The City of Opa-locka community is served by two elementary schools. Major initiatives On June 1, 2016, the City of Opa-locica City Commission adopted a Resolution to request a declaration that the City is in a state of financial emergency, and to seek the appointment of a financial emergency board and other assistance pursuant to section 218.503 (1), Florida Statutes. The State of Florida, Office of the Governor, issued Executive Order 16-135, signed by Florida Governor, Rick Scott. As of September 2018 the Cairo Lane and NW 127 Street project is at 51 % completion and we are looking • forward to finishing this project by June 2021. Acknowledgements The Finance Department, under the supervision of TriMcrgc Consulting Group, P.A. the City Manager, Assistant City Manager, Directors and Staff Members all contributed to the preparation of this report. We would also like to express our appreciation for the leadership of the Mayor, Vice Mayor and Commissioners. Respectfully, John if: Pate City, Manager ii CITY OF OPA-LOCKA, FLORIDA Joseph L. Kelley Vice Mayor John Riley Commissioner LIST OF PRINCIPAL OFFICIALS CITY COMMISSION Myra L. Taylor Mayor CITY EXECUTIVE MANAGEMENT Newall J. Daughtrey City Manager Joanna Flores City Clerk Vincent Brown City Attorney Timothy Holmes Commissioner Matthew Pigatt Commissioner iii CITY OF OPA-LOCKA, FLORIDA ORGANIZATIONAL CHART Mayor and City Commission Citizens City Attorney City Manager City Clerk Finance Department Human Resources Information Technology Community Development Code Enforcement Police Department Building and Licenses 1 Capital Improvement Projects Public Works & Utilities dParks and Recreation Boards & Committees Community Redevelopment Agency (CRA) iv FINANCIAL SECTION BRUNSON P.A. \ANTHONY CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS INDEPENDENT AUDITORS' REPORT To the Honorable Mayor and Members of the City Council City of Opa-locka, Florida We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Opa-locka, Florida, (the "City") as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the City'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 conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 intemal 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 unmodified and qualified audit opinions. Basis for Qualified Opinion on these Financial Statements As discussed in Note 1, we were unable to obtain sufficient appropriate audit evidence on the City's physical existence of capital asset balances. Accounting principles generally accepted in the United States of America pertaining to capital assets requires evidence of their existence and that assets are reported at the proper amounts. Summary of Opinions Opinion Unit Type of Opinion Governmental Activities Qualified Business -type Activities Qualified General Fund Unmodified People's Transportation Tax Unmodified Capital Projects Improvement Debt Service Unmodified Enterprise Fund Qualified Aggregate Remaining Fund Information Unmodified Miramar Office 3350 SW 148tAvenue l Suite 110 Miramar, Florida 33027 (954) 874-1721 -1- 7\13 IF.yT FOCUSED: SOLUTION 01(11 Ly info@abcpasolutions.com Miami Office 801 Brickell Avenue Suite 900 Miami, Florida 33131 (305) 789-6673 The amounts by which sufficient appropriate audit evidence could not be obtained would affect the assets, and net position of the government activities, business -type activities and enterprise fund has not been determined. Qualified Opinion In our opinion, except for the effects of the matters described in the "Basis for Qualified Opinion on these Financial Statements" paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of the City of Opa-locka, Florida as of September 30, 2018, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 15 and budgetary comparison information on pages 64 through 67 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management' s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the Limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit engagement was for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements of the City of Opa-locka, Florida. The introductory section, combining and individual nonmajor fund financial statements 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 and the budgetary comparison schedules 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, except for these effects on the Supplementary Information of the qualified opinion on the financial statements as explained in the "Basis for Qualified Opinion on these Financial Statements" paragraph the combining and individual nonmajor fund fmancial statements and the budgetary comparison schedules, are fairly stated in all material respects, in relation to the basic financial statements as a whole. The introductory sections have 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 them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 13, 2020, on our consideration of the City's internal control over fmancial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. rialf7f. May 13, 2020 -2- MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 OVERVIEW OF THE FINANCIAL STATEMENTS The City of Opa-locka's Management Discussion and Analysis (MD&A) is designed to provide an objective and easy to read analysis of the City's financial activities based on currently known facts, decisions, or conditions. It is intended to provide a broad overview on short-term and long-term analyses of the City's activities based on information presented in the financial report and fiscal policies that have been adopted by the City. Specifically, this section is designed to assist the reader in focusing on significant financial issues, provide an overview of the City's financial activity, identify changes in the City's financial position (its ability to address the next and subsequent year challenges), identify any material deviations from the financial plan (the approved budget), and identify individual fund issues or concerns. The information contained within this section should be considered only a part of a greater whole of information on the City's financial status. FINANCIAL HIGHLIGHTS 1. The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows at the close of the most recent fiscal year by $8.1 million (net position). 2. The City's total net position remained essentially unchanged rising by $1,943 or 0.02% resulting from current City operations. 3. The City's governmental -type activities reported net position of $6.4 million representing a $565,845 or 8.2% decrease when compared to the prior year's net position of $6.9 million. 4. The City's business -type activities reported a net position of $1.8 million, representing a $567,788 or 46.6%, increase in comparison to the prior year's net position of $1.2 million. 5. At the end of the fiscal year, the Governmental Fund reported a fund balance of $4.8 million, of which negative $4.5 million was unassigned general fund. 6. The City's total liabilities for governmental activities rose by $1.17 million, or 3.9% during the current fiscal year as a result of increases in due to other governments, accounts payable and accrued liabilities, as well as compensated balances. 7. The total debt outstanding for the City's business -type activities decreased by $686,040, or 4% due to reductions in accounts payable and accrued liabilities, as well as long term. Overview of the Financial Statements This annual report consists of four parts —management's discussion and analysis (this section), the basic financial statements, required supplementary information and an additional section that presents combining statements for non -major governmental funds. The basic financial statements include two kinds of statements that present different views of the City: • The first two statements are government -wide financial statements that provide both long-term and short-term information about the City's overall financial status. • The remaining statements are fund fmancial statements that focus on individual parts of the City government, reporting the City's operations in more detail than the government -wide statements. 3 CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 • The governmental funds statements show how general government services such as public safety were financed in the short term as well as what remains for future spending. The financial statements include notes explaining some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information which further explains and supports the information in the financial statements. In addition to these required elements, we have included a section with combining statements that provide details about our non -major governmental funds, each of which is added together and presented in a single column in the basic financial statements. Users interested in "budgetary performance" will find that information available in the required supplementary information and other financial information following the notes to the financial statements. GOVERNMENT -WIDE FINANCIAL STATEMENTS The government -wide fmancial statements consist of a Statement of Net Position and a Statement of Activities. Both statements represent an overview of the City as a whole, separating its operations between governmental and business -type activities. All information is presented utilizing the economic resources measurement focus and accrual basis of accounting. This method better matches revenues and expenses to the period in which the revenues are earned and the expenses attributed, and is a useful indicator of a government's fmancial position. The Statement of Net Position (the "Unrestricted Net Position") is designed to be similar to a bottom line for the City and its governmental and business -type activities. This statement combines and consolidates governmental fund's current financial resources (short-term spendable resources) with capital assets and long-term obligations. It presents information on all the City's assets and deferred outflows of resources, on one hand; liabilities and deferred inflows of resources on the other hand; the difference between them, reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the fmancial position of the City is improving or deteriorating. The Statement of Activities is focused on both the gross and net cost of various activities (including governmental, business -type and component unit), which are provided by the government's general tax and program revenues. This is intended to summarize and simplify the user's analysis of the cost of various governmental services and the local taxing efforts necessary to sustain each of those activities. Both of the government -wide financial statements distinguish functions of the City that are principally supported by taxes, charges for services, and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The governmental activities of the City include general government, public safety, transportation, cultural and recreational. The business -type activities include water and sewer, solid waste and stormwater, where the fee for service typically covers all or most of the cost of operations and depreciation. The government -wide fmancial statements can be found on pages 16-17 of this report. -4 CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 FUND FINANCIAL STATEMENTS Unlike government -wide financial statements, the focus of fund financial statements is directed to specific activities of the City rather than the City as a whole. Except for the General Fund, separate funds are established to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. GOVERNMENTAL FUNDS Governmental funds are used to account for essentially the same functions reported as governmental activities in the government -wide financial statements. Governmental fund financial statements focus on near -term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near - term financing requirements. Because the focus of governmental funds is narrower than that of the government -wide financial statements, it is useful to compare the information presented for the governmental funds with similar information presented for the governmental activities in the government -wide financial statements. By doing so, readers may better understand the long-term impact of the government's near -term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate the comparison between governmental funds and governmental activities. The City maintains individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balance for the General Fund, which is considered to be a major fund. The Capital Projects Improvement Debt Service Fund was established to account for the proceeds of the 2011 and 2015 debt issuance and presented as a major fund. The City presents data from all other governmental funds in a single column (non -major funds). Individual fund data for each of these non -major governmental funds are included in the combining statements. The City adopts an annual appropriated budget for its governmental funds. Budgetary comparison schedules have been provided for all the governmental funds to demonstrate compliance with the funds' budgets. The basic governmental fund fmancial statements can be found on pages 18-20 of this report. PROPRIETARY FUNDS Proprietary fund financial statements consist of a statement of net position, a statement of revenues, expenses, and changes in fund net position and a statement of cash flows. These statements are prepared on an accounting basis that is similar to the basis used to prepare the government -wide financial statements. For fmancial reporting purposes, proprietary funds are grouped into Enterprise Funds. 5 CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 The City uses Enterprise Funds to account for business -type activities that charge fees to customers for the use of specific goods or services. These funds are used to report the same functions presented as business - type activities in the government -wide financial statements. Proprietary funds provide the same type of information as the government -wide financial statements, only in more detail. The City has three Enterprise Funds: the Water and Sewer Fund, Solid Waste and Stormwater Fund. A statement of cash flows is presented at the fund financial statement level for the proprietary funds. The basic propriety fund financial statements can be found on pages 22-24 of this report. ANALYSIS OF THE OVERALL FINANCIAL POSITION AND RESULTS OF OPERATIONS When evaluating the financial position and short-term financial performance of the City, two tools are particularly valuable: The Statement of Net Position and the Statement of Activities. It is useful for the user to compare the current year with the prior year. This aids in spotting trends and other areas of concern or interest. For ease of relative comparisons, we include the percent change from one year to another (See below). NOTES TO THE BASIC FINANCIAL STATEMENTS Notes to the Financial Statements. The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government -wide and fund financial statements. The notes to the fmancial statements can be found on pages 25-63 of this report. OTHER INFORMATION In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information (RSI) concerning the City's progress in funding its obligation to provide pension and other post -employment benefits to its employees. This section also includes a comparison between the City's General Fund adopted and fmal budget and actual financial results. A budgetary comparison schedule has been provided for the General Fund to demonstrate compliance with this budget. The City also adopts an annual appropriated budget for each of its other governmental funds which are presented as supplementary information. Combining statements referred to earlier in connection with non -major governmental funds are presented immediately following the Required Supplemental Information. 6 CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 GOVERNMENT -WIDE FINANCIAL ANALYSIS Summary of Net Position. As noted earlier, Net Position may serve over time as a useful indicator of a government's financial position. There are six basic transactions that will affect the comparability of the Statement of Net Position summary presentation as reflected below: 1. Net results of activities will impact (increase/decrease) current assets and unrestricted Net Position. 2. Borrowing for capital will increase current assets and long-term debt. 3. Spending borrowed proceeds on new capital will reduce current assets and increase capital assets. There is a second impact, an increase in invested in capital assets and an increase in related net debt which will not change the net investment in capital assets. 4. Spending of non -borrowed current assets on new capital will reduce current assets and increase capital assets and will reduce unrestricted Net Position and net investment in capital assets. 5. Principal payment on debt will reduce current assets and reduce long-term debt and reduce unrestricted Net Position and increase net investment in capital assets. 6. Reduction of capital assets through depreciation will reduce capital assets and net investment in capital assets. The following schedule is a summary of the fiscal year 2018 Statement of Net Position with comparative information for fiscal year 2017. Net Position - Government -wide Governmental Business -type Activities Activities Total 2018 2017 Change 2018 2017 Chance 2018 2017 Change Current and other assets $ 10,366,428 $ 8,844,497 17% $ 6,484,200 $ 6,114,543 6% $ 16,850,628 $ 14,959,040 12% Capital assets, net 25.189.033 26,109.456 -4% 11.317.139 11,809.514 -4% 36.506,172 37,918,970 -4% Total assets 35,525.461 34,953,953 2% 17 801,339 17 924,057 -1% 53,356,798 53,326,800 1% Deferred outflow of resources 3,949.017 3,840.956 3% 538,502 523.767 3% 4.487.519 4364,723 3% Current and other liabilities 6,472,085 5,110,294 27% 5,167,983 5,394,687 -4% 11,640,068 10,504,981 11% Long-term liabilities 24,320,704 24,512.362 -1% 11.069.175 11,528,511 4% 35.389,879 36,040,873 -2% Total liabilities 30.792.789 29.622.656 4% 16.237,158 16.923,198 -4% 47029.947 46.545,854 1% Deferred inflow of resources 2,323,230 2.247.949 3% 316.805 306.539 3% 2,640,035 2.554,488 3% Net assets: Invested in capital assets, net 12,342,000 12,497,766 -1% 6,263,470 1,106,209 466% 18,605,470 13,603,975 37% of related debt Restricted 2,873,620 3,298,639 -13% 0% 2,873,620 3,298,639 -13% Unrestricted (8 857,1611 (8,872,101) 2% (4,477,5941 111,879 -4102% (13,334,7551 (8,760,222) 52% Total net assets $ 6358,459 $ 924,304 -8% $ 1,785 876 $ 1218 088 47% $ 8,1 • • 13.1 $ 8,142,392 0% -7- CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 STATEMENT OF NET POSITION The overall net position of the City increased in fiscal year 2018, from the prior year net position, by $1,943 or 0.02%. The net position was $8.1 million in FY 2017 and FY 2018. Slight changes in net position over time can be one of the best and most useful indicators of financial health. The governmental activities of the City's current and other assets increased by 17% while the current liability of those activities increased by 27%. Meanwhile, the business -type activities of the City's current and other assets increased by 6% while the current liability of those activities declined by 4% as a result of a change in due from funds. The governmental activities invested in capital assets decreased by $920,422 or 3.5% from the previous year and unrestricted net position now stands at ($8.9) million, a $14,940 or 0.2% improvement from the previous year. The business -type activities invested in capital assets decreased by $492,375 or 4.2% and unrestricted net position now stands at ($4.5) million, compared to $111,879 in the prior year. Five Years Total Net Position (in millions) $30.0 S25.0 $20.0 S15.0 S10.0 $5.0 S- 2014 2015 Total Net Position 2016 Fiscal Year 2017 2018 By far the largest portion of the City's net position is investment in capital assets (e.g., land, buildings and building improvements, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to its citizens; however, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 8 CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 STATEMENT OF ACTIVITIES The following schedule is a summary of the fiscal year 2018 Statement of Activities with comparative information to fiscal year 2017: Changes in Net Assets Governmental Business -type Activities Activities Total 2018 2017 Change, 2018 2017 Change 2018 2017 Change Revenues: Program revenues: Charges for services $ 1,434,921 $ 1,798,315 -20% $ 8,156,228 $ 9,328,761 -13% $ 9,591,149 $ 11,127,076 -14% Operating/capital grants and cont. 733,240 398,338 84% 228,000 365,302 -38% 961,240 763,640 26% General revenues: 0% Property taxes 7,091,758 7,654,862 -7% 0% 7,091,758 7,654,862 -7% Other taxes 2,481,869 2,308,003 8% 0% 2,481,869 2,308,003 8% Franchise fees 1,675,728 1,355,702 24% 0% 1,675,728 1,355,702 24% Intergovernmental, unrestricted 822,465 1,891,134 -57% 0% 822,465 1,891,134 -57% Unrestricted interest earnings 1,113 587 90% - 0% 1,113 587 90% Miscellaneous 888,059 1,739,788 -49% 0% 888,059 1,739,788 -49% Transfers - 381,243 -100% 0% 381,243 -100% Debt proceeds 214,236 -100% 0% 214.236 -100% Total revenues 15,129.153 17.742208 -14% 8,384,229 9,694,063 -14% 23,513.382 27,436.271 -14% Expenses and transfers: General government 5,892,068 6,751,876 -13% 0% 5,892,068 6,751,876 -13% Public safety 6,316,205 5,512,414 15% 0% 6,316,205 5,512,414 15% Transportation 2,414,667 1,780,407 36% 0% 2,414,667 1,780,407 36% Culture and recreation 604,816 537,294 13% - 0% 604,816 537,294 13% Interest and fiscal charges 466,622 490,299 -5% 0% 466,622 490,299 -5% Water and sewer - 0% 9,180,678 10,250,266 -10% 9,180,678 10,250,266 -10% Stormwater 0% 682,664 1,215,121 61% 682,664 1,215,121 61% Solid waste 0% (4,107) 423,594 -100% (4,107) 423,594 -100% Transfers 381,242 -100% - 0% 381.242 -100% Total expenses 15.694,378 15,453.532 2% 9,859235 11 888.981 -17% 25.553.613 27,342.513 -7% Increase (decrease) in net positions (565.225) 2,288,676 -12% (1.475.0071 (2,194.918) 33% (2,040,2321 93.758 -2276% Net positions, beginning as 6,924,303 4,906,119 41% 1,218,088 3,111,443 -61% 8,142,391 8,017,562 2% previously stated Prior period adjustment (6191 (270.4921 100% 2.042,780 301,563 577% 2 042 161 31.071 6437% Net position, beginning as restated ,6,923,684 4,635,627 49% 3 260,868 3,413.006 -4% 10.184,552 8.048,633 27% Net positions, ending $ 6,358 459 $ 6,924,301 -8% $ 1,785,861 $ 1,218 088 47% $ 8,144,320 $ 8,142,391 0% The Statement of Activities reflects a 14.3% reduction in overall revenues compared to the prior year. Meanwhile, total expenses declined by 6.5%. The govemmental activities account for the most significant activity within the City, with program revenues of $15.1 million. Total overall decreased by 14.7% in govemmental activities over the prior year was due to a decrease in general government services activities such as charge for services, and other areas such as Intergovernmental -unrestricted, miscellaneous revenues and property taxes. The business -type activities are water and sewer, solid waste and storm water operations which reflected a $1.3 million or 13.5% decline in total revenues. The decrease is due to a reduction in charge for services, and grants. 