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HomeMy Public PortalAbout08222022 CRACity Council Special Joint Meeting Agenda PacketCRA/CITY COUNCIL SPECIAL JOINT MEETING AGENDA August 22, 2022 5:00 p.m. Council Chambers The Public is invited to view our meetings on the City of Crestview Live stream at https://www.cityofcrestview.org or the City of Crestview Facebook Page. You may submit questions on any agenda item in advance by 3:00 p.m. the day of the meeting to cityclerk@cityofcrestview.org. 1.Call to Order 2.Open Policy Making and Legislative Session 3.Action Items 3.1.Presentation by Purvis Gray - Audited Financial Statements 4.Comments from the Mayor and Council 5.Comments from the Audience 6.Adjournment The Presentations section is for items that were submitted by a citizen or group of Citizens no later than the Wednesday 2 weeks prior to the meeting to the Clerk's office for approval. These items will be scheduled under the section titles Presentations and Reports. Supporting documents must be submitted at this time to be on the regular agenda. All Action Items are for staff and elected officials only and must be submitted for approval no later than the Wednesday 10 days prior to the meeting. Those not listed on the regular agenda who wish to address the council should fill out a yellow card. The card must be submitted to the City Clerk. Speaking time should be three minutes or less, large groups may designate a spokesperson. All remarks should be addressed to the Council as a whole and not to individual members. All meeting procedures are outlined in the Meeting Rules and Procedures brochure available outside the Chambers. Florida Statute 286.0105. Notices of meetings and hearings must advise that a record is required to appeal. Each board, commission, or agency of this state or of any political subdivision thereof shall include in the notice of any meeting or hearing, if notice of the meeting or hearing is required, of such board, commission, or agency, conspicuously on such notice, the advice that, if a person decides to appeal any decision made by the board, agency, or commission with respect to any matter considered at such meeting or hearing, he or she will need a record of the proceedings, and that, for such purpose, he or she may need to ensure that a verbatim record of the proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. The requirements of this section do not apply to the notice provided in s. 200.065(3). In accordance with Section 286.26, F.S., persons with disabilities needing special accommodations, please contact Maryanne Schrader, City Clerk at cityclerk@cityofcrestview.org or 850- 628-1560 option2 within 48 hours of the scheduled meeting. Page 1 of 121 Page 2 of 121 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT CITY OF CRESTVIEW, FLORIDA CRESTVIEW, FLORIDA SEPTEMBER 30, 2021 TABLE OF CONTENTS Independent Auditor’s Report .................................................................................................................. 1-3 Management’s Discussion and Analysis ................................................................................................. 4-15 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position .................................................................................................................... 16 Statement of Activities .................................................................................................................... 17-18 Fund Financial Statements: Balance Sheet - Governmental Funds .................................................................................................. 19 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ........................................................................................... 20 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds............................................................................................... 21 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ...................................................................................................................... 22 Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General Fund .......................................................................... 23 Statement of Net Position - Proprietary Funds ............................................................................... 24-25 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds .............................................................................................................................. 26 Statement of Cash Flows - Proprietary Funds ................................................................................. 27-28 Statement of Fiduciary Net Position - Pension Trust Funds .......................................................................................................................... 29 Statement of Changes in Fiduciary Net Position - Pension Trust Funds .......................................................................................................................... 30 Notes to Basic Financial Statements..................................................................................................... 31-61 Page 3 of 121 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT CITY OF CRESTVIEW, FLORIDA CRESTVIEW, FLORIDA SEPTEMBER 30, 2021 TABLE OF CONTENTS Required Supplementary Information Schedule of Changes in the Total OPEB Liability and Related Ratios ...................................................... 62 Schedule of Changes in Net Pension Liabilities and Related Ratios - General Employees’ Retirement Plan ........................................................................ 63 Schedule of Changes in Net Pension Liabilities and Related Ratios – Police Officers’ and Firefighters’ Retirement Plan ............................................................................... 64 Schedule of Contributions - General Employees’ Retirement Plan .................................................... 65-66 Schedule of Contributions - Police Officers’ and Firefighters’ Retirement Plan ................................ 67-68 Schedule of Investment Returns - General Employees’ Retirement Plan ............................................... 69 Schedule of Investment Returns - Police Officers’ and Firefighters’ Retirement Plan ............................ 70 Combining Financial Statements Combining Balance Sheet – Non-Major Governmental Funds ................................................................ 71 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds ............................................................ 72 Combining Statement of Net Position – Non-Major Enterprise Funds ................................................... 73 Combining Statement of Revenues, Expenses, and Changes in Net Position – Non-Major Enterprise Funds .................................................................................... 74 Combining Statement of Cash Flows – Non-Major Enterprise Funds ..................................................... 75 Compliance Section Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ..................................................................................................... 76-78 Management Letter ............................................................................................................................ 79-80 Independent Accountant’s Report on Compliance with Section 218.415, Florida Statutes .................................................................................................................................... 81 Page 4 of 121 1 INDEPENDENT AUDITOR’S REPORT Honorable Mayor and City Council City of Crestview Crestview, Florida Report on the Financial Statements 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 Crestview (the City) as of and for the year ended September 30, 2021, 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Page 5 of 121 2 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of September 30, 2021, and the respective changes in financial position, and, where applicable, cash flows thereof and the budgetary comparisons for the General Fund 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, and other required supplementary information as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual non-major 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 non-major fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual non-major fund financial statements are fairly stated in all material respects in relation to the basic financial statements as a whole. Page 6 of 121 3 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 21, 2022, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’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. June 21, 2022 Tallahassee, Florida Page 7 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 4 As management of the City of Crestview, we offer readers of the City of Crestview’s financial statements this narrative overview and analysis of the financial activities of the City of Crestview for the fiscal year ended September 30, 2021. We encourage readers to consider the information presented here. FINANCIAL HIGHLIGHTS • The assets and deferred outflows of the City of Crestview exceeded liabilities and deferred inflows by approximately $66.3 million (net position) and represents an increase of approximately $5.8 million in net position from the prior year. Of this amount, approximately $41.8 million represents the net investment in capital assets (e.g., land, infrastructure, building, machinery and equipment), $4.5 million is restricted for future obligations, and $19.9 million is unrestricted and may be used to meet the City’s ongoing obligations to citizens and creditors. • The governmental net position increased by approximately $4.3 million from the prior year. • The net position of the business-type activities of the City increased by approximately $1.6 million from the prior year. • At the end of the current fiscal year, unassigned fund balance for the General Fund was $16.9 million, or 73% of the total General Fund expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the City of Crestview’s basic financial statements. The City of Crestview’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements - The government-wide financial statements are designed to provide readers with a broad overview of the City of Crestview’s finances, in a manner similar to a private- sector business. The statement of net position presents information on all of the City of Crestview’s assets and liabilities, with the difference between the two reported as net position. The statement combines and consolidates the governmental fund’s current financial resources (short-term spendable resources) with capital assets and long-term obligations. Over time, increases or decreases in net position may serve as a useful indicator of the financial position of the City of Crestview. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flow in future fiscal periods. Page 8 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 5 Both of the government-wide financial statements distinguish functions of the City of Crestview that are principally supported by taxes and inter-governmental 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 of Crestview include general government (city clerk, city council, mayor, finance, service maintenance and non-departmental expenses), public safety (police and fire), public works (administration and engineering), transportation (streets and right-of-way), culture and recreation (parks and library) and debt service interest. The business-type activities of the City of Crestview include utilities (water and sewer), sanitation, stormwater and the newly formed entity Crestview Unlimited will operate the City’s golf operation. The government- wide financial statements are found on pages 16-18 of this report. Fund financial statements - A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Crestview, 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 three categories: governmental funds, proprietary funds and fiduciary funds. FUNDS Governmental funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as 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 financial requirements. Found on pages 19-23 of this report are the basic governmental fund financial statements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide 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 this comparison between governmental funds and governmental activities. The City of Crestview maintains five individual governmental funds (General Fund, Community Redevelopment Fund, Law Enforcement Trust Fund, Debt Service Fund and the Permanent Fund). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, which is considered a major fund. Data from the other four governmental funds (Community Redevelopment Fund, Debt Service Fund, Law Enforcement Trust Fund, and Permanent Fund) are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. Page 9 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 6 The City of Crestview adopts an annual appropriated budget for its General Fund. A budgetary comparison statement is provided for the General Fund to demonstrate compliance with the budget. Proprietary funds - All proprietary funds of the City of Crestview are maintained as enterprise funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Crestview uses enterprise funds to account for its utilities operations (water operations and distribution and sewer collections and treatment), Stormwater, Sanitation and CV Unlimited (Blackwater Golf Club) operations. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The Utilities Fund and Sanitation Fund are both considered major proprietary funds. Data from the other two enterprise funds (Stormwater and CV Unlimited) are combined into a s ingle, aggregated presentation. The proprietary fund financial statements are found on pages 24-28 of this report. Fiduciary Funds - Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City of Crestview’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary fund financial statements are found on pages 29-30 of this report. NOTES TO THE FINANCIAL STATEMENTS The notes provide additional information, which is essential to the full understanding of the data provided in the government-wide and fund financial statements. On page 31 of this report is the beginning of the notes to the financial statements. OTHER INFORMATION The combining statements referred to earlier in connection with the non-major governmental funds are presented immediately following the notes to the financial statements. The combining and individual fund statements and schedules are found on pages 71-75 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City of Crestview, assets exceeded liabilities by $66.3 million (net position) for the fiscal year ended 2021 as reported in Table 1. Page 10 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 7 TABLE 1 CITY OF CRESTVIEW, FLORIDA NET POSITION AS OF SEPTEMBER 30, 2021 AND 2020 By far the largest portion of the City of Crestview’s net position, approximately $41.8 million (or 63%), represent the investment in capital assets (e.g., land, infrastructure, building, machinery and equipment). An additional portion of the City of Crestview’s net position, approximately $4.5 million (or 18%) represent resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $19.9 million, may be used to meet the government’s ongoing obligations to citizens and creditors. The overall increase in the City’s net position was $5.8 million during FY 2021. Governmental Activities - Governmental activities increased the City of Crestview’s net position by $4.3 million and business-type activities increased the City’s net position by $1.6 million. Reported in Table 2 are the key elements of these changes. Total assets, excluding capital assets $23,362,150 $31,019,836 $10,802,751 $9,870,445 $34,164,901 $40,890,281 Capital assets, net of depreciation 30,399,718 28,083,250 42,453,594 40,874,459 72,853,312 68,957,709 Total assets 53,761,868 59,103,086 53,256,345 50,744,904 107,018,213 109,847,990 Deferred outflows of resources 3,240,449 2,249,771 1,230,848 1,232,752 4,471,297 3,482,523 Total assets and deferred outflows $57,002,317 $61,352,857 $54,487,193 $51,977,656 $111,489,510 $113,330,513 Total liabilities, excluding long-term liabilities $3,009,634 $10,458,085 $4,579,360 $1,804,448 $7,588,994 $12,262,533 Long-term liabilities 14,188,161 18,039,334 18,685,234 20,958,246 32,873,395 38,997,580 Total liabilities 17,197,795 28,497,419 23,264,594 22,762,694 40,462,389 51,260,113 Deferred inflows of resources 4,056,780 1,394,774 692,691 241,167 4,749,471 1,635,941 Net position: Net investment in capital assets 17,913,413 14,871,971 23,899,384 21,405,074 41,812,797 36,277,045 Restricted 2,691,908 2,175,915 1,841,497 1,506,789 4,533,405 3,682,704 Unrestricted 15,142,421 14,412,778 4,789,027 6,061,932 19,931,448 20,474,710 Total net position 35,747,742 31,460,664 30,529,908 28,973,795 66,277,650 60,434,459 Total liabilities, deferred inflows and net position $57,002,317 $61,352,857 $54,487,193 $51,977,656 $111,489,510 $113,330,513 202020212020202120202021 TotalBusiness-Type ActivitiesGovernmental Activities Page 11 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 8 TABLE 2 CITY OF CRESTVIEW, FLORIDA CHANGE IN NET POSITION FOR THE YEARS ENDED SEPTEMBER 30, 2021 AND 2020 Financial Impacts There are eight basic impacts on revenues and expenses as reflected below: Revenues • Economic Condition - This can reflect a declining, stable, or growing economic environment and has a substantial impact on property, sales, gas or other tax revenue. • Council Approved Rate Adjustments - While certain tax rates are set by statute, the City Council has significant authority to impose and periodically adjust rates (water, wastewater, sanitation, impact fees, recreation user fees, etc.). Program revenues: Charges for services $1,336,259 $1,163,097 $12,586,031 $12,195,718 $13,922,290 $13,358,815 Operating grants and contributions 226,034 4,305,524 28,083 - 254,117 4,305,524 Capital grants and contributions 300,000 20,808 - - 300,000 20,808 General revenues: Property taxes 8,827,803 8,149,046 - - 8,827,803 8,149,046 Other taxes 6,216,544 5,804,946 - - 6,216,544 5,804,946 Other revenues 8,063,127 6,330,712 3,728 200,928 8,066,855 6,531,640 Total revenues 24,969,767 25,774,133 12,617,842 12,396,646 37,587,609 38,170,779 Expenses: General government 5,207,463 5,340,050 - - 5,207,463 5,340,050 Public safety 11,026,288 10,152,718 - - 11,026,288 10,152,718 Economic Environment 77,778 - - - 77,778 - Transportation 1,775,117 1,725,466 - - 1,775,117 1,725,466 Culture and recreation 1,778,176 1,796,051 - - 1,778,176 1,796,051 Interest on long-term debt 338,124 316,558 - - 338,124 316,558 Utilities fund - - 7,276,115 7,563,268 7,276,115 7,563,268 Sanitation fund - - 3,918,647 3,916,718 3,918,647 3,916,718 Stormwater fund - - 346,710 - 346,710 - Total expenses 20,202,946 19,330,843 11,541,472 11,479,986 31,744,418 30,810,829 Increase (decrease) in net assets before transfers 4,766,821 6,443,290 1,076,370 916,660 5,843,191 7,359,950 Transfers (479,743) (74,030) 479,743 74,030 - - Increase (decrease) in net position $4,287,078 $6,369,260 $1,556,113 $990,690 $5,843,191 $7,359,950 Governmental Activities Business-type Activities Total 2021 2020 2021 2020 2021 2020 Page 12 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 9 • Changing Patterns in Intergovernmental Grant Revenue (both recurring and non-recurring) – Certain recurring revenues (state revenue sharing and community development grants) may experience significant changes periodically while non-recurring (or one-time) grants are less predictable and often distorting in their impact on year-to-year comparisons. • Market Impacts on Investment Income - The current market conditions have little influence on the City’s investment income since the majority of the City’s non-pension investments consist of certificates of deposit and deposits with the State Board of Administration. Expenses • Introduction of New Programs - Within functional expense categories, (police, fire, public works, community development, parks and recreation, etc.) individual programs may be added or deleted to meet changing community needs. • Authorized Position Adjustments - Changes in service demand may cause the City Council to change authorized staffing. Staffing costs (salary and related benefits) represent approximately 68% of the City’s operating costs. • Salary Adjustments - The ability to attract and retain human and intellectual resources requires the City to strive to approach a competitive salary range position in the marketplace. • Inflation - While overall inflation appears to be reasonably modest, the City is a major consumer of certain commodities such as paper, chemicals, supplies, fuel, oil, and parts. Some fluctuations may experience commodity specific increases. Current Year Impacts - Governmental Activities • Net position in the Governmental Activities increased by approximately $6.4 million in the prior year and increased approximately $4.3 million in the current year. Total revenues in the governmental activities decreased by approximately $804 thousand and expenditures increased approximately $872 thousand. • Property taxes increased by approximately $679 thousand (or 8%) due to improving property values. • Other taxes which include Franchise fees, utility and fuel taxes increased by approximately $412 thousand (or 7%) due to improving current economic conditions. • Other revenues which include state shared revenues increased by approximately $1.7 million (or 27%) due to improving economic conditions in the City and the State of Florida. Page 13 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 10 The following chart compares the program revenues from governmental activities to the related expenses. Please note that expenses exceed revenues as government seeks to identify the needs of citizens and then raise resources to meet those needs. The excess of expenses over program revenues is then funded by the remaining general revenues of the government. The chart below reflects the percentage of individual revenue sources to total revenue sources for governmental activities. Charges for Services, grants, and contributions are considered program revenues. Taxes, intergovernmental revenues, interest and other miscellaneous revenues are considered general revenues. $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 General Government Public Safety Economic Environment Transportation Culture and Recreation Interest Chart 1 Expenses and Program Revenue -Governmental Activities Expenses Program Revenues 5.35% 0.91% 1.20% 35.35% 24.90% 32.29% Revenues by Source -Governmental Activities Charges for services Operating grants and contributions Capital grants and contributions Property taxes Other taxes Other revenues Page 14 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 11 Business-Type Activities The net position from business-type activities increased by approximately $1.6 million. • Charges for services for business-type activities increased by approximately $390,000 (or 3%). • Total operating expenses increased by approximately $61,000 (less than 1%). The following chart compares the program revenues from the City’s Business-type activities to the related expenses for the fiscal year. Business-type activities differ from governmental activities in that charges for services are designed specifically to recover the cost of providing those services, including capital costs such as depreciation or debt service. The following chart shows the composition of revenues from the City’s business-type activities. - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 Utilities Sanitation Stormwater Chart 3 Expenses and Program Revenue -Business-Type Activities Expenses Program Revenues 99.75% 0.22%0.03% Chart 4 Revenues by Source -Business-Type Activities Charges for services Operating grants and contributions Other revenues Page 15 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 12 FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS As noted earlier, the City of Crestview uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Governmental Funds - The focus of the City of Crestview’s governmental funds is to provide information on near-term inflows, and balances of spendable resources. Such information is useful in assessing the City of Crestview’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City of Crestview’s governmental funds reported combined ending fund balance of $21.8 million, an increase of $1.2 million in comparison with the prior year. Approximately 78% of this total amount ($16.9 million) constitutes unassigned fund balance in the General Fund, which is available for spending at the City Council’s discretion. The remainder of fund balance is not available for general spending because it has already been assigned by the City ($2.5 million). The General Fund is the chief operating fund of the City of Crestview. At the end of the current fiscal year, unassigned fund balance of the General Fund was $16.9 million, while total fund balance reached $19.4 million. