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HomeMy Public PortalAbout08282023 CRACC Special Joint Meeting Agenda Packet CRA/CITY COUNCIL SPECIAL JOINT MEETING AGENDA AUGUST 28, 2023 5:00 P.M. CITY 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, please) to cityclerk@cityofcrestview.org. 1. Call to Order 2. Pledge of Allegiance 3. Approve Agenda 4. Action Items 4.1. Presentation by Purvis Gray - Audited Financial Statements 4.2. Discussion/approval of CRA Grant Policy Exception 5. Comments from the Audience 6. Comments from the Mayor and Council 7. Adjournment 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 option 2 within 48 hours of the scheduled meeting. Page 1 of 138 CITY OF CRESTVIEW Item # 4.1. Staff Report CITY COUNCIL MEETING DATE: August 28, 2023 TYPE OF AGENDA ITEM: Presentation TO: Mayor and City Council CC: City Manager, City Clerk, Staff and Attorney FROM: Tim Bolduc, City Manager, Gina Toussaint, Finance Director DATE: 8/23/2023 SUBJECT: Presentation by Purvis Gray - Audited Financial Statements BACKGROUND: Audited Financial Statements are required as governed by Florida State Statutes. DISCUSSION: The City's auditing firm, Purvis Gray, will present the results of the September 30, 2022 Audited Financial Statements for the City of Crestview and the Crestview Redevelopment Agency. GOALS & OBJECTIVES This item is consistent with the goals in A New View Strategic Plan 2020 as follows; Foundational- these are the areas of focus that make up the necessary foundation of a successful local government. Financial Sustainability- Achieve long term financial sustainability Organizational Capacity, Effectiveness & Efficiency- To efficiently & effectively provide the highest quality of public services Infrastructure- Satisfy current and future infrastructure needs Communication- To engage, inform and educate public and staff Quality of Life- these areas focus on the overall experience when provided by the city. Community Character- Promote desirable growth with a hometown atmosphere Safety- Ensure the continuous safety of citizens and visitors Mobility- Provide safe, efficient and accessible means for mobility Opportunity- Promote an environment that encourages economic and educational opportunity Play- Expand recreational and entertainment activities within the City Community Culture- Develop a specific identity for Crestview FINANCIAL IMPACT No financial impact as it relates to the presentation. RECOMMENDED ACTION Staff respectfully requests the Board accept the audited financial statements as presented. Page 2 of 138 Attachments 1. City of Crestview Audit 2022 2. City of Crestview CRA Audit 2022 Page 3 of 138 CITY OF CRESTVIEW Item # 4.1. Staff Report CITY COUNCIL MEETING DATE: August 28, 2023 TYPE OF AGENDA ITEM: Presentation TO: Mayor and City Council CC: City Manager, City Clerk, Staff and Attorney FROM: Tim Bolduc, City Manager, Gina Toussaint, Finance Director DATE: 8/23/2023 SUBJECT: Presentation by Purvis Gray - Audited Financial Statements BACKGROUND: Audited Financial Statements are required as governed by Florida State Statutes. DISCUSSION: The City's auditing firm, Purvis Gray, will present the results of the September 30, 2022 Audited Financial Statements for the City of Crestview and the Crestview Redevelopment Agency. GOALS & OBJECTIVES This item is consistent with the goals in A New View Strategic Plan 2020 as follows; Foundational- these are the areas of focus that make up the necessary foundation of a successful local government. Financial Sustainability- Achieve long term financial sustainability Organizational Capacity, Effectiveness & Efficiency- To efficiently & effectively provide the highest quality of public services Infrastructure- Satisfy current and future infrastructure needs Communication- To engage, inform and educate public and staff Quality of Life- these areas focus on the overall experience when provided by the city. Community Character- Promote desirable growth with a hometown atmosphere Safety- Ensure the continuous safety of citizens and visitors Mobility- Provide safe, efficient and accessible means for mobility Opportunity- Promote an environment that encourages economic and educational opportunity Play- Expand recreational and entertainment activities within the City Community Culture- Develop a specific identity for Crestview FINANCIAL IMPACT No financial impact as it relates to the presentation. RECOMMENDED ACTION Staff respectfully requests the Board accept the audited financial statements as presented. Page 4 of 138 Attachments 1. City of Crestview Audit 2022 2. City of Crestview CRA Audit 2022 Page 5 of 138 ORDINANCE: Page 6 of 138 Page 7 of 138 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT CITY OF CRESTVIEW, FLORIDA CRESTVIEW, FLORIDA SEPTEMBER 30, 2022 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..................................................................................................... 31-62 Page 8 of 138 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT CITY OF CRESTVIEW, FLORIDA CRESTVIEW, FLORIDA SEPTEMBER 30, 2022 TABLE OF CONTENTS Required Supplementary Information Schedule of Changes in the Total OPEB Liability and Related Ratios ...................................................... 63 Schedule of Changes in Net Pension Liabilities and Related Ratios - General Employees’ Retirement Plan ................................................................... 64-65 Schedule of Changes in Net Pension Liabilities and Related Ratios – Police Officers’ and Firefighters’ Retirement Plan .......................................................................... 66-67 Schedule of Contributions - General Employees’ Retirement Plan .................................................... 68-69 Schedule of Contributions - Police Officers’ and Firefighters’ Retirement Plan ................................ 70-71 Schedule of Investment Returns - General Employees’ Retirement Plan ............................................... 72 Schedule of Investment Returns - Police Officers’ and Firefighters’ Retirement Plan ............................ 73 Combining Financial Statements Combining Balance Sheet – Non-Major Governmental Funds ................................................................ 74 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds ............................................................ 75 Combining Statement of Net Position – Non-Major Enterprise Funds ................................................... 76 Combining Statement of Revenues, Expenses, and Changes in Net Position – Non-Major Enterprise Funds .................................................................................... 77 Combining Statement of Cash Flows – Non-Major Enterprise Funds ..................................................... 78 Compliance Section Schedule of Expenditures of Federal Awards and State Financial Assistance…………………………………79-80 Notes to the Schedule of Expenditures of Federal and State Financial Assistance…………………………………81 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 ..................................................................................................... 82-84 Independent Auditor’s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance ................................................................................................................ 85-87 Schedule of Findings of Questioned Costs................................................................................................88 Management Letter ............................................................................................................................ 89-90 Independent Accountant’s Report on Compliance with Section 218.415, Florida Statutes .................................................................................................................................... 