9 7^%o CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 Sources of Revenue for Fiscal Year 2018 Fiscal Year 2018 0% 40%0 0%%o a 4% 1 /o 4% BUSINESS -TYPE ACTIVITIES • Charges for services m Operating /capital grants and cont. 40% Property taxes Other taxes ® Franchise fees • Intergovernmental, unrestricted • Unrestricted interest earnings • Miscellaneous • Transfers • Debt proceeds The Business -type Activities are comprised of the Water and Sewer, Solid Waste and Stormwater Fund. • The operating loss for the Water and Sewer was ($1.5) million, which was a 33% improvement from the prior year's ($2.2) million. This improvement was the result of the curtailment of Water & Sewer, Stormwater and Solid Waste expenses. • The Solid Waste Fund activity is not being managed in house by the City. FINANCIAL ANALYSIS OF THE CITY'S FUNDS The City uses fund accounting to ensure and demonstrate compliance with finance -related legal requirements. Governmental Funds The focus of the City's governmental funds is to provide information on near -term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City's funding requirements. In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. - 10- CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 As of the end of fiscal year 2018, the City's governmental funds reported combined ending fund balance of $4.8 million compared to $4.6 million in the prior year, an increase of $173,481 in fund balance. Most of the fund balance is restricted to indicate that it is not available for new spending because it has already been committed or restricted to pay 1) debt service, 2) transportation and 3) public safety. Additionally, there are restrictions to cash on hand being held as a result of the City's bonds with City National Bank. General Fund The General Fund is the chief operating fund of the City. At the end of the current fiscal year the total fund balance equals a negative $3.96 million, as compared to a negative $1.6 million in the prior fiscal year, representing a $2.35 million or 146% decline. Total revenues for the general fund declined by $2.4 million, or 17.8%, as a result a combination of decreases in other financial sources, other revenues, property taxes, fines and forfeitures, as well as local option use and service taxes. A large source of state revenue sharing was withheld in both fiscal year ending September 30, 2017 and September 30, 2018, as a result these funds were not available to the City in accordance with Section 218.63(2), Florida Statutes. Revenue in the general fund is shown in the following schedule: Increase Percent 2018 Percent 2017 Percent (Decrease) of Increase General Fund Revenues Amount of Total Amount of Total From 2017 (Decrease) Property $ 6,734,982 61% $ 7,438,862 55% $ (703,880) -9% Utility service taxes 63,454 1% 62,876 0% 578 1% Communication service taxes - 0% - 0% - 0% Local option, use and fuel taxes 29,104 0% 302,792 2% (273,688) -90% Franchise fees 1,675,728 15% 1,355,702 10% 320,026 24% Local business taxes 301,715 3% 254,399 2% 47,316 19% Permits and fees 737,810 7% 606,220 4% 131,590 22% Intergovernmental 45,500 0% 63,370 0% (17,870) -28% Charges for services 148,460 1% 190,784 1% (42,324) -22% Fines and forfeitures 548,651 5% 1,001,311 7% (452,660) -45% Interest 0% 3 0% (3) -100% Other revenue 816,080 7% 1,633,892 12% (817,812) -50% Other financing sources - 0% 595,479 4% (595,479) -100% Total Revenues $ 11,101,484 100% $ 13,505,690 100% $ (2,404,206) -18% Total expenditures for the general fund increased by $1.0 million, representing an 8.3% increase. This increase was comprised of a $400,083 reduction in general government, coupled with growth in both public safety and transportation, which rose by $795,710 and $524,693, respectively. - 11 - CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 Expenditures in the general fund are shown in the following schedule: Increase Percent 2018 Percent 2017 Percent (Decrease) of Increase General Fund Expenditures Amount of Total Amount of Total From 2017 (Decrease) General govemment $ 3,975,884 30% $ 4,375,967 36% $ (400,083) -9% Public safety 6,307,538 48% 5,511,828 45% 795,710 14% Transportation 1,963,493 15% 1,438,800 12% 524,693 36% Culture and recreation 604,816 5% 537,294 4% 67,522 13% Debt service 76,555 1% 154,186 1% (77,631) -50% Capital outlay 209,374 2% 110,621 1% 98,753 89% Transfers 0% 0% 0% Total expenditures $ 13,137,660 100% $ 12,128,696 100% $ 1,008,964 8% Proprietary Funds • The City's proprietary fund statements provide the same type of information found in the govemment-wide financial statements, but in more detail. The unrestricted net position of the water and sewer, storm water, and solid waste funds at the end of the prior year was $111,879 and has declined in the current fiscal year to a deficit of ($4.5) million. The total decrease in net position for the enterprise funds was $1.5 million in the current year versus a decrease of $2.2 million in the prior year, both of which were due to losses in operating the water and sewer fund. GENERAL FUND BUDGETARY HIGHLIGHTS During the year there were adjustments to the appropriations between the original and fmal amended budget. Overall, the City's actual total revenues were less than budgeted while overall expenditures were over budget; this created an excess of expenditures over revenues of $2,036,179. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City's investment in capital assets for its governmental and business type activities as of September 30, 2018, amounted to $36.5 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and buildings improvements, machinery and equipment, park facilities, roads and utility systems infrastructure. The City's investment in capital assets declined by $1.4 million for the current fiscal year, primarily due to depreciation. Major capital assets additions during the current fiscal year included the following: • Construction in progress for Cairo Lane; • Sewer line projects on Bahman Avenue; • The milling and resurfacing of portions of the streets listed below: o Ahmad Street, Aladdin Street, Jann Avenue, Kalandar Street, N.W. 26th Avenue, Opa-locka Blvd and Sinbad Avenue; • Vehicles, Furniture & Equipment. - 12 - CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 City of Opa-locka's Capital Assets (net of accumulated depreciation) Governmental Activities Business -type Activities Total 2018 2017 2018 2017 2018 2017 Land $ 2,980,457 $ 2,980,457 $ 14,762 $ 14,762 $ 2,995,219 $ 3,057,237 Construction in progress 2,114,944 2,114,914 4,084,879 3,796,056 6,199,793 5,252,948 Buildings and building improvements 15,213,621 15,602,268 - 15,213,621 15,990,916 Furniture and equipment (8,609) 106,794 333,405 341,538 324,796 910,353 Infrastructure 4,888,619 5,304,992 6,884,102 7,657,167 11,772,721 14,313,470 Total $ 25,189,032 $ 26,109,425 $ 11,317,148 $ 11,809,523 $ 36,506 180 $ 39,524,924 Additional information on the City's capital assets can be found in Note 7 of the note disclosures accompanying this report. Debt Administration At the end of the current fiscal year the City had total debt outstanding of $46.1 million, inclusive of deferred inflow of resources, an increase of $8.1 million, see Note 9 for long-term debt note disclosures. Governmental Activities Business -type Activities Total 2018 2017 2018 2017 2018 2017 Revenue bonds $ 12,627,334 $ 13,371,604 $ - $ - $ 12,627,334 $ 13,371,604 Capital leases 5,463 25,850 39,490 5,463 65,340 Loans - 5,053,667 5,307,753 5,053,667 5,307,753 GASB 68 liability 9,076,099 8,566,264 1,237,650 1,168,127 10,313,749 9,734,391 Liability to Miami -Dade 214,236 214,236 5,356,061 5,356,061 5,570,297 5,570,297 OPEB 300,161 582,852 41,709 81,149 341,870 664,001 Compensated absences 1,750,962 1,360,847 107,644 107,795 1,858,606 1,468,642 Legal 1 296.683 1,297.602 1 296 ,683 1,297,602 Total $ 25,270.938 $ 25,419,255 $ 11,796.731 $ 12.060.375 $ 37,067.669 $ 37.479.630 ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES During fiscal year 2018, the City will be looking at the following programs/initiatives: • On June 1, 2016, the City of Opa-locka City Commission adopted a Resolution to request a declaration that the City is in a state of financial emergency to seek the appointment of a financial emergency board and other assistance pursuant to section 218.503(1), Florida Statutes. The State of Florida, Office of the Governor, issued Executive Order 16-135, signed by Florida Govemor Rick Scott. In 2019, the City will be looking to improve and enhance its operational and financial controls. - 13 - CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 • Development of key audit schedules and documentation to begin the external audit work for fiscal year 2019. Additional temporary accounting and audit staff were engaged to assist with completion of this task. • We brought our pump station from 90% deficiency to 50% compliance with DERM. Continue with upgrades to bring all of the City's 19 pump stations out of moratorium and other improvements to the utility system to increase the opportunities for economic development and compliance with the consent agreement with the Department of Environmental Management (DERM). • The City is working with Miami Dade County -Public Housing and Community Development Department (MDC-PHCD) to increase the grant funding previously approved in fiscal year 2015. Once approved, the Request for Proposals document needs to be revised and approved by the City and MDC-PHCD. • During fiscal year 2018, the City continues facing many challenges to accomplish Cairo Lane & NW 127th Roadway & Drainage Improvement Project, such as the relocation of utility poles and the need of some easement access that needs to be obtained from some business owners in order to proceed with construction as planned. The heavy rainy season continues causing Cairo Lane to flood and creates huge potholes constantly requiring costly maintenance to the road. Due to the existing state of financial emergency, the City requires to follow a longer process for approval of invoices causing huge delays to issue monthly payments to Intercounty Engineering, the prime contractor. As a result of this new implemented process, the prime contractor, demobilized from February to September of this year. In September 2018, the contractor re -mobilized to the project. Construction progress made this year includes: installation of the water main offset on Cairo Lane, installation of the water main extension and a fire hydrant on Alexandria Drive, three bacteria sampling points were installed on NW 127th Street, and the water main extension was pressure tested and chlorinated successfully. Overall project completion is at 51%. • In 2019-2020, there has been three new houses built in the South Area of Town Center bounded by Opa-locka Boulevard to the Northeast, the CSX Railroad ROW to the Northwest and Atlantic Street to the South between NW 27th Avenue and Sesame Street. One house was an infill project built on a former City owned surplus vacant lot at 825 Superior Street. Two houses at 931 and 951 Superior Street were built on a site where the Historic King Truck Factory once stood. The 1930 structure was demolished in 2017 after years of neglect and fire inside of the historic structure. The City participates with Miami -Dade County's Infill Housing Project team members for development of the Magnolia Area of the City that is located within the boundaries of NW 22' Avenue and Ali - Baba to NW 151s` Street to the railroad tracks. Herein lies some 17 vacant properties slated for residential development and completion during fiscal year 2020. The Department of PHCD is working with recommendations from the City to develop these properties. Palmetto Homes is one of the developers selected by Miami -Dade County [per recommendation by PHCD] to build residential and mixed use development in the Magnolia North area. Two -twin homes [4 units] are presently under construction and are scheduled to be completed by the end of FY 2020. This company has four more nearby sites to be built on in FY 2020-21. The City also owns 9 vacant parcels in the Magnolia Area and is moving forward to develop them for residential and mixed uses. The 9 vacant City owned properties in Magnolia North have been proffered as part of a legal settlement agreement. One of the properties had a deed restriction with a reverter clause with Miami -Dade County. The Opa-locka City Commission approved a resolution for the deed restriction to be modified for residential development. Miami -Dade County is addressing this deed amendment which requires action by the Board of County Commissioners. City is awaiting action - 14 - CITY OF OPA-LOCKA, FLORIDA MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDED SEPTEMBER 30, 2018 from Miami -Dade County before anything can occur on that one property. Once the legal settlement is complete, Opa-locka PCD staff will be meeting with the new owners/developers to determine what will be built on these sites. • Work to expand the City's online services to allow residents to access an e-commerce platform, which is ongoing until fiscal year 2019. It is anticipated to be complete and released during fiscal year 2019. The migration of water billing to Miami -Dade Water and Sewer has allowed the City to refocus the online portal portion of the website to other online services. The City Clerk's Office in conjunction with the Information Technology Department has created an online portal which allows the public access official City documents via the website. Additionally, the ability to submit building plans via the portal was enabled. A data cleanup is still underway in the Building Department which is necessary to complete the ability of permit application and status. • The development of a destination plan to attract more visitors to the City has been an ongoing project that is continuing through subsequent fiscal years. As the external audits are released for these fiscal years, it is anticipated that additional funds will be released to facilitate achievement of the destination plans to attract more visitors to the City. • The City started the Milling & Resurfacing Phase I, which covers 2.4 miles in need of improvement in the downtown area. 90% of this project was accomplished this year enhancing driving comfort and safety to the following streets: - Jann Avenue: from Golf Course Blvd. to Ahmad Street - Ahmad Street: from Sharazad Blvd. to NW 151 Street & from Ali -Baba Avenue to Sharazad Avenue - Kalandar Street: from Sharazad Blvd. to NW 151 Street - Aladdin Street: from Atlantic Avenue to Burlington Street and from Ali -Baba Avenue to Fisherman Street - Opa-locka Blvd: from Ali -Baba Avenue to Sharazad Blvd. - Sinbad Avenue: from Atlantic Avenue to Opa-locka Blvd. - NW 26th Avenue: from Burlington Street to superior Street Plans for milling and resurfacing of the City's roadways were a continued priority during fiscal year 2018. There was approximately 10 miles of roadway that were in need of improvement, of which 7 miles were completed during fiscal year 2019 and 3 miles are pending completion. Due to the magnitude of trucking and other traffic throughout the City, this is an ongoing project. These factors were considered in preparing the City of Opa-locka's budget for fiscal years 2018-2019 and 2019-2020. Contacting the City's Financial Management This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to demonstrate the City's accountability. Questions concerning any of the information provided in this report or requests for additional information should be addressed to The City of Opa-locka, Finance Department, 780 Fisherman Street 4th Floor, Opa-locka, Florida 33054. A copy of this report will also be available. - 15 - BASIC FINANCIAL STATEMENTS CITY OF OPA-LOCKA, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Governmental Proprietary Activities Activities Total ASSETS Cash and equity in pooled cash $ 2,042,501 $ 2,505,044 $ 4,547,545 Receivables, net 406,343 3,876,086 4,282,429 Internal balance 2,000,483 (2,000,483) - Due from other governments 1,736,399 569,471 2,305,870 Prepaids 22,584 86,821 109,405 Restricted cash and cash equivalents 4,128,118 1,447,261 5,575,379 Capital assets, not being depreciated 5,095,401 4,099,641 9,195,042 Capital assets, being depreciated net 20,093,632 7,217,498 27.311.130 Total assets 35,525,461 17,801,339 53,326.800 DEFERRED OUTFLOW OF RESOURCES Pension (See Note 10) Total deferred outflow of resources 3,949,017 3,949,017 538,502 4,487.519 538,502 4.487.519 LIABILITIES Accounts payable and accrued liabilities 1,985,108 1,793,482 3,778,590 Due to other governments 3,523,122 33,168 3,556,290 Customers' deposits 12,616 2,613,774 2,626,390 Unearned revenue 1,005 1,005 Noncurrent liabilities: Due within one year: Compensated absences 175,096 10,767 185,863 Long term debt 775,138 716,792 1,491,930 Due in more than one year: Compensated absences 1,575,866 96,880 1,672,745 OPEB obligation 300,161 41,709 341,870 Contingency 1,296,683 - 1,296,683 Long -term debt - pension liability 9,076,099 1,237,650 10,313,749 Long -term debt 12.071,895 9.692,936 21,764,831 Total liabilities 30 792,789 16,237,158 47.029,947 DEFERRED INFLOW OF RESOURCES Pension ( See Note 10) Total deferred inflow of resources 2,323,230 2,323,230 316,805 2 640,035 316,805 2,640,035 NET POSITION Invested in capital assets, net of related debt 12,342,000 6,263,470 18,605,470 Restricted for. CRA 330,068 - 330,068 Public safety 663,432 - 663,432 Transportation 1,343,940 - 1,343,940 Capital projects 536,180 - 536,180 Unrestricted (8,857,161) (4,477,594) (13,334,755) Total net position $ 6,358,459 $ 1,785,876 $ 8,144,335 See notes to basic financial statements. - 16 - CITY OF OPA-LOCKA, FLORIDA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2018 Net (Expense) Revenue and Program Revenues Changes in Net Position Operating Capital Charges Grants and Grants and Governmental Proprietary Functions / Programs Expenses for Services Contributions Contributions Activities Activities Total Governmental activities: General government $ 5,892,068 $ 886,270 $ $ $ (5,005,798) $ - $ (5,005,798) Public safety 6,316,205 548,651 31,403 (5,736,151) (5,736,151) Transportation 2,414,667 - 701,837 (1,712,830) - (1,712,830) Culture and recreation 604,816 - (604,816) - (604,816) Interest on long term debt 466,622 - (466,622) - (466,622) Total governmental activities 15,694,378 1,434,921 31,403 701,837 (13,526,217) (13,526,217) Proprietary activities: Water and sewer 9,180,677 7,367,956 228,000 (1,584,721) (1,584,721) Stormwater 682,662 788,272 105,610 105,610 Solid waste (4,107) - 4.107 4.107 Total proprietary activities Total 9,859,232 8,156,228 228,000 $ 25.553.610 $ 9,591.149 $ 31.403 $ 929.837 (13,526,217) (1,475,004) (1,475,004) (1,475,004) (15,001,221) General revenues: Property taxes 7,091,758 7,091,758 Franchise fees 1,675,728 - 1,675,728 Utility taxes 1,415,423 - 1,415,423 Communication services tax 426,277 - 426,277 Local option, use and fuel taxes 338,454 - 338,454 Local business tax 301,715 - 301,715 Intergovernmental revenue - unrestricted 822,465 822,465 Unrestricted interest earnings 1,113 - 1,113 Other 888,059 12 888,071 Total general revenues and transfers 12.960,992 12 12,961,004 Change in net position Net position, beginning as previously restated (Note 18) Prior period adjustment Net position, beginning restated Net position, ending See notes to basic financial statements. - 17 - (565,225) (1,474.992) (2,040,217) 6,924,303 (619) 1,218,088 8,142,391 2,042,780 2,042,161 6.923,684 3,260,868 10,184,552 5 6,358,459 $ 1,785,876 $ 8,144,335 CITY OF OPA-LOCKA, FLORIDA BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30, 2018 People's Capital Projects Other Nonmajor Total General Transportation Improvement Governmental Governmental Fund Tax Debt Service Funds Funds ASSETS Cash and equity in pooled cash $ 1,416,479 $ 105,100 $ - $ 520,922 $ 2,042,501 Receivables, net 278,265 - 128,078 406,343 Other government account receivables 31,403 1,430,433 174,563 100,000 1,736,399 Due from other funds 17,733,875 1,807,400 6,374,627 2,418,285 28,334,187 Prepaid items 22,584 - - 22,584 Restricted cash and cash equivalents 759,354 - 3.299,660 69,104 4,128,118 Total assets $ 20,241,960 $ 3,342,933 $ 9,976,928 $ 3,108,311 $ 36,670,132 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 1,697,052 $ 35,248 $ 31,064 $ 221,744 $ 1,985,108 Due to other funds 18,973,699 1,963,745 3,362,012 2,034,248 26,333,704 Customer deposits 12,616 - - 12,616 Uneamed revenue - 1,005 1,005 Other government account payables 3,523,122 - - 3,523,122 Total liabilities 24,206,489 1,998,993 3,393,076 2 256,997 31,855,555 FUND BALANCE Nonspendable: Prepaid items Restricted for: Debt service CRA Committed for: Public safety Transportation Unassigned: Capital projects funds General fund Total fund balances Total Liabilities and Fund Balances 22,584 536,180 (4,523,293) (3,964,529) $ 20,241.960 1,343,940 1,343,940 $ 3 342.933 22,584 6,455,773 6,455,773 330,068 330,068 663,432 663,432 1,343,940 536,180 128,079 (142,186) (4,537,400) 6,583,852 851,314 4,814,577 $ 9 976 928 $ 3.108,311 $ 36.670,132 See notes to basic financial statements. - 18 - CITY OF OPA-LOCKA, FLORIDA RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2018 Fund balances - total governmental funds $ 4,814,577 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. Government capital assets net of accumulated depreciation $ 25,189,033 Long-term debt (12,847,033) Pension liability (9,076,099) Compensated absences (1,750,962) Deferred inflow of resources (2,323,230) Deferred outflow of resources 3,949,017 Other post -employment benefits (300,161) Accrued legal settlement (1,296,683) Net adjustment 1,543,882 Net position of governmental activities $ 6,358,459 See notes to basic financial statements. - 19 - CITY OF OPA-LOCKA, FLORIDA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 General People's Capital Other Nonmajor Total Transportation Improvement Governmental Governmental Tax Debt Service Funds Funds REVENUES: Taxes: Property taxes $ 6,734,982 $ $ - $ 356,776 $ 7,091,758 Utility taxes 63,454 - 1,351,969 1,415,423 Communications service taxes - 426,277 426,277 Local option, use and fuel taxes 29,104 - 309,350 338,454 Local business taxes 301,715 - 301,715 Franchise fees 1,675,728 - 1,675,728 Permits and fees 737,810 - - 737,810 Intergovernmental 45,500 701,837 805,651 2,717 1,555,705 Charges for services 148,460 - 148,460 Fines and forfeitures 548,651 548,651 Interest 59 1,054 1,113 Other 816.080 - 71,979 888,059 Total revenues 11,101,484 701,837 2,583,956 741,876 15,129,153 EXPENDITURES: Current: General government 3,975,884 - 140,587 4,116,471 Public safety 6,307,538 - 8,667 6,316,205 Transportation 1,963,493 193,867 - 257,307 2,414,667 Culture and recreation 604,816 - - 604,816 Debt service: Principal 76,555 - 744,270 820,825 Interest - 466,622 466,622 Capital outlay 209,374 - - 6,072 215.446 Total expenditures 13,137.660 193,867 1,210,892 412,633 14 955,052 Excess (deficiency) of revenues over expenditures (2,036,176) 507,970 1,373,064 329,243 174,101 OTHER FINANCING SOURCES (USES): Debt proceeds Total other financing sources (uses) Net change in fund balances (2,036,176) 507,970 1,373,064 329,243 174,101 Fund balances, beginning (1,612,097) 1,082,514 5,210,789 (40,111) 4,641,095 Prior period adjustment (316,256) (246,544) (1) 562,182 (619) Fund balances, beginning restated (1,928,353) 835,970 5,210,788 522,071 4 640,476 Fund balances, ending $ (3,964.529) $ 1.343,940 $ 6.583.852 $ 851.314 $ 4.814,577 See notes to basic financial statements. - 20 - CITY OF OPA-LOCKA, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2018 NET CHANGES IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS, PAGE 20 $ 174,101 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives. Expenditures for capital outlays Provision for depreciation expense on governmental capital assets is included in the governmental activities in the statement of net position. (920,422) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Principal payments on long-term debt are reported as expenditures in governmental funds, but as a reduction of long-term liabilities in the statement of net position. 