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total expenditures. Unassigned fund balance represents 73% of the total General Fund expenditures, while total fund balance represents 83% of that same amount. Proprietary Funds - The City of Crestview’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the proprietary funds totaled $4.8 million at the end of the year; of that the Utilities Fund amounted to $1 million, the Sanitation Fund totaled $3.2 million, and the non-major funds totaled 548 thousand. The net position for this fiscal year in the proprietary funds increased by approximately $1.6 million. Other factors concerning the finances of these two funds have already been addressed in the discussion of the City of Crestview’s business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS During the year, the City’s budget was amended to correctly reflect capital lease payments in the general fund budget. Revenues for the year were less than budget by approximately $698,000. Expenditures were less than budgeted amounts by approximately $4.2 million. Page 16 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 13 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The City of Crestview’s investments in capital assets for its governmental and business-type activities as of September 30, 2021, amounts to $119.4 million ($71.8 million net of accumulated depreciation). This investment in capital assets includes land, buildings, water, wastewater and drainage systems improvements, machinery and equipment, park facilities, roads, and highways, etc. The total increase in the City of Crestview’s gross capital assets for the current fiscal year were $6.1 million or 5% overall, and is summarized as follows: • Land purchases ($1,927,852). • Construction in progress ($1,957,353). • Improvements to highways and streets and other infrastructure ($436,871) and water and sewer system ($785,792). • Purchases of equipment and vehicles for the police, fire, streets, permitting and utility departments ($1,038,506). • Intangible assets ($117,416). TABLE 3 CITY OF CRESTVIEW CAPITAL ASSETS Land $3,758,127 $2,325,326 $2,711,370 $2,216,319 $6,469,497 $4,541,645 Construction in progress 8,490,490 8,048,026 6,042,657 4,527,768 14,533,147 12,575,794 Buildings 8,394,828 8,394,828 8,954,298 8,954,298 17,349,126 17,349,126 Improvements 8,203,676 7,766,805 3,635,890 3,513,032 11,839,566 11,279,837 Infrastructure 15,071,839 15,071,839 36,401,111 35,738,177 51,472,950 50,810,016 Machinery and equipment 9,002,301 8,842,403 7,149,636 6,884,367 16,151,937 15,726,770 Capital lease equipment 1,591,177 977,838 - - 1,591,177 977,838 Intangible Assets 1,007,202 889,786 - - 1,007,202 889,786 Total prior to depreciation 55,519,640 52,316,851 64,894,962 61,833,961 120,414,602 114,150,812 Less accumulation depreciation 25,119,922 23,847,430 22,441,368 20,959,502 47,561,290 44,806,932 Total $30,399,718 $28,469,421 $42,453,594 $40,874,459 $72,853,312 $69,343,880 Governmental Activities Business-Type Activities Total 2021 2020 2021 2020 2021 2020 Page 17 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 14 Long-Term Debt At the end of the current fiscal year, the City of Crestview had total long-term debt outstanding of $31.8 million. The City of Crestview’s debt represents bonds secured solely by specified revenue sources (i.e., revenue bonds), state revolving loans, and capital leases. The State of Florida does not place a legal limit of debt on municipalities. For general obligation debts, greater than one year, the City is required to conduct a voter referendum process for approval of this type of debt. The City has no general obligation debts greater than one year as of September 30, 2021. TABLE 4 CITY OF CRESTVIEW OUTSTANDING DEBT REVENUE BONDS, NOTES PAYABLE AND CAPITAL LEASES Net of deferred outflows related to losses on bond refunding, total long-term debt decreased by approximately $2 million during the 2021 fiscal year. Additional information on the City of Crestview’s long-term debt can be found in Note 6 of this report. ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The State of Florida, by constitution, does not have a state personal income tax and therefore the State operates primarily using sales, gasoline, and corporate income taxes. Local governments (cities, counties, and school boards) primarily rely upon property and limited array of permitted other taxes (sales, gasoline, utility service taxes, etc.) and fees (franchise and business license) for their governmental activities. There are a limited number of state shared revenues and recurring and non-recurring grants from both the state and federal government, which provide funding for specific programs, projects, or activities. For the business-type activities and certain governmental activities (permitting and recreational programs) the user pays a related fee or charge associated with the service. The level of taxes, fees, and charges for services (including development related impact fees) has an impact on the City’s specific competitive ability to encourage development and redevelopment (office, retail, residential, and industrial) for those businesses that choose to locate in our jurisdiction. As the City and surrounding area continues to experience growth, the City places great emphasis on forecasting the needs of the future to ensure the continued financial and economic health of our community. Notes payable $- $- $8,518,775 $9,262,411 $8,518,775 $9,262,411 Capital leases 936,328 692,472 95,027 - 1,031,355 692,472 Revenue bonds 11,549,977 12,904,978 10,728,850 11,052,313 22,278,827 23,957,291 Total $12,486,305 $13,597,450 $19,342,652 $20,314,724 $31,828,957 $33,912,174 Governmental Activities Business-Type Activities Total 2021 2020 2021 2020 2021 2020 Page 18 of 121 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) 15 The military has a significant presence in our community with Duke Field, Eglin Air Force Base, Hurlburt Special Operations and the 7th Special Forces Operations Group, employing military and civilian personnel. These installations are essential to the continued long-term economic vitality of this area. Eglin Air Force Base is the world’s largest Department of Defense installation, spanning 724 square miles. Defense contractor companies are established throughout the Northwest Florida region. The City is undertaking several processes to assist in future planning by creating a multi-year capital improvement program. Another factor that is being looked at is a replacement program for capital equipment such as vehicles, computers, etc. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the City of Crestview’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Office of the Finance Director, 198 N. Wilson Street, Crestview, Florida 32536. The City’s website address is www.cityofcrestview.org. Inquiries may also be sent via email to the Finance Department at ginatoussiant@cityofcrestview.org. Page 19 of 121 BASIC FINANCIAL STATEMENTS Page 20 of 121 Governmental Business-Type Activities Activities Total Assets Cash and Cash Equivalents 21,033,280$ 6,547,462$ 27,580,742$ Investments 53,125 - 53,125 Accounts Receivable, Net 482,392 1,529,067 2,011,459 Due from Other Governments 903,209 - 903,209 Prepaid Expenses 5,535 - 5,535 Restricted Assets: Cash and Cash Equivalents 764,962 2,414,495 3,179,457 Investments - 260,265 260,265 Net Pension Asset 119,647 51,462 171,109 Capital Assets: Assets not Being Depreciated 12,248,617 8,754,027 21,002,644 Assets Being Depreciated, Net 18,151,101 33,699,567 51,850,668 Total Assets 53,761,868 53,256,345 107,018,213 Deferred Outflows of Resources Deferred Loss on Bond Refunding - 788,442 788,442 Other Postemployment Benefits 468,092 78,614 546,706 Pensions 2,772,357 363,792 3,136,149 Total Deferred Outflows of Resources 3,240,449 1,230,848 4,471,297 Liabilities Accounts Payable 587,846 463,092 1,050,938 Accrued Expenses 344,108 50,688 394,796 Unearned Revenue 54,761 1,936,085 1,990,846 Due to Other Governments 493,623 - 493,623 Accrued Interest 79,373 74,728 154,101 Customer Deposits 7,961 885,807 893,768 Non-Current Liabilities: Due Within One Year 1,441,962 1,168,960 2,610,922 Due in More Than One Year 14,188,161 18,685,234 32,873,395 Total Liabilities 17,197,795 23,264,594 40,462,389 Deferred Inflows of Resource Other Postemployment Benefits 214,336 35,997 250,333 Pensions 3,842,444 656,694 4,499,138 Total Deferred Inflows of Resources 4,056,780 692,691 4,749,471 Net Position Net Investment in Capital Assets 17,913,413 23,899,384 41,812,797 Restricted for: Non-Spendable 53,125 - 53,125 Impact Fees 293,233 1,242,781 1,536,014 Debt Service 471,730 348,716 820,446 Reserve and Replacement - 250,000 250,000 Building Permits 964,970 - 964,970 Redevelopment 908,850 - 908,850 Unrestricted 15,142,421 4,789,027 19,931,448 Total Net Position 35,747,742$ 30,529,908$ 66,277,650$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2021 Primary Government The accompanying notes are an integral part of these financial statements. 16 Page 21 of 121 Operating Capital Charges for Grants and Grants and Function/Program Activities Expenses Services Contributions Contributions Governmental Activities General Government 5,207,463$ 716,689$ 3,148$ 300,000$ Public Safety 11,026,288 279,948 12,208 - Economic Environment 77,778 - 110,678 - Transportation 1,775,117 - - - Culture and Recreation 1,778,176 339,622 100,000 - Interest 338,124 - - - Total Governmental Activities 20,202,946 1,336,259 226,034 300,000 Business-Type Activities Utilities 7,276,115 7,902,735 - - Sanitation 3,918,647 4,295,561 28,083 - Stormwater 346,710 387,735 - - Total Business-Type Activities 11,541,472 12,586,031 28,083 - Total 31,744,418$ 13,922,290$ 254,117$ 300,000$ General Revenues Taxes: Property Taxes Franchise and Utility Taxes Communication Service Tax Fuel Taxes Other Taxes State-Shared Revenues Other Intergovernmental Revenue Investment Earnings Miscellaneous Revenue Transfers Total General Revenues Change in Net Position Net Position, Beginning of Year Net Position, End of Year CITY OF CRESTVIEW, FLORIDA YEAR ENDED SEPTEMBER 30, 2021 STATEMENT OF ACTIVITIES Program Revenues The accompanying notes are an integral part of these financial statements. 17 Page 22 of 121 Governmental Business-Type Activities Activities Total (4,187,626)$ -$ (4,187,626)$ (10,734,132) - (10,734,132) 32,900 - 32,900 (1,775,117) - (1,775,117) (1,338,554) - (1,338,554) (338,124) - (338,124) (18,340,653) - (18,340,653) - 626,620 626,620 - 404,997 404,997 - 41,025 41,025 - 1,072,642 1,072,642 (18,340,653) 1,072,642 (17,268,011) 8,827,803 - 8,827,803 4,527,918 - 4,527,918 766,804 - 766,804 794,456 - 794,456 127,366 - 127,366 7,768,083 - 7,768,083 58,830 - 58,830 14,247 3,728 17,975 221,967 - 221,967 (479,743) 479,743 - 22,627,731 483,471 23,111,202 4,287,078 1,556,113 5,843,191 31,460,664 28,973,795 60,434,459 35,747,742$ 30,529,908$ 66,277,650$ CITY OF CRESTVIEW, FLORIDA Net (Expense) Revenue and Changes in Net Position YEAR ENDED SEPTEMBER 30, 2021 STATEMENT OF ACTIVITIES The accompanying notes are an integral part of these financial statements. 18 Page 23 of 121 Other Total Governmental Governmental General Funds Funds Assets Cash and Cash Equivalents 18,919,866$ 2,113,414$ 21,033,280$ Cash and Cash Equivalents - Restricted 622,770 142,192 764,962 Investments - 53,125 53,125 Accounts Receivable - Other 482,392 - 482,392 Interfund Receivables 110,678 - 110,678 Due from Other Governments 792,531 110,678 903,209 Prepaid Expenses 5,535 - 5,535 Total Assets 20,933,772$ 2,419,409$ 23,353,181$ Liabilities Accounts Payable 585,423$ 2,423$ 587,846$ Accrued Expenses 328,249 15,859 344,108 Customer Deposits 7,961 - 7,961 Due to Other Governments 493,623 - 493,623 Interfund Payables - 110,678 110,678 Unearned Revenue 54,761 - 54,761 Total Liabilities 1,470,017 128,960 1,598,977 Fund Balances Non-Spendable 5,535 53,125 58,660 Restricted 622,771 2,016,012 2,638,783 Assigned 1,880,909 221,312 2,102,221 Unassigned 16,954,540 - 16,954,540 Total Fund Balances 19,463,755 2,290,449 21,754,204 Total Liabilities and Fund Balances 20,933,772$ 2,419,409$ 23,353,181$ CITY OF CRESTVIEW, FLORIDA BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30, 2021 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES The accompanying notes are an integral part of these financial statements. 19 Page 24 of 121 Total Funds Balances - Governmental Funds 21,754,204$ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds. Capital Assets 55,712,367$ Less Accumulated Depreciation (25,312,649) 30,399,718 Certain pension and other postemployment benefits are being deferred and amortized over a period of years: Deferred Outflows Related to Pensions and OPEB 3,240,449 Deferred Inflows Related to Pensions and OPEB (4,056,780) (816,331) Long-term liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds: Accrued Interest Payable (79,373) Bonds, Notes and Capital Leases (12,486,305) Net Pension Liability (Asset)(339,292) Compensated Absences (993,084) Other Postemployment Benefit Obligation (1,691,795) (15,589,849) Total Net Position - Governmental Activities 35,747,742$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF NET POSITION - GOVERNMENTAL FUNDS SEPTEMBER 30, 2021 RECONCILIATION OF THE BALANCE SHEET TO THE The accompanying notes are an integral part of these financial statements. 20 Page 25 of 121 Other Total Governmental Governmental General Funds Funds Revenues Taxes 13,025,675$ -$ 13,025,675$ License and Permits 1,979,272 677,071 2,656,343 Intergovernmental 7,842,269 110,678 7,952,947 Charges for Services 354,805 - 354,805 Fines and Forfeitures 243,250 - 243,250 Miscellaneous 1,234,351 2,396 1,236,747 Total Revenues 24,679,622 790,145 25,469,767 Expenditures Current: General Government 5,970,093 283,881 6,253,974 Public Safety 10,825,248 470,561 11,295,809 Transportation 1,468,242 - 1,468,242 Economic Environment - 77,778 77,778 Culture and Recreation 3,197,760 - 3,197,760 Debt Service: Principal 1,512,336 209,928 1,722,264 Interest 375,062 83,818 458,880 Total Expenditures 23,348,741 1,125,966 24,474,707 Excess (Deficiency) of Revenues Over (Under) Expenditures 1,330,881 (335,821) 995,060 Other Financing Sources (Uses) Transfers in 882,500 522,853 1,405,353 Transfers (out)(1,727,596) (157,500) (1,885,096) Capital Lease Obligation 532,830 80,509 613,339 Total Other Financing Sources (Uses)(312,266) 445,862 133,596 Net Changes in Fund Balances 1,018,615 110,041 1,128,656 Fund Balance, Beginning of Year 18,445,140 2,180,408 20,625,548 Fund Balance, End of Year 19,463,755$ 2,290,449$ 21,754,204$ CITY OF CRESTVIEW, FLORIDA IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2021 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES The accompanying notes are an integral part of these financial statements. 21 Page 26 of 121 Net Change in Fund Balances - Governmental Funds 1,128,656$ Amounts reported for governmental activities in the statement of activities are different because: The repayment of principal on long-term debt consumes the current financial resources of governmental funds but has no effect on the government-wide net position. Also, governmental funds report the effects of premiums, discounts and similar items when debt is first issued, whereas these amounts are deferred in the Statement of Activities. Principal Payments 1,722,264$ Capital Lease Obligation (613,339) Amortization of Bond Premium 2,220 1,111,145 Capital outlays are reported in the general fund as expenditures. However, in the statement of activities, the cost of those assets is allocated over their useful lives as depreciation expense. Expenditures for Capital Assets 3,095,516 Donation of Capital Assets 300,000 (Current Year Depreciation)(1,465,219) 1,930,297 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds: Change in Accrued Interest 118,536 Change in Accrued Compensated Absences (119,073) Change in Net Pension Liability (Asset)268,888 Change in Other Postemployment Benefits (151,371) 116,980 Change in Net Position - Governmental Activities 4,287,078$ CITY OF CRESTVIEW, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, STATEMENT OF ACTIVITIES - GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2021 AND CHANGES IN FUND BALANCES TO THE The accompanying notes are an integral part of these financial statements. 22 Page 27 of 121 Variance with Final Budget - Original Final Positive Budget Budget Actual (Negative) Revenues Taxes 12,602,691$ 12,602,691$ 13,025,675$ 422,984$ License and Permits 1,445,500 1,445,500 1,979,272 533,772 Intergovernmental 5,888,900 10,421,329 7,842,269 (2,579,060) Charges for Services 225,010 225,010 354,805 129,795 Fines and Forfeitures 290,500 290,500 243,250 (47,250) Miscellaneous 234,300 392,292 1,234,351 842,059 Total Revenues 20,686,901 25,377,322 24,679,622 (697,700) Expenditures Current: General Government 4,998,444 10,311,889 5,970,093 4,341,796 Public Safety 11,133,806 11,277,109 10,825,248 451,861 Transportation 2,343,529 2,343,529 1,468,242 875,287 Culture and Recreation 2,250,307 3,532,270 3,197,760 334,510 Debt Service: Principal 94,091 94,091 1,512,336 (1,418,245) Interest 15,499 15,499 375,062 (359,563) Total Expenditures 20,835,676 27,574,387 23,348,741 4,225,646 Excess (Deficiency) of Revenues Over (Under) Expenditures (148,775) (2,197,065) 1,330,881 3,527,946 Other Financing Sources (Uses) Transfers in 882,500 882,500 882,500 - Transfers (out)(1,751,986) (1,751,986) (1,727,596) 24,390 Capital Lease Obligation 532,830 532,830 Total Other Financing Sources (Uses)(869,486) (869,486) (312,266) 557,220 Reserves 1,018,261 3,066,551 18,445,140 15,378,589 Net Change in Fund Balances -$ -$ 19,463,755$ 19,463,755$ YEAR ENDED SEPTEMBER 30, 2021 FUND BALANCES BUDGET AND ACTUAL - GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN CITY OF CRESTVIEW, FLORIDA The accompanying notes are an integral part of these financial statements. 23 Page 28 of 121 Utilities Sanitation Other Fund Fund Funds Total Assets Current Assets: Cash and Cash Equivalents 3,014,207$ 2,952,970$ 580,285$ 6,547,462$ Accounts Receivable, Net 971,334 533,914 23,819 1,529,067 Total Current Assets 3,985,541 3,486,884 604,104 8,076,529 Non-Current Assets: Restricted Assets: Cash and Cash Equivalents 2,414,495 - - 2,414,495 Investments 260,265 - - 260,265 Net Pension Asset 46,778 - 4,684 51,462 Capital Assets: Assets not Being Depreciated 8,754,027 - - 8,754,027 Assets Being Depreciated, Net 33,699,567 - - 33,699,567 Total Non-Current Assets 45,175,132 - 4,684 45,179,816 Total Assets 49,160,673 3,486,884 608,788 53,256,345 Deferred Outflows of Resources Deferred Loss on Bonding Refunding 788,442 - - 788,442 Other Postemployment Benefits 71,458 - 7,156 78,614 Pensions 330,678 - 33,114 363,792 Total Deferred Outflows of Resources 1,190,578 - 40,270 1,230,848 Enterprise Funds Business-Type Activities CITY OF CRESTVIEW, FLORIDA STATEMENT OF NET POSITION PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2021 The accompanying notes are an integral part of these financial statements. 24 Page 29 of 121 Utilities Sanitation Other Fund Fund Funds Total Liabilities Current Liabilities: Accounts Payable 179,494$ 281,834$ 1,764$ 463,092$ Accrued Expenses 47,824 - 2,864 50,688 Accrued Interest 74,728 - - 74,728 Unearned Revenue 1,936,085 - - 1,936,085 Customer Deposits 885,807 - - 885,807 Revenue Bonds, Notes and Capital Leases Payable 1,155,205 - - 1,155,205 Compensated Absences 13,755 - - 13,755 Total Current Liabilities 4,292,898 281,834 4,628 4,579,360 Non-Current Liabilities: Other Postemployment Benefits Obligation 258,267 - 25,862 284,129 Compensated Absences 206,438 - 7,220 213,658 Revenue Bonds, Notes and Capital Leases Payable 18,187,447 - - 18,187,447 Total Non-Current Liabilities 18,652,152 - 33,082 18,685,234 Total Liabilities 22,945,050 281,834 37,710 23,264,594 Deferred Inflows of Resources Other Postemployment Benefits 32,720 - 3,277 35,997 Pensions 596,919 - 59,775 656,694 Total Deferred Inflows of Resources 629,639 - 63,052 692,691 Net Position Net Investment in Capital Assets, Net of Related Debt 23,899,384 - - 23,899,384 Restricted 1,841,497 - - 1,841,497 Unrestricted 1,035,681 3,205,050 548,296 4,789,027 Total Net Position 26,776,562$ 3,205,050$ 548,296$ 30,529,908$ Enterprise Funds Business-Type Activities STATEMENT OF NET POSITION PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2021 CITY OF CRESTVIEW, FLORIDA The accompanying notes are an integral part of these financial statements. 25 Page 30 of 121 Utilities Sanitation Other Fund Fund Funds Total Operating Revenue Charges for Service 7,574,230$ 4,295,561$ 387,735$ 12,257,526$ Other 328,505 - - 328,505 Total Operating Revenue 7,902,735 4,295,561 387,735 12,586,031 Operating Expenses Personnel Expenses 2,018,267 - 276,128 2,294,395 Purchased Services 1,250,853 3,895,996 - 5,146,849 Repairs and Maintenance 221,891 - 24,490 246,381 Depreciation and Amortization 1,481,866 - - 1,481,866 Materials and Supplies 319,539 - 31,650 351,189 Other Expenses 1,313,000 22,651 14,442 1,350,093 Total Operating Expenses 6,605,416 3,918,647 346,710 10,870,773 Operating Income 1,297,319 376,914 41,025 1,715,258 Non-Operating Revenue and Expense Interest Earnings 3,728 - - 3,728 Interest Expense (670,699) - - (670,699) Intergovernmental Revenue - 28,083 - 28,083 Total Non-Operating Revenues and Expenses (666,971) 28,083 - (638,888) Income Before Operating Transfers 630,348 404,997 41,025 1,076,370 Transfers Transfers in 698,292 - 507,271 1,205,563 Transfers (out)(625,820) (100,000) - (725,820) Total Transfers 72,472 (100,000) 507,271 479,743 Change in Net Position 702,820 304,997 548,296 1,556,113 Net Position, Beginning of Year 26,073,742 2,900,053 - 28,973,795 Net Position, End of Year 26,776,562$ 3,205,050$ 548,296$ 30,529,908$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2021 Enterprise Funds Business-Type Activities The accompanying notes are an integral part of these financial statements. 26 Page 31 of 121 Utilities Sanitation Other Fund Fund Funds Total Cash Flows from Operating Activities Cash Received from Customers 9,705,530$ 4,242,745$ 363,916$ 14,312,191$ Cash Paid to Suppliers for Goods and Services (3,105,701) (3,886,762) (65,954) (7,058,417) Cash Paid to Employees for Services (2,147,176) - (224,948) (2,372,124) Net Cash Provided by Operating Activities 4,452,653 355,983 73,014 4,881,650 Cash Flows from Non-Capital Financing Activities Transfers to Other Funds (625,820) (100,000) - (725,820) Transfers from Other Funds 698,292 - 507,271 1,205,563 Intergovernmental Revenue - 28,083 - 28,083 Net Cash Provided by Non-Capital Financing Activities 72,472 (71,917) 507,271 507,826 Cash Flows from Capital and Related Financing Activities Acquisition and Construction of Capital Assets (2,939,727) - - (2,939,727) Interest Paid (602,807) - - (602,807) Principal Payment of Bonds, Notes and Capital Leases (1,112,102) - - (1,112,102) Net Cash Used in Capital and Related Financing Activities (4,654,636) - - (4,654,636) Cash Flows from Investing Activities Proceeds from Maturities of Investments 99,367 - - 99,367 Purchases of Investments (844) - - (844) Interest Received 3,728 - - 3,728 Net Cash Provided by Investing Activities 102,251 - - 102,251 Net Change in Cash and Cash Equivalents (27,260) 284,066 580,285 837,091 Cash and Cash Equivalents, Beginning of Year 5,455,962 2,668,904 - 8,124,866 Cash and Cash Equivalents, End of Year 5,428,702$ 2,952,970$ 580,285$ 8,961,957$ Enterprise Funds Business-Type Activities CITY OF CRESTVIEW, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2021 The accompanying notes are an integral part of these financial statements. 