91 Page 9 of 138 1 INDEPENDENT AUDITOR’S REPORT Honorable Mayor and City Council City of Crestview Crestview, Florida Report on the Financial Statements Opinions 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, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. 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, 2022, 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 conformity with accounting principles generally accepted in the United States of America. Basis for Opinions 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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management 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, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Page 10 of 138 2 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: ■ Exercise professional judgment and maintain professional skepticism throughout the audit. ■ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. ■ Obtain an understanding of internal control relevant to the audit 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 City’s internal control. Accordingly, no such opinion is expressed. ■ Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. ■ Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. 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 Page 11 of 138 3 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary 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 accompanying combining non-major fund financial statements and other schedules, schedule of expenditures of federal awards and state financial assistance, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from, and relates directly to, the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual non-major fund financial statements and other schedules and state financial assistance, the schedule of expenditures of federal awards, are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 22, 2023, 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 22, 2023 Tallahassee, Florida Page 12 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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, 2022. 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 $75 million (net position) and represents an increase of approximately $9.2 million in net position from the prior year. Of this amount, approximately $45.9 million represents the net investment in capital assets (e.g., land, infrastructure, building, machinery and equipment), $5.7 million is restricted for future obligations, and $23.8 million is unrestricted and may be used to meet the City of Crestview’s ongoing obligations to citizens and creditors. • The governmental net position increased by approximately $4.2 million from the prior year. • The net position of the business-type activities of the City of Crestview increased by approximately $4.9 million from the prior year. • At the end of the current fiscal year, unassigned fund balance for the General Fund was $19.4 million, or 75% 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 deferred outflows) and liabilities (and deferred inflows), with the difference 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 13 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (UNAUDITED) 5 Both of the government-wide financial statements distinguish functions of the City of Crestview that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Crestview include general government (city clerk, city council, mayor, finance, service maintenance, planning, administration, engineering, facilities, and non-departmental expenses), public safety (police and fire), economic environment (CDBG), transportation (streets and right-of-way), human services (animal shelter), 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 recently formed entity Crestview Unlimited (CV Unlimited), which operates the City of Crestview’s golf course. 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 of Crestview 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 seven individual governmental funds (General Fund, Law Enforcement Trust Fund, Community Redevelopment Fund, Community Development Block Grant Fund, Building and Permitting 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 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 14 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 single, 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 74-78 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 $75 million (net position) for the fiscal year ended 2022 as reported in Table 1. Page 15 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (UNAUDITED) 7 TABLE 1 CITY OF CRESTVIEW, FLORIDA NET POSITION AS OF SEPTEMBER 30, 2022 AND 2021 By far the largest portion of the City of Crestview’s net position, approximately $45.9 million (or 61%), represents 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 $5.7 million (or 8%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $23.8 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 $9.2 million during FY 2022, which is primarily due from the receipt of capital grants and contributions from ARPA and the State of Florida and some large impact fees. Governmental Activities - Governmental activities increased the City of Crestview’s net position by $4.2 million and business-type activities increased the City’s net position by $4.9 million. Reported in Table 2 are the key elements of these changes. Total assets, excluding capital assets $26,930,075 $23,362,150 $16,507,921 $10,802,751 $43,437,996 $34,164,901 Capital assets, net of depreciation 34,543,335 30,399,718 46,109,213 42,453,594 80,652,548 72,853,312 Total assets 61,473,410 53,761,868 62,617,134 53,256,345 124,090,544 107,018,213 Deferred outflows of resources 7,296,288 3,240,449 1,962,271 1,230,848 9,258,559 4,471,297 Total assets and deferred outflows $68,769,698 $57,002,317 $64,579,405 $54,487,193 $133,349,103 $111,489,510 Total liabilities, excluding long-term liabilities $3,818,626 $3,009,634 $4,955,610 $4,579,360 $8,774,236 $7,588,994 Long-term liabilities 24,516,823 14,188,161 24,112,662 18,685,234 48,629,485 32,873,395 Total liabilities 28,335,449 17,197,795 29,068,272 23,264,594 57,403,721 40,462,389 Deferred inflows of resources 447,038 4,056,780 50,332 692,691 497,370 4,749,471 Net position: Net investment in capital assets 20,135,236 17,913,413 25,771,441 23,899,384 45,906,677 41,812,797 Restricted 2,592,634 2,691,908 3,112,541 1,841,497 5,705,175 4,533,405 Unrestricted 17,259,341 15,142,421 6,576,819 4,789,027 23,836,160 19,931,448 Total net position 39,987,211 35,747,742 35,460,801 30,529,908 75,448,012 66,277,650 Total liabilities, deferred inflows and net position $68,769,698 $57,002,317 $64,579,405 $54,487,193 $133,349,103 $111,489,510 TotalBusiness-Type ActivitiesGovernmental Activities 202120222021202220212022 Page 16 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (UNAUDITED) 8 TABLE 2 CITY OF CRESTVIEW, FLORIDA CHANGE IN NET POSITION FOR THE YEARS ENDED SEPTEMBER 30, 2022 AND 2021 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 $1,842,913 $1,336,259 $15,564,456 $12,586,031 $17,407,369 $13,922,290 Operating grants and contributions 305,761 226,034 - 28,083 305,761 254,117 Capital grants and contributions 730,553 300,000 2,290,455 - 3,021,008 300,000 General revenues: Property taxes 9,586,787 8,827,803 - - 9,586,787 8,827,803 Other taxes 6,642,702 6,216,544 - - 6,642,702 6,216,544 Other revenues 9,815,725 8,063,127 1,277 3,728 9,817,002 8,066,855 Total revenues 28,924,441 24,969,767 17,856,188 12,617,842 46,780,629 37,587,609 Expenses: General government 6,167,465 5,207,463 - - 6,167,465 5,207,463 Public safety 12,868,310 11,026,288 - - 12,868,310 11,026,288 Economic environment 139,742 77,778 - - 139,742 77,778 Transportation 1,983,031 1,775,117 - - 1,983,031 1,775,117 Human services 165,622 - - - 165,622 - Culture and recreation 2,244,594 1,778,176 - - 2,244,594 1,778,176 Interest on long-term debt 386,489 338,124 - - 386,489 338,124 