744,270 Capital lease obligation 20,387 Other (465,532) Some items reported in the statement of activities do not require the use of current fmancial resources and, therefore, are not reported in the governmental funds. These activities consist of: Change in deferred out flow of resource 32,780 Change in legal accrual 919 Change in other post -employment benefits (282,691) Change in compensated absences 390,115 Change in long-term debt (259,152) CHANGES IN NET POSITION OF GOVERNMENTAL ACTIVITIES, PAGE 17 $ (565,225) See notes to basic financial statements. - 21 - CITY OF OPA-LOCKA, FLORIDA STATEMENT OF NET POSITION -PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Business -Type Activities - Enterprise Funds Water and Other Nonmajor Sewer Enterprise Funds Total ASSETS Current assets: Cash and equity in pooled cash $ 1,059,493 $ 1,445,551 $ 2,505,044 Receivables, net 3,348,276 527,810 3,876,086 Due from other governments 525,033 44,438 569,471 Other assets 86,821 - 86,821 Restricted cash and cash equivalents 1,337,261 110,000 1,447,261 Due from other funds 3.974,946 2,232,522 6,207,468 Total current assets 10,331,830 4,360,321 14,692,151 Noncurrent assets: Non depreciable capital assets 3,810,585 289,056 4,099,641 Capital assets, net 7,185,506 31 990 7,217.496 Total noncurrent assets 10,996,091 321 046 11,317.137 Total assets $ 21,327,921 $ 4,681,367 $ 26,009,288 DEFERRED OUTFLOW OF RESOURCES Pension (See Note 10) $ 538,502 $ - $ 538,502 Total deferred outflow of resources 538,502 538.502 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 1,571,867 221,616 1,793,483 Due to other funds 5,446,697 2,761,256 8,207,953 Due to other governments 33,168 - 33,168 Deposits 2,548,902 64,872 2,613,774 Current portion of long term debt 716,792 - 716,792 Total current liabilities 10,317,426 3,047,744 13,365,170 Noncurrent liabilities: Compensated absences 67,925 39,719 107,644 OPEB 38,046 3,663 41,709 Long -term debt - pension liability 1,237,650 - 1,237,650 Long term debt 9,144,710 548,226 9,692.936 Total noncurrent liabilities 10,488,331 591,608 11,079,939 Total liabilities 20,805,757 _ 3,639,352 24 445 109 DEFERRED INFLOW OF RESOURCES Pension (See Note 10) 316.805 316,805 Total deferred inflow of resources 316.805 316,805 NET POSITION Invested in capital assets, net of related debt 5,942,424 321,046 6,263,470 Unrestricted (5.198,563) 720,969 (4 477 594) Total net position $ 743,861 $ 1.042,015 $ 1,785.876 See notes to basic financial statements. - 22 - CITY OF OPA-LOCKA, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION -PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Business -Type Activities -Enterprise Funds Other Nonmajor Water and Sewer Enterprise Funds Total Operating revenues: Charges for services $ 6,755,519 $ 788,272 $ 7,543,791 Other revenues 840,437 840,437 Total operating revenues 7,595,956 788,272 8,384,228 Operating expenses: Operating, administrative and maintenance 7,522,548 673,155 8,195,703 Bad debts and other 755,777 755,777 Depreciation 902,353 5,399 907,752 Total operating expenses 9,180,678 678,554 9,859,232 Operating income (loss) (1,584,722) 109,719 (1,475,004) Non -operating revenues (expenses) Interest and fiscal charges 12 12 Total non -operating revenues (expenses) 12 12 Income before transfers Change in net position (1,584,710) (1,584,710) 109,718 (1,474,992) 109,718 (1,474,992) Net position, beginning as previously stated 339,393 878,695 1,218,088 Prior period adjustment 1,989,178 53,602 2,042,780 Net position, beginning restated 2,328,571 932,297 3,260,868 Net position, ending $ 743,861 $ 1,042,015 $ 1,785,876 See notes to basic financial statements. - 23 - CITY OF OPA-LOCKA, FLORIDA STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Business -Type Activities- Enterprise Funds Water and Other Nonmajor Sewer Enterprise Funds Total Cash flows from operating activities: Cash received from customers $ 7,811,434 $ 788,272 $ 8,599,706 Cash paid to vendors (8,046,795) (566,540) (8,613,335) Cash paid to employees (869,713) (116,118) (985,831) Receipts from other government 227.999 227,999 Net cash provided by operating activities (877,075) 105,614 (771,4611 Cash flows from capital and related financing activities: Acquisition and construction of capital assets (288,831) - (288,831) Interest paid on long term debt (57,632) (57,632) Proceeds from debt 226,956 226,956 Principal paid on debt (520,5291 (520,529) Net cash used in capital and related financing activities (640,0361 (640.036) Cash flows from investing activities: Interest income 12 - 12 Net cash provided by investing activities 12 12 Net increase (decrease) in cash Cash, beginning Cash, ending (1,517,099) 4,167.570 2.650.471 105,614 (1,411,485) 1,196,220 5 363,790 1,301.834 3,952,305 Display as: Unrestricted 1,059,493 1,445,551 2,505,044 Restricted 1,337261 110.000 1,447.261 Total $ 2,396,754 5 1.555551 $ 3 952 30$ Reconciliation of operating income to cash provided by operating activities: Operating income (loss) $ (1,584,722) $ 109,716 $ (1,475,006) Adjustment to reconciled operating income to net cash provided by (used in) operating activities: Depreciation expenses 902,353 5,399 907,752 Provision for loss on accounts receivable 755,777 755,777 Other, net 1,711,688 (200,113) 1,511,575 (Increase) decrease in: Accounts receivable (2,132,378) (283,341) (2,415,719) Due from other governments (109,566) (109,566) Due from other funds (332,152) (54,193) (386,345) Other current assets (86,821) (86,821) Deferred outflow of resources (14,735) (14,735) Increase (decrease) in: Accounts payable and accrued liabilities (781,497) 133,275 (648,222) Customer deposits 195,100 (1,396) 193,704 Compensated absences (7,055) 6,904 (151) Other liabilities and pension (240,080) (23,323) (263,403) Due to other funds 804,625 412,686 1,217,311 Deferred inflow of resources 10,266 10,266 Due to other governments 32,122 32.122 Net cash provided by operating activities $ (877,075) $ 105_614 $ (771,461) See notes to basic financial statements. - 24 - NOTES TO FINANCIAL STATEMENTS CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Opa-locka, Florida (the "City") in Miami -Dade County, Florida (the "County") was incorporated in 1926 by the Laws of Florida Chapter 13187. The City comprises approximately 4.5 square miles of land and operates under a Commission/City Manager form of government and provides municipal services to its residents, including general government, public safety, transportation, and parks and recreation. The City also operates water, sewer, and storm water enterprises. The accounting policies of the City conform to accounting principles generally accepted in the United States of America the Generally Accepted Accounting Principles (GAAP) as applied to governmental units. This report, the accounting systems, and classification of accounts conform to standards of the Governmental Accounting Standards Board (GASB), which is the accepted standard -setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies of the City are described below. A. Reporting Entity The financial reporting entity covered by this report includes the City and its component unit. The reporting entity has been defined in accordance with GASB Codification of Governmental Accounting and Financial Reporting Standards Section 2100. The accompanying fmancial statements include those of the City (the primary government) and those of its component unit. Component units are legally separate organizations for which the primary government is fmancially accountable or organizations which should be included in the City's financial statements because of the nature and significance of their relationship with the primary government. GASB Codification of Governmental Accounting and Financial Reporting Standards Section 2100 provides guidance for the inclusion of a legally separate entity as a component unit of an entity. The application of this guidance provides for identification of entities for which the City is financially accountable or organizations that the nature and significance of their relationship with the City are such that exclusions would cause the City's basic financial statements to be misleading or incomplete. Based upon the application of GASB Codification Section 2100, the component units listed below have been included in the City's reporting entity as either blended or discretely presented component units. Blended component units, although legally separate entities, are in substance part of the City's operations. Accordingly, data from these component units are included with data of the primary government. A discretely presented component unit, on the other hand, is reported in a separate column in the fmancial statements to emphasize that they are legally separate from the City. The financial balances and activities of the blended component unit are as of and for the year ended September 30, 2018. -25- CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. Reporting Entity (cont'd) Blended Component Units Blended component units are separate legal entities that meet the component unit criteria described and whose government body is the same, or substantially the same and 1) there is a financial benefit or burden relationship between the primary government and the component unit or 2) management below the level of the governing board of the primary government has operational responsibility for a component unit. The Opa-locks Community Redevelopment Agency (CRA) is a dependent special district established by the City Commission in 2011 and approved by Miami -Dade County in 2013 under the authority granted by Florida Statute 163, section III. The CRA is a legal subsidiary governed by a seven member board appointed by the City Commission, the Miami -Dade County, District One Commissioner, and the Office of the Governor. The Board currently is comprised of the Mayor, Vice -mayor, and three City Commissioners, and an appointee from the Miami -Dade County Commissioner and the Florida Governor's Office. Its sole purpose is to finance the City's designed redevelopment areas through Tax Increment Financing (TIF). The CRA can provide services and financial benefits/assistance to imposed fmancial burdens on the City. The CRA continued to operate in a limited -active phase based on limited tax increment funds produced by ad valorem taxes. For the fiscal year ended September 2018, there was approximately $356,776 in revenues other than transfers from the General Fund. Although the CRA activities did not meet the major fund criteria, the CRA's financial data is presented within the City's major governmental funds in order to comply with the audit requirements of F.S. 163.387(8) and is part of non -major governmental funds. No separate financial statements are issued. Special District 1) The City passed ordinances in prior years establishing various neighborhood improvement districts. The following neighborhood improvement districts, which are considered to be component units of the City, are included in the non -major governmental fund fmancial statements. No separate financial statements are issued. 2) East-West Neighborhood Improvement District 2) Ali -Baba Neighborhood Improvement District 3) Niles Garden Neighborhood Improvement District - 26 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government -wide and Fund Financial Statements The government -wide financial statements (i.e., the statement of net position and statement of activities) report information on all of the activities of the City. For the most part, the effect of inter -fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Amounts reported as program revenues include 1) charges to customers or applicants who purchase, use of directly benefit from goods, services, or privileges provided by a given function, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not included among program revenues are reported as general revenues. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. All remaining governmental funds are aggregated and reported as non -major funds. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government -wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within sixty (60) days of the end of the current fiscal period, with the exception of expenditure driven (reimbursements) grants, for which the availability period is one year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Property taxes, sales taxes, utility taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the City. - 27 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (cont'd) The financial transactions of the City are recorded in individual funds. The operations of each fund are accounted for using a separate set of self -balancing accounts which comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equities, revenue and expenditure or expenses. Fund accounting is designed to demonstrate legal compliances and to aid financial management by segregating transactions related to certain government functions or activities. Accounting principles generally accepted in the United States of America set forth minimum criteria for determination of major funds based on the percentage of the applicable category balances. The non -major funds are presented in one column in the respective fund financial statements. The City reports the following major governmental funds: The General Fund is the general operation fund of the City. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Peoples Transportation Tax Fund accounts for the City's prorated share of the Charter County Transit System Surtax proceeds used toward projects and programs such as public transportation operations. The Capital Improvement Debt Service Fund is used to account for the sinking fund requirements of the Series 2011 A&B Capital Improvement Revenue Bonds. The City reports the following major proprietary funds: The Water and Sewer Fund is used to account for the operation and maintenance of the City's water and sewer system. As a general rule the effect of inter -fund activity has been eliminated from the government - wide financial statements. Exceptions to this general rule are payments and other charges between the City's water and sewer function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concemed. - 28 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (cont'd) Proprietary funds distinguish operating revenues and expenses from non -operating 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 City's water and sewer, solid waste and storm water enterprise funds, are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non -operating revenues and expenses. Operating expenses for the enterprise funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non -operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. D. Basis for Qualified Opinion GASB 34 requires governments to report and better understand the extent to which the City has invested in capital assets, including roads, bridges and other infrastructure assets. The City has not fully identified its infrastructure assets nor developed an asset management system that the City can document that its capital assets are being properly managed and preserved. Moreover, the City has not performed a physical inventory of its capital assets for several years. E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position/Fund Balance 1. Encumbrances Encumbrances accounting, under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to serve that portion of the applicable appropriation, is employed in the General and Capital Projects Funds. Encumbrances outstanding at the balance sheet date are canceled. - 29 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position/Fund Balance (cont'd) 2. Deposits and Investments The City considers cash on hand, cash with fiscal agents, demand deposits, and certificates of deposit with and original maturity of (90) ninety days or less to be cash and cash equivalents. For purposes of the statement of cash flows for proprietary fund types fund, all highly liquid investments (including restricted assets) with maturity of three months or less when purchased are considered to be cash equivalents. Investments, consisting of U.S. Government securities, and certificates of deposit with financial institutions, are stated at cost plus accrued interest. 3. Receivables In the government -wide statements, receivables consist of all revenues earned at year-end and not yet received. The City calculates its allowance for uncollectible using historical collection data, specific account analysis, and management's judgment. Major receivables balances for the governmental activities include franchise fees and utility taxes, and amounts due from other governments. Business -type activities report utility billings as major receivables. 4. Inventories Inventories are valued at cost, which approximates market, using the first -in, and first -out method. Inventories in the General and Enterprise Funds consist of fuel and expendable supplies held for consumption. The costs of Governmental Fund type inventories are recorded as expenditures when consumed rather than when purchased. In the governmental funds, reported inventories are offset by a fund balance reserve which indicates that they do not constitute available spendable resources. The City ceased the maintenance of fuel inventory as of March 2018. 5. Restricted Assets Restricted assets include cash and cash equivalents of the governmental and enterprise funds that are legally restricted as to their use. Cash and cash equivalents are restricted for debt service, customers' deposits, revenue bond requirement, and sewer system improvements. -30- CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position/Fund Balance (cont'd) 6. Capital Assets Capital assets, including land, buildings, improvements, infrastructure, and equipment assets, are reported in the applicable governmental or business -type activities columns in the government -wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $500 and an initial useful life of one year or greater. Such assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extended the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business - type activities is included as part of the capitalized value of the assets constructed. Buildings, improvements, infrastructure and equipment assets are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings and Building Improvements 10-50 Infrastructure Systems 30 Equipment 3-10 Vehicles 3-10 7. Inter -fund Transactions Activities between funds that are representative of lending/borrowing arrangements at the end of the fiscal year are referred to as "due to/from other funds" or "advances to/from other funds". Any residual balances outstanding between the governmental activities and business -type activities are reported in the government -wide financial statements as "internal balances". Non -current portions of long-term inter -fund loan receivables are reported as advances within the governmental funds, and are offset equally by a fund balance reserve account which indicates that they do not constitute expendable available financial resources, and therefore, are not available for appropriation. Transactions among City funds that would be treated as revenues and expenditures or expenses if they involve organizations external to City government are accounted for as revenues and expenditures or expenses in the funds involved. - 31 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position/Fund Balance (cont'd) 7. Inter -fund Transactions (cont'd) Transactions that constitute reimbursements to a fund for expenditures initially made from it, which are properly applicable to another fund, are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the reimbursed fund. Transactions, which constitute the transfer of resources from a fund receiving revenues to a fund through which the revenues are to be expended, are separately reported in the respective funds' operating statements. 8. Deferred Outflows of Resources The statement of net position includes a separate section, listed below Total Assets, for Deferred Outflows of Resources. This represents the usage of net position applicable to future periods and will not be recognized as expenditures until the future period to which it applies. Items in this category include deferred items related to pension and the deferred charge on refunding reported on the Government -wide Statement of Net Position. A deferred charge is the difference between the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or the refiinding debt. 9. Unearned Revenues Unearned revenue is recorded for governmental fund receivables that are measurable and available, but have not met the criteria for revenue recognition, such as donations or grants received for specific projects. These are recorded as unearned revenue in the government - wide and fund statements. 10. Compensated Absences It is the City's policy to permit employees to accumulate, with certain limits, earned but unused vacation time and sick leave hours for subsequent use or for payment upon termination, death or retirement. For government -wide statements and proprietary fund types, these accumulations are recorded as expenses and liabilities of the appropriate fund in the fiscal year earned. For governmental fund types, the amount of accumulated unpaid vacation and sick leave that is payable from available resources is recorded as a liability of the respective fund only if they have matured, for example, as a result of employee retirements and resignations. -32- CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position/Fund Balance (cont'd) 11. Long -Term Debt In the government -wide financial statements, and proprietary fund types in the fund fmancial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business -type activities, or proprietary fund type statement of net position. Bonds payable are reported net of the applicable premium or discount. These premiums and discounts are deferred and amortized over the life of the bonds using the straight line method. Bond issuance costs are expensed in the year they are incurred. 12. Deferred Inflows of Resources The Statement of Net Position includes a separate section, listed below Total Liabilities, for Deferred Inflows of Resources. This represents the acquisition of net position applicable to future periods and will not be recognized as revenue until the future period to which it applies. In the governmental funds, this category includes unavailable revenue, whereas in the government -wide and the proprietary fund statements. It includes resources related to pension, which will be recognized as inflows of resources in the period that the amounts become available. 13. Net Position and Fund Balance Net position in the government -wide and proprietary funds is categorized as net investment in capital assets; restricted or unrestricted. Net investment in capital assets is the difference between the cost of capital assets, less accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets plus unspent bond proceeds. Restricted balances consist of net position with constraints placed on their use by external parties (creditors, grantors, contributors, laws or regulations of other governments) or imposed by law through constitutional provisions or enabling legislation. Unrestricted balances indicate the portion of net position that is available to fund future operations. Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted — net position and unrestricted — net position in the government -wide and proprietary fund fmancial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government's policy to consider restricted — net position to have been depleted before unrestricted — net position is applied. - 33 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position/Fund Balance (cont'd) 13. Net Position and Fund Balance (cont'd) In the fund financial statements, governmental funds report fund classifications that comprise a hierarchy based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Amounts that are restricted to specific purposes either by constraints placed on the use of resources by (a) creditors, grantors, contributors, laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation are classified as restricted fund balances. Amounts that can only be used for specific purposes pursuant to constraints imposed by the City Commission through an ordinance or resolution are classified as committed fund balances. Amounts that are constrained by the City's intent to be used for specific purposes but are neither restricted nor committed are classified as assigned fund balances. Assignments are made by City management based on Commission direction. Non -spendable fund balances include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Unassigned fund balance represents fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the general fund. 14. Deferred Compensation Plan The City offers its employees a deferred compensation plan (the "Plan") created in accordance with Internal Revenue Code Section 457. The Plan, available to all City employees, allows them to defer a portion of their salary to future years. The City's direct involvement in the Plan is limited to remitting the amounts withheld from employees to the Plan's administrator. The deferred compensation plan is not included in the City's financial statements. F. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Material estimates that are particularly susceptible to significant change in the near term relate to: 1) The determination of the actuarially accrued liability for unpaid claims which is prepared based on certain assumptions pertaining to interest rates, and inflation rates, etc.; and The actuarially determined liability for post -employment benefits other than pensions. Although these estimates (as well as all estimates) are based on management's knowledge of current events and actions in the future, they may ultimately differ from actual results. - 34 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 2. DEFICIT FUND EQUITY The City reported fund balance deficits of $3.9 million for the General Fund, $22,947 for the Solid Waste Fund, and $103,389 for the Safe Neighborhood Capital Projects Fund. These deficit balances are being addressed through a five-year recovery plan beginning in fiscal year 2019. In accordance with Florida Statue, 218.503 (3)(h) that clarifies the determination of financial emergency, the City is in the process of completing the Five -Year Recovery Plan to submit to State of Florida Governor's office for approval of the plan, and to resolve its financial emergency condition. NOTE 3. PROPERTY TAXES Property taxes are levied on the first of November each year, at which time taxes become an enforceable lien on property assessed as of the previous January. Tax bills are payable upon receipt with discounts rates of one to four percent allowed if paid prior to March 1 of the following calendar year. Taxes become delinquent on April 1 of the year following the year of assessment and State law provides for enforcement of collection of property taxes by the sale of interest -bearing tax certificates and the seizure of personal property to satisfy unpaid property taxes. Miami -Dade County bills and collects all property taxes for the City, and sells tax certificates for delinquent taxes. The gross taxable value of property, as established by the Miami -Dade County Property Appraiser, at July 1, 2017 upon which the 2017-2018 levy, was approximately $6.7 million. For the year ended September 30, 2018, the millage rate to finance general government services was 8.9999 per $1,000 of assessed taxable value. No accrual for the property tax levy becoming due in November 2018 is included in the accompanying fmancial statements since the legal right to receive these taxes occurs on November 1, 2018, and such taxes are collected to finance expenditures of the fiscal year ending September 30, 2019. NOTE 4. DEPOSITS AND INVESTMENTS As of September 30, 2018, the City's cash are considered to be cash on hand, and demand deposits. Deposits All deposits with financial institutions are fully insured or collateralized as required by the City Commission. The deposits are covered by federal depository insurance and, for the amount in excess of such federal depository insurance, by the State of Florida's Public Deposits Act ("the Act"). Provisions of the Act require that public deposits may only be made at qualified public depositories. The Act requires each qualified public depository to deposit with the State Treasurer eligible collateral equal to or in excess of the required collateral as determined by the provisions of the Act. In the event of a failure by a qualified public depository, losses, in excess of federal depository insurance and proceeds from the sale of the securities pledged by the defaulting depository, are assessed against the other qualified public depositories of the same type as the depository in default. -35- CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 4. DEPOSITS AND INVESTMENTS (Continued) Investments The City is authorized to make direct investments in U.S. government, federal agency, and instrumentality obligations at a price not to exceed the market price at the time of purchase. In addition, the City may invest in certificates of financial institutions insured by the United States government or agencies thereof and repurchase agreements. As of September 30, 2018, the City had no investments. NOTE 5. ACCOUNTS RECEIVABLE Receivable balances and the allowance for doubtful accounts as of September 30, 2018, were as follows: Due from Allowance for Accounts Taxes Other Agencies Others Uncollectible Net Governmental activities General $ - $ - $ - $ 532,503 $ (254,238) $ 278,265 Capital projects and debt service 128,078 - - - - 128.078 Total governmental activities $ 128,078 $ $ $ 532 503 $ (254 238) $ 406.343 Business -type activities: Water and sewer $ 5,014,889 $ $ - $ - $ (1,666,613) $ 3,348,276 Stormwater 545.075 - (17264) 527,811 Total business -type activities $ 5,559,964 $ - $ $ - $ (1,683,877) $ 3,876,087 NOTE 6. INTERFUND BALANCES AND TRANSFERS Transfers are used to (1) move revenues from the fund that statute or budget requires collecting them to the fund that statute or budget requires to expend them or (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. These transfers are eliminated in the consolidation, by column, for the Governmental Activities. Inter -fund balances result from the time lag between the dates that (1) inter -fund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system and (3) payments between funds are made. Interfund balances as of September 30, 2018, consisted of the following: Due from Other Funds Due to Other Funds Major governmental fund: General fund $ 17,733,875 $ 18,973,699 Capital improvement debt service 6,374,628 3,362,012 People's transportation 1,807,400 1,963,745 Non -major governmental funds 2,418,285 2,034,248 Major enterprise fund: Water and sewer 3,974,946 5,446,697 Non -major enterprise funds 2232,522 2,761,255 Total $ 34,541,656 $ 34,541,656 -36- CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 6. INTERFUND BALANCES AND TRANSFERS (Continued) There were no interfund transfers for the year ended September 30, 2018. The balance of certain pledged funds are normally available for use within the General Fund and are transferred back after debt services payments have been completed. However, City National Bank has restricted the use of these excess pledged funds after debt service payments have been made as a result of the City's financial emergency declaration (Note 20); as of September 30, 2018, approximately $3.2 million is unavailable for City operations. Subsequent to City National Bank's restrictions, an agreement modification was adopted on April 8, 2020, for the City to have access and redemption options for the available funds. NOTE 7. CAPITAL ASSETS The following is a summary of changes in capital assets for the year ended September 30, 2018: Balance Balance 09/30/17 Increases Decreases 09/30/18 Governmental Activities: Capital assets not being depreciated: Land $ 2,980,457 $ - $ $ 2,980,457 Construction in progress 2,114.944 - 2.114,944 Total assets not being depreciated 5 095,401 5.095,401 Capital assets being depreciated: Buildings and improvements 19,498,959 - 19,498,959 Vehicles, furniture, and equipment 4,820,656 4,820,656 Infrastructure 21,648.028 - 21,648,028 Total assets being depreciated 45.967.643 45,967.643 Less accumulated depreciation: Buildings and improvements (3,896,691) (388,647) (4,285,338) Vehicles, furniture, and equipment (4,713,862) (115,402) (4,829,264) Infrastructure (16,343,036) (416.373) (16.759,409) Total accumulated depreciation (24.953.589) (920,422) - (25,874.011) Total capital assets being depreciated, net 21 014,054 (920.422) 20.093.631 Governmental activities capital assets, net $ 26,109455 $ (920,422) $ $ 25,189,033 Business -type Activities: Capital assets not being depreciated: Land $ 14,762 $ - $ - $ 14,762 Construction in progress 3 796,056 288,823 4.084,879 Total assets not being depreciated 3.810.818 288.823 4,099,641 Capital assets being depreciated: Vehicles, furniture, and equipment 6,867,366 126,554 6,993,920 Infrastructure 21,899,740 - 21 899,740 Total assets being depreciated 28,767.106 126,554 - 28 893.660 Less accumulated depreciation: Vehicles, furniture, and equipment (6,525,828) (134,687) - (6,660,515) Infrastructure (14 242.573) (773,064) (15 015.638) Total accumulated depreciation (20,768.401) (907,752) (21 676.153) Total capital assets being depreciated, net 7,998.705 (781.197) - 7,217.507 Business -type activities capital assets, net $ 11 809j22 $ (492,375) $ $ 11,317,147 -37- CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 7. CAPITAL ASSETS (Continued) Depreciation expense was charged to functions/programs of the City as follows: Governmental activities: General government $ 285,331 Public safety 184,084 Transportation 441,803 Parks and recreation 9,204 Total $ 920,422 Business -type activities: Water and sewer $ 902,353 Storm water 5,399 Total $ 907,752 NOTE 8. LEASES Capital Leases The City has entered into lease agreements as lessee for financing the acquisition of various vehicles. These lease agreements qualify as capital leases for accounting purposes and, therefore, have been recorded at the present value of their future minimum lease payments as of the inception dates. Future minimum payments under the lease agreements and the present value of minimum payments as of September 30, 2018, are as follows: Governmental Activities: Year Endine September 30, Total minimum lease Less: amount representing interest Present value of minimum lease payments - 38 - Governmental Business -Type Activities Activities Total $ 5,603 $ $ 5,603 140 140 $ 5,463 $ $ 5,463 CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 9. LONG-TERM DEBT Long-term liability activity for the year ended September 30, 2018, was as follows: Balance Balance Due in 9/30/17 Additions Reductions Adjustments 9/30/18 One Year Governmental Activities Capital Improvement Revenue Bond $ 5,271,000 $ - $ (510,000) $ - $ 4,761,000 $ 527,000 Series 2011 A&B Citi National Bank Series 2015 8,100,604 - (234,270) - 7,866,334 242,675 Other liabilities: Capital lease obligation 25,850 - (20,387) - 5,463 5,463 Total bond and leases 13 397,454 (764,657) 12,632,797 775.138 Compensated absences 1,360,847 390,115 1,750,962 OPEB 582,852 - (282,691) - 300,161 - FRS Pension liability 8,566,264 - 509,835 9,076,099 - Miami Dade County debt 214,236 - - - 214,236 - Long-term liability legal 1,297,602 (919) - 1,296,683 Total other long-term debt 12,021,801 - (283,610) 899.950 12 638,141 Total Governmental Activities $ 25,419,255 $ $ (1,048,267) $ 899,950 $ 25,270,938 $ 775 138 Business Type Activities State Revolving Loan CS12080003P $ 535,701 $ $ (90,926) $ - $ 444,775 $ 93,703 State Revolving Loan WW800050 1,286,567 (120,013) - 1,166,554 121,856 State Revolving Loan DW 130330 83,793 - (8,626) - 75,167 10,299 State Revolving Loan SW130320 167,201 - (4,302) - 162,899 9,012 State Revolving Loan WW130300 470,653 (13,347) 457,306 23,455 State Revolving Loan WW130301 2,576,948 226,956 (166,545) - 2,637,359 333,090 State Revolving Loan DW130331 186,889 - (22,058) (55,224) 109,607 125,377 Total State Revolving Loans 5 307,752 226,956 (425,817) (55,224) 5,053.667 716,792 Other debt: 39,488 - (39,488) Capital lease obligation - - Total leases 39,488 (39,488) Compensated absences 107,795 - - (151) 107,644 OPEB 81,148 (39,439) - 41,709 Long-term debt - MDC 5,356,061 - - 5,356,061 FRS Pension liability 1,168,127 - - 69.523 1,237,650 Total other long-term debt 6,713,131 - (39,439) 69,372 6 743,064 Total Business Type Activities $ 12,060,371 $ 226,956 $ (504,744) $ 14,148 $ 11,796.731 $ 716,792 - 39 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 9. LONGTERM DEBT (Continued) For governmental activities, compensated absences are generally liquidated by the General Fund. Long -Term Debt — Governmental Activities Long-term debt of the City's governmental activities, excluding compensated absences and capital leases, include the: (a) Series 2011A&B Capital Improvement Revenue bonds, bearing annual interest rates on the Series A and Series B bonds range from approximately 3.31% to 3.89%, and are payable from a pledge of Grantee Entitlement Revenues which must be shared by the State of Florida, in annual principal installments ranging from $445,000 in 2018 to $670,000 through 2026. Series 2015 Capital Improvement Revenue Note ("2015 Note") - for $8,600,000, bearing interest at a rate of 2.65% to 4.25%, with a maturity date of July 1, 2025, and are payable by a lien on Pledge Revenues as defined by the terms of the Series 2015 Note agreement. (b) The Series 2014 Capital Improvement Revenue Note was paid off in May 2015 and replaced by the Series 2015 Bond for the purchase of Town Center One, the New City Hall. Long -Term Debt - Business -Type Activities Long-term debt of the City's business -type activities, excluding compensated absences, consists of the following: (a) State Revolving Loan Note Project No. CS12080003P as amended - for $1.827 million, bearing interest at a rate of 2.56% and 1.54%, due in 40 semi-annual payments of $53,240, including interest, from June 15, 2003 through December 15, 2022, secured by a lien on Pledge Revenues as defined by the State Revolving Fund loan agreement. State Revolving Loan Note Project No. WW800050 - for $2.375 million, bearing interest at a rate of 1.53%, due in 40 semi-annual payments of $71,143, including interest, secured by a lien on Pledge Revenues as defined by the State Revolving Fund loan agreement. (c) Various Capital agreements with the Ford Motor Company in the original total amount of $354,863 commencing March 15, 2013 and June 14, 2013. Interest payable at 3.79% and 4.00% respectively. Principal and interest payments due monthly in the amounts of approximately $4,001 and $3,119 through May and February 2018, respectively. (d) State Revolving Loan Note Project No. WW130300 — for $512,806, bearing interest at a rate of 1.63%, due in 40 semi-annual payments of $15,644, including interest, secured by a lien on Pledge Revenues as defined by the State Revolving Fund loan agreement. (e) State Revolving Loan Note Project No. SW130320 — for $197,035, bearing interest at a rate of 1.63%, due in 40 semi-annual payments of $6,011, including interest, secured by a lien on Pledge Revenues as defined by the State Revolving Fund loan agreement. (b) - 40 - (g) CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 9. LONG-TERM DEBT (Continued) Long -Term Debt - Business -Type Activities (cont'd) (f) State Revolving Loan Note Project No. DW130330 — for $240,000, bearing interest at a rate of 2.53%, due in 40 semi-annual payments of $6,011, including interest, secured by a lien on Pledge Revenues as defined by the State Revolving Fund loan agreement. State Revolving Loan Note Project No. WW 130301- for $16.895 million, interest -free, due in forty (40) semi-annual payments of $430,845, from July 15, 2018 through June 15, 2032, including interest, secured by a lien on pledged revenues as defined by the State Revolving Fund loan agreement. (h) State Revolving Loan Note Project No. DW130331- for $2,745,981 million, bearing interest at a rate of 1.21%, due in 40 semi-annual payments of $79,075, from July 15, 2018 until all amounts have been fully paid, secured by a lien on pledged revenues as defined by the State Revolving Fund loan agreement. (i) In August 4, 2017, the City entered into an agreement with Miami -Dade County ("the County") for (1) sewer disposal service, (2) administering the meter reading, billing and collection of water, sanitary sewage and stormwater utility charges, and (3) acknowledging delinquent charges and repay at a rate of three percent (3%) annual interest rate, in monthly payments for sixty (60) months to re -pay past due debt owed as of March 15, 2017. As of September 30, 2018, the total debt outstanding was $5,570,297, with monthly payments of $100,090.95. No loan payments were made in the fiscal year ended September 30, 2018. (j) As of September 30, 2018, the City owed the State of Florida $3,522,945 for their portion of the Traffic Safety Program (Red Light Camera). The City will budget for future payments to reduce this debt. Annual debt service requirements to maturity for debt outstanding, other than the capital leases, are as follows: Fiscal Year Ending September 30, 2019 2020 2021 2022 2023-2028 Thereafter Governmental Activities Business - Type Activities Principal Interest Principal Interest $ 770,390 $ 439,780 $ 890,096 $ 106,446 797,140 412,708 1,778,170 219,271 825,221 384,676 1,817,423 180,019 853,646 355,653 1,857,804 139,638 9,380,249 893,789 5,966,820 288,451 - 4,948,569 114,334 $ 12,626,646 $ 2,486,606 $ 17,258,882 $ 1,048,159 -41 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 9. LONGTERM DEBT (Continued) Summary of Debt Covenants Series 2011A and Series 2011B Capital Improvement Revenue Bonds — Debt service is provided by a pledge of guaranteed state revenue sharing funds, local option gas tax revenues, and the half - cent sales tax. Reserves must be maintained equal to the maximum bond service requirement. At September 30, 2017, the City had on deposit with the trustee for these bonds, a reserve account insurance policy which unconditionally and irrevocably guarantees the full and complete payment required to be made by or on the behalf of the City. On June 3, 2014 - as authorized by City Ordinance No. 13-40 - the City entered into an agreement with City National Bank of Florida for the issuance of the Series 2014 Capital Improvement Revenue Note for the purpose of acquiring, construction, installation and equipping an administration building. Debt service is provided by a pledge of guaranteed state communications services tax revenues, public service tax revenues and all investment income except for Rebate fund. In May 2015, this was rolled up into the Series 2015 Note. Pledged Revenues - the City's agreement under the State of Florida Revolving Loan Fund Program requires the City to generate Pledged Revenues, as defined by the agreement, from the services furnished by its water and sewer systems equal to or exceeding 1.15 times the sum of the semiannual loan payments. As of September 30, 2018, the City is in compliance with this requirement. The amount of long-term debt that can be incurred by the City is limited by the charter of the City. Total general obligation bond of the City outstanding in any one fiscal year can be no greater than 15% of the assessed value of taxable property as of the beginning of the fiscal year. As of September 30, 2018, the amount of bonds outstanding and notes payable exclusively from the revenues of a municipal project was less than 5% of property assessments as of September 30, 2018. Bonds payable exclusively from the revenue of a municipal project may be issued and outstanding without regard to the 15% limitation; however, such an issue would be subject to the limitations imposed by the City's charter with respect to restrictions on bonds parity with or junior to the Series 2011A and Series 2011B Capital Improvement Revenue Bonds. NOTE 10. RETIREMENT PLANS All of the City's employees participate in the Florida Retirement System (FRS). As provided by Chapters 121 and 112, Florida Statutes, the FRS provides two cost sharing, multiple employer defined benefit plans administered by the Florida Department of Management Services, Division of Retirement, including the Pension Plan and the Retiree Health Insurance Subsidy (HIS Plan). Under Section 121.4501, Florida Statutes, the FRS also provides a defined contribution plan (Investment Plan) alternative to the Pension Plan, which is administered by the State Board of Administration (SBA). As a general rule, membership in the FRS is compulsory for all employees working in a regularly established position for a Florida state agency, county government, district school board, state university, community college, or a participating city or special district. The FRS provides retirement and disability benefits, annual cost -of -living adjustments, and death benefits to plan members and beneficiaries. The Florida Legislature established and may amend the contribution requirements and benefit terms of all FRS plans. - 42 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) The plan administrator for FRS prepares and publishes its own stand-alone comprehensive annual financial report, including financial statements and required supplementary information. Copies of this report can be obtained from the Department of Management Services, Division of Retirement, Bureau of Research and Member Communications, P.O. Box 9000, Tallahassee, Florida 32315- 9000; or at the Division's website (www.frs.myflorida.com). A. Pension Plan - Florida Retirement System (FRS) Plan Description - The Pension Plan is a cost -sharing multiple -employer defined benefit pension plan, with a Deferred Retirement Option Program (DROP) for eligible employees. The general classes of membership for the City are as follows: • Regular Class - Members of the FRS who do not qualify for membership in the other classes. • Senior Management Service Class (SMSC) - Members in senior management level positions • Special Risk Class — Members who are employed as law enforcement officers Employees enrolled in the Pension Plan prior to July 1, 2011, vest after six years of creditable service, and employees enrolled in the Pension Plan on or after July 1, 2011, vest after eight years of creditable service. Regular Class and SMSC members initially enrolled in the Pension Plan before July 1, 2011, once vested, are eligible for normal retirement benefits at age 62 or at any age after 30 years of creditable service. Members in these classes initially enrolled in the Pension Plan on or after July 1, 2011, once vested, are eligible for normal retirement benefits at age 65 or any time after 33 years of creditable service. Early retirement may be taken any time after vesting within 20 years of normal retirement age; however, a 5.0% benefit reduction is imposed for each year prior to the normal retirement age. DROP is available under the Pension Plan when the member first reaches eligibility for normal retirement. The DROP allows a member to retire while continuing employment for up to 60 months. While in the DROP, the member's retirement benefits accumulate in the FRS Trust Fund increased by a cost -of -living adjustment each July and earn monthly interest equivalent to an annual rate of 1.30%. DROP participants with an effective DROP commencement date before July 1, 2011, earn monthly interest equivalent to an annual rate of 6.50%. Benefits Provided - Benefits under the Pension Plan are computed on the basis of age and/or years of service, average final compensation, and service credit. Credit for each year of service is expressed as a percentage of the average final compensation. For members initially enrolled before July 1, 2011, the average final compensation is the average of the five highest fiscal years' earnings; for members initially enrolled on or after July 1, 2011, the average final compensation is the average of the eight highest fiscal years' earnings. The total percentage value of the benefit received is determined by calculating the total value of all service, which is based on the retirement plan and/or class to which the member belonged when the service credit was earned. The following chart shows the percentage value for each year of service credit earned. - 43 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) A. Pension Plan - Florida Retirement System (FRS) (cont'd) % Value Class, Initial Enrollment, and Retirement Age/Years of Service (Per Year of Service) Regular Class Members Initially Enrolled Before July 1, 2011 Retirement up to age 62 or up to 30 years of service 1.60% Retirement at age 63 or with 31 years of service 1.63% Retirement at age 64 or with 32 years of service 1.65% Retirement at age 65 or with 33 or more years of service 1.68% Regular Class Members Initially Enrolled On or After July 1, 2011 Retirement up to age 65 or up to 33 years of service 1.60% Retirement at age 66 or with 34 years of service 1.63% Retirement at age 67 or with 35 years of service 1.65% Retirement at age 68 or with 36 or more years of service 1.68% Special Risk Class Service from Dec. 1, 1970 through Sept. 30, 1974 2.00% Service on and after Oct. 1, 1974 3.00% Senior Management Service Class 2.00% The benefits received by retirees and beneficiaries are increased by a COLA each July based on their June benefit amount. For retirees who have been retired for less than 12 months on July 1, the first COLA increase is prorated. The COLA applies to all continuing monthly retirement benefits paid under the FRS Pension Plan (i.e., normal and early service retirement benefits and benefits accruing in participant accounts under the DROP, disability retirement benefits, and survivor benefits). The COLA for retirements or DROP participation effective before August 1, 2011, is 3 percent per year. The COLA formula for retirees with an effective retirement date or DROP begin date on or after August 1, 2011, will be the sum of the pre -July 2011 service credit divided by the total service credit at retirement multiplied by 3 percent. Each Pension Plan member with an effective retirement date of August 1, 2011, or after will have an individual COLA factor for retirement. FRS Pension Plan members initially enrolled on or after July 1, 2011, will not have a COLA after retirement. -44- CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) A. Pension Plan - Florida Retirement System (FRS) (cont'd) Contributions - Effective July 1, 2011, all enrolled members of the Pension Plan, other than DROP participants, are required to contribute 3.0% of their salary to the Pension Plan. In addition to member contributions, governmental employers are required to make contributions to the Pension Plan based on state-wide contribution rates established by the Florida Legislature. These rates are updated as of July 1 of each year. The employer contribution rates by job class for the fiscal year 2017-2018 are as follows: Employee Employer Total Class Contribution Rate Contribution Rate* Contribution Rate Regular 3.00% 6.2% 9.2% Senior Management 3.00% 20.99% 23.99% Special Risk 3.00% 21.55% 24.55% DROP N/A 11.60% 11.66% *These rates include the normal cost and unfunded actuarial liability contributions but do not include the 1.66percent contribution for the Retiree Health Insurance Subsidy and the fee of 0.06 percent for administration of the FRS Investment Plan and provision of educational tools for both plans. For the fiscal year ending September 30, 2018, contributions, including employee contributions, to the Pension Plan for the City totaled $926,137. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions. At September 30, 2018, the City reported a liability of $8,031,493 for its proportionate share of the Pension Plan's net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2018. The City's proportionate share of the net pension liability was based on its share of the City's 2017-2018 fiscal year contributions relative to the 2016-2017 fiscal year contributions of all participating members. The FRS Actuarial Assumption Conference is responsible for setting the assumptions used in the valuations of the defined benefit pension plans pursuant to Section 215.136(10) Florida Statutes. The 7.00 percent return assumption used in the June 30, 2018 calculations were determined by Plan's consulting actuary to be reasonable and appropriate per Actuarial Standards of Practice. The 7.00 percent reported investment return assumption differs from the 7.40 percent investment return assumption chosen by the 2018 FRS Actuarial Assumption Conference for funding policy purposes, as allowable under governmental accounting and reporting standards. - 45 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) A. Pension Plan - Florida Retirement System (FRS) (continued) For the fiscal year ended September 30, 2018, the City recognized pension expense of $1,213,752. In addition, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience $ 680,388 $ (24,695) Change of Assumptions 2,624,301 Net difference between projected and actual earnings on Pension Plan investments (620,531) Changes in proportion and differences between Pension Plan contributions and proportionate share of contributions 380,416 (1,001,513) Pension Plan contributions subsequent to the measurement date 166,220 Total $ 3,851,325 $ (1,646,739) The deferred outflows of resources related to the Pension Plan, totaling $166,220 for the City, resulting from contributions to the Plan subsequent to the measurement date will be recognized as a reduction of the net pension liability in the fiscal year ended September 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the Pension Plan will be recognized in pension expense as follows: For the Year Ending September 30, Deferred Outflows/(Inflows) Net 2019 $ 598,425 2020 425,370 2021 120,219 2022 490,410 2023 335,264 Thereafter 68,677 Total $ 2,038,365 Actuarial Assumptions — The total pension liability in the June 30, 2018, actuarial valuation was determined using the following actuarial assumptions: Inflation 2.60% Salary Increases 3.25% average, including inflation Investment Rate of Return 7%, net of pension plan investment expense, including inflation Mortality rates were based on the Generational RP-2000 with Projection Scale BB tables. - 46 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) A. Pension Plan - Florida Retirement System (FRS) (cont'd) The actuarial assumptions used in the July 1, 2018, valuation were based on the results of an actuarial experience study for the period July 1, 2008, through June 30, 2013. The long-term expected rate of return on Pension Plan investments was not based on historical returns but, instead, is based on a forward -looking capital market economic model. The allocation policy's description of each asset class was used to map the target allocation to the asset classes shown below. Each asset class assumption is based on a consistent set of underlying assumptions and includes an adjustment for the inflation assumption. The target allocation and best estimates of arithmetic and geometric real rates of return for each major asset class are summarized in the following table: Compound Annual Annual Target Arithmetic (Geometric) Standard Asset Class Allocation* Return Return Deviation Cash 1.00% 2.9% 2.9% 1.8% Fixed Income 18.00% 4.4% 4.3% 4.0% Global Equity 54.00% 7.6% 6.3% 17.0% Real Estate (Property) 11.00% 6.6% 6.0% 11.3% Private Equity 10.00% 10.7% 7.8% 26.5% Strategic Investments 6.00% 6.0% 5.7% 8.6% Total 100.00% Assumed Inflation — Mean 2.6% *As outlined in the Pension Plan 's investment policy. 1.9% Discount Rate — The discount rate used to measure the total pension liability was 7.0%. The Pension Plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the discount rate for calculation of the total pension liability is equal to the long-term expected rate of return. Sensitivity of the Proportionate Share of the Net Position Liability to Changes in the Discount Rate — The following represents the City's proportionate share of the net pension liability calculated using the discount rate of 7.0%, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (6.0%) or one percentage point higher (8.0%) than the current rate: 1% Current 1% Decrease Discount Rate Increase 6.0% 7.0% 8.0% City's proportionate share of the net pension liability $14,657,812 $8,031,493 $2,527,944 - 47 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) A. Pension Plan - Florida Retirement System (FRS) (cont'd) Pension Plan Fiduciary Net Position - Detailed information regarding the Pension Plan's fiduciary net position is available in the separately issued FRS Pension Plan and Other State -Administered Systems Comprehensive Annual Financial Report. Payables to the Pension Plan - At September 30, 2018, the City had no outstanding payables of to the Pension Plan for contributions to the Pension Plan required for the fiscal year ended September 30, 2018. B. Retiree Health Insurance Subsidy Program (HIS) Plan Description - The HIS Plan is a cost -sharing multiple -employer defined benefit pension plan established under Section 112.363, Florida Statutes, and may be amended by the Florida Legislature at any time. The benefit is a monthly payment to assist retirees of state administered retirement systems in paying health insurance costs and is administered by the Florida Department of Management Services, Division of Retirement. Benefits Provided - For the fiscal year ended September 30, 2018, eligible retirees and beneficiaries received a monthly HIS payment of $5 for each year of creditable service completed at the time of retirement, with a minimum HIS payment of $30 and a maximum HIS payment of $150 per month. To be eligible to receive these benefits, a retiree under a state administered retirement system must provide proof of health insurance coverage, which may include Medicare. Contributions - The HIS Plan is funded by required contributions from FRS participating employers as set by the Florida Legislature. Employer contributions are a percentage of gross compensation for all active FRS members. For the fiscal year ended September 30, 2018, the HIS contribution rate for the period October 1, 2016 through September 30, 2018, was 1.66% of payroll pursuant to section 112.363, Florida Statutes. The City contributed 100% of its statutorily required contributions for the current and preceding three years. HIS Plan contributions are deposited in a separate trust fund from which payments are authorized. HIS Plan benefits are not guaranteed and are subject to annual legislative appropriation. In the event legislative appropriation or available funds fail to provide full subsidy benefits to all participants, benefits may be reduced or cancelled. For the fiscal year ending September 30, 2018, contributions to the HIS Plan for the City totaled $141,785. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions - At September 30, 2018, the City reported a liability of $2,282,255 for its proportionate share of the HIS Plan's net pension liability. The net pension liability was measured as of June 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2018. The City's proportionate share of the net pension liability was based its share of the City's 2017-2018 fiscal year contributions relative to the 2016-2017 fiscal year contributions of all participating members. - 48 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) B. Retiree Health Insurance Subsidy Program (HIS) For the fiscal year ended September 30, 2018, the City recognized pension expense of $142,080. In addition, the City reported deferred outflows of resources and deferred in flows of resources related to pensions from the following sources: Differences between expected and actual experience Change of Assumptions Deferred Outflows Deferred Inflows of Resources of Resources $ 34,940 $ (3,877) 253,815 (241,299) Net difference between projected and actual earnings on Pension Plan investments 1,378 Changes in proportion and differences between Pension Plan contributions and proportionate share of contributions 321,213 (748,118) Pension Plan contributions subsequent to the measurement date 24,848 Total $ 636,194 $ (993,294) The deferred outflows of resources related to the HIS Plan, totaling $24,848 for the City, resulting from contributions to the HIS Plan subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the fiscal year ended September 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the HIS Plan will be recognized in pension expense as follows: For the Year Ending September 30, Deferred Outflows/(Inflows) Net 2019 $ 213,338 2020 60,627 2021 51,260 2022 42,594 2023 (1,208) Thereafter 15,337 Total $ 381,948 - 49 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) B. Retiree Health Insurance Subsidy Program (HIS) Actuarial Assumptions — Actuarial valuations for the HIS plan are conducted biennially. The July 1, 2017 HIS valuation is the most recent actuarial valuation and was used to develop the liabilities for June 30, 2018. Liabilities originally calculated as of the actuarial valuation date have been recalculated as of a later GASB Measurement Date using standard actuarial roll forward procedures. The total pension liability as of June 30, 2018 was determined using the following actuarial assumptions: Inflation 2.60% Salary Increases 3.25% average, including inflation Investment Rate of Return 3.87%, net of pension plan investment expense, including inflation Mortality rates were based on the Generational RP-2000 with Projection Scale BB tables. The actuarial assumptions that determine the total pension liability as of June 30, 2018 were based on the results of an actuarial experience study for the period July 1, 2008 through June 30, 2013. Discount Rate - The discount rate used to measure the total pension liability at June 30, 2018 was 3.87%. In general, the discount rate for calculating the total pension liability is equal to the single rate equivalent to discounting at the long-term expected rate of retum for benefit payments prior to the projected depletion date. Because the HIS benefit is essentially funded on a pay-as-you-go basis, the depletion date is considered to be immediate, and the single equivalent discount rate is equal to the municipal bond rate selected by the HIS Plan sponsor. The Bond Buyer General Obligation 20-Bond Municipal Bond Index was adopted as the applicable municipal bond index. The discount rate used in the 2018 valuation was updated from 3.58% to 3.87% reflecting the change in the Bond Buyer General Obligation 20-Bond municipal Bond Index as of June 30, 2018. Sensitivity of the Proportionate Share of the Net Position Liability to Changes in the Discount Rate - The following represents the City's proportionate share of the net pension liability calculated using the discount rate of 3.87%, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (2.87%) or one percentage point higher (4.87%) than the current rate: 1% Current 1% Decrease Discount Rate Increase 2.87% 3.87% 4.87% City's proportionate share of the net pension liability $2,599,355 $2,282,255 $2,017,934 Pension Plan Fiduciary Net Position - Detailed information regarding the HIS Plan's fiduciary net position is available in the separately issued FRS Pension Plan and Other State -Administered Systems Comprehensive Annual Financial Report. - 50 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) C. Investment Plan The SBA administers the defined contribution plan officially titled the FRS Investment Plan. The Investment Plan is reported in the SBA's annual financial statements and in the State of Florida Comprehensive Annual Financial Report. As provided in Section 121.4501, Florida Statutes, eligible FRS members may elect to participate in the Investment Plan in lieu of the defined benefit pension plan. City employees participating in DROP are not eligible to participate in the Investment Plan. Employer and employee contributions, including amounts contributed to individual member's accounts, are defined by law, but the ultimate benefit depends in part on the performance of investment funds. Benefit terms, including contribution requirements, for the Investment Plan are established and may be amended by the Florida Legislature. The Investment Plan is funded with the same employer and employee contribution rates that are based on salary and membership class, as the Pension Plan. Contributions are directed to individual member accounts, and the individual members allocate contributions and account balances among various approved investment choices. Costs of administering the Investment Plan, including the FRS Financial Guidance Program, are funded through an employer contribution of 0.04 percent of payroll and by forfeited benefits of plan members. Allocations to the investment member's accounts during the 2017-18 fiscal year, as established by Section 121.72, Florida Statutes, are based on a percentage of gross compensation, by class, as follows: Membership Class Percentage of Gross Compensation FRS Regular 6.30% FRS Senior Manager Service 7.67% FRS Special Risk 14.00% For all membership classes, employees are immediately vested in their own contributions and are vested after one year of service for employer contributions and investment earnings. If an accumulated benefit obligation for service credit originally earned under the Pension Plan is transferred to the Investment Plan, the member must have the years of service required for Pension Plan vesting (including the service credit represented by the transferred funds) to be vested for these funds and the earnings on the funds. Non -vested employer contributions are placed in a suspense account for up to five years. If the employee returns to FRS -covered employment within the five- year period, the employee will regain control over the account. If the employee does not return within the five-year period, the employee will forfeit the accumulated account balance. For the fiscal year ended September 30, 2018, the information for the amount of forfeitures was unavailable from the SBA; however, management believes that these amounts, if any, would be immaterial to the City. - 51 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 10. RETIREMENT PLANS (Continued) C. Investment Plan (cont'd) After termination and applying to receive benefits, the member may rollover vested funds to another qualified plan, structure a periodic payment under the Investment Plan, receive a lump - sum distribution, leave the funds invested for future distribution, or elect any combination of these options. Disability coverage is provided; the member may either transfer the account balance to the Pension Plan when approved for disability retirement to receive guaranteed lifetime monthly benefits under the Pension Plan, or the member may remain in the Investment Plan and rely upon that account balance for retirement income. The Investment Plan pension expense for the City totaled $125,677, for the fiscal year ended September 30, 2018. At September 30, 2018, the City has no outstanding contributions to the Investment Plan required for the fiscal year ended September 30, 2018. NOTE 11. RELATIONSHIP WITH THE COUNTY In November 6, 1956, the Florida Legislature adopted the Miami -Dade County Home Rule for a general election to amend the Florida State Constitution designed to provide a centralized form of government to the County of Miami -Dade (the "County"). The County is, in effect, a municipality with governmental powers effective with 34 cities, towns and villages in the County, including the City, and the unincorporated areas. The County does not displace or replace cities, but can supplement them. The County can take over particular services of the City's operations if (1) the services fall below minimum standards set by the County Commission or (2) with the consent of the governing body of the City. Since the inception of the City, the County has assumed responsibility for a number of functions, including county -wide police services, complementing county -wide fire protection; consolidated two-tier court systems; creation of the various surface transportation programs; installation of a central traffic control computer system; merging public transportation systems into a county system; and centralization of the property appraiser and tax collector functions. In addition to county -wide services provided by Miami -Dade County in the City, the City has a Memorandums of Understanding (MOU), with the County to provide waste collection services and water utility billing services. The MOU dated February 17, 2017, for waste collection and waste hauler services was agreed after the City's vendor provided notification that they would no longer provide those services. The MOU for transitioning water utility billing services and meter replacements city-wide to Miami -Dade County Water & Sewer Department was agreed to on August 4, 2017. - 52 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 12. COMMITMENTS AND CONTINGENCIES Water Supply and Sewer Services Contract In February 1985, the City entered into an agreement with Miami -Dade Water and Sewer Authority (the "Authority") for the purpose of providing to the City all of its potable water supply and sewer services for a period of thirty (30) years subject to termination at any time by operation of law or by mutual consent of the City and the Authority. For the year ended September 30, 2018 and 2017, the City purchased water and sewer services totaling $3,857,673 and $4,078,651 respectively, from the Authority under the terms of this agreement. Various other claims and lawsuits, which arose in the normal course of operations, are pending against the City and are summarized below: Threatened Litigation, Claims and Assessments The City is involved in litigation and additional claims have been asserted against the City which are being handled by the City Attomey's office, in addition to third party Attorneys. A number of cases remain outstanding. In some cases, the City anticipates that its insurance carrier will cover the damages. Please consult with the City Attorney and Risk Manager for further information regarding such claims and lawsuits which arose in the normal course of operations, and are pending against the City. In the opinion of management and based on the advice of the City's Attorney, the outcome of some of these actions is not yet known. However, provision for liability has been accrued on the financial position and results of operations of the City for those cases where the outcome is known. Contingencies The City participates in a number of Federal and State grant programs in accordance with the provisions of the Uniform Guidance and the State of Florida Single Audit Act. Pursuant to those provisions, financial assistance programs were tested for compliance with applicable grant requirements. These programs may be subjected to financial and compliance audits by the grantors or their representatives. The possible disallowance of any item charged to the program or request for the return of already collected funds may be requested by the grantor agency. In the opinion of management, future disallowances, if any, of grant program expenditures would not have a material adverse effect on the financial condition of the City. - 53 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 12. COMMITMENTS AND CONTINGENCIES (Continued) Grant Contingency The City receives financial assistance from federal, state and local governmental agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreement and may be subject to audit by the grantor agencies. In accordance with Title 2 U.S. Code of Federal Regulations, Part 200, Uniformed Administrative Requirements, Cost Principals, and Audit Requirement for Federal Awards (Uniform Guidance) and the Florida Single Audit Act, the City is required to conduct "single audits" when the required thresholds of $750,000 in grant expenditures from either source is exceeded. For the year ended September 30, 2018, neither a Federal single audit in accordance with the Uniform Guidance or the state single audit in accordance with the Florida Single Audit Act was required. NOTE 13. OTHER POST -EMPLOYMENT BENEFITS Effective October 1, 2017, the City implemented GASB Statement No. 75, Accounting and Reporting for