27 Page 32 of 121 Utilities Sanitation Other Fund Fund Funds Total Displayed as Cash and Cash Equivalents 3,014,207$ 2,952,970$ 580,285$ 6,547,462$ Restricted Cash and Cash Equivalents 2,414,495 - - 2,414,495 Total 5,428,702$ 2,952,970$ 580,285$ 8,961,957$ Reconciliation of Operating Income to Net Cash Operating Income 1,297,319$ 376,914$ 41,025$ 1,715,258$ Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation and Amortization Expense 1,481,866 - - 1,481,866 Changes in Operating Assets and Liabilities: Accounts Receivable (132,508) (52,816) (23,819) (209,143) Prepaid Expenses 66,867 - - 66,867 Accounts Payable and Accrued Expenses (157,285) 31,885 4,628 (120,772) Unearned Revenues 1,936,085 - - 1,936,085 Customer Deposits (782) - - (782) Compensated Absences 48,055 - 7,220 55,275 Other Postemployment Benefits and Related Deferred Inflows and Outflows (17,580) - 21,983 4,403 Net Pension Liability and Related Deferred Inflows and Outflows (69,384) - 21,977 (47,407) Total Adjustments 3,155,334 (20,931) 31,989 3,166,392 Net Cash Provided by Operating Activities 4,452,653$ 355,983$ 73,014$ 4,881,650$ Supplemental Schedule of Non-Cash Activities Capital Lease Obligation 121,274$ -$ -$ 121,274$ Amortization of Bond (Premium)/Discount 18,756 - - 18,756 Amortization of Refunding Loss 56,897 - - 56,897 Enterprise Funds Business-Type Activities STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2021 CITY OF CRESTVIEW, FLORIDA The accompanying notes are an integral part of these financial statements. 28 Page 33 of 121 General Police Officers/ Employees Firefighters Retirement Plans Plan Total Assets Cash and Cash Equivalents 148,540$ 407,719$ 556,259$ Accrued Interest 2,933 - 2,933 Contributions Receivable 35,938 395,855 431,793 Investments: Fixed Income Securities 6,396,269 8,187,325 14,583,594 Common Stock and Equity Funds 14,950,027 14,795,859 29,745,886 Real Estate 3,119,968 3,171,862 6,291,830 Total Investments 24,466,264 26,155,046 50,621,310 Total Assets 24,653,675 26,958,620 51,612,295 Liabilities Accounts Payable and Accrued Expenses 35,103 41,756 76,859 Net Position Net Position Restricted for Pensions 24,618,572$ 26,916,864$ 51,535,436$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2021 PENSION TRUST FUNDS Fiduciary Funds The accompanying notes are an integral part of these financial statements. 29 Page 34 of 121 General Police Officers/ Employees Firefighters Retirement Plans Plan Total Additions Contributions: Contributions - Employee 340,203$ 326,315$ 666,518$ Contributions - City 669,775 575,189 1,244,964 Contributions - State - 378,243 378,243 Total Contributions 1,009,978 1,279,747 2,289,725 Investment Income: Investment Earnings 4,124,050 4,424,450 8,548,500 (Investment Expenses)(83,932) (105,716) (189,648) Net Investment Income 4,040,118 4,318,734 8,358,852 Total Additions 5,050,096 5,598,481 10,648,577 Deductions Benefits Paid 1,229,788 835,170 2,064,958 Refunds of Contributions 21,416 14,479 35,895 Administrative Expenses 79,123 79,586 158,709 Total Deductions 1,330,327 929,235 2,259,562 Changes in Net Position 3,719,769 4,669,246 8,389,015 Net Position, Beginning of Year, As Restated 20,898,803 22,247,618 43,146,421 Net Position, End of Year 24,618,572$ 26,916,864$ 51,535,436$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET POSITION PENSION TRUST FUNDS YEAR ENDED SEPTEMBER 30, 2021 Fiduciary Funds The accompanying notes are an integral part of these financial statements. 30 Page 35 of 121 NOTES TO BASIC FINANCIAL STATEMENTS Page 36 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 31 Note 1 - Summary of Significant Accounting Policies The City of Crestview (the City) was originally incorporated as the Town of Crestview under Laws of the State of Florida in April 11, 1916. The town was re-incorporated by Ch. 9718, Acts 1923, and Chapter 25754, Special Acts 1949, as the City of Crestview. The City operates under the Council-Mayor form of government and provides the following services: public safety (law enforcement and fire control), roads and streets, water and sewer, sanitation, culture and recreation, public improvements, planning and zoning and general administrative services. The financial statements of the City have been prepared in accordance with accounting principles generally accepted (GAAP) in the United States of America applicable to governmental units and the Uniform Accounting System mandated by Chapter 218.33, Florida Statutes. The Governmental Accounting Standards Board (GASB) is the standard-setting body for governmental accounting and financial reporting. The following is a summary of the more significant accounting policies of the City: A. Reporting Entity The City is governed by a five-member City Council and a Mayor, each elected at-large for four-year terms. The Council has no powers other than those expressly vested in by State Statute and the City Charter and their governmental powers cannot be delegated. As required by GAAP, these financial statements present the City (the primary government) and its component units, entities for which the City is considered to be financially accountable. In evaluating the City as reporting entity, management has considered all potential component units for which the City may or may not be financially accountable and, as such, be included within the City’s financial statements. Management utilized criteria set forth in GASB Statement No. 61 for determining financial accountability of potential component units in evaluating all potential component units. In accordance with GASB Statement No. 61, the City (primary government) is financially accountable if it appoints a voting majority of the potential component unit’s governing board and: (1) it is able to impose its will on the organization, or (2) there is a potential for the organization to provide specific burden on the City. In addition, component units can be other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. As of September 30, 2021, the City has two component units, the Crestview Community Redevelopment Agency (the Agency) and Crestview Unlimited, Inc. These entities are presented in the financial statements of the primary government as blended component units. The Agency was established by the City as a separate legal entity in accordance with Florida Statute 166.021, Chapter 163, Part III. The Agency oversees the redevelopment of the downtown area. The Community Redevelopment Board of Commissioners consists of the City Council. In addition, City employees manage the Agency’s assets. The Agency is reported in the financial statements of the primary government as a non-major governmental fund. The Agency also issues separate, audited financial statements which are available from the Agency at 198 North Wilson Street, Crestview, FL 32536. Page 37 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 32 Crestview Unlimited, Inc. (Crestview Unlimited) was established as a separate not-for-profit corporation on June 10, 2021. The purpose of this entity is to erect and maintain public facilities fostering amateur sports. The Board of Directors of Crestview Unlimited consists of the City Council. Due to the level of control and a benefit/burden relationship with the City, Crestview Unlimited is reported in the financial statements of the City as a non-major enterprise fund. This fund will account for the operation of a golf course managed by Crestview Unlimited. Crestview Unlimited does not issue separate financial statements from the City. The City of Crestview Housing Authority (the Authority) is considered a related organization to the City rather than a component unit. The Mayor of the City appoints each of the five board members of the Authority. The Mayor and members of the City Council have no oversight responsibility or any financial relationship with the Authority, other than providing certain services. Thus, the Authority is determined not to be a part of the reporting entity and is not included as a component unit in the financial statements. B. Government-Wide and Fund Financial Statements The basic financial statements include both government-wide (based on the City as a whole) and fund financial statements. The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the primary government and its component unit. For the most part, the effect of interfund 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 or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate fund financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual governmental funds and major enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Pension plans recognize revenue when contributions are due, as there is a statutory requirement to make the contribution. Property taxes are recorded as revenue in the year for which they are levied. Grants and similar items are recognized as revenue soon as all eligibility requirements imposed by the provider have been met. Page 38 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 33 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 collected 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 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgements, are recorded only when payment is due. Franchise fees, licenses, sales taxes, gas taxes, operating and capital grants 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 items are considered to be measurable only when cash is received by the City. The City’s ad valorem taxes are assessed by the Okaloosa County Property Appraiser and collected by the Okaloosa County Tax Collector in accordance with Florida Statutes. The City retains the right and duty to set millage rates. Property taxes are not recorded as receivables at September 30 because, though legally assessed as of January 1, they are not due and payable until after the close of the fiscal year ended the following September 30. The following is the current property tax calendar: Assessment Date January 1, 2021 Levy Date November 1, 2021 Due Date March 31, 2022 Delinquency Date April 1, 2022 Discounts of 1% for each month taxes are paid prior to March are granted. Revenue recognition criteria for property taxes under GASB requires that only property taxes expected to be collected within 60 days of the current period be accrued. Property taxes which are uncollected as of the end of the fiscal year are generally immaterial in amount and highly susceptible to uncollectibility; therefore, they are not recorded as a receivable at the balance sheet date. D. Basis of Presentation The financial transactions of the City are recorded in individual funds. Each fund is a separate accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions or limitations. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. Page 39 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 34 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 for the City’s 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 revenue 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 government’s policy to use restricted resources first, then unrestricted resources as they are needed. The following three classifications are used to categorize the fund types used by the City: ■ Governmental Funds Governmental funds focus on the determination of financial position and changes in financial position (sources, uses and balances of financial resources) and not net income. The City reports the following major governmental fund: General Fund—This is the City’s primary operating Fund. It is used to account for all financial resources except those required to be accounted for in another fund. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. ■ Proprietary Funds Proprietary funds focus on the determination of net income, changes in net position, financial position and cash flows. All of the City’s proprietary funds are enterprise funds, as fees are charged to external users for services. The following is a description of the major proprietary funds of the City. Utilities Fund—This fund accounts for the City’s distribution of potable water; sales and service and sanitary wastewater collection; and treatment of and disposal operations services. Sanitation Fund—This fund accounts for the City’s solid waste collection, disposal, and/or recycling services. ■ Fiduciary Funds Fiduciary funds are used to account for the assets held on behalf of outside parties, including other governments. The City has two major fiduciary funds: Crestview Police Officers/Firefighters Retirement Plan—Used to report resources that are required to be held in trust for the members and beneficiaries of a defined benefit pension plan administered by the City for all City police officers and firefighters. Crestview General Employees Retirement Plan—Used to report the resources that are required to be held in trust for the members and beneficiaries of a defined benefit pension plan administered by the City for the employees that are not part of the police officer/firefighter plan. Page 40 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 35 E. Assets, Liabilities, and Net Position or Fund Balances Cash and Cash Equivalents The City has defined cash and cash equivalents to include cash on hand, demand deposits, certificates of deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Deposits and Investments Section 218.415, Florida Statutes, requires the investment of surplus public funds and prescribes the instruments in which those investments are authorized, specifically the State of Florida Local Government Surplus Funds Trust Fund, direct obligations of the United States Government or other obligations unconditionally guaranteed by the United States Government and other similar permitted investments. The City adheres strictly to the provisions of those cited Statutes, as well as with Chapter 280, Florida Statutes, which requires the City to maintain deposits only with “Qualified Public Depositories”. The City maintains a cash pool available for use by all funds. Earnings from the pool are allocated to the respective funds based on applicable cash participation by each fund. In addition, restricted cash accounts, certificates of deposit, and other investments are separately maintained by a few City funds in accordance with bond ordinances, retirement fund plan documents and other contractual agreements. Investments are stated at fair value. Cash amounts in the general and utilities funds are generally either placed in State Board of Administration Debt Service accounts for investment of debt service moneys, invested with the State Board of Administration for participation in the Local Government Surplus Funds Trust Fund investment pools created by Section 218.405 and218.417, Florida Statutes, or made locally. At September 30, 2021, the City’s investments in the Local Government Surplus Funds Trust Fund A (“Florida PRIME”), which the State Board of Administration indicates is a Securities and Exchange Commission Rule 2a7-like external investment pool, are similar to money market funds in which shares are owned in the fund rather than the underlying investments. These investments are reported at fair value, which approximates amortized cost. Pension Trust Funds may invest in collateralized interest-bearing time deposits or savings accounts in state or federal banks or savings and loan associations; direct obligations of the United States Government or other obligations unconditionally guaranteed by the United States Government or an agency of the U.S. Government; stocks, mutual funds, corporate bonds, structured mortgage products issued by the U.S. Government, or other mortgage related or asset-backed securities provided the meet certain criteria; real estate; and foreign fixed income and equity securities. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “interfund receivables/payables” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non-current portion of interfund loans). Any residual balances outstanding between governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances”. Page 41 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 36 Advances between funds, if any, are offset by a fund balance reserve account in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources. Services provided, deemed to beat market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Accounts receivable from customers are reported at the outstanding balance due from customers, net of any allowance for doubtful accounts. The City provides for doubtful accounts based on experience and analysis of individual accounts. When the collectability of a receivable becomes questionable, an allowance for doubtful accounts is established. When specific accounts are determined to be uncollectible, they are written off by charging the allowance and crediting the receivable. At September 30, 2020, the allowance for doubtful accounts for proprietary funds totaled $70,000. Restricted Assets Certain proceeds of the City’s Revenue Bonds, as well as certain resources set aside for their repayment, are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. Additionally, impact fees and customer deposits for water and sewer services are classified as restricted assets. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statements for proprietary funds. Capital assets are defined by the government as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. 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, offset by any interest earned on the invested proceeds over the same period. Property, plant, and equipment of the primary government is depreciated using the straight-line method over the following estimated useful lives: Buildings and Utility System 20-50 Years Improvements Other Than Buildings 20-40 Years Infrastructure 20-40 Years Machinery and Equipment 3-40 Years Page 42 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 37 Deferred Outflows/Inflows of Resources The City has implemented the provisions of GASB Statement Nos. 63 and 65. GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, provides financial reporting guidance for deferred outflows and inflows of resources, originally introduced and defined in GASB Concepts Statement No. 4, Elements of Financial Statements, as an acquisition or consumption, respectively, of net assets applicable to a future reporting period. Further, GASB Concepts Statement No. 4 also identifies net position as the residual of all other elements presented in a statement of financial position. GASB Statement No. 65, Items Previously Reported As Assets and Liabilities, reclassifies and recognizes certain items that were formerly reported as assets and liabilities as one of four financial statement elements: (1) deferred outflows of resources, (2) outflows of resources, (3) deferred inflows of resources, and (4) inflows of resources. GASB Concepts Statement No. 4 requires that deferred outflows and deferred inflows be recognized only in those instances specifically identified in GASB pronouncements. GASB Statement No. 65 provides that guidance. The City reports increases and decreases in net position that relate to future periods as deferred inflows and outflows of resources in separate sections of the statement of net position. The City’s three deferred outflows of resources reported in the government-wide financial statements are related to deferred loss on bond refunding, pensions and other postemployment benefits (OPEB). The City’s two deferred inflows of resources reported in the government-wide financial statements are related to pensions and other postemployment benefits (OPEB). The deferred loss on bond refunding is further discussed in Note 8. The deferred outflows and inflows of resources related to pensions and OPEB are further discussed in Note 9 and 10, respectively. In addition to assets, the statement of net position will sometimes include a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has three types of deferred outflows at September 30, 2021. The deferred outflows of resources arising from the refunding of bonds is being amortized over the remaining life of the refunding bonds, and the deferred outflow of resources related to pension expense and OPEB are discussed below. In addition to liabilities, the statement of net position and/or balance sheet-governmental funds will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. At September 30, 2020, the City does not have any of this type of item, other than for pensions and OPEB as discussed below. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City pension plans and additions to/deduction from the City pension plans’ fiduciary net position have been determined on the same basis as they are reported by the City pension plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. Page 43 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 38 Other Postemployment Benefits (OPEB) The measurement of net OPEB obligation, deferred outflows of resources, and deferred inflows of resources related to OPEB, and OPEB expense are described in more detail in Note 10. Additions to/deductions have been determined on the same basis as they have been reported by the OPEB plan. Benefit payments, including refunds of employee contributions, are recognized when due and payable in accordance with the benefit terms. Compensated Absences It is the City’s policy to permit employees to accumulate earned but unused vacation, personal, and sick leave based on length of service to the City. All vacation, personal, and sick leave is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for the amounts of vacation, personal, and sick leave is reported in the governmental fund financial statements only if they have matured, for example, as a result of employee resignations and retirements. Annual leave is accrued by full-time employees as follows: Years of Employment General Police Fire 0 – 3 Years of Service 13.33 Hours 16 Hours 20 Hours 3 – 5 Years of Service 15.66 Hours 20 Hours 28 Hours* 5+ Years of Service 18 Hours 24 Hours 33 Hours* *The fire accrual for the 3 - 5 years of service and the 5+ years of service are for those with less than 100 hours banked. Upon termination or retirement, a maximum of 480 hours of accrued benefit will be paid for any earned but unused leave to their credit as of the effective date of termination. Long-Term Obligations In the government-wide financial statements and proprietary fund types in the fund financial 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. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as current period expenses. In the fund financial statements, governmental fund types recognize the face amount of debt issued as other financing sources. Bond premiums and discounts are recognized as other financing sources or uses as appropriate. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Classification of Fund Balance GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications, under GASB Statement No. 54, are compromised of the following: Page 44 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 39 ■ Non-Spendable—includes amounts that are: (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, for example: inventories, deposits, prepaid items, and advances to other funds. ■ Restricted—includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. ■ Committed—includes fund balance amounts that can be used only for the specific purposes that are internally imposed by a formal action of the government’s highest level of decision making authority, the City Council. Commitments may be changed or lifted only by the City taking the same formal action that imposed the constraint initially. Contractual obligations are included to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual obligations. ■ Assigned—includes fund balance amounts that sets limits as a result of the intended use of funds that are neither restricted nor committed, per the City’s Purchasing Policy, which is set by the City’s management. In governmental funds, other than the general fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that the resources of other governmental funds are, at a minimum, intended to be used for the purpose of that fund. ■ Unassigned—includes residual positive fund balance within the General Fund which has not been classified within the other above-mentioned categories. Unassigned fund balance may also include negative balances for any governmental fund if expenditures exceed amounts restricted, committed, or assigned for those specific purposes. When restricted, committed, assigned, or unassigned resources are available for use in the governmental fund financial statements, it is the City’s policy to use restricted resources first, followed by committed, assigned resources and then unassigned resources, as they are needed. The City has established a fund balance policy which requires that 25% of budgeted annual operating expenses be held in reserve for unanticipated events or emergencies. Net Position The government-wide and business-type fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted and unrestricted. ■ Net Investment in Capital Assets—is intended to reflect the portion of net position which are associated with non-liquid, capital assets, net of related debt. ■ Restricted Net Position—are liquid assets, generated from revenues and net bond proceeds, which are not accessible for general use because of third-party (statutory, bond covenant or grant agency) limitations. ■ Unrestricted Net Position—represents unrestricted liquid assets. Page 45 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 40 F. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenditures during the reporting period. Actual results could differ from those estimates. G. Budgets Budgets are adopted on a basis consistent with generally accepted accounting principles, except that capital lease proceeds and related capital outlay are excluded from the budget. Annual appropriated budgets are adopted by ordinance for all governmental and proprietary funds. However, budgets for proprietary funds are not legally required to be reported on and are not included in these financial statements. All appropriations lapse at fiscal year-end except for appropriations related to multiyear capital projects. Budgetary data reflected in the financial statements are established by the following procedures: Prior to September 1 of each year, the City Council prepares in detail and adopts a budget of anticipated revenues and expenditures for all City purposes of the ensuing year. Proposed budgets are advertised in a newspaper of general circulation in the City and detailed in the minutes of the Council. Public hearings are conducted for the purposes of receiving taxpayer comments. When the budget is adopted, it has the force and effect of appropriations for the various items and purposes specified. The limits shall not be exceeded by the Council nor any office or department during the year. Amendments and transfers may be made to the budget by a two-thirds vote of the Council and the consent of the Mayor. The level of budgetary control (that is the level at which expenditures cannot legally exceed appropriations) has been established at the fund level. A budget amendment shall be deemed to mean the act of increasing the total budgeted amount of a given fund as opposed to a transfer of a budgeted amount from one account to another within the same fund. Budgeted amounts are as originally adopted, or as amended with the approval of the City Council. During the year ended September 30, 2021, the City did not amend the General Fund’s original budget to prevent actual expenditures from exceeding budgeted expenditures. Significant purchases, which the budget was not amended for, were presented to and approved by City Council. H. Upcoming Accounting Pronouncements GASB Statement No. 87, Leases, must be implemented for the City’s fiscal year ending September 30, 2022. This statement establishes a single model for lease accounting based on the principle that leases are the financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby, enhancing the relevance and consistency of information about a government’s leasing activities. The City is still evaluating the impact the implementation of this standard will have on its financial statements. Page 46 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 41 I. Restatement Beginning net position in the Pension Trust Funds was restated to properly account for certain items that were previously reported as liabilities that are now reported as Net Position under the provisions of GASB Statement No. 67, Financial Reporting For Pension Plans. The restatement of beginning Net Position, Restricted for Pensions consisted of the following: General Police Officer’s Employees and Firefighters Retirement Plan Retirement Plan Net Position, Beginning of Year, As Originally Reported $ 20,418,189 $ 22,150,024 Prior Period Adjustment: Remove DROP Liability 480,614 - Remove Prepaid Contribution Liability - 97,594 Net Position, Beginning of Year, As Restated $ 20,898,803 $ 22,247,618 Note 2 - Deposits and Investments Deposits Deposits may be exposed to custodial credit risk, which is the risk that in the event of a bank failure, the government’s deposits may not be returned. The City manages its custodial credit risk by maintaining its deposits with “Qualified Public Depositories” (QPDs), as defined in Chapter 280, Florida Statutes, which bear no custodial credit risk or are in institutions which meet the exemption requirements of Chapter 280.The exemptions qualify under the exemptions 280.03(e) or 280.03(f) as a deposit made in accordance with Chapter 17.57(g). The provisions of Chapter 280 allow “Qualified Public Depositories” to participate in a multiple financial institution collateral pool to ensure the security for public deposits. All Qualified Public Depositories must place with the Treasurer of the State of Florida, securities which have a market value equal to 50% of all public funds on deposit at the end of each month in excess of any applicable deposit insurance. In the event of default by a qualified public institution, the State Treasurer will pay public depositors all losses. Losses in excess of insurance and collateral will be paid through assessments between all Qualified Public Depositories. Under this method, all deposits are fully insured or collateralized with securities held by the State Treasurer in the City’s name. Investments As of September 30, 2021, the City held the following investments in its governmental and proprietary funds as categorized below in accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosure: Investment Type Fair Value Maturity Rating Local Government Investment Pool (*) $ 757,898 < One Year AAAm Certificates of Deposit 313,390 < One Year N/A (*) this amount is included in cash and cash equivalents in the accompanying financial statements due to its less than three month maturity. Page 47 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 42 As of September 30, 2021, the City’s Pension Funds held the following investments: Investment Type Fair Value Equities $ 29,745,886 Fixed Income Securities 14,583,594 Real Estate Investment Fund 6,291,830 Total $ 50,621,310 Interest Rate Risk Section 218.415(17), Florida Statutes, limits investment maturities to provide sufficient liquidity to pay obligations as they come due. The City minimizes interest rate risk by structuring investments to mature to meet future operating cash requirements and investing primarily in short-term securities. The maturity of the State Board of Administration Local Government Surplus Funds Trust Fund Florida PRIME is based on the weighted average days to maturity (WAM). A portfolio’s WAM reflects the average maturity in days based on the final maturity or reset date, in the case of floating rate instruments. WAM measures the sensitivity of the portfolio to interest rate changes. Neither the General Employees’ Retirement Plan nor the Police Officers’ and Firefighters’ Retirement Plan have policies that limit their investment maturities as a means of managing their exposure to fair value losses arising from increasing interest rates. Credit Risk Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a real or perceived change in the ability of the issuer to repay its debt. Credit risk exists when there is a possibility the issuer or other counterparty to an investment may be unable to meet its obligations. GASB Statement No. 40 requires disclosure of credit quality ratings for investments in debt securities as well as investments in external investment pools, money market funds, and other pooled investments of fixed income securities. The City does not have a formal policy that limits its investment choices. Unless otherwise authorized by law or ordinance, the City is authorized under Section 218.415, Florida Statutes, to invest and reinvest surplus public funds in its control or possession, in accordance with resolutions to be adopted from time- to-time in: Less than More than Fair Value 1 Year 1-5 Years 6-10 Years 10 Years General Employees' Plan: Bond Mutual Funds 6,396,269$ 6,396,269$ -$ -$ -$ Police Officers/Firefighters Plan: Asset Backed Securities 484,541 44,184 - - 440,357 Foreign Bonds 343,427 - 180,263 139,827 23,337 Government Backed Securities 2,209,146 195 - 51,066 2,157,885 US Treasuries 1,205,934 - 602,513 603,421 - Corporate Bonds 2,617,467 775,874 1,102,545 652,844 86,204 Bond Mutual Funds 1,326,810 1,326,810 - - - Total 14,583,594$ 8,543,332$ 1,885,321$ 1,447,158$ 2,707,783$ Investment Maturities Page 48 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 43 1. The Local Government Surplus Funds Trust Fund or any intergovernmental investment pool authorized pursuant to the Florida Interlocal Cooperation Act as provided in Chapter 163.01, Florida Statutes. 2. Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency. 3. Interest-bearing time deposits or savings accounts in qualified public depositories as defined in Chapter 280.02, Florida Statutes. 4. Direct obligations of the U.S. Treasury. 5. Federal agencies and instrumentalities. 6. Rated or unrated bonds, notes, or instruments backed by the full faith and credit of the government of Israel. 7. Other investments authorized by law or by ordinance for a county or municipality. 8. Other investments authorized by law or by resolution for a school district or a special district. 9. Securities of, or other interests in, any open-end or closed-end management type investment company or investment trust registered under the Investment Company Act of 1940, 15 U.S.C. ss.80a- 1 et seq., as amended from time-to-time, provided the portfolio of such investment company or investment trust is limited to obligations of the United States Government or any agency or instrumentality thereof and to repurchase agreements fully collateralized by such United State Government obligations and provided such investment company or investment trust takes delivery of such collateral either directly or through an authorized custodian. As of September 30, 2021, the City’s investment in the Florida PRIME is rated AAAm by Standard &Poor’s. As of September 30, 2021, the General Employees’ Retirement Plan portfolio consisted of investments in securities held in total return bond funds which are not rated by Moody’s. As of September 30, 2021, the Police Officers’ and Firefighters’ Retirement Plan portfolio consisted of U.S. Treasury, mortgage-backed securities, and asset backed securities/commercial mortgage-backed securities (all rated Aaa by Moody’s). The portfolio also consisted of corporate and non-corporate bonds with ratings ranging from Aaa to Ba1. In addition, there are certain bond mutual funds held in the portfolio that are not rated by Moody’s. Concentration Risk GASB Statement No. 40 requires disclosure of the concentration of credit risk when five or more percent of the total assets of the portfolio are invested with a single issuer. The investment limits set aside by the City pension plans for an individual company security are summarized below: General Police Officers’ and Employees’ Firefighters’ Security Retirement Plan Retirement Plan Equities (Common Stock) 5% of Value of Plan Assets 5% of Value of Plan Assets Fixed Income (Bonds) 5% of Value of Plan Assets 5% of Value of Plan Assets Foreign Securities in Total May not Exceed 25% of Value of Plan Assets 25% of Value of Plan Assets Page 49 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 44 Fixed income investments generally must meet certain investment grading standards and equities must be traded on a national exchange. Investments in corporate common stocks and convertible bonds are limited to 70% of the market value of each plan’s assets. Similar grading and/or trading criteria apply to mutual funds, money market funds, U.S. government back securities, etc. None of the above limitations were exceeded by either plan at September 30, 2021. Investment policies are subject to a review at least annually by the Board of Trustees for each plan. Fair Value Measurements The General Employees’ Retirement Plan (GERP) and the Police Officers’ and Firefighters’ Retirement Plan (POFRP) categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted inactive markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 are significant unobservable inputs. The following table presents the GERP assets carried at fair value at September 30, 2021. The following table present the POFRP assets carried at fair value at September 30, 2021. Note 3 - Interfund Receivables, Payables, and Transfers All transfers are routine and are consistent with the activities of the fund making the transfer. Included in these are intergovernmental transfers and transfers from the General Fund to the Utilities Fund to allocate expenses in the correct fund. The following presents the interfund transfers for the year ended September 30, 2021: Investment Type Amount (Level 1) (Level 2)(Level 3) Equities 14,950,027$ 14,950,027$ -$ -$ Fixed Income 6,396,269 - 6,396,269 - Total Investments Measured at Fair Value 21,346,296$ 14,950,027$ 6,396,269$ -$ Investments Measured at the Net Asset Value (NAV)Amount Real Estate Fund 3,119,968$ Total Investments 24,466,264$ General Employee Retirement Plan Investment Type Amount (Level 1) (Level 2)(Level 3) Equities 14,795,859$ 14,795,859$ -$ -$ Fixed Income 8,187,325 - 8,187,325 - Total Investments Measured at Fair Value 22,983,184$ 14,795,859$ 8,187,325$ -$ Investments Measured at the Net Asset Value (NAV)Amount Real Estate Fund 3,171,862$ Total Investments 26,155,046$ Police Officers' and Firefighters' Employee Retirement Plan Page 50 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 45 Transfers In Transfers Out General Fund $ 882,500 $ 1,727,596 Other Governmental Funds 522,853 157,500 Utilities Fund 698,292 625,820 Sanitation Fund - 100,000 Stormwater Fund 7,271 - Crestview Unlimited 500,000 - Total $ 2,610,916 $ 2,610,916 Interfund receivables and payables include the following at September 30, 2021: Interfund Interfund Receivable Payable General Fund $ 110,678 $ - CDBG Fund - 110,678 This represents a short-term borrowing by the CDBG fund for funds that were expended in advance of receiving reimbursement from the granting agency. Note 4 - Receivables Receivables at September 30, 2021, were as follows: Note 5 - Capital Assets Changes in capital assets of the government-type activities are summarized as follows: Governmental Activities General Utilities Sanitation Stormwater Fund Fund Fund Fund Total Franchise Fees 176,687$ -$ -$ -$ 176,687$ Utility Services 227,612 - - - 227,612 Accounts Receivable 58,830 500,840 281,340 23,819 864,829 Unbilled Receivables - 515,494 277,574 - 793,068 Less: Allowance for Doubtful Accounts - (45,000) (25,000) - (70,000) Other 19,263 - - - 19,263 Receivables, Net 482,392$ 971,334$ 533,914$ 23,819$ 2,011,459$ Business-Type Activities Primary Government Beginning Balance Increases (Decreases)Ending Balance Governmental Activities Capital Assets Not Being Depreciated: Land 2,325,326$ 1,432,801$ -$ 3,758,127$ Construction in Progress 8,048,026 1,259,847 (817,383) 8,490,490 Total Capital Assets Not Being Depreciated 10,373,352 2,692,648 (817,383) 12,248,617 Capital Assets Being Depreciated: Buildings 8,394,828 - - 8,394,828 Improvements Other than Buildings 7,766,805 436,871 - 8,203,676 Infrastructure 15,071,839 - - 15,071,839 Machinery and Equipment 8,842,403 352,625 (192,727) 9,002,301 Equipment Under Capital Lease 977,838 613,339 - 1,591,177 Intangible Assets - Software 889,786 117,416 - 1,007,202 Total Capital Assets Being Depreciated 41,943,499 1,520,251 (192,727) 43,271,023 Less Accumulated Depreciation: Buildings (3,056,262) (162,502) - (3,218,764) Improvements Other than Buildings (5,133,018) (254,548) - (5,387,566) Infrastructure (8,627,494) (338,776) - (8,966,270) Machinery and Equipment (6,189,061) (444,957) 192,727 (6,441,291) Equipment Under Capital Lease (337,980) (183,862) - (521,842) Intangible Assets - Software (503,615) (80,574) - (584,189) Total Accumulated Depreciation (23,847,430) (1,465,219) 192,727 (25,119,922) Total Capital Assets Being Depreciated, Net 18,096,069 55,032 - 18,151,101 Governmental Activities Capital Depreciated, Net 28,469,421$ 2,747,680$ (817,383)$ 30,399,718$ Page 51 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 46 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities General Government $ 289,464 Public Safety 576,790 Transportation 402,271 Culture and Recreation 196,694 Total Depreciation Expenses Governmental Activities $ 1,465,219 Business-Type Activities – Utilities $ 1,481,866 Note 6 - Non-Current Liabilities The following is a summary of changes in long-term debt and other liabilities of the City: Primary Government Beginning Balance Increases (Decreases)Ending Balance Business-Type Activities Capital Assets Not Being Depreciated: Land 2,216,319$ 495,051$ -$ 2,711,370$ Construction in Progress 4,527,768 1,514,889 - 6,042,657 Total Capital Assets Not Being Depreciated 6,744,087 2,009,940 - 8,754,027 Capital Assets Being Depreciated: Buildings 8,954,298 - - 8,954,298 Improvements Other than Buildings 3,513,032 122,858 - 3,635,890 Infrastructure 35,738,177 662,934 - 36,401,111 Machinery and Equipment 6,884,367 265,269 - 7,149,636 Total Capital Assets Being Depreciated 55,089,874 1,051,061 - 56,140,935 Less Accumulated Depreciation: Buildings (4,664,747) (185,009) - (4,849,756) Improvements Other than Buildings (1,393,344) (182,525) - (1,575,869) Infrastructure (10,707,409) (721,845) - (11,429,254) Machinery and Equipment (4,194,002) (392,487) - (4,586,489) Total Accumulated Depreciation (20,959,502) (1,481,866) - (22,441,368) Total Capital Assets Being Depreciated, Net 34,130,372 (430,805) - 33,699,567 Total Business-Type Activities Capital Assets, Net 40,874,459$ 1,579,135$ -$ 42,453,594$ Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental Activities Direct Borrowings: Capital Leases 692,472$ 613,339$ (369,483)$ 936,328$ 252,176$ Other Debt: Revenue Bonds 12,858,358 - (1,352,781) 11,505,577 1,158,390 Plus Deferred Amounts for Issuance Premium 46,620 - (2,220) 44,400 - Compensated Absences 934,691 58,393 - 993,084 31,396 Other Postemployment Benefits 1,242,702 449,093 - 1,691,795 - Net Pension Liability - POFRP 2,577,230 - (2,118,291) 458,939 - Total Governmental Activities 18,352,073$ 1,120,825$ (3,842,775)$ 15,630,123$ 1,441,962$ Page 52 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 47 Description of Long-Term Debt and Other Liabilities Outstanding: Governmental Activities Current Long-Term Total Revenue Bonds Public Improvement Refunding Bonds, Series 2015 Issued $3,165,000, interest ranges from 1.2% to 4%. Principal and interest payments due annually on March 1, matures in September 2041. Secured and payable from the public service taxes, franchise fees, communication services taxes and the local government half-cent sales tax. Funds used for the purpose of retiring the City’s Public Improvement Revenue Bonds, Series 2001 and Series 2008. $ 205,000 $ 2,105,000 $ 2,310,000 Capital Improvement Revenue Bonds, Series 2020 Issues $10,348,358, bearing an interest rate of 2.15%. Interest is payable semi-annually and annual principal payments are due on June 1, matures in June 2030. Secured and payable from the local government half- cent sales tax and non-ad valorem revenues. Of the original issue amount, $1,125,863 due June 2029 and $1,145,027 due June 2030 is not secured by the half-cent sales tax. Funds used for the purpose of capital outlay purchases. 953,390 8,242,187 9,195,577 Unamortized Premium on Bond Refunding - 44,400 44,400 Total Revenue Bonds – Governmental Activities 1,158,390 10,391,587 11,549,977 Capital Leases – Other Debt – Direct Borrowings Capital lease with Pierce Manufacturing for two fire trucks; due in annual installments of $126,472; payments through June 2023; bearing an interest rate of 2.89%; secured by the equipment; net book value at September 30, 2021 $578,664. 96,205 360,280 456,485 Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Business-Type Activities Direct Borrowings: State Revolving Loans 9,262,411$ -$ (743,636)$ 8,518,775$ 762,775$ Capital Leases - 121,274 (26,247) 95,027 30,820 Other Debt: Revenue Bonds 11,316,642 - (342,219) 10,974,423 361,610 Less Deferred Amounts for Issuance Discount (264,329) 18,756 - (245,573) - Compensated Absences 172,138 55,275 - 227,413 13,755 Other Postemployment Benefits 228,636 55,493 - 284,129 - Net Pension Liability 443,566 - (443,566) - - Total Business-Type Activities 21,159,064$ 250,798$ (1,555,668)$ 19,854,194$ 1,168,960$ Page 53 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 48 Current Long-Term Total Capital leases with Enterprise for 22 vehicles; due in monthly installments of $13,774; due at various times over 48 months; bearing interest rates between 3.042 and 3.167%; secured by vehicles; net book value at September 30, 2021 of $490,671. $ 155,971 $ 323,872 $ 479,843 Total Capital Leases – Governmental Activities 252,176 684,152 936,328 Total Governmental Activities $ 1,410,566 $ 11,075,739 $ 12,486,305 Business-Type Activities State Revolving Loans – Direct Borrowings State revolving loan payable (2008) of $7,068,015, due in semi-annual payments of $230,172, through June 15, 2028, bearing an interest rate of 2.53%, secured by anticipated net water and sewer system revenues. $ 388,499 $ 2,547,755 $ 2,936,254 State revolving loan payable (2010) of $890,026, due in semi-annual payments of $29,486, through July 15, 2032, bearing an interest rate of 2.86%; secured by anticipated net water and sewer system revenues. 43,458 509,739 553,197 State revolving loan payable (2013) of $7,283,055, due in semi-annual payments of $228,485, through August 15, 2034, bearing an interest rate of 2.55%; secured by anticipated net water and sewer system revenues. 330,818 4,698,506 5,029,324 Total Revolving Loans – Business-Type Activities 762,775 7,756,000 8,518,775 Revenue Bonds Water and Sewer Refunding and Improvement Revenue Bonds, Series 2015 Issued $6,650,000, interest ranges 2.1% to 4%. Interest is payable semi-annually and annual principal payments are due on March 1, matures in September 2033, secured by anticipated net water and sewer system revenues. Funds used for the purpose of retiring the Water and Sewer Revenue Bonds, Series 2008. 70,000 6,300,000 6,370,000 Page 54 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 49 Current Long-Term Total Water and Sewer Refunding and Improvement Revenue Bonds, Series 2016 Issued $5,450,000, interest ranges 2.4% to 4%. Interest is payable semi-annually and annual principal payments are due on March 1, matures in September 2038, secured by anticipated net water and sewer system revenues. Funds used for the purpose of retiring the Water and Sewer Revenue Bonds, Series 2008. $ 250,000 $ 3,940,000 $ 4,190,000 Capital Improvement Revenue Bonds, Series 2020 Issued $451,652 bearing an interest rate of 2.15%. Interest is payable semi-annually and annual principal payments are due on June 1, matures in June 2030. Secured and payable from the local government half-cent sales tax and non- advalorem revenues. Of the original issue amount, $49,137 due June 2029 and $49,973 due June 2030 is not secured by the half-cent sales tax. Funds used for the purposes of retiring a capital lease. 