Utilities fund - - 8,323,951 7,276,115 8,323,951 7,276,115 Sanitation fund - - 4,001,333 3,918,647 4,001,333 3,918,647 Stormwater fund - - 344,904 346,710 344,904 346,710 Crestview Unlimited - - 984,826 - 984,826 - Total expenses 23,955,253 20,202,946 13,655,014 11,541,472 37,610,267 31,744,418 Increase (decrease) in net assets before transfers 4,969,188 4,766,821 4,201,174 1,076,370 9,170,362 5,843,191 Transfers (729,719) (479,743) 729,719 479,743 - - Increase (decrease) in net position $4,239,469 $4,287,078 $4,930,893 $1,556,113 $9,170,362 $5,843,191 Business-Type Activities Total 2022 20212021202220212022 Governmental Activities Page 17 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 of Crestview’s investment income since the majority of the City of Crestview’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 of Crestview’s operating costs. • Salary Adjustments - The ability to attract and retain human and intellectual resources requires the City of Crestview to strive to approach a competitive salary range position in the marketplace. • Inflation - While overall inflation appears to be reasonably modest, the City of Crestview 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 $4.3 million in the prior year and increased approximately $4.2 million in the current year. Total revenues in the governmental activities increased by approximately $4.0 million and expenditures increased approximately $3.8 million. • Property taxes increased by approximately $759 thousand (or 8%) due to improving property values. • Other revenues, which include state shared revenues, increased by approximately $1.8 million (or 22%) due to improving economic conditions in the City of Crestview and the State of Florida plus $800 thousand of proceeds from the sale of City of Crestview property. Page 18 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 $14,000,000 General Government Public Safety Economic Environment Transportation Human Services Culture and Recreation Interest Chart 1 Expenses and Program Revenue -Governmental Activities Expenses Program Revenues 6.37% 1.06% 2.53% 33.14% 22.97% 33.94% Revenues by Source -Governmental Activities Charges for services Operating grants and contributions Capital grants and contributions Property taxes Other taxes Other revenues Page 19 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (UNAUDITED) 11 Business-Type Activities The net position from business-type activities increased by approximately $4.9 million. • Charges for services for business-type activities increased by approximately $2.9 million (or 24%). This resulted from continued growth in the City of Crestview, additional water and sewer impact fees collected during the year, and CV Unlimited beginning operations in April of 2022. • Total operating expenses increased by approximately $2.1 million (or 18%). This resulted from additional depreciation expense from the expansion of the water and sewer system, increasing operational costs, and CV Unlimited beginning operations in April of 2022. The following chart compares the program revenues from the City of Crestview’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 of Crestview’s business-type activities. - 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 Utilities Sanitation Stormwater Crestview Unlimited Chart 3 Expenses and Program Revenue -Business-Type Activities Expenses Revenues 13% 0% 57% 25% 2%3% Revenues by Source -Business Type Activities Capital grants and contributions Other revenues Utilities Sanitation Stormwater Crestview Unlimited Page 20 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 $25.1 million, an increase of $3.4 million in comparison with the prior year. Approximately 77% of this total amount ($19.4 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 is restricted or has already been assigned by the City of Crestview ($5.7 million). The General Fund is the chief operating fund of the City of Crestview. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $19.4 million, while total fund balance reached $22.9 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 75% of the total General Fund expenditures, while total fund balance represents 89% 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 $6.6 million at the end of the year; of that the Utilities Fund amounted to $2.8 million, the Sanitation Fund totaled $3.5 million, and the non-major funds totaled $177 thousand. The net position for this fiscal year in the proprietary funds increased by approximately $4.9 million. This increase primarily resulted from the Utilities Fund, which recognized capital grant revenue related to ARPA totaling $2.3 million when the associated costs have been capitalized and will be depreciated over time. Other factors concerning the finances of proprietary 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 of Crestview’s budget was amended to correctly reflect capital lease payments in the General Fund budget. Revenues for the year were more than budget by approximately $3.2 million. Expenditures were less than budgeted amounts by approximately $3.2 million. Page 21 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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, 2022, amounts to $132 million ($80 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 $11.5 million or 9.6% overall, and is summarized as follows: • Construction in progress ($5.2 million which is net of $2.6 million of closings to the plant accounts). • Improvements to highways and streets and other infrastructure ($883 thousand) and water and sewer system ($476 thousand). • Purchases of equipment and vehicles for the police, fire, streets, permitting, utility, stormwater departments, and the golf course ($4.9 million). TABLE 3 CITY OF CRESTVIEW CAPITAL ASSETS Land $3,781,127 $3,758,127 $2,711,370 $2,711,370 $6,492,497 $6,469,497 Construction in progress 11,956,874 8,490,490 7,799,113 6,042,657 19,755,987 14,533,147 Buildings 8,794,946 8,394,828 8,954,298 8,954,298 17,749,244 17,349,126 Improvements 8,339,162 8,203,676 3,635,890 3,635,890 11,975,052 11,839,566 Infrastructure 15,418,907 15,071,839 36,876,609 36,401,111 52,295,516 51,472,950 Machinery and equipment 10,044,308 9,002,301 10,079,328 7,028,362 20,123,636 16,030,663 Leased equipment 2,122,703 1,591,177 398,387 121,274 2,521,090 1,712,451 Intangible assets 1,007,202 1,007,202 - - 1,007,202 1,007,202 Total prior to depreciation 61,465,229 55,519,640 70,454,995 64,894,962 131,920,224 120,414,602 Less accumulation depreciation 26,921,894 25,119,922 24,345,783 22,441,368 51,267,677 47,561,290 Total $34,543,335 $30,399,718 $46,109,212 $42,453,594 $80,652,547 $72,853,312 Governmental Activities Business-Type Activities Total 2022 2021 2022 2021 2022 2021 Page 22 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (UNAUDITED) 14 Long-Term Debt At the end of the current fiscal year, the City of Crestview had total long-term debt outstanding of $38.2 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 of Crestview is required to conduct a voter referendum process for approval of this type of debt. The City of Crestview has no general obligation debts greater than one year as of September 30, 2022. 