Post -Employment Benefits Other Than Pensions, for certain post -employment healthcare benefits provided by the City. The implementation of this statement resulted in a restatement of the City's government -wide statements as discussed in Note 13. Plan Description Pursuant to Section 112.081, Florida Statutes, the City is required to permit eligible retirees and their eligible dependents to participate in the City's health insurance program at a cost to the retiree that is no greater than the cost at which the coverage is available for active employees. The City does not provide retirees with any subsidy for this benefit. On September 17, 2008, the City established the OPEB Trust, a single employer defined benefit health care plan to all of its employees except part-time employees and full-time employees who either resign or are terminated. They City is authorized to establish and amend benefit levels, subject to minimum requirements set forth by Florida Statutes, and to approve the actuarial assumptions used in the determination of contribution levels. The plan does not issue a separate financial report. Benefits Provided The OPEB Plan provides healthcare insurance benefits for retirees and their dependents. Funding Policy The City's funding policy is to pay post -retirement medical benefits from general funds. A trust has not been established to pre -fund these benefits. - 54 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 13. OTHER POST -EMPLOYMENT BENEFITS (Continued) Plan Membership At October 1, 2017, the date of the latest actuarial valuation, plan participation consisted of the following: Active plan members 119 Inactive plan members 119 Total OPEB Liability The City's total OPEB liability of $341,870* was measured as of September 30, 2018, and was determined by an actuarial valuation as of October 1, 2017. * This amount has been rolled forward from October 1, 2017. Actuarial Assumptions and Other Inputs Valuation Date: Measurement Date: Roll -forward Disclosure October 1, 2017 September 30, 2018 The Total OPEB Liability was rolled -forward from the valuation date to the measurement date using standard actuarial techniques. Methods and Assumptions Used to Determine Total OPEB Liability: Actuarial Cost Method Inflation Discount Rate Salary Increases Retirement Age Entry Age Normal 2.2% 3.64% 3% per annum Retirement rate assumptions are based on the Florida Retirement System, retirement rates based on those used in the July 1, 2016 actuarial valuation of Florida Retirement System. Mortality Sex -distinct rates set forth in the PUB-2010 Mortality Table (without income adjustments) for general and public safety employees, with full generational improvements in mortality using Scale MP-2017 Retirees Share of Benefit Premium contributions are required from retirees. Related Costs The Plan is unfunded; as such no projection of Fiduciary Net Position is required. Demographic assumptions mirror those used for the Florida Retirement System pension plans. The discount rate used to determine the liabilities under GASB 75 is based on the return on the S&P Municipal Bond 20-year High Grade Index as of the measurement date. The discount rate is 3.64% per annum. - 55 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 13. OTHER POST -EMPLOYMENT BENEFITS (Continued) Actuarial Assumptions and Other Inputs (cont'd) Changes in the OPEB liability for the fiscal year ended September 30, 2018, were as follow: Balance at September 30, 2018 -as restated $ 309,518 Changes for the year Service cost 28,528 Expected interest growth 12,155 Changes in assumptions Differences between expected and actual experience Total change in OPEB liability for 9/30/18 350,201 Estimated employer contributions/ benefits payments (8,331) Total OPEB Liability - September 30, 2018 $ 341,870 Sensitivity of the total OPEB liability to changes in the discount rate: Regarding the sensitivity of the total OPEB liability to changes in the discount rate, the following presents the plan's total OPEB liability, calculated using a discount rate of 3.64%, as well as what the plan's total OPEB liability would be if it were calculated using a discount rate that is one percent lower or one percent higher: Discount Rate Total OPEB Liability Net OPEB Liability 1% Decrease 2.64% $ 379,276 $ 379,276 Discount Rate 3.64% $ 341,870 $ 341,870 1% Increase 4.64% $ 309,072 $ 309,072 Sensitivity of the total OPEB liability to the healthcare cost trend rate: The following table illustrates the impact of healthcare cost trend sensitivity on the Net OPEB Liability for fiscal year ending September 30, 2018. Ultimate Trend 1% Decrease 4.00% Medical Trend 7.00% graded down to 5.00% 1% Increase 6.00% Total OPEB Liability Net OPEB Liability $ 297,780 $ 341,870 $ 394,843 $ 297,780 $ 341,870 $ 394,843 - 56 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 13. OTHER POST -EMPLOYMENT BENEFITS (Continued) OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the fiscal year ended September 30, 2018, the City recognized OPEB expense of $32,252*. At September 30, 2018, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: *This amount is recognized on the employer's income statement. Deferred Deferred Outflows Inflows of Resources of Resources Balance as of September 30, 2018 Change due to: Amortization payments, investment gain/loss Demographic gain/loss, assumption changes Balance as of September 30, 2018 NOTE 14. DEFERRED COMPENSATION PLAN The City offers its employees a deferred compensation plan (the "Plan"), which is administered by two administrators. The portion of the plan administered by the International City Management Association Retirement Corporation ("ICMA") was created in accordance with Internal Revenue Code Section 457 (a qualified plan). The other portion constitutes a nonqualified plan benefit and is administered by the Life Insurance Company of Southwest. The Plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in this plan is optional. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All assets and income of the Plan are held in trust for the exclusive benefits of the participants. The City makes no investment decisions and has no fiduciary responsibilities regarding the Plan; therefore, the assets and liabilities of the Plan are not included in the City's financial statements as September 30, 2018. NOTE 15. RISK MANAGEMENT The government is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters for which the City carries commercial insurance. The City has not had a significant reduction in insurance coverage from coverage in the prior year by major categories of risk, and settled claims have not exceeded the City's retention and excess coverage in force for each of the past three years. - 57 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 16. REQUIRED SUPPLEMENTARY INFORMATION Under GASB Statement No. 34, budgetary comparison information is required to be presented for the general fund and each major special revenue fund with a legally adopted budget. The City adopts annual operating budgets for the general fund and all special revenue funds. Budget and actual comparison for the General Fund is presented in the Required Supplementary Information section of the report. Budget and actual comparisons for other funds are reflected in the Combining Statements section. NOTE 17. COMPENSATED ABSENCES It is the City's policy to permit employees to accumulate within certain limits, earned but unused personal -time -off, which will be paid to employees upon separation from City service. All personal time -off is accrued when incurred in the government -wide financial statements. In the governmental funds, a liability is recorded only for paid time off payouts for employee separations that occurred within 60 days after the fiscal year ended September 30, 2018. The General Fund and Enterprise Fund have been used in prior years to liquidate the liability for compensated absences. NOTE 18. RESTATEMENT - PRIOR PERIOD ADJUSTMENTS The beginning net position of Government Activities and Business -Type Activities were restated. Government Activities — The City's net position of Government Activities as of September 30, 2017, has been restated for prior period adjustments. The net position decreased by $619 resulting from net adjustments to due to/from other funds, cash, revenue, expenditures, and other errors related to prior year. Business -Type Activities — The City's net position of Business -Type Activities as of September 30, 2017, has been restated for prior period adjustments. The net position increased by $2,042,780 resulting from net adjustments to due to/from other funds, cash, revenue, expenditures, and other errors related to prior year. Net position September 30, 2017, previously stated and reported Prior period adjustment: Net effect of Correction of errors, effect of adjustment to revenue, expenditure and other Restatement of Net Position Governmental Activities $ 6,924,303 Business -Type Activities Total $ 1,218,088 $ 8,142,391 (619) 2,042,780 2,042,161 Net Position, September 30, 2017 $ 6,923,684 $ 3,260,868 $ 10,184,552 NOTE 19. NEW ACCOUNTING PRONOUNCEMENTS ISSUED Accounting Pronouncements — Adopted and Unadopted GASB Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. - 58 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 19. NEW ACCOUNTING PRONOUNCEMENTS ISSUED (Continued) Accounting Pronouncements — Adopted and Unadopted (cont'd) This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that previously was accounted for in accordance with the requirements of paragraphs 5-22 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business -type activity or enterprise fund. This Statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles. The provisions of this Statement are effective for reporting periods beginning after December 15, 2019. Earlier application is encouraged. The requirements of this Statement should be applied prospectively. GASB Statement No. 90, Majority Equity Interest, an amendment of GASB Statements No. 14 and No. 61. The primary objectives of this Statement are to improve the consistency and comparability of reporting a government's majority equity interest in a legally separate organization and to improve the relevance of fmancial statement information for certain component units. It defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government's holding of the equity interest meets the definition of an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund. Those governments and funds should measure the majority equity interest at fair value. For all other holdings of a majority equity interest in a legally separate organization, a government should report the legally separate organization as a component unit, and the government or fund that holds the equity interest should report an asset related to the majority equity interest using the equity method. This Statement establishes that ownership of a majority equity interest in a legally separate organization results in the government being financially accountable for the legally separate organization and, therefore, the government should report that organization as a component unit. This Statement also requires that a component unit in which a government has a 100 percent equity interest account for its assets, deferred outflows of resources, liabilities, and deferred inflows of resources at acquisition value at the date the government acquired a 100 percent equity interest in the component unit. Transactions presented in flows statements of the component unit in that circumstance should include only transactions that occurred subsequent to the acquisition. - 59 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 19. NEW ACCOUNTING PRONOUNCEMENTS ISSUED (Continued) Accounting Pronouncements — Adopted and Unadopted (cont'd) The provisions of this Statement are effective for reporting periods beginning after December 15, 2018. Earlier application is encouraged. The requirements should be applied retroactively, except for the provisions related to (1) reporting a majority equity interest in a component unit and (2) reporting a component unit if the government acquires a 100 percent equity interest. Those provisions should be applied on a prospective basis. GASB Statement No. 91, Conduit Debt Obligations. The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. A conduit debt obligation is defined as a debt instrument having all of the following characteristics: • There are at least three parties involved: (1) an issuer, (2) a third -party obligor, and (3) a debt holder or a debt trustee. • The issuer and the third -party obligor are not within the same financial reporting entity. • The debt obligation is not a parity bond of the issuer, nor is it cross -collateralized with other debt of the issuer. • The third -party obligor or its agent, not the issuer, ultimately receives the proceeds from the debt issuance. • The third -party obligor, not the issuer, is primarily obligated for the payment of all amounts associated with the debt obligation (debt service payments). All conduit debt obligations involve the issuer making a limited commitment. Some issuers extend additional commitments or voluntary commitments to support debt service in the event the third party is, or will be, unable to do so. An issuer should not recognize a conduit debt obligation as a liability. However, an issuer should recognize a liability associated with an additional commitment or a voluntary commitment to support debt service if certain recognition criteria are met. As long as a conduit debt obligation is outstanding, an issuer that has made an additional commitment should evaluate at least annually whether those criteria are met. An issuer that has made only a limited commitment should evaluate whether those criteria are met when an event occurs that causes the issuer to reevaluate its willingness or ability to support the obligor's debt service through a voluntary commitment. - 60 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 19. NEW ACCOUNTING PRONOUNCEMENTS ISSUED (Continued) Accounting Pronouncements — Adopted and Unadopted (cont'd) This Statement also addresses arrangements —often characterized as leases —that are associated with conduit debt obligations. In those arrangements, capital assets are constructed or acquired with the proceeds of a conduit debt obligation and used by third -party obligors in the course of their activities. Payments from third -party obligors are intended to cover and coincide with debt service payments. During those arrangements, issuers retain the titles to the capital assets. Those titles may or may not pass to the obligors at the end of the arrangements. Issuers should not report those arrangements as leases, nor should they recognize a liability for the related conduit debt obligations or a receivable for the payments related to those arrangements. In addition, the following provisions apply: ■ If the title passes to the third -party obligor at the end of the arrangement, an issuer should not recognize a capital asset. If the title does not pass to the third -party obligor and the third party has exclusive use of the entire capital asset during the arrangement, the issuer should not recognize a capital asset until the arrangement ends. ■ If the title does not pass to the third -party obligor and the third party has exclusive use of only portions of the capital asset during the arrangement, the issuer, at the inception of the arrangement, should recognize the entire capital asset and a deferred inflow of resources. The deferred inflow of resources should be reduced, and an inflow recognized, in a systematic and rational manner over the term of the arrangement. This Statement requires issuers to disclose general information about their conduit debt obligations, organized by type of commitment, including the aggregate outstanding principal amount of the issuers' conduit debt obligations and a description of each type of commitment. Issuers that recognize liabilities related to supporting the debt service of conduit debt obligations also should disclose information about the amount recognized and how the liabilities changed during the reporting period. The requirements of this Statement are effective for reporting periods beginning after December 15, 2020. Earlier application is encouraged. GASB Statement No. 92, Omnibus 2020. The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics and includes specific provisions about the following: • The effective date of Statement No. 87, Leases, and Implementation Guide No. 2019-3, Leases, for interim financial reports ■ Reporting of intra-entity transfers of assets between a primary government employer and a component unit defined benefit pension plan or defined benefit other postemployment benefit (OPEB) plan. - 61 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 19. NEW ACCOUNTING PRONOUNCEMENTS ISSUED (Continued) Accounting Pronouncements — Adopted and Unadopted (cont'd) • The applicability of Statements No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, as amended, and No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, to reporting assets accumulated for postemployment benefits. • The applicability of certain requirements of Statement No. 84, Fiduciary Activities, to postemployment benefit arrangements. • Measurement of liabilities (and assets, if any) related to asset retirement obligations (AROs) in a government acquisition. • Reporting by public entity risk pools for amounts that are recoverable from reinsurers or excess insurers. • Reference to nonrecurring fair value measurements of assets or liabilities in authoritative literature. • Terminology used to refer to derivative instruments. The requirements of this Statement are effective as follows: • The requirements related to the effective date of Statement 87 and Implementation Guide 2019- 3, reinsurance recoveries, and terminology used to refer to derivative instruments are effective upon issuance. • The requirements related to intra-entity transfers of assets and those related to the applicability of Statements 73 and 74 are effective for fiscal years beginning after June 15, 2020. • The requirements related to application of Statement 84 to postemployment benefit arrangements and those related to nonrecurring fair value measurements of assets or liabilities are effective for reporting periods beginning after June 15, 2020. • The requirements related to the measurement of liabilities (and assets, if any) associated with AROs in a government acquisition are effective for government acquisitions occurring in reporting periods beginning after June 15, 2020. Earlier application is encouraged and is permitted by topic. - 62 - CITY OF OPA-LOCKA, FLORIDA NOTES TO THE BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2018 NOTE 20. STATE AND LOCAL AGREEMENT On June 1, 2016, the City of Opa-locka City Commission adopted a Resolution to request a declaration that the City is in a state of fmancial emergency to seek the appointment of a financial emergency board and other assistance pursuant to section 218.503(1), Florida Statutes. The State of Florida, Office of the Governor, issued Executive Order 16-135, signed by Florida Governor Rick Scott. On June 8, 2016, the City entered into a State and Local Agreement of Cooperation between the Governor as a result of being in a state of financial emergency. The State implemented measures to resolve the financial emergency, the City's cooperation with the Governor to resolve the financial emergency and the Governor to designate the Office of the Chief Inspector General ("Governor's Designee") to serve as the lead entity responsible for coordinating the Governor's efforts in providing intervention and assistance to the City. NOTE 21. MANAGEMENT'S REVIEW In preparing these financial statements, the Organization has evaluated events and transactions for potential recognition or disclosure through May 13, 2020, the date the financial statements were available to be issued. There were no other significant events that management believed require disclosure. NOTE 22. SUBSEQUENT EVENTS In December 2019, COVID 19 (Coronavirus) surfaced in Wuhan, China, and has spread around the Globe resulting in social and business disruption. The Coronavirus was declared a Public Health Emergency of International Concern by the World Health Organisation on January 30, 2020. The operations and business results of the City could be significantly adversely affected. The extent to which the Coronavirus may impact governmental activity will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the Coronavirus and the actions required to contain it and to treat its impact. The City will recoup $901,927 from Miami -Dade County in March 2020, as a result of completing a three year backlog of the Charter County Transportation System Surtax Review. This amount is the City's portion of Surtax proceeds used in compliance with the Interlocal Agreement for Distribution, Use and Reporting of Charge County Transit System Surtax Proceeds levied by Miami Dade County. - 63 - REQUIRED SUPPLEMENTARY INFORMATION (Other Than MD&A) Revenues: Taxes: Property taxes $ 6,874,693 $ 6,443,648 $ 6,734,982 $ 291,334 Utility taxes 62,749 67,947 63,454 (4,493) Local option gas tax - 29,104 29,104 Local business taxes 181,883 301,560 301,715 155 Franchise fees 1,355,659 1,689,101 1,675,728 (13,373) Permits and fees 638,401 737,624 737,810 186 Intergovernmental 68,504 31,019 45,500 14,481 Charges for services 78,713 118,165 148,460 30,295 Fines and forfeitures 1,218,670 1,598,181 548,651 (1,049,530) Other 3,410,507 581,699 816,080 234,381 Cash balance carry forward 3,700,000 3,700,000 - (3,700,000) Total revenues 17,589,779 15,298,048 11,101,484 (4,196,564) CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE GENERAL FUND (NON-GAAP BUDGETARY BASIS - UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 Budgeted Amounts Variance with Final Budget Original Final Actual Positive (Negative) Expenditures: General government: City commission 136,515 133,103 135,847 (2,744) City manager 684,171 516,315 531,098 (14,783) City clerk 370,109 289,500 292,336 (2,836) City attorney 487,600 459,571 677,138 (217,567) Finance 476,428 595,898 618,211 (22,313) Town center 270,482 232,841 295,774 (62,933) Human resources 452,707 351,008 324,461 26,547 Building licenses 540,814 405,025 475,134 (70,109) Community development 581,181 496,724 683,351 (186,627) Town center 4,000,007 3,479,985 4,033,350 (553,365) Total general government Public safety: 5,401,844 5,091,855 4,932,080 159,775 Police 317,079 348,759 348,759 - Code enforcement 5.718,923 5,440,614 5,280,839 159,775 Total public safety Public works: 250,758 245,379 324,592 (79,213) Administration 177,209 299,297 69,166 230,131 Sanitation 354,995 490,720 601,001 (110,281) Street maintenance 461,859 694,109 317,035 377,074 Building maintenance 80,000 62,373 _ 720,866 (658,493) Vehicle maintenance 1,324,821 1,791.878 2,032,660 (240,782) Total public works Parks and recreation: 624,943 537.211 537,770 (559) Parks 624,943 537.211 537,770 (559) Total parks and recreation 5,921.085 1 391,668 1,253,044 138,624 Non -departmental 5,921,085 1,391.668 1 253,044 138,624 Total non -departmental Total expenditures 17,589.779 12,641,356 13,137,663 (496,307) Excess of revenues over expenditures Other financing sources (uses): Net change in fund balance 2 656,692 (2.036.179) (4,692,871) $ (2,036,179) Fund balance, beginning (1,612,097) Prior period adjustment (316,256) Fund balances, beginning restated (1 928,353) Fund balance, ending $ (3 964.532) -64- CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMEMTARY INFORMATION BUDGETARY COMPARISON SCHEDULE PEOPLE'S TRANSPORTATION TAX FUND (NON-GAAP BUDGETARY BASIS - UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 Budgeted Amounts Variance with Final Budget Original Final Actual Positive (Negative) Revenues: Taxes: Intergovernmental $ 180,000 $ 195,000 $ 701,837 $ 506,837 Total revenues 180,000 195,000 701,837 506,837 Expenditures: Current: General government: Public works: Street maintenance 180,000 195,000 193,867 1,133 Total public works 180,000 195,000 193,867 1,133 Total expenditures Excess of revenues over expenditures 180,000 195,000 193,867 1,133 507,970 507,970 Net change in fund balance 507,970 Fund balance, beginning 1,082,514 Prior period adjustment (246,544) Fund balances, beginning restated 835,970 Fund balance, ending $ 1,343,940 - 65 - Revenues: Taxes: Intergovernmental Interest Total revenues CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY COMPARISON SCHEDULE CAPITAL IMPROVEMENT DEBT SERVICE (NON-GAAP BUDGETARY BASIS - UNAUDITED) FOR THE YEAR ENDED SEPTEMBER 30, 2018 Budgeted Amounts Original Final $ 1,632,803 933,297 2,566,100 $ 1,748,757 631,088 2,379,845 Expenditures: Current: General government: Debt service: Principal 744,270 744,270 Interest 466,622 466,622 Reserves 1,168,952 Total debt service 1,210,892 2,379,844 Total expenditures 1,210,892 2,379,844 Excess of revenues over expenditures Net change in fund balance Fund balance, beginning Prior period adjustment Fund balances, beginning restated Fund balance, ending 1,355,208 1 - 66 - Actual $ 1,778,246 805,651 59 2,583,956 744,270 466,622 1,210,892 1,210,892 1,373,064 1,373,064 5,210,789 (11 5,210,788 $ 6,583,852 Variance with Final Budget Positive (Negative) $ 29,489 174,563 59 204,111 1,168,952 1,168,952 1,168,952 1,373,063 CITY OF OPA-LOCKA, FLORIDA NOTES TO BUDGETARY SCHEDULE REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED SEPTEMBER 30, 2018 NOTE 1. BUDGETS AND BUDGETARY ACCOUNTING Chapter 166, Florida Statutes, requires that all municipalities prepare, approve, adopt and execute an annual budget for funds as may be required by law or by sound financial practices and generally accepted accounting principles. The budgets control the levy and the expenditure of money for City purposes in the ensuing fiscal year. The budgeting process is based on estimates of revenues and expenditures. The City budgets are prepared on a modified -accrual basis or accrual basis of accounting in accordance with generally accepted accounting principles. The City follows these procedures in establishing the budgetary data reflected in the financial statements. 