41,610 372,813 414,423 Unamortized Discount on Bond Refunding - (245,573) (245,573) Total Revenue Bonds – Business-Type Activities 361,610 10,367,240 10,728,850 Capital Leases – Other Debt – Direct Borrowings Capital leases with Enterprise for 5 vehicles; due in monthly installments of $2,720; due at various times over 48 months; bearing interest rates between 3.042 and 3.167%; secured by vehicles; net book value at September 30, 2021 of $123,145 30,820 64,207 95,027 Total Business-Type Activities $ 1,155,205 $ 18,187,447 $ 19,342,652 Annual Requirements to Amortize Debt Outstanding The annual requirements to amortize all debt outstanding except compensated absences and other postemployment benefits as of September 30, 2021, are as follows: Year Ending September 30 Principal Interest Principal Interest Total 2022 1,410,566$ 305,664$ 1,155,205$ 576,713$ 3,448,148$ 2023 1,708,464 274,775 1,185,884 544,716 3,713,839 2024 1,230,876 233,587 1,222,067 511,101 3,197,631 2025 1,152,457 202,248 1,226,772 474,755 3,056,232 2026 1,153,372 176,556 1,261,021 438,946 3,029,895 2027-2031 4,601,170 495,795 6,747,790 1,654,384 13,499,139 2032-2036 535,000 179,401 5,424,486 667,960 6,806,847 2037-2041 650,000 68,150 1,365,000 217,058 2,300,208 TOTAL 12,441,905$ 1,936,176$ 19,588,225$ 5,085,633$ 39,051,939$ Governmental Activities Business-Type Activities Page 55 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 50 Default Provisions The City’s revenue bonds contain a provision that in an event of a default, any trustee or any holder of bonds may by suit, action, mandamus or other proceedings, protect and enforce any and all rights under the laws of the State of Florida. The Capital Improvement Revenue Bonds, Series 2020 contains an additional provision obligating the City to pay all costs related to the collection and enforcement of the default, including attorneys’ fees. The City’s state revolving loans contain provisions that in an event of a default, the City may be required to do one of the following: (1) Account for all moneys received from the Florida Department of Environmental Protection (the Department) as well as the receipt, use, application or disposition of pledged revenues; (2) use an appointed receiver to manage the water and sewer systems, including establishing and collecting fees and charges to reduce the City’s obligation; (3) pay the delinquent amount plus a penalty from unobligated funds due to the City; (4) notify financial market credit rating agencies; or (5) the Department may sue for payment or accelerate the repayment schedule. The City’s capital lease agreements contain a provision that in the event of a default, the City shall pay total outstanding amounts due by acceleration, including costs incurred by the lessor associated with the default. The lessor may also request the return of the leased property. Pledged Revenues Pledged revenues on the City’s outstanding debt for the year ended September 30, 2021 are as follows: Note 7 - Refundings of Debt Advance Refunding of Debt The City issued refunding revenue bonds to defease certain outstanding bonds for the purpose of consolidation at lower interest rates. The City placed the proceeds from those refunding bonds in irrevocable escrow accounts with a trust agent to insure payment of debt service on the refunded bonds. Accordingly, the trust account assets and the liabilities for the defeased bonds are not included in the City’s financial statements. Although defeased, the refunded debt from these earlier issues will not be actually retired until the call dates have come due or until maturity if they are not callable issues. Principal Pledged Estimated Pledged Original Outstanding and Interest Revenue Percentage Pledged Revenue Source Debt Issue Through Amount Balance Payments Received Pledged Net Water and Sewer Utility Revenues State Revolving Loan - 2008 2028 7,068,015$ 2,936,254$ 460,344$ State Revolving Loan - 2010 2032 890,026 553,197 58,972 State Revolving Loan - 2013 2034 7,283,055 5,029,324 456,970 Water and Sewer Refunding Revenue Bonds, Series 2015 2033 6,650,000 6,370,000 326,970 Water and Sewer Refunding Revenue Bonds, Series 2016 2038 5,450,000 4,190,000 417,122 1,720,378 2,730,206 63.0% Public Service Taxes, Franchise Fees, Communications Services Taxes, 1/2 Cent Sales Tax Public Improvement Refunding, Series 2015 2041 3,165,000 2,310,000 286,741 5,293,721 5.4% 1/2 Cent Sales Tax, Non-Ad Valorem Revenues;Capital Improvement Revenue Bonds, Except That $1,125,863 Due June 2029 and $1,145,027 Due Series 2020 (Governmental)2030 10,348,358 9,195,577 1,470,477 3,105,062 47.4% June 2030 is Not Secured by the 1/2 Cent Sales Tax 1/2 Cent Sales Tax, Non-Ad Valorem Revenues;Capital Improvement Revenue Bonds, Series 2020 (Utility)2030 451,652 414,423 50,193 135,520 37.0% Except that $49,137 Due June 2029 and $49,973 Due June 2030 is Not Secured by the 1/2 Cent Sales Tax Page 56 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 51 During the year ended September 30, 2016, the City issued $6,650,000 Water and Sewer System Refunding Revenue Bonds, Series2015 and $5,450,000 of Water and Sewer Refunding and Improvement Bonds, Series 2016, to advance refund $10,070,000 of Water System Revenue Bonds, Series 2008. The difference between the acquisition price and the net carrying value is reported as a deferred loss on bond refunding in the accompanying financial statements and is being charged to operations through the year 2039 using the straight-line amortization method. At September 30, 2021, the City has $8,680,000 of bonds outstanding that are considered to be defeased. Note 8 - Defined Benefit Pension Plans The City administers two defined benefit pension plans: the Crestview General Employees’ Retirement Plan Trust Fund and the Crestview Police Officers’ and Firefighters’ Plan Trust Fund. These plans provide benefits for all qualifying employees of the City. Each plan is administered by a five-person retirement committee consisting of two members appointed by the City Council, two elected members of the Plan and a fifth member elected by the other four and appointed by the City Council. The Plans do not issue separate financial statements. General Employees’ Retirement Plan (GERP) The Crestview General Employees’ Retirement Plan Trust Fund is the administrator of a single employer public employee retirement system established by the City. It is mandatory that all full-time general employees of the City participate in the Plan. GERP provides retirement benefits and reduced early retirement benefits, as well as death and disability benefits. All benefits vest after 10 years of credited service. Employees who retire at or after age 55 with 10 years of credited service are entitled to an annual retirement benefit, payable monthly, of 2.64% of Average Final Compensation for year of credited service plus $215 per month. This benefit is paid in the form of a Life Annuity (options available). Employees who have attained age 50 and completed 10 years of credited service are eligible for early retirement and may elect to receive an immediate actuarially reduced benefit. Disability benefits are also provided at a reduced benefit amount for qualifying employees determined by the Board to be totally and permanently disabled. Benefit provisions are established by the Trust Instrument. Any amendments to the Plan are accomplished through revision and amendment of City Ordinances. The Plan includes a provision for a deferred retirement option plan (DROP). A member becomes eligible when normal retirement requirements are satisfied. The member may not participate in the DROP for more than 60 months. The average daily balance in a member’s DROP account shall be credited or debited at a rate equal to the actual net rate of investment return, net of brokerage commissions, transaction costs and management fees. Upon entering the DROP, the members shall not accrue any additional credited service or additional benefits and shall not be permitted to again contribute to the System. All benefits payable to a member from the DROP shall be paid from the assets of the member’s DROP account and neither the City nor the Board shall have a duty or liability to furnish the DROP with any funds, securities or other assets except to the extent required by any applicable law. The DROP balances as of September 30, 2021 were $657,019. Page 57 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 52 Police Officers’ and Firefighters’ Retirement Plan (POFRP) The Crestview Police Officers’ and Firefighters’ Retirement Plan Trust Fund is the administrator of a single employer public employee retirement system established by the City. It is mandatory that all full-time City police officers and firefighters participate in the plan. The POFRP provides retirement benefits and reduced early retirement benefits as well as death and disability benefits. All benefits vest after 10 years of credited service. Employees who retire at or after age 55 with 10 years of credited service or age 52 with 25 years of credited service are eligible for normal retirement and are entitled to an annual retirement benefit, payable monthly, of three and one-fifth percent (3.2%) of Average Final Compensation times credited service. This benefit is paid in the form of a Ten Year Certain and Life Annuity (options available). Employees who have attained age 45 and completed 10 years of credited service are eligible for early retirement and may elect to receive a benefit reduced 3% for each year that early retirement precedes age 50 and actuarially reduced accordingly. Disability benefits are also provided at a reduced benefit amount for qualifying employees determined by the Board to be totally and permanently disabled. Benefit provisions are established by the Trust Instrument. The State also contributes to the Plan. Any amendments to the Plan are accomplished through revision and amendment of City Ordinances. The Plan includes a provision for a deferred retirement option plan (DROP). A member becomes eligible when normal retirement requirements are satisfied. The member may not participate in the DROP for more than 60 months. An eligible member which elects to enter the DROP can select either 1) actual net rate of investment return, net of brokerage commissions, transaction costs and management fees or 2) interest at an effective rate of 6.5% per annum compounded monthly on the prior month’s ending balance. Upon entering the DROP, the member shall not accrue any additional credited service or additional benefits and shall not be permitted to again contribute to the System. All benefits payable to a member from the DROP shall be paid only from the assets of the member’s DROP account and neither the City nor the Board shall have a duty or liability to furnish the DROP with any funds, securities or other assets except to the extent required by any applicable law. The DROP balances as of September 30, 2021 were $85,492. Membership of each plan consisted of the following on September 30, 2021, the date of the latest actuarial report. GERP POFRP Active Plan Members 112 88 Inactive Plan Members: Receiving Benefits 60 28 Entitled to but not Receiving Benefits 29 9 Total 201 125 Contributions The contribution requirements of plan members and the City are established annually and amended by City ordinance. Plan members are required to contribute a set percentage of their annual covered salaries. The City is required to contribute at an actuarially determined rate. Investments The following was the Board’s adopted asset allocation policy as of September 30, 2021: Page 58 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 53 Target Asset Class Allocation Domestic Equity 42.5% International Equity 15.0% Broad Market Fixed Income 22.5% Fixed Income (Non-Core) 2.5% Global Fixed Income 2.5% Real Estate 10.0% Alternative 5.0% 100% The Plans did not hold investments in any one organization that represent 5% or more of the Pension Plans’ fiduciary net position. For the year ended September 30, 2021, the annual money-weighted rate of return on the GERP and POFRP investments, net of pension plan investment expenses, was 19.42% percent and 19.40% percent, respectively. More information about the Plan’s investments is discussed in Note 2. Net Pension Asset (Liability) of the Sponsor The components of the net pension asset (liability) of the sponsor on September 30, 2021 were as follows: GERP POFRP Total Pension Liability $ 24,447,463 $ 27,375,803 Plan Fiduciary Net Position (24,618,572) (26,916,864) Sponsor’s Net Pension Asset (Liability) (171,109) 458,939 Plan Fiduciary Net Position as a Percentage of Total Pension Liability 100.70% 98.32% Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2021, the City recognized pension expense of $405,391 for the GERP and $901,964 for the POFRP. At September 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Deferred Deferred Deferred Deferred Outflows of Inflows of Outflows of Inflows of Outflows of Inflows of Resources Resources Resources Resources Resources Resources Difference Between Expected and Actual Experience 232,003$ 160,417$ 583,235$ 262,638$ 815,238$ 423,055$ Changes in Assumptions 977,596 - 1,343,315 48,320 2,320,911 48,320 Difference Between Projected and Actual Earnings on Investments - 2,023,075 - 2,004,688 - 4,027,763 Balance as of September 30, 2021 1,209,599$ 2,183,492$ 1,926,550$ 2,315,646$ 3,136,149$ 4,499,138$ GERP POFRP Total Page 59 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 54 The outcome of the deferred outflows of resources related to pensions resulting from employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability each year. Other amounts reported as deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended September 30, GERP POFRP 2022 $ (205,182) $ 64,682 2023 (206,714) (141,508) 2024 (269,428) (337,387) 2025 (292,569) (243,961) 2026 - 269,078 Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2019 updated to September 30, 2021 using the following actuarial assumptions applied to all measurements periods. GERP POFRP Inflation 2.50% 2.50% Invested Rate of Return 7.00% 7.00% Projected Salary Increases Service based Age based GERP: PubG.H-2010 Mortality Table for healthy active lives for employees (set back one year for males), healthy retiree lives (set back one year for males), beneficiary lives for healthy retirees (set back one year for males), and disabled lives (set forward three years). POFRP: PubS.H-2010 Mortality Table (Below Median) for healthy active lives for female and male employees set forward one year. PubS.H-2010 Mortality Table for healthy retirees for female and male retirees set forward one year. PubG.H-2010 Mortality Table for beneficiary lives for healthy retirees set back one year for males. 80% PubG.H-2010/20% PubS.H-2010 Mortality Tables for disabled retirees. The actuarial assumptions used in the October 1, 2019 valuation were based on the results of an actuarial experience study dated August 29, 2016. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of September 30, 2021 (see the discussion of the pension plan’s investment policy) are summarized in the following table: Asset Class GERP POFRP Domestic Equity 7.50% 7.50% International Equity 8.50% 8.50% Broad Market Fixed Income 2.50% 2.50% Global Fixed Income 2.50% 3.50% Real Estate 4.50% 4.50% Alternative 5.92% 5.92% Page 60 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 55 Discount Rate The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed that the employee contributions will be made at the current contribution rate and that the City’s contributions will be made at rates equal to the difference between the actuarially determined contribution rates and the employee rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. GERP POFRP 1% Decrease of Discount Rate to 6.00% for GERP and POFRP $ 2,978,917 $ 4,151,597 Current Discount Rate of 7.00% for GERP and POFRP (171,109) 458,939 1% Increase of Discount Rate to 8.00% for GERP and POFRP (2,771,458) (2,575,605) Changes in Net Pension Liability – GERP Change in Net Pension Liability – POFRP Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (Asset) Balance at September 30, 2021 22,319,466$ 20,895,055$ 1,424,411$ Changes for the Year: Service Cost 682,347 - 682,347 Interest 1,622,464 - 1,622,464 Difference Between Expected and Actual Experience 13,985 - 13,985 Changes of Assumptions 1,055,199 - 1,055,199 Contribution - Employer - 669,775 (669,775) Contribution - Employee - 340,203 (340,203) Net Investment Income - 4,035,610 (4,035,610) Benefit Payments, Including Refunds of Employee Contributions (1,245,998) (1,245,998) - Administration Expense - (76,073) 76,073 Balance at September 30, 2021 24,447,463$ 24,618,572$ (171,109)$ Total Pension Plan Fiduciary Net Net Pension Liability Position Liability Balance at September 30, 2021 23,855,305$ 22,258,920$ 1,596,385$ Changes for the Year: Service Cost 855,640 - 855,640 Interest 1,760,744 - 1,760,744 Share Plan Allocation 139,291 - 139,291 Difference Between Expected and Actual Experience 485,335 - 485,335 Changes of Assumptions 1,129,136 - 1,129,136 Contribution - Employer - 575,632 (575,632) Contribution - State - 378,243 (378,243) Contribution - Employee - 320,388 (320,388) Net Investment Income - 4,307,665 (4,307,665) Benefit Payments, Including Refunds of Employee Contributions (849,648) (849,648) - Administration Expense - (74,336) 74,336 Balance at September 30, 2021 27,375,803$ 26,916,864$ 458,939$ Page 61 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 56 The City has allocated the net pension (asset) liabilities above across funds based on payroll costs of each fund. The City’s net pension (asset) liabilities are reports as follows: GERP POFRP Net Pension Net Pension (Asset) Liability Governmental Activities $ (119,647) $ 458,939 Business-Type Activities (51,462) - Total $ (171,109) $ 458,939 Pension expense for the year ending September 30, 2021, was a follows: Governmental Activities $ 405,391 Business-Type Activities 901,964 Total $ 1,307,355 Note 9 - Other Postemployment Benefit Plan GASB Statement No. 75, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (Statement No. 75), requires governments to account OPEB on an accrual basis, rather than on a pay-as-you-go basis. The effect is the recognition of an actuarially determined expenses when a future retiree earns their postemployment benefits, rather than when they use their postemployment benefits. The total OPEB liability is recorded at the fund level for proprietary activities and the allocated amount for governmental activities is presented at the government-wide level. The annual OPEB cost is included in the line item of personal services for proprietary fund statements and is allocated by function for governmental activities on the government-wide financial statements. Plan Description The City of Crestview’s Retiree Health Care Plan (Plan) is a single employer defined benefit postemployment health care plan that covers eligible retired employees of the City. The Plan, which is administered by the City, allows employees who retire and meet retirement eligibility requirements under one of the City’s retirement plans to continue medical and life insurance coverage as a participant in the City’s plan. For purposes of applying Paragraph 4 under Statement No. 75, the Plan does not meet the requirements for an OPEB plan administered through a trust. The Plan does not issue a stand-alone report, and it is not included in the report of a Public Employee Retirement System or another entity. Employees Covered by Benefit Terms At September 30, 2019 (the most recent actuarial valuation), the following employees were covered by the benefit terms: Active Plan Members 207 Inactive Plan Members or Beneficiaries Currently Receiving Benefits 4 Inactive Plan Members Entitled to but no yet Receiving Benefits - Total 211 Benefits Provided A retired employee and his or her spouse are eligible to continue health insurance identical to active employees if they meet the eligibility for retirements under the applicable Plan. The retiree is responsible for paying the entire premium for health coverage and that of any covered spouse or eligible dependents. Page 62 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 57 Total OPEB Liability At September 30, 2021, the City reported total OPEB liability of $1,975,924 for the single-employer plan. Total OPEB liability was measured as of September 30, 2020. The measurement period for OPEB expense was October 1, 2019 through September 30, 2020. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of September 30, 2019, using the following actuarial assumptions: Inflation Rate 2.50% Salary Increase Rate(s) Varies by Service Discount Rate 2.14% Initial Trend Rate 7.00% Ultimate Trend Rate 4.00% Years to Ultimate 54 All mortality rates were based on those used in actuarial valuations of corresponding General Employee and Police and Fire pension plans. For general employees, mortality rates were based on the PubG-2010 tables. For female lives, 100% of the white-collar table was used. For active lives, headcount weighted employee mortality with male rates set back one year, projected generationally with Scale MP-2018. For healthy inactive lives and beneficiaries, headcount weighted healthy retiree mortality with male rates set back one year, projected generationally with Scale MP-2018. For disabled lives, weighted mortality with male and female rates set forward three years, projected generationally with Scale MP-2018. For police and fire employees, mortality rates were also based on PubS-2010 tables. For female lives, 100% of the white-collar table was used. For active lives, headcount weighted employee mortality, below median income, with male and female rates set forward one year projected generationally with Scale MP- 2018. For healthy inactive lives, headcount weighted healthy retiree mortality with both male and female rates set forward one year, projected generationally with Scale MP-2018. For beneficiaries, headcount weighted healthy retiree mortality with male rates set back one year, projected generationally with Scale MP-2018. For disabled lives, headcount weighted disabled retiree tables and 20% of PubS-2010 headcount weighted disabled retiree tables, projected generationally with Scale MP-2021. Discount Rate Given the City’s decision not to fund the program, all future benefit payments were discounted using a high-quality municipal bond rate of 2.14%. The high-quality municipal bond rate was based on the S&P Municipal Bond 20 Year High Grade Rate Index as published by S&P Dow Jones Indices nearest the measurement date. The S&P Municipal 20 Year High Grade Rate Index consists of bonds in the S&P Municipal Bond Index with a maturity of 20 years. Eligible bonds must be rated at least AA by Standard and Poor’s Rating Services, Aa2 by Moody’s or AA by Fitch. If there are multiple ratings, the lowest rating is used. Page 63 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 58 Increase (Decrease in Total OPEB Liability Balance as of October 1, 2020 $ 1,471,338 Changes for the Year: Service Cost 129,806 Interest 56,991 Differences Between Expected and Actual Experience (142,530) Changes of Assumptions 478,917 Benefit Payments (18,598) Balance as of September 30, 2021 $ 1,975,924 Changes of assumptions reflect a change in the discount rate from 3.58% for the reporting period ended September 30, 2020 to 2.14% for the reporting period ended September 30, 2021. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current discount rate. 1% Current 1% Decrease Discount Rate Increase (1.14%) (2.14%) (3.14%) Total OPEB Liability $ 2,191,482 $ 1,975,924 $ 1,782,738 Sensitivity of the Total OPEB Liability to Changes in the Healthcare Cost Trend Rates The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1% point lower or 1%point higher than the current discount rate. 1% Current 1% Decrease Discount Rate Increase (3%-6.5%) (4%-7.5%) (5%-8.5%) Total OPEB Liability $ 1,719,070 $ 1,975,924 $ 2,284,943 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2021, the City recognized OPEB expense of $216,801. At September 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Deferred Outflows Outflows of Resources of Resources Differences Between Expected and Actual Experience $ - $ 186,756 Changes in Assumptions 485,679 63,577 Employer Contributions Subsequent to the Measurement Date 61,027 - Total $ 546,706 $ 250,333 Page 64 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 59 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ended September 30, 2022 $ 26,004 2023 26,004 2024 26,004 2025 26,001 2026 36,138 Thereafter 95,195 Total $ 235,346 Note 10 - Risk Management The City is exposed to various risks of loss related to torts, theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; employee medical benefits and natural disasters. The City purchases insurance through commercial carriers and participates in the Florida Municipal Insurance Trust, which is a public entity risk pool. Coverage through the Florida Municipal Insurance Trust includes comprehensive general and professional liability, automobile, property and workers’ compensation coverages. The remaining insurance coverage, which includes but is not limited to health and life insurance coverages, is purchased from various commercial carriers. The City does not retain a risk of loss as a participant in the public entity risk pool. The City maintains minimal deductibles for insurance policies from its various commercial carriers. There has been no significant reduction in insurance coverage from the prior fiscal year. Settlement amounts have not exceeded insurance coverage for the current year or the three prior years. The City participates in various federal and state grants. The expenditures of these grants are subject to audit and adjustment by the funding agency or their representatives. If expenditures are subsequently disallowed due to noncompliance with the program, the City may be required to repay the funding agency. The City’s management believes that disallowed expenditures, if any, will not be material to the accompanying financial statements. Note 11 - Fund Equity Restricted Net Position The City has established certain restrictions within the net position section of the enterprise funds. It is the City’s policy to first apply restricted resources for expenditures incurred for which there are restricted and unrestricted resources available. Additionally, the City would first apply committed, followed by assigned amounts and lastly unassigned amounts of unrestricted fund balance when expenditures are incurred. Utilities Restricted for Impact Fees $ 1,242,781 Restricted for Reserve and Replacement 250,000 Restricted for Debt Service 348,716 Total $ 1,841,497 Page 65 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 60 Fund Balances The City has established certain restrictions within the fund balance section of the governmental funds. The City would first apply restricted, followed by assigned amounts and lastly unassigned amounts of unrestricted fund balance when expenditures are incurred. Non-Spendable, restricted and assigned fund balances at September 30, 2021, consist of the following: Note 12 - Commitments and Contingencies Contracts The City has contracted with CH2MHill, Inc. (CH2M) to operate, maintain and manage the City’s sewer treatment plant. Fees are payable monthly and are subject to adjustment on a regular basis. A new contract was signed for a five-year term commencing October 1, 2019. The agreement will automatically renew for another five-year term ending September 30, 2024.The latest contract established a base fee for fiscal year 2020 of $1,045,028. It also provides for electrical cost or consumption increases over an established amount ($192,000) to be shared equally by the City andCH2M. Total fees under the contract for the year ended September 30,2021 were $1,102,766. Legal Matters The City is involved in pending and threatened legal actions. In the opinion of City management, after consulting with legal counsel, the range of potential loss from all such claims and actions should not materially affect the financial condition of the City. Sanitation Collection In September 2013, the City contracted with Waste Pro of Florida, Inc. for the collection and disposal of residential and commercial solid waste, yard refuse and recycling. The non-exclusive franchise agreement expired September 30, 2018. The contract was renewed and is effective through September 30, 2023. The City is responsible for billings and collections related to the sanitation services and retains 6% of the Other Total General Governmental Governmental Fund Funds Funds Non-Spendable Prepaid Expenditures 5,535$ -$ 5,535$ Permanent Fund - 53,125 53,125 Total Non-Spendable 5,535$ 53,125$ 58,660$ Restricted For Impact Fees 245,213$ 48,020$ 293,233$ Debt Service 377,558 94,172 471,730 Building Permits - 964,970 964,970 Redevelopment - 908,850 908,850 Total Restricted 622,771$ 2,016,012$ 2,638,783$ Assigned For Subsequent Year's Budget 1,880,909$ -$ 1,880,909$ Debt Service - 213,906 213,906 Law Enforcement - 4,493 4,493 Library - 2,913 2,913 Total Assigned 1,880,909$ 221,312$ 2,102,221$ Page 66 of 121 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2021 61 collections as payment for managing the collections. The remainder of the collections are remitted to Waste Pro of Florida, Inc. Collections remitted to Waste Pro of Florida amounted to $3,828,524 million for the year ended September 30, 2021. Grants Amounts received or receivable from grant activities are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time, although the City expects such amount, if any, to be immaterial. In September 2004, Hurricane Ivan impacted Northwest Florida, including the City with considerable damage. Many of the expenses incurred for debris removal and other repairs were reimbursed to the City through grant funding from the Federal Emergency Management Agency (FEMA). In 2005, FEMA reimbursed the City for most of the expenses incurred, but then later determined that certain expenses did not qualify for reimbursement according to the grant. FEMA has notified the City that the City will be responsible for those expenses determined not to be reimbursable. The City will not know the exact amount of funds that are to be repaid to FEMA until FEMA has performed a final close-out audit. The City has estimated the liability to FEMA for non-reimbursable expenses to be $485,655. This amount is included in Due to other governments on the accompanying financial statements. Note 13 - Subsequent Events On December 17, 2021, the City issued Water and Sewer Revenue Bonds, Series 2021 in the amount of $5,075,000. The purpose of the issuance is to finance capital improvements to the City’s sewer system. Annual debt service payments will be required until September 1, 2042 including interest at 2.09%. The debt service payments are secured by net revenues of the water and sewer system. On January 7, 2022, the City issued Capital Improvement Revenue Bonds, Series 2022 in the amount of $2,575,000. The purpose of the issuance is to finance the acquisition, construction and equipping of various capital improvements to the golf course. Annual debt service payments will be required until June 1, 2042 including interest at 3.07%. The debt service payments are secured by non-ad valorem revenues as identified in Resolution 2022-5 adopted by the City Council on December 13, 2021. Page 67 of 121 REQUIRED SUPPLEMENTARY INFORMATION Page 68 of 121 Reporting Period Ending 9/30/2021 9/30/2020 9/30/2019 9/30/2018 Measurement Date 9/30/2020 9/30/2019 9/30/2018 9/30/2017 Total OPEB Liability Service Cost 129,806$ 110,071$ 107,956$ 112,421$ Interest 56,991 55,819 48,482 39,333 Differences Between Expected and Actual Experience (142,530) - (99,269) - Changes of Assumptions 478,917 88,837 (36,901) (81,027) Benefit Payments (18,598) (17,220) (20,602) (18,944) Net Change in Total OPEB Liability 504,586 237,507 (334) 51,783 Total OPEB Liability - Beginning of Year 1,471,338 1,233,831 1,234,165 1,182,382 Total OPEB Liability - End of Year 1,975,924$ 1,471,338$ 1,233,831$ 1,234,165$ Covered Payroll (Projected)9,749,221$ 10,002,787$ 9,414,388$ 9,803,788$ Total OPEB Liability as a Percentage of Covered Employee Payroll 20.27%14.71%13.11%12.59% *Information is presented for those years in which information is available. Notes to Schedule September 30, 2021:2.14% September 30, 2020:3.58% September 30, 2019:4.18% September 30, 2018:3.64% Changes of assumptions and other inputs reflect the effects of changes in the discount rate each period.The following are the discount rates used in each period: Also reflected as assumption changes are updated health care costs and premiums,updated health care cost trend rates,updated spousal participation rates, and updated mortality, termination, retirement, disability, and salary scale increase rates. Differences between expected and actual experience reflects the impact of changes to the census data from the prior valuation to the valuation as of September 30, 2020. The City did not provide actual net benefits for the fiscal year ended on September 30,2021.Expected net benefit payments produced by the valuation model for the same period are shown in the table above CITY OF CRESTVIEW, FLORIDA LAST 10 FISCAL YEARS* SEPTEMBER 30, 2021 SCHEDULE OF CHANGES IN THE TOTAL OPEB LIABILITY AND RELATED RATIOS REQUIRED SUPPLEMENTARY INFORMATION 62 Page 69 of 121 2021 2020 2019 2018 2017 2016 2015 2014 2013 Total Pension Liability Service Cost 682,347$ 667,898$ 611,990$ 555,982$ 522,311$ 565,716$ 536,574$ 538,171$ 498,306$ Interest 1,622,464 1,555,250 1,518,916 1,462,086 1,336,940 1,310,682 1,240,902 1,163,671 1,085,340 Differences Between Expected and Actual Experience 13,985 368,023 (197,435) (407,213) 557,747 (372,488) (196,887) - - Changes in Assumptions 1,055,199 32,218 - 570,521 585,568 152,935 - - - Benefit Payments, Including Refund of Employee Contributions (1,245,998) (2,175,488) (800,956) (761,657) (823,522) (668,726) (806,243) (663,463) (625,281) Net Change 2,127,997 447,901 1,132,515 1,419,719 2,179,044 988,119 774,346 1,038,379 958,365 Total Pension Liability, Beginning 22,319,466 21,871,565 20,739,050 19,319,331 17,140,287 16,152,168 15,377,822 14,339,443 13,381,078 Total Pension Liability, Ending (a)24,447,463$ 22,319,466$ 21,871,565$ 20,739,050$ 19,319,331$ 17,140,287$ 16,152,168$ 15,377,822$ 14,339,443$ Plan Fiduciary Net Position Contributions - Employer 669,775$ 629,053$ 455,980$ 343,359$ 248,704$ 298,505$ 556,922$ 756,791$ 779,531$ Contributions - Employee 340,203 317,003 303,409 285,401 269,713 263,011 246,579 240,968 242,185 Net Investment Income 4,035,610 1,721,236 909,926 1,522,216 2,050,466 1,172,257 (319,164) 1,396,846 1,537,348 Benefit Payments, Including Refund of Employee Contributions (1,245,998) (2,175,488) (800,956) (761,657) (823,522) (668,726) (806,243) (663,463) (625,281) Administrative Expense (76,073) (55,909) (58,103) (55,635) (56,085) (45,495) (43,915) (35,530) (31,453) Other - - - - - - - 44,105 - Net Change 3,723,517 435,895 810,256 1,333,684 1,689,276 1,019,552 (365,821) 1,739,717 1,902,330 Plan Fiduciary Net Position, Beginning 20,895,055 20,459,160 19,648,904 18,315,220 16,625,944 15,606,392 15,972,213 14,232,496 12,330,166 Plan Fiduciary Net Position, Ending (b)24,618,572 20,895,055 20,459,160 19,648,904 18,315,220 16,625,944 15,606,392 15,972,213 14,232,496 Net Pension Liability, Ending (a) - (b)(171,109)$ 1,424,411$ 1,412,405$ 1,090,146$ 1,004,111$ 514,343$ 545,776$ (594,391)$ 106,947$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 100.70%93.62%93.54%94.74%94.80%97.00%96.62%103.87%99.25% Covered Employee Payroll 5,315,672$ 4,953,172$ 4,740,758$ 4,459,380$ 4,214,265$ 4,109,545$ 3,852,802$ 3,765,128$ 3,784,133$ Net Pension Liability as a Percentage of Covered Employee Payroll -3.22%28.76%29.79%24.45%23.83%12.52%14.17%-15.79%2.83% *Information provided above was obtained from an actuarial valuation. Information prior to fiscal year 2013 was not available. CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITIES AND RELATED RATIOS - GENERAL EMPLOYEES' RETIREMENT PLAN LAST 10 FISCAL YEARS* 63 Page 70 of 121 2021 2020 2019 2018 2017 2016 2015 2014 2013 Total Pension Liability Service Cost 855,640$ 829,996$ 810,126$ 781,326$ 736,601$ 675,767$ 650,319$ 704,926$ 645,804$ Interest 1,760,744 1,630,907 1,557,188 1,494,147 1,401,536 1,205,985 1,207,893 1,142,097 1,050,053 Differences Between Expected and Actual Experience 485,335 211,677 (355,584) (254,535) 226,022 293,542 (1,131,354) - - Changes of Benefit Terms - - (3,124) - - - - 102,466 - Contributions - Buy Back - - - 18,708 - - - - - Changes in Assumptions 1,129,136 (72,480) - 635,050 1,144,118 337,452 - - - Share Plan Allocation 139,291 110,280 119,721 113,414 88,474 775,763 - - - Other - - - - - - - 36,400 - Change in Excess State Money - - - - (9,059) (798,033) 102,691 110,979 - Benefit Payments, Including Refund of Employee Contributions (849,648) (1,040,702) (1,228,318) (1,286,243) (1,191,193) (618,732) (933,578) (1,079,145) (334,643) Net Change 3,520,498 1,669,678 900,009 1,501,867 2,396,499 1,871,744 (104,029) 1,017,723 1,361,214 Total Pension Liability, Beginning 23,855,305 22,185,627 21,285,618 19,783,751 17,387,252 15,515,508 15,619,537 14,601,814 13,240,600 Total Pension Liability, Ending (a)27,375,803$ 23,855,305$ 22,185,627$ 21,285,618$ 19,783,751$ 17,387,252$ 15,515,508$ 15,619,537$ 14,601,814$ Plan Fiduciary Net Position Contributions - Employer 575,632$ 537,980$ 378,613$ 121,687$ 121,961$ 111,296$ 429,649$ 576,763$ 746,119$ Contributions - State 378,243 339,563 352,151 343,741 310,487 300,086 296,275 296,686 291,738 Contributions - Employee 320,388 304,695 295,647 288,434 278,697 267,931 255,354 235,503 264,486 Contributions - Buy Back - - - 18,708 - - - - - Net Investment Income 4,307,665 1,661,513 778,906 1,519,422 2,132,311 1,072,929 (374,169) 1,512,913 1,596,346 Benefit Payments, Including Refund of Employee Contributions (849,648) (1,040,702) (1,228,318) (1,286,243) (1,191,193) (618,732) (933,578) (1,079,145) (334,643) Administrative Expense (74,336) (69,573) (62,363) (66,003) (70,281) (47,835) (46,407) (37,041) (30,354) Other - - - - - - - (44,105) - Net Change 4,657,944 1,733,476 514,636 939,746 1,581,982 1,085,675 (372,876) 1,461,574 2,533,692 Plan Fiduciary Net Position, Beginning 22,258,920 20,525,444 20,010,808 19,071,062 17,489,080 16,403,405 16,776,281 15,314,707 12,781,015 Plan Fiduciary Net Position, Ending (b)26,916,864 22,258,920 20,525,444 20,010,808 19,071,062 17,489,080 16,403,405 16,776,281 15,314,707 Net Pension Liability, Ending (a) - (b)458,939$ 1,596,385$ 1,660,183$ 1,274,810$ 712,689$ (101,828)$ (887,897)$ (1,156,744)$ (712,893)$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 98.32%93.31%92.52%94.01%96.40%100.59%105.72%107.41%104.88% Covered Employee Payroll 5,006,067$ 4,760,860$ 4,619,494$ 4,506,775$ 4,354,635$ 4,186,426$ 3,989,908$ 3,701,314$ 4,132,599$ Net Pension Liability as a Percentage of Covered Employee Payroll 9.17%33.53%35.94%28.29%16.37%-2.43%-22.25%-31.25%-17.25% *Information provided above was obtained from an actuarial valuation. Information prior to fiscal year 2013 was not available. CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITIES AND RELATED RATIOS - POLICE OFFICERS' AND FIREFIGHTERS' RETIREMENT PLAN LAST 10 FISCAL YEARS* 64 Page 71 of 121 2021 2020 2019 2018 2017 2016 2015 2014 2013 Actuarially Determined Contribution 669,775$ 629,053$ 497,780$ 379,047$ 248,242$ 304,106$ 473,895$ 756,791$ 779,531$ Contributions in Relation to the Actuarially Determined Contributions 669,775 629,053 455,980 343,359 248,704 298,505 556,922 756,791 779,531 Contributions Deficiency (Excess)1,339,550$ -$ 41,800$ 35,688$ (462)$ 5,601$ (83,027)$ -$ -$ Covered Employee Payroll 5,315,672$ 4,953,172$ 4,740,758$ 4,459,380$ 4,214,265$ 4,109,545$ 3,852,802$ 3,765,128$ 3,784,133$ Contributions as a Percentage of Covered Employee Payroll 12.60%12.70%9.62%7.70%5.90%7.26%14.45%20.10%20.60% *Information provided above was obtained from an actuarial valuation. Information prior to fiscal year 2013 was not available. Notes to Schedule: Valuation Date October 1, 2019 Actuarially determined contribution rates are calculated as of October 1, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Funding Method Entry age normal actuarial cost method. Actuarial Asset Method Each year, the prior actuarial value of assets is brought forward utilizing the historical geometric 4-year average Market Value return. It is possible that over time this technique will produce an insignificant bias above or below Market Value. Amortization Method Level of percentage of pay, closed. Remaining Amortization Period 20 years (as of October 1, 2016). Inflation 2.5% per year. Salary Increases Service Increase 0 10.0% 1 - 2 7.5% 3 - 10 6.0% 11 - 19 5.0% 20+4.0% Payroll Growth 3% per year. Interest Rate 7.75% per year compounded annually, net of investment related expenses. CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS - GENERAL EMPLOYEES' RETIREMENT PLAN LAST 10 FISCAL YEARS* 65 Page 72 of 121 CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS - GENERAL EMPLOYEES' RETIREMENT PLAN LAST 10 FISCAL YEARS* Retirement Age Age Rate 55 - 57 20.0% 58 - 64 25.0% 65+100.0% Early Retirement None. Termination Rates See table below. Disability Rates See table below. Mortality Healthy Lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB. Male: RP2000 Generational, 50% Annuitant White Collar / 50% Annuitant Blue Collar, Scale BB. Disabled Lives: Female: 100% RP2000 Disabled Female set forward 2 years. Male: 100% RP2000 Disabled Male set back 4 years. Other Information Termination Rates Table Service Rate Service Rate 0 - 1 25.0%20 0.026% 2 20.0%30 0.029% 3 15.0%40 0.061% 4 10.0%50 0.251% 5 9.5% 6 9.0% 7 8.5% 8 8.0% 9 7.5% 10 7.0% 11 6.5% 12 6.0% 13 5.5% 14 5.0% 15 4.5% 16+4.0% Disability Rates Table 66 Page 73 of 121 2021 2020 2019 2018 2017 2016 2015 2014 2013 Actuarially Determined Contribution 815,989$ 785,542$ 632,870$ 432,650$ 326,598$ 322,355$ 542,628$ 762,470$ 929,835$ From Excess State Money Reserve - - - - - 102,941 - - - Contributions in Relation to the Actuarially Determined Contributions 814,585 767,263 611,043 352,014 353,034 330,709 623,233 762,470 929,835 Contributions Deficiency (Excess)1,404$ 18,279$ 21,827$ 80,636$ (26,436)$ (111,295)$ (80,605)$ -$ -$ Covered Employee Payroll 5,006,067$ 4,760,860$ 4,619,494$ 4,506,775$ 4,354,635$ 4,186,726$ 3,989,908$ 3,701,314$ 4,132,599$ Contributions as a Percentage of Covered Employee Payroll 16.27%16.12%13.23%7.81%8.11%7.90%15.62%20.60%22.50% *Information provided above was obtained from an actuarial valuation. Information prior to fiscal year 2013 was not available. Notes to Schedule: Valuation Date October 1, 2019 Actuarially determined contribution rates are calculated as of October 1, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Funding Method Frozen entry age actuarial cost method. Actuarial Asset Method Each year, the prior actuarial value of assets is brought forward utilizing the historical geometric 4-year average Market Value return. It is possible that over time this technique will produce an insignificant bias above or below Market Value. Amortization Method Level of percentage of pay, closed. Remaining Amortization Period 20 years (as of October 1, 2016). Inflation 2.5% per year. Salary Increases 6.5% per year until the assumed retirement age. Payroll Growth 3% per year. Interest Rate 8% per year compounded annually, net of investment related expenses. Retirement Age Earlier of age 55 and 10 years of service or age 52 and 25 years of service. Any member who has reached normal retirement age on the valuation date is assumed to continue employment for one additional year. Early Retirement Commencing with the earliest retirement age (45). Members are assumed to retire with immediate subsidized benefit at the rate of 5% per year. CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS - POLICE OFFICERS' AND FIREFIGHTERS' RETIREMENT PLAN LAST 10 FISCAL YEARS* 67 Page 74 of 121 CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS - POLICE OFFICERS' AND FIREFIGHTERS' RETIREMENT PLAN LAST 10 FISCAL YEARS* Termination Rates See table below. Disability Rates See table below. Mortality Healthy Lives: Female: RP2000 Generational, 100% Annuitant White Collar, Scale BB. Male: RP2000 Generational, 10% Annuitant White Collar / 90% Annuitant Blue Collar, Scale BB. Disabled Lives: Female: 60% RP2000 Disabled Female set forward 2 years / 40$ Annuitant White Collar with no setback, no projection scale. Male: 60% RP2000 Disabled Male set back 4 years / 40% Annuitant White Collar with no setback, no projection scale. Other Information Termination and Disability Rates Table % Becoming Disabled Age % Termination During the Year 20 15.0%0.14% 50 2.0%1.00% 30 12.5%0.18% 40 6.5%0.30% 68 Page 75 of 121 For the Year Ended September 30,2021 2020 2019 2018 2017 2016 2015 2014 2013 Annual Money Weighted Rate of Return, Net of Investment Expense 19.42%8.65%4.64%8.35%12.40%7.54%-1.99%9.70%12.28% *Information provided above was obtained from an actuarial valuation. Information prior to fiscal year 2013 was not available. CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF INVESTMENT RETURNS - GENERAL EMPLOYEES' RETIREMENT PLAN LAST 10 FISCAL YEARS* 69 Page 76 of 121 For the Year Ended September 30,2021 2020 2019 2018 2017 2016 2015 2014 2013 Annual Money Weighted Rate of Return, Net of Investment Expense 19.40%8.12%3.94%8.12%12.45%6.60%-2.25%9.92%12.04% *Information provided above was obtained from an actuarial valuation. Information prior to fiscal year 2013 was not available. CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF INVESTMENT RETURNS - POLICE OFFICERS' AND FIREFIGHTERS' RETIREMENT PLAN LAST 10 FISCAL YEARS* 70 Page 77 of 121 COMBINING FINANCIAL STATEMENTS Page 78 of 121 CITY OF CRESTVIEW, FLORIDA NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS The special revenue funds are used to account for the proceeds of specific sources (other than special assessments, expendable trusts, or for major capital projects) that are legally restricted to expenditure for specified purposes. Law Enforcement Trust Fund—To account for proceeds collected under the Florida Contraband Forfeiture Act. The proceeds are to be used solely for law enforcement purposes, with emphasis given to crime prevention, safe neighborhoods, and drug abuse prevention programs. Community Redevelopment Agency—To account for the operation of the Agency overseeing the redevelopment of the designated redevelopment areas. The Agency is funded by property taxes collected in the Agency’s designated area. Community Development Block Grant (CDBG) Fund – To account for grant revenues and expenses related to the federal grant program which provides funding for housing, community and economic development activities, and assistance for low and moderate income persons. Building and Permitting Fund—To account for revenues derived from building permits and inspection fees that are legally restricted for enforcing the Florida Building Code. DEBT SERVICE FUND The Debt Service Fund is used to accumulate monies for payment of the Public Improvement Refunding Bonds, Series 2015, with remaining principal and interest due annually on March 1 until maturity in September 2041. PERMANENT FUND Permanent funds are used to report resources that are legally restricted to the extent that only earnings, not principal, may be used for purposes that support the reporting government’s programs. Library Fund—To account for a donation to the City to purchase library books. The interest is used to purchase books for the City’s public library. Page 79 of 121 Law Community Enforcement Redevelopment Building and Debt Permanent Trust Agency CDBG Permitting Service Fund Total Assets Cash and Cash Equivalents 4,493$ 909,188$ -$ 982,914$ 213,906$ 2,913$ 2,113,414$ Cash and Cash Equivalents - Restricted - - - - 142,192 - 142,192 Investments - - - - - 53,125 53,125 Due from Other Governments - - 110,678 - - - 110,678 Total Assets 4,493 909,188 110,678 982,914 356,098 56,038 2,419,409 Liabilities Accounts Payable - 338 - 2,085 - - 2,423 Accrued Expenses - - - 15,859 - - 15,859 Interfund Payables - - 110,678 - - - 110,678 Total Liabilities - 338 110,678 17,944 - - 128,960 Fund Balances Non-Spendable - - - - - 53,125 53,125 Restricted - 908,850 - 964,970 356,098 - 2,229,918 Assigned 4,493 - - - - 2,913 7,406 Total Fund Balances 4,493 908,850 - 964,970 356,098 56,038 2,290,449 Total Liabilities and Fund Balances 4,493$ 909,188$ 110,678$ 982,914$ 356,098$ 56,038$ 2,419,409$ CITY OF CRESTVIEW, FLORIDA COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2021 Special Revenue Funds 71 Page 80 of 121 Law Community Enforcement Redevelopment Building and Debt Permanent Trust Agency CDBG Permitting Service Fund Total Revenues Taxes -$ 82,570$ -$ -$ -$ -$ 82,570$ Licenses and Permits - - - 594,501 - - 594,501 Intergovernmental - - 110,678 - - - 110,678 