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 increased by approximately $6.3 million during the 2022 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 of Crestview’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 of Crestview and surrounding area continues to experience growth, the City of Crestview places great emphasis on forecasting the needs of the future to ensure the continued financial and economic health of our community. Notes payable $- $- $7,755,999 $8,518,775 $7,755,999 $8,518,775 Leases 1,143,732 936,328 317,462 95,027 1,461,194 1,031,355 Revenue bonds 13,264,367 11,549,977 15,687,813 10,728,850 28,952,180 22,278,827 Total $14,408,099 $12,486,305 $23,761,274 $19,342,652 $38,169,373 $31,828,957 202120222021202220212022 Governmental Activities Business-Type Activities Total Page 23 of 138 CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (UNAUDITED) 15 The military has a significant presence in our community with Duke Field, Eglin Air Force Base, Hurlburt Special Operations, and the 7th Special Forces Operations Group employing military and civilian personnel. These installations are essential to the continued long-term economic vitality of this area. Eglin Air Force Base is the world’s largest Department of Defense installation, spanning 724 square miles. Defense contractor companies are established throughout the Northwest Florida region. The City of Crestview is undertaking several processes to assist in future planning by creating a multi-year capital improvement program. Another factor that is being looked at is a replacement program for capital equipment such as vehicles, computers, etc. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the City of Crestview’s finances for all those with an interest in the City of Crestview’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Office of the Finance Director, 198 N. Wilson Street, Crestview, Florida 32536. The City of Crestview’s website address is www.cityofcrestview.org. Inquiries may also be sent via email to the Finance Department at ginatoussiant@cityofcrestview.org. Page 24 of 138 BASIC FINANCIAL STATEMENTS Page 25 of 138 Governmental Business-Type Activities Activities Total Assets Cash and Cash Equivalents 22,925,910$ 6,603,951$ 29,529,861$ Investments 53,285 - 53,285 Accounts Receivable, Net 485,735 1,684,943 2,170,678 Due from Other Governments 2,407,897 - 2,407,897 Inventories - 70,895 70,895 Interfund Receivable 72,326 - 72,326 Prepaid Expenses 244,293 115,684 359,977 Restricted Assets: Cash and Cash Equivalents 740,629 7,771,754 8,512,383 Investments - 260,694 260,694 Capital Assets: Assets not Being Depreciated 15,738,001 10,510,484 26,248,485 Assets Being Depreciated, Net 18,805,334 35,598,729 54,404,063 Total Assets 61,473,410 62,617,134 124,090,544 Deferred Outflows of Resources Deferred Loss on Bond Refunding - 731,545 731,545 Other Postemployment Benefits 404,524 69,653 474,177 Pensions 6,891,764 1,161,073 8,052,837 Total Deferred Outflows of Resources 7,296,288 1,962,271 9,258,559 Liabilities Accounts Payable 740,098 653,887 1,393,985 Accrued Expenses 215,934 161,081 377,015 Interfund Payables - 72,326 72,326 Unearned Revenue 55,961 1,584,208 1,640,169 Due to Other Governments 493,291 - 493,291 Accrued Interest 90,841 74,223 165,064 Customer Deposits 12,006 898,590 910,596 Non-Current Liabilities: Due Within One Year 2,210,495 1,511,295 3,721,790 Due in More Than One Year 24,516,823 24,112,662 48,629,485 Total Liabilities 28,335,449 29,068,272 57,403,721 Deferred Inflows of Resource Other Postemployment Benefits 222,398 38,294 260,692 Pensions 224,640 12,038 236,678 Total Deferred Inflows of Resources 447,038 50,332 497,370 Net Position Net Investment in Capital Assets 20,135,236 25,771,441 45,906,677 Restricted for: Non-Spendable 53,285 - 53,285 Impact Fees 329,833 2,545,381 2,875,214 Debt Service 410,796 317,160 727,956 Reserve and Replacement - 250,000 250,000 Building Permits 1,324,426 - 1,324,426 Redevelopment 474,294 - 474,294 Unrestricted 17,259,341 6,576,819 23,836,160 Total Net Position 39,987,211$ 35,460,801$ 75,448,012$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF NET POSITION SEPTEMBER 30, 2022 Primary Government The accompanying notes are an integral part of these financial statements. 16 Page 26 of 138 Operating Capital Charges for Grants and Grants and Function/Program Activities Expenses Services Contributions Contributions Governmental Activities General Government 6,167,465$ 1,138,443$ 77,123$ -$ Public Safety 12,868,310 370,639 43,734 480,553 Economic Environment 139,742 - 184,904 - Transportation 1,983,031 - - - Human Services 165,622 4,229 - - Culture and Recreation 2,244,594 329,602 - 250,000 Interest 386,489 - - - Total Governmental Activities 23,955,253 1,842,913 305,761 730,553 Business-Type Activities Utilities 8,323,951 10,208,288 - 2,290,455 Sanitation 4,001,333 4,464,893 - - Stormwater 344,904 399,198 - - Crestview Unlimited 984,826 492,077 - - Total Business-Type Activities 13,655,014 15,564,456 - 2,290,455 Total 37,610,267$ 17,407,369$ 305,761$ 3,021,008$ 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, 2022 STATEMENT OF ACTIVITIES Program Revenues The accompanying notes are an integral part of these financial statements. 17 Page 27 of 138 Governmental Business-Type Activities Activities Total (4,951,899)$ -$ (4,951,899)$ (11,973,384) - (11,973,384) 45,162 - 45,162 (1,983,031) - (1,983,031) (161,393) - (161,393) (1,664,992) - (1,664,992) (386,489) - (386,489) (21,076,026) - (21,076,026) - 4,174,792 4,174,792 - 463,560 463,560 - 54,294 54,294 - (492,749) (492,749) - 4,199,897 4,199,897 (21,076,026) 4,199,897 (16,876,129) 9,586,787 - 9,586,787 4,927,091 - 4,927,091 813,682 - 813,682 795,332 - 795,332 106,597 - 106,597 8,625,104 - 8,625,104 63,496 - 63,496 34,000 1,277 35,277 1,093,125 - 1,093,125 (729,719) 729,719 - 25,315,495 730,996 26,046,491 4,239,469 4,930,893 9,170,362 35,747,742 30,529,908 66,277,650 39,987,211$ 35,460,801$ 75,448,012$ CITY OF CRESTVIEW, FLORIDA Net (Expense) Revenue and Changes in Net Position YEAR ENDED SEPTEMBER 30, 2022 STATEMENT OF ACTIVITIES The accompanying notes are an integral part of these financial statements. 18 Page 28 of 138 Other Total Governmental Governmental General Funds Funds Assets Cash and Cash Equivalents 20,727,370$ 2,198,540$ 22,925,910$ Cash and Cash Equivalents - Restricted 668,814 71,815 740,629 Investments - 53,285 53,285 Accounts Receivable - Other 485,735 - 485,735 Interfund Receivables 374,097 - 374,097 Due from Other Governments 2,106,126 301,771 2,407,897 Prepaid Expenses 241,995 2,298 244,293 Total Assets 24,604,137$ 2,627,709$ 27,231,846$ Liabilities Accounts Payable 633,634$ 106,464$ 740,098$ Accrued Expenses 214,679 1,255 215,934 Customer Deposits 12,006 - 12,006 Due to Other Governments 493,291 - 493,291 Interfund Payables - 301,771 301,771 Unearned Revenue 55,961 - 55,961 Total Liabilities 1,409,571 409,490 1,819,061 Deferred Inflows of Resources Unavailable Revenues 275,216 - 275,216 Fund Balances Non-Spendable 241,995 55,583 297,578 Restricted 668,814 1,870,535 2,539,349 Assigned 2,575,178 292,101 2,867,279 Unassigned 19,433,363 - 19,433,363 Total Fund Balances 22,919,350 2,218,219 25,137,569 Total Liabilities, Deferred Inflows of Resources, and Fund Balances 24,604,137$ 2,627,709$ 27,231,846$ CITY OF CRESTVIEW, FLORIDA BALANCE SHEET - GOVERNMENTAL FUNDS SEPTEMBER 30, 2022 The accompanying notes are an integral part of these financial statements. 19 Page 29 of 138 Total Funds Balances - Governmental Funds 25,137,569$ 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 61,465,229$ Less Accumulated Depreciation (26,921,894) 34,543,335 Certain pension and other postemployment benefits are being deferred and amortized over a period of years: Deferred Outflows Related to Pensions and OPEB 7,296,288 Deferred Inflows Related to Pensions and OPEB (447,038) 6,849,250 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 (90,841) Bonds, Notes and Leases (14,408,099) Net Pension Liability (Asset)(9,446,780) Compensated Absences (1,084,608) Other Postemployment Benefit Obligation (1,787,831) (26,818,159) Some revenues have been deferred on the balance sheet because they were not measurable and available at year-end.275,216 Total Net Position - Governmental Activities 39,987,211$ CITY OF CRESTVIEW, FLORIDA TO THE STATEMENT OF NET POSITION SEPTEMBER 30, 2022 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS The accompanying notes are an integral part of these financial statements. 