1. Prior to August 1, the City Manager submits to the City Commission a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted to obtain taxpayer comments. 3. Prior to October 1, the budget is legally enacted through passage of an ordinance. 4. Budgetary control is maintained at the departmental and fund level, with finance department providing support to departments in the administration of their budgets. In accordance with the City's budget transfer policy, the City Manager is authorized to transfer budgeted amounts within any fund or functions; however, any supplemental appropriations or revisions that amend the total expenditure of any fund must be approved by the City Commission. The City also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances outstanding at the balance sheet date are canceled. 5. Annual operating budgets are legally adopted for the General, Special Revenue, Debt Service, Capital Projects, and Enterprise Funds. All budgets are on a basis consistent with accounting principles generally accepted in the United States of America. The legal level of budgetary control is the department level. This is the level at which expenditures may not exceed appropriations. 6. All annual appropriations lapse at fiscal year-end. NOTE 2. BUDGETARY EXPENDITURES IN EXCESS OF APPROPRIATIONS For the year ended September 30, 2018, expenditures exceeded appropriations in, general government, public works and parks and recreation of the general fund. Overall, General Fund exceeded its budget by a variance of approximately $4.6 million. For the year ended September 30, 2018, expenditures did not exceed appropriations in the People Transportation Tax fund. There was a positive variance with the final budget by approximately $1,133. This was attributed to planning the street, side -walk, and other transportation related projects according to the available revenue. - 67 - CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY - FLORIDA RETIREMENT SYSTEM PENSION PLAN SEPTEMBER 30, 2018 2018 2017 2016 2015 2014 City of Opa-locka's proportion of the net pension liability 0.0266% 0.0259% 0.0343% 0.0357% 0.0325% City of Opa-locka's proportionate share of the net pension liability $ 8,031,493 $ 7,651,779 $ 8,653,259 $ 4,610,060 $ 3,574,813 City of Opa-locka's covered -employee payroll $ 7,134,236 $ 6,394,032 $ 7,395,338 $ 9,279,820 $ 8,850,709 City of Opa-locka's proportionate share of the net pension liability (asset) as a percentage of its covered -employee payroll 112.58% 119.67% 117.01% 49.68% 40.39% Plan fiduciary net position as a percentage of the total pension liability 84.26% 83.89% 84.88% 92.00% 96.09% Note: The amounts presented for each fiscal year were determined as of June 30th. These schedules are presented to illustrate the requirements to show information for 10 years. However, until a full 10-year trend has been compiled, information is presented only for the years for which the required supplementary information is available. - 68 - CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY'S CONTRIBUTIONS - FLORIDA RETIREMENT SYSTEM PENSION PLAN SEPTEMBER 30, 2018 2018 2017 2016 2015 2014 Contractually required contribution $ 926,137 $ 852,437 $ 983,512 $ 1,086,534 $ 937,687 Contributions in relation to the contractually required contribution 926,137 852,437 983,512 1,086,534 937,687 Contribution deficiency (excess) $ $ $ $ $ City of Opa-Iocka's covered -employee payroll $ 7,134,236 $ 6,394,032 $ 7,395,338 $ 9,279,820 $ 8,850,709 Contributions as a percentage of covered -employee payroll 12.98% 13.33% 13.30% 11.71% 10.59% Note: The amounts presented for each fiscal year were determined as of September 301°. These schedules are presented to illustrate the requirements to show information for 10 years. However, until a full 10-year trend has been compiled, information is presented only for the years for which the required supplementary information is available. - 69 - CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY - HEALTH INSURANCE SUBSIDY PENSION PLAN SEPTEMBER 30, 2018 2018 2017 2016 2015 2014 City of Opa-locka's proportion of the net pension liability (asset) 0.0256% 0.0195% 0.0270% 0.0309% 0.0288% City of Opa-locka's proportionate share of the net pension liability (asset) $ 2,282,255 $ 2,082,612 $ 3,144,569 $ 3,151,008 $ 3,574,813 City of Opa-locka's covered -employee payroll $ 7,134,236 $ 6,394,032 $ 7,395,338 $ 9,279,820 $ 8,850,709 City of Opa-locka's proportionate share of the net pension liability (asset) as a percentage of its covered -employee payroll 31.99% 32.57% 42.52% 33.96% 40.39% Plan fiduciary net position as a percentage of the total pension liability 2.15% Note: The amounts presented for each fiscal year were determined as of June 30th. 1.64% 0.97% 0.50% 0.99% These schedules are presented to illustrate the requirements to show information for 10 years. However, until a full 10-year trend has been compiled, information is presented only for the years for which the required supplementary information is available. - 70 - Contractually required contribution CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE CITY'S CONTRIBUTIONS - HEALTH INSURANCE SUBSIDY PENSION PLAN SEPTEMBER 30, 2018 2018 2017 2016 2015 2014 $ 141,785 $ 129,528 $ 161,304 $ 156,110 $ 129,092 Contributions in relation to the contractually required contribution 141,785 129.528 161 304 156,110 129.092 Contribution deficiency (excess) $ - $ $ $ $ - City of Opa-locka's covered -employee payroll $ 7,134,236 $ 6,394,032 $ 7,395,338 $ 9,279,820 $ 8,850,709 Contributions as a percentage of covered -employee payroll 1.99% 2.03% 2.18% 1.68% 1.46% Note: The amounts presented for each fiscal year were determined as of September 306. These schedules are presented to illustrate the requirements to show information for 10 years. However, until a full 10-year trend has been compiled, information is presented only for the years for which the required supplementary information is available. - 71 - CITY OF OPA-LOCKA, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN THE CITY'S TOTAL — OTHER POST EMPLOYMENT BENEFITS LIABILITY AND RELATED RATIOS SEPTEMBER 30, 2018 Total OPEB Liability Service cost $ 28,528 Interest 12,155 Changes in assumptions Benefit payments (8,331) Net change in Total OPEB liability 32,352 Total OPEB liability -beginning as restated 309,518 Total OPEB liability -ending $ 341,870 Covered employer payroll N/A Total OPEB liability as a % of covered employee payroll N/A Notes to schedule 1. Changes of assumptions — Discount rate was changed as follows: Discount Rate 9/30/2017 3.10% 9/30/2018 3.64% 2. The information in this schedule is not required to be presented retroactively. Therefore, years will be added to this schedule in future years until ten years of information are available. - 72 - OTHER SUPPLEMENTARY INFORMATION CITY OF OPA-LOCKA, FLORIDA COMBINING BALANCE SHEET NON -MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2018 Special Community Safe Law Redevelopment Neighborhood Enforcement Aeency Capital Projects Total ASSETS Cash and equity in pooled cash $ 263,424 $ 100,995 $ 156,503 $ 520,922 Other government account receivables 100,000 100,000 Due from other funds 408,157 242,822 1,767,306 2,418,285 Restricted cash and cash equivalents - 69,104 69,104 Total assets $ 671,581 $ 343,817 $ 2,092,913 $ 3,108,311 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 8,000 $ 8,749 $ 204,995 $ 221,744 Due to other funds 150 43,796 1,990,302 2,034,248 Unearned revenue 1,005 1,005 Total liabilities 8,150 52,545 2,196,302 2,256,997 Fund Balances: Reserved for: Public safety Unreserved Total fund balances Total liabilities and fund balances 663,431 291,272 (103,389) 851,314 $ 671,581 $ 343,817 $ 2,092,913 $ 3,108,311 - 73 - CITY OF OPA-LOCKA, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON -MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2018 Special Community Safe Law Redevelopment Neighborhood Enforcement A2encv Capital Projects Total Revenues: Property taxes $ $ 356,776 $ - $ 356,776 Local option, use and fuel taxes 309,350 309,350 Intergovernmental 2,717 - - 2,717 Interest 1,054 1,054 Other 71,979 71,979 Total revenues 74,696 356,776 310,404 741,876 Expenditures: Current: General government - 125,167 15,420 140,587 Public safety 8,667 - 8,667 Transportation - - 257,307 257,307 Capital outlay 6,072 6,072 Total expenditures 8,667 125,167 278,799 412,633 Excess (deficiency) of revenues over expenditures Net change in fund balance 66,029 231,609 31,605 329 243 66,029 231,609 31,605 329,243 Fund balance - beginning 597,403 45,803 (683,319) (40,113) Prior period adjustment (1) 13,860 548,325 562,184 Fund balance - beginning restated 597,402 59,663 (134,994) 522,071 Fund balance - ending $ 663,431 $ 291,272 $ (103,389) $ 851,314 - 74 - CITY OF OPA-LOCKA, FLORIDA COMBINING STATEMENT OF NET POSITION BALANCES NON -MAJOR ENTERPRISE FUNDS SEPTEMBER 30, 2018 Stormwater Solid Waste Total ASSETS Current assets: Cash and equity in pooled cash $ 1,445,551 $ $ 1,445,551 Estimated unbilled services 527,810 - 527,810 Due from other governments 44,438 44,438 Restricted cash and cash equivalents 110,000 110,000 Due from other funds 541,531 1,690,991 2,232,522 Total current assets 2,669,330 1,690,991 4,360,321 Non -current assets: Non -depreciable capital assets Capital assets, net Total non -current assets Total assets 289,056 31,990 321,046 $ 2,990,376 $ 1,690,991 289,056 31,990 321,046 $ 4,681,367 LIABILITIES Current liabilities: Accounts payable and accrued liabilities $ 221,616 $ - $ 221,616 Due to other funds 1,112,189 1,649,067 2,761,256 Customers' deposits 1 64,871 64,872 Total current liabilities 1,333,806 1,713,938 3,047,744 Long term debt: Compensated absences OPEB obligation Long-term debt Total long-term debt Total liabilities 39,719 3,663 548,226 39,719 3,663 548 226 591,608 591,608 1,925,414 1,713,938 3,639,352 NET POSITION Invested in capital assets, net of related debt (227,180) (227,180) Unrestricted 1,292,142 (22,947) 1,269,195 Total net position $ 1,064,962 $ (22,947) $ 1,042,015 - 75 - CITY OF OPA-LOCKA, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN NET POSITION -NON -MAJOR ENTERPRISE FUNDS Operating revenues: Charges for services Total operating revenues Operating expenses: Operating, administrative and maintenance Depreciation Total operating expenses SEPTEMBER 30, 2018 Stormwater Solid Waste Total $ 788,272 $ $ 788,272 788,272 788,272 677,265 5,399 682,664 Change in net position 105,608 (4,108) 673,157 5,399 (4,108) 678,556 4,108 109,716 Net position, beginning 901,643 (22,947) 878,696 Prior period adjustment 57,709 (4,107) 53,602 Net position, beginning restated 959,352 (27,054) 932,298 Net position, ending $ 1,064,960 $ (22,946) $ 1,042,014 - 76 - CITY OF OPA-LOCKA, FLORIDA COMBINING STATEMENT OF CASH FLOWS NON -MAJOR ENTERPRISE FUNDS SEPTEMBER 30, 2018 Stormwater Solid Waste Total Cash flows from operating activities: Cash received from customers $ 788,272 $ $ 788,272 Cash paid to vendors (566,540) - (566,540) Cash paid to employees (116,118) (116,118) Net cash provided by operating activities 105,614 105,614 Cash flows from investing activities: Interest income Net cash provided by capital and related financing activities Net increase (decrease) in cash 105,614 105,614 Cash, beginning 1,196 220 - 1,196,220 Cash, ending 1,304,834 1,3204,834 Display as: Unrestricted 1,445,551 - 1,445,551 Restricted 110,000 110,000 Total $ 1,555,551 $ - $ 1,555,551 Reconciliation of operating income to cash provided by operating activities: Operating (loss) $ 105,608 $ 4,108 $ 109,716 Adjustment to reconciled operating income to net cash provided by (used in) operating activities: Depreciation 5,399 5,399 Other, net (196,005) (4,108) (200,113) Increase (decrease) in: Accounts receivable (283,341) (283,341) Due from other funds (54,193) - (54,193) Increase (decrease) in: Accounts payable and accrued liabilities 137,383 (4,108) 133,275 Customer deposits (1) (1,395) (1,396) Compensated absences 6,904 - 6,904 Other liabilities and pension (23,323) - (23,323) Due to other funds 407,183 5,503 412,686 Other - - Net cash provided by operating activities $ 105,614 $ $ 105,614 - 77 - COMPLIANCE SECTION ANTHONY BRUNSON P.A. CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the City Council City of Opa-locka, Florida 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, each major fund, and the aggregate remaining fund information of The City of Opa-locka, ("Opa-locka")" as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise Opa-locka's basic financial statements and have issued our report thereon dated May 13, 2020 Our report qualifies an opinion on such financial statements because as discussed in Note 1, we were unable to obtain sufficient appropriate audit evidence on the City's capital asset balances. Internal Control over Financial Reporting In planning and performing our audit of the financial statements of Opa-locka, we considered Opa-locka'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 Opa-locka's internal control. Accordingly, we do not express an opinion on the effectiveness of Opa-locka's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. 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. We consider the deficiencies described in the accompanying schedule of findings and questioned costs to be material weaknesses. 2017-01, 2017-02, 2017-03, 2017-04, 2017-05, 2015-01, 2015-03, and 2014-03. Miramar Office 3350 SW 148tAvenue I Suite 110 Miramar, Florida 33027 (954) 874-1721 -78- CLIENT FOCUSED: SOLUTION DRIVEN info@abcpasolutions.com Miami Office 801 Brickell Avenue I Suite 900 Miami, Florida 33131 (305) 789-6673 A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying schedule of findings and questioned costs to be significant deficiencies. 2017-06 and 2015-02. Compliance and Other Matters In connection with our engagement to audit the financial statements of Opa-locka, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. City of Opa-locka's Response to Findings Opa-locka's response to the findings identified in our engagement is described in the accompanying schedule of findings and questioned costs. Opa-locka's response was not subjected to the auditing procedures applied in the engagement to audit the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an engagement to perform an audit in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. May 13, 2020 -79- CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section II - Financial Statement Current Year Findings and Questioned Costs No new fmdings noted in the current year audit, however, material weaknesses and significant deficiencies reported in the fiscal year 2017 and in reports prior to fiscal year 2017 continued through the fiscal year 2018 audit. See prior year section below for fiscal year 2018 status. Section III — Prior Year - Financial Statement Findings and Status Material Weakness 2017-01 Florida Auditor General Report Findings Criteria Prudent accounting practices include policies, procedures, and controls over the safeguarding, recording, processing, and reporting of the City's financial operations and transactions. Condition On May 23, 2019, the Auditor General of the State of Florida prepared a report on the City, pursuant to an operational audit conducted by the Agency. As a result of the audit, multiple findings and recommendations were submitted to the City seeking actual or proposed corrective actions. Recommendation We recommend that the City designate a member of management take to timely action to resolve issues identified or propose action plans to formally address issues cited as soon as time permits. Current Year Status Auditor General report dated May 23, 2019, contained 99 findings and related recommendations. Many items prescribed in the proposed corrective action plan were addressed; however, several items remain open. View of Responsible Officials and Planned Corrective Actions The City has undertaken a rigorous program of correcting prior issues where practical and is developing documented policies and procedures where appropriate to establish guidance and checks and balances to avoid a recurrence of these problems in the future. At this time, 30 findings have been deemed to have been satisfactorily completed, with work underway on the remainder with a target of July 2020 for completion. - 80 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Material Weakness 2017-02 Strengthen Staff Resources in the Finance and Accounting Department Criteria The City should have available finance and/or accounting staff members who understand and have experience in the accounting and financial reporting requirements of the governmental industry. Condition In performing the City's audits, we noted conditions of personnel turnover as well as a lack of full- time employees who possess the skills, knowledge and experience in the governmental industry. Recommendation We recommend the City assess the accounting department staffing needs as well as hire an experienced governmental accounting person or train an existing staff member to enhance their skill sets. Current Year Status An initial working trial balance (WTB) was received from the City's Finance and Accounting department in February 2020 for the fiscal year ended September 30, 2018. During field work for this engagement, our 150 adjustments with minimally 3,000 data entry lines were required to correct the original WTB submission. A complete assessment of the skillset and knowledge of the City's team is required to address required daily tasks. View of Responsible Officials and Planned Corrective Actions The City is currently advertising the recruitment of an experienced governmental accounting professional to employ as the Finance Director. In addition, the City will assess and identify areas of weakness in the Finance Department to make corrective action, and provide the necessary resources and tools to further strengthen the department. The City has added additional resource consultants to assist with providing the government accounting experience on an interim basis. - 81 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Material Weakness 2017-03 There is No Physical Inventory of Infrastructure and Fixed Assets Criteria The implementation of GASB 34 established financial reporting standards for state and local governments. In connection therewith, the recognition of major general infrastructure assets is required to be capitalized and reported. Condition The City has not performed a physical inventory of infrastructure assets or other capital assets owned by the City. Recommendation We recommend that the City perform a physical inventory of its infrastructure and capital assets soon as time permits. Current Year Status This comment remains relevant for fiscal year 2018. View of Responsible Officials and Planned Corrective Actions The City is assessing its financial needs and resources as it develops a 5-year financial recovery plan as a condition of the State and Local Cooperation Agreement between the Governor and the City to fund a citywide physical inventory. This process will also include a procurement plan to request information to assess the scope and cost of a physical inventory of infrastructure assets or other capital assets owned by the City. - 82 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Material Weakness 2017-04 Reconciliation of Cash Accounts Criteria Timely preparation of complete and accurate bank reconciliations is a key to maintaining adequate control over both cash receipts and disbursements. Condition During review of cash accounts, we noted that the account reconciliation was not accurately completed. For governmental funds checks totaling $35,560 that cleared the bank account prior to September 30, 2017, were included in reconciling listing of outstanding as of September 30, 2017. For the water and sewer fund, checks totaling $583,141 that cleared the bank prior to September 30, 2017 were included in the reconciling listing of outstanding checks as of September 30, 2017. Cause Failure of the City to perform timely reconciliation of cash accounts. Effect Material journal entries were proposed to correct errors and misstatements. Recommendation We recommend that the bank reconciliations be reviewed for accuracy and completeness on a timely basis by someone with the appropriate skill -set identify significant discrepancies. The review should include tests of mechanical accuracy and tracing of items on the reconciliation to the relevant source documents. Current Year Status Bank reconciliations were not fully completed for the fiscal year ended September 30, 2018 until the month of April 2020. - 83 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Material Weakness 2017-04 Reconciliation of Cash Accounts (cont'd) View of Responsible Officials and Planned Corrective Actions For multiple years, the City's Finance Department was functioning without the required resources, along with a rotation of Finance Directors, therefore the staffing capacity and competency suffered. The City is currently advertising the recruitment of an experienced governmental accounting professional to employ as the Finance Director. In addition, the City will assess and identify areas of weakness within the Finance Department to make corrective action, and provide the necessary resources and tools to further strengthen the department. As a result, the City was behind in past financial and compliance audits and day to day operations. Currently, the City is addressing past financial and compliance audits and day to day operational needs of the Finance Department. The City is enhancing its bank reconciliation process to be completed timely, to ensure accurate financial reporting and implement a proper review process. The City's bank reconciliations were fully prepared, completed and reviewed