Miscellaneous - 1,870 - - - 526 2,396 Total Assets - 84,440 110,678 594,501 - 526 790,145 Expenditures Current: General Government - 283,881 - - - - 283,881 Public Safety - - - 470,561 - - 470,561 Economic Environment - - 77,778 - - - 77,778 Debt Service: Principal - - - 9,928 200,000 - 209,928 Interest - - - 2,469 81,349 - 83,818 Total Expenditures - 283,881 77,778 482,958 281,349 - 1,125,966 Excess (Deficiency) Revenues Over (Under) Expenditures - (199,441) 32,900 111,543 (281,349) 526 (335,821) Other Financing Sources (Uses) Transfers in - 194,600 - 2,706 325,547 - 522,853 Transfers out - (39,600) (32,900) (85,000) - - (157,500) Capital Lease Obligation - - - 80,509 - - 80,509 Total Other Financing Sources (Uses)- 155,000 (32,900) (1,785) 325,547 - 445,862 Net Change in Fund Balances - (44,441) - 109,758 44,198 526 110,041 Fund Balances, Beginning of Year 4,493 953,291 - 855,212 311,900 55,512 2,180,408 Fund Balances, End of Year 4,493$ 908,850$ -$ 964,970$ 356,098$ 56,038$ 2,290,449$ Special Revenue Funds CITY OF CRESTVIEW, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2021 72 Page 81 of 121 Stormwater Crestview Fund Unlimited Total Assets Current Assets: Cash and Cash Equivalents 80,285$ 500,000$ 580,285$ Accounts Receivable, Net 23,819 - 23,819 Total Current Assets 104,104 500,000 604,104 Non-Current Assets: Net Pension Asset 4,684 - 4,684 Total Non-Current Assets 4,684 - 4,684 Total Assets 108,788 500,000 608,788 Deferred Outflows of Resources Other Postemployment Benefits 7,156 - 7,156 Pensions 33,114 - 33,114 Total Deferred Outflows of Resources 40,270 - 40,270 Total Assets and Deferred Outflows 149,058 500,000 649,058 Liabilities Current Liabilities: Accounts Payable 1,764 - 1,764 Accrued Expenses 2,864 - 2,864 Total Current Liabilities 4,628 - 4,628 Non-Current Liabilities: Other Postemployment Benefits Obligation 25,862 - 25,862 Compensated Absences 7,220 - 7,220 Total Non-Current Liabilities 33,082 - 33,082 Total Liabilities 37,710 - 37,710 Deferred Inflows of Resources Other Postemployment Benefits 3,277 - 3,277 Pensions 59,775 - 59,775 Total Deferred Inflows of Resources 63,052 - 63,052 Net Position Unrestricted 48,296$ 500,000$ 548,296$ CITY OF CRESTVIEW, FLORIDA COMBINING STATEMENT OF NET POSITION NON-MAJOR ENTERPRISE FUNDS SEPTEMBER 30, 2021 73 Page 82 of 121 Stormwater Crestview Fund Unlimited Total Operating Revenue Charges for Service 387,735$ -$ 387,735$ Operating Expenses Personnel Expenses 276,128 - 276,128 Repairs and Maintenance 24,490 - 24,490 Materials and Supplies 31,650 - 31,650 Other Expenses 14,442 - 14,442 Total Operating Expenses 346,710 - 346,710 Operating Income 41,025 - 41,025 Transfers Transfers in 7,271 500,000 507,271 Change in Net Position 48,296 500,000 548,296 Net Position, Beginning of Year - - - Net Position, End of Year 48,296$ 500,000$ 548,296$ CITY OF CRESTVIEW, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION NON-MAJOR ENTERPRISE FUNDS YEAR ENDED SEPTEMBER 30, 2021 74 Page 83 of 121 Stormwater Crestview Fund Unlimited Total Cash Flows from Operating Activities Cash Received from Customers 363,916$ -$ 363,916$ Cash Paid to Suppliers for Goods and Services (65,954) - (65,954) Cash Paid to Employees for Services (224,948) - (224,948) Net Cash Provided by Operating Activities 73,014 - 73,014 Cash Flows from Non-Capital Financing Activities Transfers to Other Funds 7,271 500,000 507,271 Net Change in Cash and Cash Equivalents 80,285 500,000 580,285 Cash and Cash Equivalents, Beginning of Year - - - Cash and Cash Equivalents, End of Year 80,285$ 500,000$ 580,285$ Reconciliation of Operating Income to Net Cash Operating Income 41,025$ -$ 41,025$ Changes in Operating Assets and Liabilities: Accounts Receivable (23,819) - (23,819) Accounts Payable and Accrued Expenses 4,628 - 4,628 Compensated Absences 7,220 - 7,220 Other Postemployment Benefits and Related Deferred Inflows and Outflows 21,983 - 21,983 Net Pension Liability and Related Deferred Inflows and Outflows 21,977 - 21,977 Total Adjustments 31,989 - 31,989 Net Cash Provided by Operating Activities 73,014$ -$ 73,014$ CITY OF CRESTVIEW, FLORIDA COMBINING STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS YEAR ENDED SEPTEMBER 30, 2021 75 Page 84 of 121 COMPLIANCE SECTION Page 85 of 121 76 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor and City Council City of Crestview Crestview, 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 City of Crestview, Florida (the City), as of and for the year ended September30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated June 21, 2022. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We identified certain deficiencies in internal control, described below that we consider to be a material weakness. Page 86 of 121 77 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 2021-01 - Financial Reporting Criteria: To maintain a well-functioning and accurate internal and external financial reporting framework, financial information must be documented, recorded, and, when applicable, provided to third-party preparers in a timely manner and at appropriate amounts. Condition: A significant number of audit adjustments were needed to properly record transactions in accordance with generally accepted accounting principles (GAAP) in the following areas: ■ Pension plan reporting of year-end balances. Due to delays in financial reporting of pension plan balances, the City’s actuaries were unable to provide timely actuarial reports necessary for the City to prepare the pension and other postemployment benefit adjustments within a reasonable time after year-end. In addition, significant adjustments were needed to properly reflect year-end balances in accordance with GAAP in the pension plans. ■ Reporting of fixed asset balances and depreciation expense. The City currently uses excel spreadsheets for tracking and maintaining fixed asset depreciation schedules. Errors were identified in the depreciation schedule related to depreciation expense and accumulated depreciation. The use of this technology lends itself to manual errors. ■ Over statements of accounts payable at year-end. The cutoff of accounts payable related to certain construction projects that crossed fiscal years required material adjustments. ■ Month-end reconciliations between the utility billing system and the general ledger are not currently being performed. As such, adjustments were needed to accurately reflect accounts receivable balances. Effect: By not maintaining an adequate framework for timely, accurate, and complete financial reporting, the City’s financial records required significant and material audit adjustments in order to create accurate financial statements in accordance with GAAP. Recommendation: We recommend that the City implement processes, procedures, and, where necessary, technology appropriate for the level of transactional activity occurring within the City’s financial reporting and recordkeeping function and makes an effort to implement periodic reconciliation procedures sufficient to verify the accuracy of the underlying financial data on an ongoing and timely basis. Management’s Response: Beginning with the fiscal year 2022, the City’s financial services division will assume responsibility for the financial reporting of the City’s two retirement plans. This service has historically been provided by an outside source; however, to streamline the process, the accounting services will be provided internally by the finance team. The finance department has discussed for some time the need to import the depreciation Excel spreadsheet to a more suitable program. With the assistance of our audit team, we are currently in the process of reviewing programs. Page 87 of 121 78 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The City has numerous major projects that are often on-going at fiscal year-end. Certain projects with expenditures in the current fiscal year (21/22) were inadvertently accrued at fiscal year-end. Discussion amongst staff ensued regarding methods to determine if services have been provided at fiscal year-end. Accounts receivables are generally reconciled at fiscal year-end. However, to reflect the information more accurately and to detect errors if they exist, staff will perform a monthly reconciliation. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of non-compliance or other matters that are required to be reported under Government Auditing Standards. Response to Findings Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the findings identified in our audit and described above. The City’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. June 21, 2022 Tallahassee, Florida Page 88 of 121 79 MANAGEMENT LETTER Honorable Mayor and City Council City of Crestview Crestview, Florida Report on the Financial Statements We have audited the financial statements of the City of Crestview, Florida (the City), as of and for the fiscal year ended September 30, 2021, and have issued our report thereon dated June 21, 2022. 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; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and Chapter 10.550 Rules of the Florida Auditor General. Other Reporting Requirements We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards; Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance; Schedule of Findings and Questioned Costs; and Independent Accountant’s Report on an examination conducted in accordance with AICPA Professional Standards, AT-C Section 315, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports, which are dated June 21, 2022, should be considered in conjunction with this management letter. Prior Audit Findings Section 10.554(1)(i)1., Rules of the Auditor General, requires that we determine whether or not corrective actions have been taken to address findings and recommendations made in the preceding financial audit report. Corrective actions have been taken to address findings and recommendations made in the preceding financial audit report. Official Title and Legal Authority Sections 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 official title and legal authority for the City and the component unit of the City has been disclosed in Note 1 to the financial statements. Page 89 of 121 80 Honorable Mayor and City Council City of Crestview Crestview, Florida MANAGEMENT LETTER Financial Condition and Management Section 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require us to apply appropriate procedures and communicate the results of our determination as to whether or not the City has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and to identify the specific condition(s) met. In connection with our audit, we determined that the City did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Pursuant to Sections 10.554(1)(i)5.b. and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures for the City. It is management’s responsibility to monitor the City’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. Section 10.554(1)(i)2., Rules of the Auditor General, requires that we communicate any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations. Additional Matters Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate non-compliance 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 warrants the attention of those charged with governance. In connection with our audit, we did not note any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, and applicable management, and is not intended to be and should not be used by anyone other than these specified parties. June 21, 2022 Tallahassee, Florida Page 90 of 121 81 INDEPENDENT ACCOUNTANT’S REPORT ON COMPLIANCE WITH SECTION 218.415, FLORIDA STATUTES Honorable Mayor and City Council City of Crestview Crestview, Florida We have examined the City of Crestview, Florida’s (the City) compliance with Section 218.415, Florida Statutes, regarding the investment of public funds during the year ended September 30, 2021. Management is responsible for the City’s compliance with those requirements. Our responsibility is to express an opinion on the City’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the City complied with Section 218.415, Florida Statutes, in accordance with the criteria, in all material respects. An examination involves performing procedures to obtain evidence about the City’s compliance with those requirements. The nature, timing, and extent of the procedures selected depend on our judgment, including as assessment of risks of material misstatement, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. In our opinion, the City complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2021. This report is intended solely for the information and use of the City and the Auditor General, State of Florida, and is not intended to be and should not be used by anyone other than these specified parties. June 21, 2022 Tallahassee, Florida Page 91 of 121 Page 92 of 121 Page 93 of 121 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA SEPTEMBER 30, 2021 TABLE OF CONTENTS Independent Auditor’s Report .................................................................................................................. 1-2 Management’s Discussion and Analysis ................................................................................................... 3-6 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position ...................................................................................................................... 7 Statement of Activities ........................................................................................................................... 8 Fund Financial Statements: Balance Sheet – Governmental Fund ..................................................................................................... 9 Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Fund .............................................................................. 10 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund ....................................................... 11 Notes to Financial Statements ............................................................................................................ 12-16 Other Reports Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ........................................................................... 17-18 Management Letter ............................................................................................................................ 19-21 Independent Accountant’s Report on Compliance with Section 218.415, Florida Statutes ......................................................................................................... 22 Independent Accountant’s Report on Compliance with Section 163.387(6) and (7), Florida Statutes ................................................................................... 23-24 Page 94 of 121 1 INDEPENDENT AUDITOR’S REPORT The Board of Commissioners Community Redevelopment Agency Crestview, Florida Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the major fund, and the budgetary comparison for the General Fund of the City of Crestview Community Redevelopment Agency (the Agency) as of and for the year ended September 30, 2021, and the related notes to the financial statements, which collectively comprise the Agency’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 an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 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 Agency’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Page 95 of 121 2 The Board of Commissioners Community Redevelopment Agency Crestview, Florida INDEPENDENT AUDITOR’S REPORT Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Agency as of September 30, 2021, and its changes in financial position and the budgetary comparisons for the General Fund 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 (MD&A), as listed in the table of contents, 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 (GASB), 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated June 21, 2022, on our consideration of the Agency’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. June 21, 2022 Tallahassee, Florida Page 96 of 121 3 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) The City of Crestview Community Redevelopment Agency’s (the Agency) Management’s Discussion and Analysis (MD&A) is intended to provide the readers of the Agency’s financial statements with a general overview of the financial activities during fiscal year 2021. HIGHLIGHTS Financial Highlights ■ The assets of the Agency exceeded its liabilities at the close of the most recent fiscal year by $908,850 (net position). ■ The Agency’s total net position decreased by $44,441 or 5%. ■ At the close of fiscal year 2021, the Agency’s General Fund reported an ending fund balance of $908,850, a decrease of $44,441. Revenues decreased by $48,452 or 36%. This was primarily due to additional funding received from Okaloosa County in the previous year for the costs related to historical signs. Total expenditures decreased by $13,070 or 4%. The expenditures include efforts to improve Main Street's aesthetics through the Agency's Awning Improvement Grants program. ■ As disclosed in Note 1.H. to the financial statements, the Agency restated beginning Net Position to remove infrastructure assets that are not titled to the Agency but considered property of the City of Crestview and reported on the City’s financial statements. OVERVIEW OF FINANCIAL STATEMENTS The Agency’s basic financial statements provide information on both the Agency as a whole (government- wide) and the major individual funds. Government-Wide Financial Statements The government-wide financial statements provide readers with a broad overview of the Agency’s finances, in a similar manner to a private-sector business. The government-wide financial statements are prepared using the accrual basis of accounting. The government-wide financial statements include: Statement of Net Position – This statement presents information on the Agency’s assets and liabilities. This statement format combines and consolidates the governmental funds’ current financial resources with capital assets and long-term obligations. Statement of Activities – This statement presents information showing how the Agency’s net position changed during the fiscal year. All changes in revenues are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods. Page 97 of 121 4 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) The government-wide financial statements present functions of the Agency that are principally supported by tax increment financing (governmental activities). The governmental activities of the Agency include general government activities and redevelopment projects. Fund Financial Statements Fund financial statements provide readers with an overview of each fund and its related function in a traditional format. A fund is a grouping of related accounts that maintain control over resources that are segregated for specific activities or objectives. The Agency uses fund accounting to ensure and demonstrate legal compliance with financial-related legal requirements. The General Fund is the only governmental fund that is used to account for the operating activities of the Agency. The General Fund also includes the activities of the redevelopment programs which are funded by restricted debt proceeds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, the governmental fund financial statements focus on near-term inflows and outflows of spendable resources and 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. The focus of governmental funds is narrower than government-wide financial statements and, therefore, useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. The ‘Balance Sheet – Governmental Fund’ and ‘Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Fund’ are reconciled as shown on the page following the respective statements to facilitate the comparison between the two presentations. Notes to the Basic Financial Statements The notes to the basic financial statements provide additional information that is essential to the full understanding of the information presented in the government-wide and the fund financial statements and is required by generally accepted accounting principles. Page 98 of 121 5 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government’s financial position. In the case of the Agency, assets exceed liabilities by $908,850 (net position) at the close of the most recent fiscal year. One hundred percent of the Agency’s net position is restricted for community redevelopment. The following schedule shows a comparison of the fiscal year 2021 and 2020 Statements of Net Position. The following schedule shows a comparison of the fiscal year 2021 and 2020 Statements of Activities. Cash and Cash Equivalents $909,188 $1,086,498 Total assets 909,188 1,086,498 Accounts Payable 338 133,207 Total liabilities 338 133,207 Net position: Restricted 908,850 953,291 Total net position $908,850 $953,291 2021 2020 Governmental Activities General revenues: Property taxes $82,570 $76,348 Other revenues - 50,000 Investment earnings 1,870 6,544 Total revenues 84,440 132,892 Expenses: General government 203,399 66,951 Community Redevelopment 80,482 230,000 Total expenses 283,881 296,951 Increase (decrease) in net assets before transfers (199,441) (164,059) Net Transfers 155,000 145,840 Increase (decrease) in net position $(44,441) $(18,219) Governmental Activities 2021 2020 Page 99 of 121 6 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2021 (UNAUDITED) Financial Analysis of the Agency’s Fund The Agency uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The Agency has only one governmental fund, the General Fund. The focus of the Agency’s general fund is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Agency’s financing requirements. At the end of the fiscal year, the Agency’s governmental fund reported an ending fund balance of $908,850, a decrease of $44,441 for the year. The Agency’s fund balance is restricted for future community redevelopment purposes. The decrease in fund balance was primarily related to additional expenses for the Downtown Mobility Study which was developed to design improvements to the downtown redevelopment area, including traffic flow, parking, and beautification, etc. General Fund Budgetary Highlights During the fiscal year 2021, actual revenues and transfers exceeded the final budget by $37,290. Total expenditures were $865,016 less than the final budgeted appropriations for the year ended September 30, 2021. This was largely due to undistributed grant funding due to lack of applications and slower than expected movement on anticipated improvement projects. Economic Factors and Next Year’s Budget The following economic factors were considered in establishing the Agency’s 2022 budget: ■ The property valuations in the Agency district increased approximately 3% from the previous year. ■ In fiscal year 2022, the Agency budgeted to implement many of the downtown improvements and upgrades identified in the recently completed mobility study. Request for Information This financial report is designed to provide a general overview of the Agency’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City of Crestview Community Redevelopment Agency at Crestview City Hall, 198 N . Wilson Street, Crestview, Florida 32536, phone (850) 682-1560. Page 100 of 121 BASIC FINANCIAL STATEMENTS Page 101 of 121 Governmental Activities Assets Current Assets: Cash and Cash Equivalents 909,188$ Total Current Assets 909,188 Total Assets 909,188 Liabilities Accounts Payable 338 Total Liabilities 338 Net Position Restricted for: Community Redevelopment 908,850 Total Net Position 908,850 Total Liabilities and Net Position 909,188$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY SEPTEMBER 30, 2021 STATEMENT OF NET POSITION See accompanying notes. 7 Page 102 of 121 Net (Expense) Revenue and Changes in Net Position Governmental Expenses Activities Functions Governmental: General Government 203,399$ (203,399)$ Community Redevelopment 80,482 (80,482) Total Functions 283,881$ (283,881)$ General Revenues Taxes 82,570 Miscellaneous 1,870 Total General Revenues 84,440 Net Transfers 155,000 Change in Net Position (44,441) Net Position - Beginning of Year, As Restated 953,291 Net Position - End of Year 908,850$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY FOR THE YEAR ENDED SEPTEMBER 30, 2021 STATEMENT OF ACTIVITIES See accompanying notes. 