20 Page 30 of 138 Other Total Governmental Governmental General Funds Funds Revenues Taxes 14,002,007$ 85,186$ 14,087,193$ License and Permits 2,229,088 854,878 3,083,966 Intergovernmental 9,290,010 434,904 9,724,914 Charges for Services 338,040 - 338,040 Fines and Forfeitures 309,450 - 309,450 Miscellaneous 577,646 3,232 580,878 Total Revenues 26,746,241 1,378,200 28,124,441 Expenditures Current: General Government 5,715,871 933,679 6,649,550 Public Safety 11,885,866 395,337 12,281,203 Transportation 2,162,491 - 2,162,491 Economic Environment - 139,742 139,742 Human Services 225,639 - 225,639 Culture and Recreation 4,601,637 - 4,601,637 Debt Service: Principal 959,266 217,997 1,177,263 Interest 296,430 80,811 377,241 Total Expenditures 25,847,200 1,767,566 27,614,766 Excess (Deficiency) of Revenues Over (Under) Expenditures 899,041 (389,366) 509,675 Other Financing Sources (Uses) Transfers in 787,324 446,136 1,233,460 Transfers (out)(1,837,826) (129,000) (1,966,826) Debt Proceeds 2,575,000 - 2,575,000 Sale of General Capital Assets 524,784 - 524,784 Lease Obligation 507,272 - 507,272 Total Other Financing Sources (Uses)2,556,554 317,136 2,873,690 Net Changes in Fund Balances 3,455,595 (72,230) 3,383,365 Fund Balance, Beginning of Year 19,463,755 2,290,449 21,754,204 Fund Balance, End of Year 22,919,350$ 2,218,219$ 25,137,569$ CITY OF CRESTVIEW, FLORIDA IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2022 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES The accompanying notes are an integral part of these financial statements. 21 Page 31 of 138 Net Change in Fund Balances - Governmental Funds 3,383,365$ 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 1,177,263$ Debt Proceeds (3,082,272) Amortization of Bond Premium 2,220 (1,902,789) Capital outlays are reported in the governmental funds 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 5,922,937 Transfer of Capital Assets Less Related Debt 3,647 (Current Year Depreciation)(1,801,972) 4,124,612 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 (11,468) Change in Accrued Compensated Absences (91,524) Change in Net Pension Liability (Asset)(1,370,277) Change in Other Postemployment Benefits (167,666) (1,640,935) Some revenues have been deferred in the governmental funds because they were not available at year-end, but have been recognized in the statement of activities.275,216 Change in Net Position - Governmental Activities 4,239,469$ CITY OF CRESTVIEW, FLORIDA RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, TO THE STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2022 AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS The accompanying notes are an integral part of these financial statements. 22 Page 32 of 138 Variance with Final Budget - Original Final Positive Budget Budget Actual (Negative) Revenues Taxes 14,630,872$ 13,444,486$ 14,002,007$ 557,521$ License and Permits 1,545,500 1,545,500 2,229,088 683,588 Intergovernmental 7,587,122 7,477,532 9,290,010 1,812,478 Charges for Services 239,000 314,190 338,040 23,850 Fines and Forfeitures 311,500 310,000 309,450 (550) Miscellaneous 251,300 433,398 577,646 144,248 Total Revenues 24,565,294 23,525,106 26,746,241 3,221,135 Expenditures Current: General Government 6,185,982 6,815,794 5,715,871 1,099,923 Public Safety 11,958,116 13,005,024 11,885,866 1,119,158 Transportation 5,248,876 3,030,116 2,162,491 867,625 Human Services - 293,980 225,639 68,341 Culture and Recreation 2,005,150 4,703,013 4,601,637 101,376 Debt Service: Principal 1,282,591 980,112 959,266 20,846 Interest 13,385 296,432 296,430 2 Total Expenditures 26,694,100 29,124,471 25,847,200 3,277,271 Excess (Deficiency) of Revenues Over (Under) Expenditures (2,128,806) (5,599,365) 899,041 6,498,406 Other Financing Sources (Uses) Transfers in 863,005 2,158,981 787,324 (1,371,657) Transfers (out)(615,107) (1,623,010) (1,837,826) (214,816) Sale of General Capital Assets - - 524,784 524,784 Debt Proceeds - 2,575,000 2,575,000 - Lease Obligation - - 507,272 507,272 Total Other Financing Sources (Uses)247,898 3,110,971 2,556,554 (554,417) Reserves 1,880,908 2,488,394 19,463,755 16,975,361 Net Change in Fund Balances -$ -$ 22,919,350$ 22,919,350$ YEAR ENDED SEPTEMBER 30, 2022 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 33 of 138 Utilities Sanitation Other Fund Fund Funds Total Assets Current Assets: Cash and Cash Equivalents 3,030,542$ 3,270,674$ 302,735$ 6,603,951$ Accounts Receivable, Net 1,053,647 601,551 29,745 1,684,943 Prepaid Expenses 112,741 - 2,943 115,684 Inventories - - 70,895 70,895 Total Current Assets 4,196,930 3,872,225 406,318 8,475,473 Non-Current Assets: Restricted Assets: Cash and Cash Equivalents 7,771,754 - - 7,771,754 Investments 260,694 - - 260,694 Capital Assets: Assets not Being Depreciated 10,510,484 - - 10,510,484 Assets Being Depreciated, Net 35,402,916 - 195,813 35,598,729 Total Non-Current Assets 53,945,848 - 195,813 54,141,661 Total Assets 58,142,778 3,872,225 602,131 62,617,134 Deferred Outflows of Resources Deferred Loss on Bonding Refunding 731,545 - - 731,545 Other Postemployment Benefits 64,273 - 5,380 69,653 Pensions 1,071,395 - 89,678 1,161,073 Total Deferred Outflows of Resources 1,867,213 - 95,058 1,962,271 Enterprise Funds Business-Type Activities CITY OF CRESTVIEW, FLORIDA STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2022 The accompanying notes are an integral part of these financial statements. 24 Page 34 of 138 Utilities Sanitation Other Fund Fund Funds Total Liabilities Current Liabilities: Accounts Payable 307,142$ 303,615$ 43,130$ 653,887$ Accrued Expenses 114,728 - 46,353 161,081 Accrued Interest 74,223 - - 74,223 Due to Other Funds - - 72,326 72,326 Unearned Revenue 1,582,435 - 1,773 1,584,208 Customer Deposits 898,590 - - 898,590 Revenue Bonds, Notes, and Capital Leases Payable 1,453,808 - 7,147 1,460,955 Compensated Absences 48,567 - 1,773 50,340 Total Current Liabilities 4,479,493 303,615 172,502 4,955,610 Non-Current Liabilities: Other Postemployment Benefits Obligation 284,061 - 23,776 307,837 Net Pension Liability 1,454,399 - 121,736 1,576,135 Compensated Absences 145,701 - 9,486 155,187 Revenue Bonds, Notes, and Leases Payable 22,055,192 - 18,311 22,073,503 Total Non-Current Liabilities 23,939,353 - 173,309 24,112,662 Total Liabilities 28,418,846 303,615 345,811 29,068,272 Deferred Inflows of Resources Other Postemployment Benefits 35,336 - 930 36,266 Pensions 11,108 - 2,958 14,066 Total Deferred Inflows of Resources 46,444 - 3,888 50,332 Net Position Net Investment in Capital Assets, Net of Related Debt 25,601,086 - 170,355 25,771,441 Restricted 3,112,541 - - 3,112,541 Unrestricted 2,831,074 3,568,610 177,135 6,576,819 Total Net Position 31,544,701$ 3,568,610$ 347,490$ 35,460,801$ CITY OF CRESTVIEW, FLORIDA Enterprise Funds Business-Type Activities STATEMENT OF NET POSITION PROPRIETARY FUNDS SEPTEMBER 30, 2022 The accompanying notes are an integral part of these financial statements. 25 Page 35 of 138 Utilities Sanitation Other Fund Fund Funds Total Operating Revenue Charges for Service 8,224,364$ 4,449,517$ 890,725$ 13,564,606$ Other 1,983,924 15,376 550 1,999,850 Total Operating Revenue 10,208,288 4,464,893 891,275 15,564,456 Operating Expenses Personnel Expenses 2,565,871 - 689,984 3,255,855 Purchased Services 1,165,307 3,975,783 33,987 5,175,077 Repairs and Maintenance 277,062 - 98,158 375,220 Depreciation and Amortization 1,901,352 - 4,667 1,906,019 Materials and Supplies 389,288 - 355,464 744,752 Other Expenses 1,226,609 25,550 137,955 1,390,114 Total Operating Expenses 7,525,489 4,001,333 1,320,215 12,847,037 Operating Income 2,682,799 463,560 (428,940) 2,717,419 Non-Operating Revenue and Expense Interest Earnings 1,277 - - 1,277 Interest Expense (798,462) - (9,515) (807,977) Total Non-Operating Revenues and Expenses (797,185) - (9,515) (806,700) Income Before Operating Transfers 1,885,614 463,560 (438,455) 1,910,719 Capital Contributions Capital Grants 2,290,455 - - 2,290,455 Transfers Transfers in 1,637,699 - 238,162 1,875,861 Transfers (out)(1,045,629) (100,000) (513) (1,146,142) Total Transfers 592,070 (100,000) 237,649 729,719 Change in Net Position 4,768,139 363,560 (200,806) 4,930,893 Net Position, Beginning of Year 26,776,562 3,205,050 548,296 30,529,908 Net Position, End of Year 31,544,701$ 3,568,610$ 347,490$ 35,460,801$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2022 Enterprise Funds Business-Type Activities The accompanying notes are an integral part of these financial statements. 