for the fiscal year ended September 30, 2018. Policies and procedures are being updated to improve the preparation and monitoring controls over the bank reconciliation process. - 84 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Material Weakness 2017-05 Internal Control Over Payroll Processing and Personnel File Maintenance Criteria Prudent accounting practices include policies, procedures and controls over the recording, processing and reporting of accounting events and transactions. Condition During our review of payroll and personnel files we noted the following: o There were discrepancies between the pay rate documented on the Payroll register and the pay rate documented personnel files o Proper documentation to support pay rates were not available in all personnel files o There was no evidence of proper approval on timesheets o There was no evidence that payroll transactions including journal entries were properly reviewed and approved prior to posting to the general ledger Cause Failure to design and implement adequate internal controls over payroll and personnel file maintenance. Effect of Condition Unauthorized or fraudulent transactions could be posted, additionally lack of adequate reviews and approvals could result in financial statement misstatements. Recommendation We recommend that the City design and implement adequate internal controls and policies and procedures for payroll processing and personnel file maintenance. - 85 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Material Weakness 2017-05 Internal Control Over Payroll Processing and Personnel File Maintenance (cont'd) Current Year Status This comment remains relevant for fiscal year 2018. View of Responsible Officials and Planned Corrective Actions The City has reviewed the internal control finding on discrepancies between the pay rate as documented in the Payroll System and the pay rate as documented on personnel files. We concur and will implement the following: • On a monthly basis, and prior to the processing of the first payroll of the month, the City's Human Resources Director will be required to process a "Payroll Pay Rate Report" to monitor and review discrepancies and the completeness of personnel files. • To ensure that there is clear evidence of proper approval on timesheets, the City has developed an electronic timesheet approval process within its ADP payroll system. This system includes an automatic cross reference mechanism that ties each employee's name to a specific supervisor. Should an attempt be made to approve an employee's time by an unauthorized supervisor, that employee's time will be rejected in the system, until the properly matched supervisor has approved the timesheet. An electronic timesheet approval process is currently in effect. • The payroll register for each payroll period will be reviewed by the Finance Director or designated personnel to perform this supervisory function with a signature as evidence of review. - 86 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Significant Deficiency 2017-06 Pension Plan Remittance Criteria The City participates in a deferred compensation plan as described in IRC section 457. Pursuant to the Department of Labor (DOL) regulations, participants' contributions received by an employer must be remitted to the Plan no later than the 15th business day of the month following the month in which the participant contribution are received by the employer. Condition During our review of the 457 Pension plan payments, we noted that for 5 months during fiscal year 2017, the City failed to remit funds in a timely manner as outlined in the DOL regulations. Cause Failure of the City to design and implement adequate controls. Effect Non-compliance with specific regulations may cause the Plan to become ineligible for the tax benefits of Section 457. Recommendation We recommend that the City implement procedures that with ensure full compliance with the Plan documents. Current Year Status This comment remains relevant for fiscal year 2018. View of Responsible Officials and Planned Corrective Actions The City has addressed and corrected untimely remittance of 457 Pension plan payments by designating appropriate staff personnel to review and monitor routinely. There will be oversight and monitoring by both the Human Resources Director and staff within the Finance Department. In addition the City has implemented an electronically monitored payment process to ensure compliance with the plan documents as required. - 87 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status Material weakness 2015-01 Timeliness of Recording Individual Transactions Criteria Prudent accounting practices include policies, procedures and controls over the recording, processing and reporting of accounting events and transactions. Condition We believe that the City of Opa-locka does not maintain adequate financial records. Certain transactions are not summarized in a general ledger, nor all transactions recorded on the books in a timely manner. Such a system does not permit the preparation of accurate and reliable financial statements. Recommendation We recommend that a designated member of management performs periodic analysis of significant accounts to determine the completeness of account balances and investigate and resolve any issues identified. This practice serves to enforce checks and balances necessary for strong internal controls and accurate financial reporting. Current Year Status Similar condition noted in the current year audit. View of Responsible Officials and Planned Corrective Actions The City has assessed and reviewed the internal accounting policies, procedures and controls over the recording, processing and reporting of its accounting events and transactions. The City has also developed the necessary policies and accounting procedures to address this fmding. The City is actively reconciling accounts on a timely basis to produce relevant and accurate data. Additionally, the City is in the process of recruiting a Finance Director to provide financial management, oversight, staff supervision and to continually monitor and improve the Finance Department's financial reporting system. - 88 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Significant Deficiency 2015-02 Upgrade the Accounting System Criteria The financial accounting and reporting system should provide the information management needs to monitor the City's financial condition and make appropriate decisions in a timely basis. Condition The software programs used to perform the financial functions and related activity does not have the capability of producing reports that are necessary for management to accurately report on the City's financial position. For example, during our audit, we noted that the City was not able to provide an accounts payable aging report or an alternate report to support the accounts payable balance in the general ledger system. Recommendation We recommend that the City conduct an evaluation of the existing financial system and an analysis of projected needs. This evaluation should focus on ensuring that the City's financial systems maximize the productivity of its staff and meet the financial reporting needs of management. Current Year Status Similar condition noted in the current year audit. View of Responsible Officials and Planned Corrective Actions The City has determined that the existing financial accounting and reporting system does not meet all of its needs. However, in assessing and evaluating the operational and financial needs of the City, any modifications and or changes to the existing financial accounting and reporting system will occur when budgetary and operational circumstances permit. The City is developing its 5-year financial recovery plan as a condition of the State and Local Cooperation Agreement between the Governor and the City to fund a citywide physical inventory. This process will also include a procurement plan to request information, quote and/or proposal for a fmancial and reporting system. - 89 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) 2015-03 — Financial Reporting Policies and Procedures Manual and Reconciliation of General Ledger Accounts to Supporting Documents Criteria Prudent financial reporting requires accurate and timely reconciliation of general ledger accounts. The existence of a formal policy and procedures manual could assist with the timeliness of reconciling account balances. Condition During the audit, we noted that significant general ledger accounts were not properly reconciled. A formal accounting policies and procedures manual would facilitate continuity in the necessary procedures. Recommendation We recommend that the City develop a formal financial reporting policies and procedures manual which include the reconciliation of general ledger accounts on a monthly basis among other process and procedures. A benefit of monthly reconciliations is that errors do not accumulate but can be identified and attributed to a specific period, which makes it easier to perform future reconciliations. Also, formal documentation can be used to reinforce established policies and procedures and serve as a training tool. Current Year Status Similar condition noted in the current year audit. View of Responsible Officials and Planned Corrective Actions The City is developing and updating its existing financial reporting policies and procedures and has implemented systems to continually monitor the monthly general ledger reconciliation process, including providing supporting documentation for accounting transactions (i.e. journal entries). - 90 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Significant Deficiency 2015-04 Journal Entries Cause Failure of the City's design and implementation of adequate controls. Effect Lack of the proper internal control environment increases the risk of errors going undetected and fraud. Criteria Adjusting journal entries should be approved by a designated member of management and include clear descriptions and supporting documentation. This allows for a complete audit trail of journal entries posted. Condition During our audit procedures, we noted the journal entries lacked proper approval by a responsible official. We also noted that many of the entries lacked adequate supporting documentation. All journal entries should be accompanied by full explanations and reference to adequate supporting data and proper approval. Recommendation We recommend that a designated member of management review and approve all journal entries and initial the support for the entries to document their approval. This process would improve controls over adjustments to the general ledger. Prior Year Status The City has taken the necessary steps to ensure that all journal entries, along with the supporting documentation, are reviewed, approved and entered in a timely fashion to ensure accurate financial reporting. Current Year Status Item has been implemented and cleared for fiscal year 2018. - 91 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) Significant Deficiency 2015-05 Deficit Cash Balances Criteria The City utilizes separate pooled cash for governmental and enterprise funds, cash transactions should be accurately recorded in the respective funds. Condition During our audit we noted that the Safe Neighborhood fund and the Solidwaste fund had deficit GL cash account balances of $201,610 and $5,106,392, respectively. The City has not been able to determine the reason for the deficit cash balances. Cause Challenging cash flow issues for the City. Effect Untimely payment of the City's obligations and additional cost incurred as a result of potential penalty and interest payments to vendors. Recommendation We recommend that the City perform a thorough analysis of the deficit cash balances and determine the necessary actions to cure the deficit position. Prior Year Status The City has addressed the issue of the deficit cash and has made the necessary joumal entries to correct the balances of understated cash balances for the prior period. The City has developed management review and internal control processes to review and approve journal entries posted in the general ledger system. Current Year Status Item has been implemented and cleared for fiscal year 2018. - 92 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) 2014-01 Checks Outstanding for Over 12 Months Criteria While performing its monthly bank reconciliations, the City should monitor old outstanding checks as required by the City's policies and procedures. Condition Stale checks dating to the prior fiscal year are still being tracked in monthly bank reconciliations. Cause The City did not perform complete monthly bank reconciliation. Effect Cash balances are not accurately stated to reflect the true cash balance at the reported date. Recommendation We recommend that the City research stale checks dated over a year and follow the City's policies and procedures regarding stale checks. Prior Year Status The City has reviewed this issue and has voided all stale dated checks through the current period. The City has developed management review and internal control processes to review and approve journal entries posted in the general ledger system for voided and stale dated checks. Current Year Status Item has been implemented and cleared for fiscal year 2018. - 93 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section III — Prior Year - Financial Statement Findings and Status (Continued) 2014-02 Budgets (Repeat finding from FY2013) Criteria The budget is an important legal requirement for the City and is a public document. City management and officials are held accountable for any budget overages or amendments, since the budget demonstrates how the City is going to spend its tax payers' money. Condition Budgets are not being adhered to, properly balanced or being utilized by management as they should be. Cause Staff is not being held accountable for the budget and there is no monitoring from budget to actual expenditures. Effect The City may be out of compliance with the Florida Statutes if expenditures exceed budgeted amendments and poor decisions may be made if budgets are not being followed correctly which could place the City in financial difficulty. Recommendation We recommend that the City appoint someone within the finance department to take responsibility for the budget and to track budget to actual expenditures on a monthly basis in order to make informed financial decisions as well as any necessary budget amendments. Prior Year Status The City has hired a Budget Administrator who will have the responsibility of maintaining the budget, preparing budget amendments and ensuring that line items do not exceed approved budgeted amounts. The Budget Administrator will also advise staff of their divisional budgetary limitations. Current Year Status Item has been implemented and cleared for fiscal year 2018. - 94 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section HI — Prior Year - Financial Statement Findings and Status (Continued) 2014-03 Deteriorating Financial Condition (Repeat finding from FY2013) Criteria The City needs to be able to keep the revenues in line with expenditures and not rely on revenues from utility funds. Condition There has been a lack of information for timely reporting. Cause There have been significant staff turnovers at the highest level, which has disrupted continuity and has caused ineffective training for finance staff as well as a general lack of experience with specific matters related to the City. Property values continue to decline which causes a loss in property tax assessments and a reduction of a significant revenue stream. Unemployment levels remain very high at 17.5% and household incomes are not increasing. Effect If financial conditions continue to deteriorate, the City may require state assistance which would then be deemed a financial emergency pursuant to Section 218.503(1), Florida Statutes. Prior Year Status On June 1, 2016, the City of Opa-locka City Commission adopted a Resolution to request a declaration that the City is in a state of financial emergency to seek the appointment of a fmancial emergency board and other assistance pursuant to section 218.503(1), Florida Statues. The State of Florida, Office of the Govemor, issued Executive Order 16-135, signed by Florida Governor Rick Scott. The City is in process of preparing its Five -Year Recovery Plan in accordance with Florida Statue, 218.503 (3)(h). Current Year Status Although not fully resolved, significant progress has occurred. - 95 - CITY OF OPA-LOCKA, FLORIDA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2018 Section IV - Current Year Findings - Federal Award and State Project - Major Programs Internal Control and Compliance 66-468 -Capitalization Grants for Drinking Water State Revolving Funds 2016-01 Insufficient Supporting Documentation Criteria The Uniform guidance require that non -Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Condition During our cash management audit procedures, we noted that City did not maintain sufficient records to support reimbursements requested from the grantor. Cause Failure to implement adequate internal controls over the grant program resulted in insufficient record keeping. Effect Continued weaknesses in internal control over Federal awards can negatively impact the City's ability to obtain funding from Federal as well as non -Federal agencies. Recommendation We recommend that the City creates a formal document that outlines internal control policies and procedures over grant programs to ensure compliance. Prior Year Status Progress has occurred but condition remains applicable. Current Year Status This item is not applicable for fiscal year 2018. View of Responsible Officials and Planned Corrective Actions The City has made improvements to the grant administration, management and compliance process to comply with Federal, State and Local requirements. The City has developed a draft grant manual to assist with improving the internal control policies and procedures over grant programs to ensure meeting compliance requirements. In addition, sufficient documentation was provided to the external auditors for the audit period ended September 30, 2017. - 96 - nd ANTHONY BRUNSON P.A. CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS MANAGEMENT LETTER IN ACCORDANCE WITH THE RULES OF THE AUDITOR GENERAL OF THE STATE OF FLORIDA To the Honorable Mayor and Member of the City Council City of Opa-locka, Florida Report on the Financial Statements We were engaged to audit the financial statements of the City of Opa-locka, Florida, as of and for the fiscal year ended September 30, 2018, and have issued a qualified of opinion thereon dated, May 13, 2020. Auditor's Responsibility We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and Chapter 10.550, Rules of the Florida Auditor General. Other Reports and Schedule We have issued our Independent Auditors' Report on Internal Control over Financial Reporting and Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards; and Independent Accountant's Report on an Examination Conducted in Accordance with AICPA Professional Standards, Section 601, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Florida Auditor General. Disclosures in those reports and schedule, which are dated, May 13, 2020, should be considered in conjunction with this management letter. Prior Audit Findings Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding annual fmancial audit report. Corrective actions have been taken to address findings and recommendations made in the preceding annual financial audit report except as noted in the Schedule of Findings and Questioned Costs. Official Title and Legal Authority Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. The name or official title and legal authority of the Primary government are disclosed in the notes to the financial statements. Miramar Office 3350 SW 148tAvenue l Suite 110 Miramar, Florida 33027 (954) 874-1721 - 97 - CLIENT FOCUSED: SOLUTION DRIVEN info@abcpasolutions.com Miami Office 801 Brickell Avenue I Suite 900 Miami, Florida 33131 (305) 789-6673 Financial Condition Sections 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require that we apply appropriate procedures and report the results of our determination as to whether or not the City has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identification of the specific condition(s) met. On June 1, 2016, the City of Opa-locka City Commission adopted a Resolution to request a declaration that the City is in a state of fmancial emergency to seek the appointment of a financial emergency board and other assistance pursuant to section 218.503(1), Florida Statues. The State of Florida, Office of the Governor, issued Executive Order 16-135, signed by Florida Governor Rick Scott. The City has submitted its Five Year Recovery Plan in accordance with Florida Statue, 218.503 (3)(h). Annual Financial Report Sections 10.554(1)(i)5.b. and 10.556(7), Rules of the Auditor General, require that we apply appropriate procedures and report the results of our determination as to whether the annual financial report for the City for the fiscal year ended September 30, 2018, filed with the Florida Department of Financial Services pursuant to Section 218.32(1)(a), Florida Statutes, is in agreement with the annual financial audit report for the fiscal year ended September 30, 2018. As a result of the completion of our audit, an amended annual report will be filed with the Auditor General. Other Matters Section 10.554(1)(i)2., Rules of the Auditor General, requires that we address in the management letter any recommendations to improve financial management. Recommendations are included in the accompanying Schedule of Findings and Questioned Costs Section 10.554(1)(i)3., Rules of the Florida Auditor General, requires that we address noncompliance with provisions of contracts or grant agreements, or abuse, that have occurred, or are likely to have occurred, that have an effect on the financial statements that is less than material but which warrants the attention of those charged with governance. Matters to be disclosed pursuant to the Rules of the Auditor General Section 10.554(1)(i)3 are reported in the accompanying Schedule of Findings and Questioned Costs. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the members of the City Commission, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties. May 13, 2020 - 98 - ANTHONY BRUNSON P.A. CERTIFIED PUBLIC ACCOUNTANTS & BUSINESS ADVISORS INDEPENDENT ACCOUNTANT'S REPORT ON COMPLIANCE WITH REQUIREMENTS OF SECTION 218.415, FLORIDA STATUTES To the Honorable Mayor and Member of the City Council City of Opa-locka, Florida We were engaged to examine the City of Opa-locka's (the City) compliance with Section 218.415, Florida Statutes, Local Government Investment Policies for the year ended September 30, 2018. Management is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on the City's compliance with the specified requirements based on our examination. The City failed to provide written investment policy that is consistent with the requirements of the applicable Florida Statutes; as such were not able to test compliance with policy requirements. Additionally, the City's books and records were not adequately maintained, hence we were not able to perform sufficient procedures to determine the status of any surplus funds that the City may have. Because of the limitation on the scope of our examination discussed in the preceding paragraph, the scope of our work was not sufficient to enable us to express, and we do not express, an opinion on whether the City complied with the specified requirements of Section 218.415,lorida Statutes for the year ended September 30, 2018. May 13, 2020 Miramar Office 3350 SW 148tAvenue I Suite 110 Miramar, Florida 33027 (954) 874-1721 -99- i13 CLIENT FOCUSED: SOLUTION 1ORIN 1'.1 info@abcpasolutions.com Miami Office 801 Brickell Avenue I Suite 900 Miami, Florida 33131 (305) 789-6673