8 Page 103 of 121 Assets Cash and Cash Equivalents 909,188$ Total Assets 909,188 Liabilities Accounts Payable 338 Total Liabilities 338 Fund Balance Restricted for: Community Redevelopment 908,850 Total Fund Balance 908,850 Total Liabilities and Fund Balance 909,188$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY BALANCE SHEET - GOVERNMENTAL FUND SEPTEMBER 30, 2021 See accompanying notes. 9 Page 104 of 121 Revenues Taxes 82,570$ Miscellaneous 1,870 Total Revenues 84,440 Expenditures Current: General Government 283,881 Community Redevelopment - Total Expenditures 283,881 (Deficiency) of Revenues Under Expenditures (199,441) Other Financing Sources Transfers in 194,600 Transfers (out)(39,600) Total Other Financing Sources 155,000 Net Change in Fund Balance (44,441) Fund Balance - Beginning of Year 953,291 Fund Balance - End of Year 908,850$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY STATEMENT OR REVENUES, EXPENDITURES, AND CHANGES FOR THE YEAR ENDED SEPTEMBER 30, 2021 IN FUND BALANCE - GOVERNMENTAL FUND See accompanying notes. 10 Page 105 of 121 Variance with Final Budget - Positive Original Final Actual (Negative) Revenues Taxes 78,000$ 82,570$ 82,570$ -$ Miscellaneous Income 4,180 4,180 1,870 (2,310) Total Revenues 82,180 86,750 84,440 (2,310) Expenditures Current: General Government 212,553 217,553 203,399 14,154 Community Redevelopment 912,134 931,344 80,482 850,862 Total Expenditures 1,124,687 1,148,897 283,881 865,016 Excess (Deficiency) of Revenues Over (Under) Expenditures (1,042,507) (1,062,147) (199,441) 862,706 Other Financing Sources Transfers in 155,000 155,000 194,600 39,600 Transfers (out)(39,600) (39,600) (39,600) - Total Other Financing Sources (Uses)115,400 115,400 155,000 39,600 Appropriation of Fund Balance 927,107 946,747 - (946,747) Net Change in Fund Balance -$ -$ (44,441)$ (44,441)$ FOR THE YEAR ENDED SEPTEMBER 30, 2021 CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY Budgeted Amounts STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND See accompanying notes. 11 Page 106 of 121 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 12 Note 1 - Summary of Significant Accounting Policies A. Reporting Entity The City of Crestview (the City) Community Redevelopment Agency (the Agency) was established by the City as a separate legal entity in accordance with Florida Statute 166.021, Chapter 163, Part III. The Agency oversees the redevelopment of the downtown area. The Community Redevelopment Board of Commissioners consists of the City Council who approve and have operational responsibility for the component unit. The President and Vice President of the City Council function as the Chairman and Vice Chairman of the Community Redevelopment Agency. In addition, City employees manage the Agency’s assets. The Agency is reported in the financial statements of the primary government as a non-major governmental fund. B. Government-Wide and Fund Financial Statements The basic financial statements include both government-wide and fund financial statements. The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. C. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recorded as revenue in the year for which they are levied. Grants and similar items are recognized as revenue 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 collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Agency considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. The Agency’s primary source of revenue is property taxes. The City’s ad valorem taxes are assessed by the Okaloosa County Property Appraiser and collected by the Okaloosa County Tax Collector in accordance with Florida Statutes. The City retains the right and duty to set millage rates. Property taxes are not recorded as receivables at September 30th because, though legally assessed as of January 1st, they are not due and payable until after the close of the fiscal year ended the following September 30th. Page 107 of 121 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 13 The following is the current property tax calendar: Assessment Date January 1, 2021 Levy Date November 1, 2021 Due Date March 31, 2022 Delinquency Date April 1, 2022 Discounts of 1% for each month taxes are paid prior to March are granted. Revenue recognition criteria for property taxes under Governmental Accounting Standards Board (GASB) requires that only property taxes expected to be collected within 60 days of the current period be accrued. Property taxes which are uncollected as of the end of the fiscal year are generally immaterial in amount and highly susceptible to uncollectibility; therefore, they are not recorded as a receivable at the balance sheet date. D. Basis of Presentation The financial transactions of the Agency are recorded in one fund. A fund is a separate accounting entity with a self-balancing set of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than program revenues. Likewise, general revenues include all taxes. When both restricted and unrestricted resources are available for use, it is the Agency’s policy to use restricted resources first, then unrestricted resources as they are needed. Governmental funds focus on the determination of financial position and changes in financial position (sources, uses and balances of financial resources) and not net income. The Agency only has one fund which is used to account for the activities of the Agency. E. Assets, Liabilities, and Net Position or Fund Balances Cash and Cash Equivalents The Agency has defined cash and cash equivalents to include cash on hand, demand deposits, certificates of deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Deposits and Investments Section 218.415, Florida Statutes, requires the investment of surplus public funds and prescribes the instruments in which those investments are authorized, specifically the State of Florida Local Government Surplus Funds Trust Fund, direct obligations of the United States Government or other obligations Page 108 of 121 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 14 unconditionally guaranteed by the United States Government and other similar permitted investments. The City adheres strictly to the provisions of those cited Statutes, as well as with Chapter 280, Florida Statutes, which requires the City to maintain deposits only with Qualified Public Depositories (QDPs). The City maintains a cash pool available for use by all funds. Earnings from the pool are allocated to the respective funds based on applicable cash participation by each fund. Capital Assets The Agency pays for certain infrastructure improvements (signs, roads, sidewalks, bridges, and other utility infrastructure) within the designated redevelopment area; however, these improvements are considered to be property of the City, and therefore are included as capital assets in the City’s government-wide financial statements. The Agency does not currently have title to any capital assets. Capital assets titled to the Agency, if any, are defined by the government as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Compensation Costs The Agency has no employees of its own. Instead, the Agency reimburses the City for the portion of salaries and benefits attributable to Agency activities based on the estimated time spent on those activities as projected during the annual budget process. Any long-term payroll and benefit liabilities such as compensated absences, other postemployment benefits, or pension liabilities are reported on the City’s financial statements. Classification of Fund Balance GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Fund balance classifications, under GASB 54, are composed of the following: ■ Restricted—includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. This classification reflects not only the nature of funds, but also provide clarity to the level of restriction placed upon fund balance. Fund balance can have different levels of restraint, such as external versus internal compliance requirements. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is generally depleted in the order of restricted, committed, assigned, and unassigned. Page 109 of 121 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 15 The government-wide fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted and unrestricted. ■ Net Investment in Capital Assets—is intended to reflect the portion of net position which are associated with non-liquid, capital assets, net of related debt. ■ Restricted Net Position—are liquid assets, generated from revenues and net bond proceeds, which are not accessible for general use because of third-party (statutory, bond covenant or grantor agency) limitations. ■ Unrestricted Net Position—represents unrestricted liquid assets. F. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenditures during the reporting period. Actual results could differ from those estimates. G. Budgets Budgets are adopted on a basis consistent with generally accepted accounting principles, except that capital lease proceeds and related capital outlay are excluded from the budget. Annual appropriated budgets are adopted by ordinance for all governmental funds. All appropriations lapse at fiscal year-end except for appropriations related to multi-year capital projects. Budgetary data reflected in the financial statements are established by the following procedures: Prior to September 1 of each year, the Board prepares in detail and adopts a budget of anticipated revenues and expenditures for all Agency purposes for the ensuing year. Proposed budgets are advertised in a newspaper of general circulation in the City and detailed in the minutes of the Council. Public hearings are conducted for the purposes of receiving taxpayer comments. When the budget is adopted, it has the force and effect of appropriations for the various items and purposes specified. The limits shall not be exceeded by the Council nor any office or department during the year. Amendments and transfers may be made to the budget by a two-thirds vote of the Council and the consent of the Mayor. The level of budgetary control (that is the level at which expenditures cannot legally exceed appropriations) has been established at the fund level. A budget amendment shall be deemed to mean the act of increasing or decreasing the total budgeted amount of a given fund as opposed to a transfer of a budgeted amount from one account to another within the same fund. Budgeted amounts reflected in the financial statements are as originally adopted, or as amended with the approval of the City Council. Page 110 of 121 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 16 H. Restatement Beginning Net Position of the governmental activities was restated to remove capital assets that are considered assets of the City in accordance with the Agency’s capital asset policies. The restatement of beginning Net Position, Governmental Activities consisted of the following: Governmental Activities Net Position, Beginning of Year, As Originally Reported $ 1,232,648 Prior Period Adjustment: Remove Capital Assets (279,357) Net Position, Beginning of Year, As Restated $ 953,291 Note 2 - Deposits Deposits may be exposed to custodial credit risk, which is the risk that in the event of a bank failure, the government’s deposits may not be returned. The Agency manages its custodial credit risk by maintaining its deposits with QPDs, as defined in Chapter 280, Florida Statutes, which bear no custodial credit risk or are in institutions which meet the exemption requirements of Chapter 280. The exemptions qualify under the exemptions 280.03(e) or 280.03(f) as a deposit made in accordance with Chapter 17.57(g). The provisions of Chapter 280 allow QDPs to participate in a multiple financial institution collateral pool to ensure the security for public deposits. All QDPs must place with the Treasurer of the State of Florida, securities which have a market value equal to 50% of all public funds on deposit at the end of each month in excess of any applicable deposit insurance. In the event of default by a qualified public institution, the State Treasurer will pay public depositors all losses. Losses in excess of insurance and collateral will be paid through assessments between all QDPs. Under this method, all deposits are fully insured or collateralized with securities held by the State Treasurer in the Agency’s name. Note 3 - Transfers The Agency is a blended component unit of the City. For the year ended September 30, 2021, the Agency received a transfer from the City in the amount of $194,600 for its portion of tax increment financing. The Agency transferred $39,600 to the City as reimbursement for shared administrative and marketing costs. Page 111 of 121 OTHER REPORTS Page 112 of 121 17 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of Commissioners Community Redevelopment Agency Crestview, Florida We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the City of Crestview Community Redevelopment Agency (the Agency), as of and for the year ended September 30, 2021, and the related notes to the financial statements, which collectively comprise the Agency’s financial statements and have issued our report thereon dated June 21, 2022. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Agency’s internal control over financial reporting (internal control) as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Agency’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Agency’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the Agency’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control that we would consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Page 113 of 121 18 The Board of Commissioners Community Redevelopment Agency Crestview, Florida INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Compliance and Other Matters As part of obtaining reasonable assurance about whether the Agency’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, non-compliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with such 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 non-compliance that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Agency’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Agency’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. June 21, 2022 Tallahassee, Florida Page 114 of 121 19 MANAGEMENT LETTER The Board of Commissioners Community Redevelopment Agency Crestview, Florida Report on the Financial Statements We have audited the financial statements of the City of Crestview Community Redevelopment Agency (the Agency) as of and for the fiscal year ended September 30, 2021, and have issued our report thereon dated June 21, 2022. 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 Auditor General. Other Reporting Requirements We have issued our Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards and Independent Accountant’s Report on examination conducted in accordance with American Institute of Certified Public Accountants Professional Standards, AT-C Section 315, regarding compliance requirements in accordance with Chapter 10.550, Rules of the Auditor General. Disclosures in those reports and schedule, which are dated June 20, 2022, 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 financial audit report. There were no findings and recommendations made in the preceding annual financial audit report. Official Title and Legal Authority Section 10.554(1)(i)4., Rules of the Auditor General, requires that the name or official title and legal authority for the primary government be disclosed in the Management Letter, unless disclosed in the notes to the financial statements (see Note 1 of the Agency’s financial statements as of and for the year ended September 30, 2021, for this information). Page 115 of 121 20 The Board of Commissioners Community Redevelopment Agency Crestview, Florida MANAGEMENT LETTER Financial Condition and Management Sections 10.554(1)(i)5.a. and 10.556(7), Rules of the Auditor General, require us to apply appropriate procedures and communicate the results of our determination as to whether or not the Agency has met one or more of the conditions described in Section 218.503(1), Florida Statutes, and identify the specific condition(s) met. In connection with our audit, we determined that the Agency did not meet any of the conditions described in Section 218.503(1), Florida Statutes. Pursuant to Sections 10.554(1)(i)5.b. and 10.556(8), Rules of the Auditor General, we applied financial condition assessment procedures. It is management’s responsibility to monitor the Agency’s financial condition, and our financial condition assessment was based in part on representations made by management and the review of financial information provided by same. Section 10.554(1)(i)2., Rules of the Auditor General, requires that we communicate any recommendations to improve financial management. In connection with our audit, we did not have any such recommendations. Special District Component Units Section 10.554(1)(i)5.c., Rules of the Auditor General, requires, if appropriate, that we communicate the failure of a special district that is a component unit of a county, municipality, or special district, to provide the financial information necessary for proper reporting of the component unit, within the audited financial statements of the county, municipality, or special district in accordance with Section 218.39(3)(b), Florida Statutes. In connection with our audit, we determined that all special district component units provided the necessary information for proper reporting in accordance with Section 218.39(3)(b), Florida Statutes. UNAUDITED As required by Section 218.39(3)(c), Florida Statutes, and Section 10.554(1)(i)6, Rules of the Auditor General, the CRA reported: a. The total number of district employees compensated in the last pay period of the district’s fiscal year was 0. The CRA has no employees but receives administrative staffing and support from the City. b. The total number of independent contractors to whom non-employee compensation was paid in the last month of the district’s fiscal year was 0. c. All compensation earned by or awarded to employees, whether paid or accrued, regardless of contingency was $0. As noted above, the CRA has no employees of its own. d. All compensation earned by or awarded to non-employee independent contractors, whether paid or accrued, regardless of contingency was $0. e. Each construction project with a total cost of at least $65,000 approved by the district that is scheduled to begin on or after October 1 of the fiscal year being reported. There were no construction projects that began on or after October 1 in the fiscal year. Page 116 of 121 21 The Board of Commissioners Community Redevelopment Agency Crestview, Florida MANAGEMENT LETTER f. A budget variance based on the budget adopted under Section 189.016(4), Florida Statutes, before the beginning of the fiscal year being reported if the district amends a final adopted budget under Section 189.016(6), Florida Statutes, was $24,210. A budget versus actual variance is presented on page 11 of the financial statements. Additional Matters Section 10.554(1)(i)3., Rules of the Auditor General, requires us to communicate non-compliance 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 warrants the attention of those charged with governance. In connection with our audit, we did not note any such findings. Purpose of this Letter Our management letter is intended solely for the information and use of the Legislative Auditing Committee, members of the Florida Senate and the Florida House of Representatives, the Florida Auditor General, Federal and other granting agencies, the Honorable Mayor, and City Council and management, and is not intended to be, and should not be, used by anyone other than these specified parties. June 21, 2022 Tallahassee, Florida Page 117 of 121 22 INDEPENDENT ACCOUNTANT’S REPORT ON COMPLIANCE WITH SECTION 218.415, FLORIDA STATUTES The Board of Commissioners Community Redevelopment Agency Crestview, Florida We have examined the City of Crestview Community Redevelopment Agency (the Agency) compliance with the requirements of Section 218.415, Florida Statutes, as of and for the year ended September 30, 2021, as required by Section 10.556(10)(a), Rules of the Auditor General. Management is responsible for the Agency’s compliance with those requirements. Our responsibility is to express an opinion on the Agency’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the Agency complied, in all material respects, with the requirements referenced above. An examination involves performing procedures to obtain evidence about whether the Agency complied with the specific requirements. The nature, timing, and extent of procedures selected depend on our judgement, including an assessment of the risk of material non-compliance, whether due to fraud or error. We believe that the evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Our examination does not provide a legal determination on the Agency’s compliance with specific requirements. In our opinion, the Agency complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2021. This report 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, the Agency, its management, and the Board of the City of Crestview, Florida, and is not intended to be, and should not be, used by anyone other than these specified parties. June 21, 2022 Tallahassee, Florida Page 118 of 121 23 INDEPENDENT ACCOUNTANT’S REPORT ON COMPLIANCE WITH SECTION 163.387(6) AND (7), FLORIDA STATUTES The Board of Commissioners Community Redevelopment Agency Crestview, Florida We have examined the Crestview Community Redevelopment Agency’s (the Agency) compliance with Section 163.387(6) and (7), Florida Statutes, as of and for the year ended September 30, 2021, as required by Section 10.556 (10)(a), Rules of the Auditor General. Management is responsible for the CRA’s compliance with those requirements. Our responsibility is to express an opinion on the CRA’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the examination to obtain reasonable assurance about whether the CRA complied, in all material respects, with the requirements referenced above. An examination involves performing procedures to obtain evidence about whether the CRA complied with the specified requirements. The nature, timing, and extent of the procedures selected depend on our judgment, including an assessment of the risks of material non-compliance, whether due to fraud or error. We believe that the ev idence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. Our examination does not provide a legal determination of the CRA’s compliance with specified requirements. In our opinion, the Agency complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2021, except for the following: 2021-1 Budget Submission Criteria: Section 163.387(6)(b), Florida Statutes requires the Agency to submit its original budget and any subsequent budget amendments to the County in which the CRA is located within 10 days of adoption. Condition: The Agency did not submit its budget and budget amendments to Okaloosa County Board of County Commissioners within 10 days of adoption. Effect: By not submitting the Agency’s budget or any budget amendments within 10 days of adoption, the Agency is not in compliance with Section 163.387(6)(b), Florida Statutes. Recommendation: We recommend the Agency submit its budget and any subsequent amendments to Okaloosa County Board of County Commissioners within 10 days of adoption. Page 119 of 121 24 The Board of Commissioners Community Redevelopment Agency Crestview, Florida INDEPENDENT ACCOUNTANT’S REPORT ON COMPLIANCE WITH SECTION 163.387(6) AND (7), FLORIDA STATUTES Management’s Response: This statute is fairly new, and CRA was not knowledgeable of the 10-day time frame until that period had lapsed. Management will ensure the budget is submitted to the County within the required time limit going forward. This report is intended solely for the information and use of the Agency and the Auditor General, State of Florida, and is not intended to be and should not be used by anyone other than these specified parties. June 21, 2022 Tallahassee, Florida Page 120 of 121 Page 121 of 121