26 Page 36 of 138 Utilities Sanitation Other Fund Fund Funds Total Cash Flows from Operating Activities Cash Received from Customers 9,785,108$ 4,397,256$ 887,122$ 15,069,486$ Cash Paid to Suppliers for Goods and Services (2,976,454) (3,979,552) (614,547) (7,570,553) Cash Paid to Employees for Services (2,381,552) - (675,563) (3,057,115) Net Cash Provided by Operating Activities 4,427,102 417,704 (402,988) 4,441,818 Cash Flows from Non-Capital Financing Activities Due to/from Other Funds - - 72,326 72,326 Transfers to Other Funds (1,045,629) (100,000) (513) (1,146,142) Transfers from Other Funds 1,637,699 - 238,162 1,875,861 Net Cash Provided by Non-Capital Financing Activities 592,070 (100,000) 309,975 802,045 Cash Flows from Capital and Related Financing Activities Acquisition and Construction of Capital Assets (5,059,791) - (172,989) (5,232,780) Debt Proceeds 5,075,000 - - 5,075,000 Interest Paid (723,314) - (9,515) (732,829) Principal Payment of Bonds, Notes and Capital Leases (1,228,776) - (2,033) (1,230,809) Capital Grants 2,290,455 - - 2,290,455 Net Cash Used in Capital and Related Financing Activities 353,574 - (184,537) 169,037 Cash Flows from Investing Activities Purchases of Investments (429) - - (429) Interest Received 1,277 - - 1,277 Net Cash Provided by Investing Activities 848 - - 848 Net Change in Cash and Cash Equivalents 5,373,594 317,704 (277,550) 5,413,748 Cash and Cash Equivalents, Beginning of Year 5,428,702 2,952,970 580,285 8,961,957 Cash and Cash Equivalents, End of Year 10,802,296$ 3,270,674$ 302,735$ 14,375,705$ Enterprise Funds Business-Type Activities CITY OF CRESTVIEW, FLORIDA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2022 The accompanying notes are an integral part of these financial statements. 27 Page 37 of 138 Utilities Sanitation Other Fund Fund Funds Total Displayed as Cash and Cash Equivalents 3,030,542$ 3,270,674$ 302,735$ 6,603,951$ Restricted Cash and Cash Equivalents 7,771,754 - - 7,771,754 Total 10,802,296$ 3,270,674$ 302,735$ 14,375,705$ Reconciliation of Operating Income to Net Cash Operating Income 2,682,799$ 463,560$ (428,940)$ 2,717,419$ Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation and Amortization Expense 1,901,353 - 4,667 1,906,020 Changes in Operating Assets and Liabilities: Accounts Receivable (82,313) (67,637) (5,926) (155,876) Prepaid Expenses (112,741) - (2,943) (115,684) Inventories (70,895) (70,895) Accounts Payable and Accrued Expenses 194,552 21,781 84,855 301,188 Unearned Revenues (353,650) - 1,773 (351,877) Customer Deposits 12,783 - - 12,783 Compensated Absences (25,925) - (127) (26,052) Other Postemployment Benefits and Related Deferred Inflows and Outflows 35,595 - 3,537 39,132 Net Pension Liability and Related Deferred Inflows and Outflows 174,649 - 11,011 185,660 Total Adjustments 1,744,303 (45,856) 25,952 1,724,399 Net Cash Provided by Operating Activities 4,427,102$ 417,704$ (402,988)$ 4,441,818$ Supplemental Schedule of Non-Cash Activities Lease Obligation 301,368$ -$ -$ 301,368$ Amortization of Bond (Premium)/Discount 18,756 - - 18,756 Amortization of Refunding Loss 56,897 - - 56,897 CITY OF CRESTVIEW, FLORIDA Enterprise Funds Business-Type Activities STATEMENT OF CASH FLOWS PROPRIETARY FUNDS YEAR ENDED SEPTEMBER 30, 2022 The accompanying notes are an integral part of these financial statements. 28 Page 38 of 138 General Police Officers/ Employees Firefighters Retirement Plans Plan Total Assets Cash and Cash Equivalents 207,934$ 258,305$ 466,239$ Contributions Receivable 23,158 458,218 481,376 Investments: Fixed Income Securities 5,004,704 5,625,164 10,629,868 Common Stock and Equity Funds 11,382,991 12,874,219 24,257,210 Real Estate 4,256,841 4,581,280 8,838,121 Total Investments 20,644,536 23,080,663 43,725,199 Total Assets 20,875,628 23,797,186 44,672,814 Liabilities Accounts Payable and Accrued Expenses 12,435 22,093 34,528 Net Position Net Position Restricted for Pensions 20,863,193$ 23,775,093$ 44,638,286$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF FIDUCIARY NET POSITION SEPTEMBER 30, 2022 PENSION TRUST FUNDS Fiduciary Funds The accompanying notes are an integral part of these financial statements. 29 Page 39 of 138 General Police Officers/ Employees Firefighters Retirement Plans Plan Total Additions Contributions: Contributions - Employee 371,870$ 329,224$ 701,094$ Contributions - City 787,741 653,303 1,441,044 Contributions - State - 423,143 423,143 Total Contributions 1,159,611 1,405,670 2,565,281 Investment Income: Investment Earnings (3,057,223) (3,363,906) (6,421,129) (Investment Expenses)(194,257) (215,815) (410,072) Net Investment Income (3,251,480) (3,579,721) (6,831,201) Total Additions (2,091,869) (2,174,051) (4,265,920) Deductions Benefits Paid 1,471,769 814,459 2,286,228 Refunds of Contributions 110,590 58,901 169,491 Administrative Expenses 81,151 94,360 175,511 Total Deductions 1,663,510 967,720 2,631,230 Changes in Net Position (3,755,379) (3,141,771) (6,897,150) Net Position, Beginning of Year 24,618,572 26,916,864 51,535,436 Net Position, End of Year 20,863,193$ 23,775,093$ 44,638,286$ CITY OF CRESTVIEW, FLORIDA STATEMENT OF CHANGES IN FIDUCIARY NET POSITION PENSION TRUST FUNDS YEAR ENDED SEPTEMBER 30, 2022 Fiduciary Funds The accompanying notes are an integral part of these financial statements. 30 Page 40 of 138 NOTES TO BASIC FINANCIAL STATEMENTS Page 41 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 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 Chapter 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, 2022, 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, Florida 32536. Page 42 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 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 non-fiduciary 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 rev enue soon as all eligibility requirements imposed by the provider have been met. Page 43 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 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. Details of the property tax calendar are presented below: 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 44 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 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 45 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 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 (QPDs). 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 and 218.417, Florida Statutes, or made locally. At September 30, 2022, 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 46 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 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, 2022, 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 47 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 37 Deferred Outflows/Inflows of Resources A deferred outflow of resources represents a consumption of net assets that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until that future time. The City has the following items that qualify for reporting in this category: ◼ Deferred loss on refunding of bonds—losses on refunding of bonds have been deferred. These amounts are being amortized over the life of the old debt or the life of the new debt, whichever is shorter. ◼ Pension and OPEB related—increases in the net pension and OPEB liability resulting from changes of assumptions, differences between projected and actual earnings on plan investments, and differences between expected and actual experience with regard to economic or demographic factors in the measurement of total pension and OPEB liability are reported as deferred outflows of resources, to be recognized as an increase in expense future years as disclosed in Notes 9 and 10. A deferred inflow of resources represents an acquisition of net assets that applies to a future period and, therefore, will not be recognized as an inflow of resources until that future time. The City has the following items that qualify for reporting in this category: ◼ Pension and OPEB related—decreases in the net pension and OPEB liability resulting from changes of assumptions, differences between projected and actual earnings on plan investments, and differences between expected and actual experience with regard to economic or demographic factors in the measurement of total pension and OPEB liability are reported as deferred inflows of resources, to be recognized as a decrease in expense in future years as disclosed in Notes 9 and 10. ◼ Unavailable Revenues—Unavailable revenues are revenues which are measurable, but not available because they have not been received within the City’s period of availability. These revenues are deferred and recorded as deferred inflows of resources in governmental fund financial statements. 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. 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. Page 48 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 38 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: ■ 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. Page 49 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 39 ■ 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. 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. Page 50 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 40 G. Budgets Budgets are adopted on a basis consistent with GAAP, 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, 2022, 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. Adoption of New Accounting Pronouncement The GASB issued Statement No. 87, Leases (GASB 87), in June of 2017. This statement is effective for the current fiscal year ended 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. No restatement of beginning net position was necessary as a result of the implementation of this statement. See Note 8 for more information regarding the City’s leases. 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 QPDs, as defined in Chapter 280, Florida Statutes, which bear no custodial credit risk or Page 51 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 41 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 QPDs to participate in a multiple financial institution collateral pool to ensure the security for public deposits. All QPDs 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 QPDs. 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, 2022, 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 (*) $ 764,351 < One Year AAAm Certificates of Deposit 313,979 < 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. As of September 30, 2022, the City’s Pension Funds held the following investments: Investment Type Fair Value Equities $ 24,257,210 Fixed Income Securities 10,629,868 Real Estate Investment Fund 8,838,121 Total $ 43,725,199 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. Page 52 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 42 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: 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. Less than More than Fair Value 1 Year 1-5 Years 6-10 Years 10 Years General Employees' Plan: Bond Mutual Funds 5,004,704$ 5,004,704$ -$ -$ -$ Police Officers/Firefighters Plan: Asset Backed Securities 225,093 - - - 225,093 Foreign Bonds 252,832 42,084 141,341 62,093 7,314 Government Backed Securities 1,812,070 - - 43,342 1,768,728 US Treasuries 329,835 - 266,284 63,551 - Corporate Bonds 1,815,536 164,015 860,135 576,255 215,131 Bond Mutual Funds 1,189,798 1,189,798 - - - Total 10,629,868$ 6,400,601$ 1,267,760$ 745,241$ 2,216,266$ Investment Maturities Page 53 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 43 As of September 30, 2022, the City’s investment in the Florida PRIME is rated AAAm by Standard &Poor’s. As of September 30, 2022, 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, 2022, 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). Corporate bonds held ratings ranging from Aaa to Ba1. Foreign bonds held ratings from Aa2 to Baa2. 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 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, 2022. 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, 2022. Investment Type Amount (Level 1) (Level 2)(Level 3) Equities 11,382,991$ 11,382,991$ -$ -$ Fixed Income 5,004,704 - 5,004,704 - Total Investments Measured at Fair Value 16,387,695$ 11,382,991$ 5,004,704$ -$ Investments Measured at the Net Asset Value (NAV)Amount Real Estate Fund 4,256,841$ Total Investments 20,644,536$ General Employee Retirement Plan Page 54 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 44 The following table present the POFRP assets carried at fair value at September 30, 2022. 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, 2022: Transfers In Transfers Out General Fund $ 787,324 $ 1,837,826 Other Governmental Funds 446,136 129,000 Utilities Fund 1,637,699 1,045,629 Sanitation Fund - 100,000 Other Enterprise Funds 238,162 513 General Fixed Assets 3,647 - Total $ 3,112,968 $ 3,112,968 Interfund receivables and payables include the following at September 30, 2022: Interfund Interfund Receivable Payable General Fund $ 374,097 $ - Other Governmental Funds - 301,771 Other Enterprise Funds - 72,326 Total $ 374,097 $ 374,097 The $301,771 represents short-term borrowing by the Community Redevelopment Agency and the CDBG fund from the General Fund for costs were expended in advance of receiving reimbursement from a granting agency. The $72,326 represents cost reimbursements owed by Crestview Unlimited to the General Fund at year-end. During the fiscal year, the City purchased golf carts and related equipment on behalf of Crestview Unlimited totaling $555,953. Two intercompany loans were entered into between Crestview Unlimited and the City to repay the City over a period of 5 years including interest of 3.991%. These intercompany loans are being treated as operating leases for accounting purposes and are not included in the interfund receivables and payables balances presented above. The City expects Crestview Unlimited to repay the loans as cash flow permits. As of September 30, 2022, the principal balances owed on the loans totaled $555,953 and unpaid interest totaled $8,964. Investment Type Amount (Level 1) (Level 2)(Level 3) Equities 12,874,219$ 12,874,219$ -$ -$ Fixed Income 5,625,164 - 5,625,164 - Total Investments Measured at Fair Value 18,499,383$ 12,874,219$ 5,625,164$ -$ Investments Measured at the Net Asset Value (NAV)Amount Real Estate Fund 4,581,280$ Total Investments 23,080,663$ Police Officers' and Firefighters' Employee Retirement Plan Page 55 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 45 Note 4 - Receivables Receivables at September 30, 2022, 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 Crestview Fund Fund Fund Fund Unlimited Total Franchise Fees 210,049$ -$ -$ -$ -$ 210,049$ Utility Services 257,094 - - - - 257,094 Accounts Receivable 18,592 470,825 273,400 21,383 8,362 792,562 Unbilled Receivables - 627,823 353,150 - - 980,973 Less: Allowance for Doubtful Accounts - (45,000) (25,000) - - (70,000) Receivables, Net 485,735$ 1,053,648$ 601,550$ 21,383$ 8,362$ 2,170,678$ Business-Type Activities Primary Government Beginning Balance Increases (Decreases)Ending Balance Governmental Activities Capital Assets Not Being Depreciated: Land 3,758,127$ 23,000$ -$ 3,781,127$ Construction in Progress 8,490,490 3,466,384 - 11,956,874 Total Capital Assets Not Being Depreciated 12,248,617 3,489,384 - 15,738,001 Capital Assets Being Depreciated: Buildings 8,394,828 400,118 - 8,794,946 Improvements Other than Buildings 8,203,676 135,486 - 8,339,162 Infrastructure 15,071,839 347,068 - 15,418,907 Machinery and Equipment 9,002,301 1,042,007 - 10,044,308 Leased Equipment 1,591,177 531,526 - 2,122,703 Intangible Assets - Software 1,007,202 - - 1,007,202 Total Capital Assets Being Depreciated 43,271,023 2,456,205 - 45,727,228 Less Accumulated Depreciation: Buildings (3,218,764) (164,764) - (3,383,528) Improvements Other than Buildings (5,387,566) (304,409) - (5,691,975) Infrastructure (8,966,270) (349,160) - (9,315,430) Machinery and Equipment (6,441,291) (558,399) - (6,999,690) Leased Equipment (521,842) (243,944) - (765,786) Intangible Assets - Software (584,189) (181,296) - (765,485) Total Accumulated Depreciation (25,119,922) (1,801,972) - (26,921,894) Total Capital Assets Being Depreciated, Net 18,151,101 654,233 - 18,805,334 Governmental Activities Capital Depreciated, Net 30,399,718$ 4,143,617$ -$ 34,543,335$ Page 56 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 46 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental Activities General Government $ 333,507 Public Safety 730,623 Transportation 461,686 Culture and Recreation 275,702 Human Services 454 Total Depreciation Expense Governmental Activities $ 1,801,972 Business-Type Activities Utilities $ 1,901,352 Stormwater 4,667 Total Depreciation Expense Business-Type Activities $ 1,906,019 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 2,711,370$ -$ -$ 2,711,370$ Construction in Progress 6,042,657 4,324,030 (2,567,573) 7,799,114 Total Capital Assets Not Being Depreciated 8,754,027 4,324,030 (2,567,573) 10,510,484 Capital Assets Being Depreciated: Buildings 8,954,298 - - 8,954,298 Improvements Other than Buildings 3,635,890 - - 3,635,890 Infrastructure 36,401,111 475,498 - 36,876,609 Machinery and Equipment 7,028,362 3,060,853 (9,887) 10,079,328 Leased Equipment 121,274 301,368 (24,255) 398,387 Total Capital Assets Being Depreciated 56,140,935 3,837,719 (34,142) 59,944,512 Less Accumulated Depreciation: Buildings (4,849,756) (184,110) - (5,033,866) Improvements Other than Buildings (1,575,869) (179,437) - (1,755,306) Infrastructure (11,429,254) (723,313) - (12,152,567) Machinery and Equipment (4,578,473) (768,295) - (5,346,768) Leased Equipment (8,015) (50,864) 1,603 (57,276) Total Accumulated Depreciation (22,441,367) (1,906,019) 1,603 (24,345,783) Total Capital Assets Being Depreciated, Net 33,699,568 1,931,700 (32,539) 35,598,729 Total Business-Type Activities Capital Assets, Net 42,453,595$ 6,255,730$ (2,600,112)$ 46,109,213$ Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental Activities Direct Borrowings: Leases 936,328$ 526,277$ (318,873)$ 1,143,732$ 651,998$ Other Debt: Revenue Bonds 11,505,577 2,575,000 (858,390) 13,222,187 1,287,345 Plus Deferred Amounts for Issuance Premium 44,400 - (2,220) 42,180 - Compensated Absences 993,084 91,524 - 1,084,608 271,152 Other Postemployment Benefits 1,691,795 96,036 - 1,787,831 - Net Pension Liability 458,939 8,987,841 - 9,446,780 - Total Governmental Activities 15,630,123$ 12,276,678$ (1,179,483)$ 26,727,318$ 2,210,495$ Page 57 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 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. $ 215,000 $ 1,890,000 $ 2,105,000 Capital Improvement Revenue Bonds, Series 2020 Issued $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. 977,345 7,564,842 8,542,187 Capital Improvement Revenue Bonds, Series 2022 Issued $2,575,000, bearing an interest rate of 3.07%. Interest is payable semi-annually and annual principal payments are due on June 1, matures in June 2042. Secured and payable from non-ad valorem revenues. Funds used for the purpose of acquisition, construction And equipping of capital improvements at the golf club. 95,000 2,480,000 2,575,000 Unamortized Premium on Bond Refunding - 42,180 42,180 Total Revenue Bonds – Governmental Activities $ 1,287,345 $ 11,977,022 $ 13,264,367 Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Business-Type Activities Direct Borrowings: State Revolving Loans 8,518,775$ -$ (762,776)$ 7,755,999$ 782,409$ Leases 95,027 301,368 (78,933) 317,462 100,891 Other Debt: Revenue Bonds 10,974,423 5,075,000 (361,610) 15,687,813 577,655 Less Deferred Amounts for Issuance Discount (245,573) - 18,756 (226,817) - Compensated Absences 227,413 - (21,886) 205,527 50,340 Other Postemployment Benefits 284,129 23,708 - 307,837 - Net Pension Liability - 1,576,135 - 1,576,135 - Total Business-Type Activities 19,854,194$ 6,976,211$ (1,206,449)$ 25,623,956$ 1,511,295$ Page 58 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 48 Business-Type Activities Current Long-Term Total 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. $ 398,390 $ 2,149,364 $ 2,547,754 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. 44,710 465,029 509,739 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. 339,308 4,359,198 4,698,506 Total Revolving Loans – Business-Type Activities $ 782,408 $ 6,973,591 $ 7,755,999 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. $ 290,000 $ 6,010,000 $ 6,300,000 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. 40,000 3,900,000 3,940,000 Page 59 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 49 Current Long-Term Total 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- ad valorem 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. $ 42,655 $ 330,158 $ 372,813 Water and Sewer Revenue Bonds, Series 2021 Issued $5,075,000 bearing an interest rate of 2.09%. Interest is payable semi-annually and annual principal payments are due on September 1, matures in September 2042, secured by anticipated net water and sewer system revenues. Funds used for the purpose of water and sewer system improvements. 205,000 4,870,000 5,075,000 Unamortized Discount on Bond Refunding - (226,817) (226,817) Total Revenue Bonds – Business-Type Activities $ 577,655 $ 14,883,341 $ 15,460,996 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, 2022, are as follows: 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. Year Ending September 30 Principal Interest Principal Interest Total 2023 1,287,345$ 333,251$ 1,360,064$ 648,965$ 3,629,625$ 2024 1,181,299 300,721 1,401,247 611,065 3,494,332 2025 1,233,999 274,203 1,439,205 571,999 3,519,406 2026 1,258,372 246,552 1,481,021 531,847 3,517,792 2027 1,267,954 218,106 1,388,175 490,296 3,364,531 2028-2032 4,423,218 669,978 8,258,565 1,833,088 15,184,849 2033-2037 1,240,000 348,523 5,945,535 742,380 8,276,438 2038-2042 1,330,000 118,590 2,170,000 118,721 3,737,311 TOTAL 13,222,187$ 2,509,924$ 23,443,812$ 5,548,361$ 44,724,284$ Governmental Activities Business-Type Activities Page 60 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 50 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, 2022 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. During the year ended September 30, 2016, the City issued $6,650,000 Water and Sewer System Refunding Revenue Bonds, Series 2015 and $5,450,000 of Water and Sewer Refunding and Improvement Bonds, Series 2016, to advance refund $10,070,000 of Water System Revenue Bonds, Series 2008. The difference between the acquisition price and the net carrying value is reported as a deferred loss on bond refunding in the accompanying financial statements and is being charged to operations through the year 2039 using the straight-line amortization method. Principal Pledged Estimated Pledged Original Outstanding and Interest Revenue Percentage Pledged Revenue Source Debt Issue Through Amount Balance Payments Received Pledged Net Water and Sewer Utility Revenues State Revolving Loan - 2008 2028 7,068,015$ 4,698,506$ 456,970$ State Revolving Loan - 2010 2032 890,026 2,547,754 460,344 State Revolving Loan - 2013 2034 7,283,055 509,739 58,972 Water and Sewer Refunding Revenue Bonds, Series 2015 2033 6,650,000 6,300,000 282,986 Water and Sewer Refunding Revenue Bonds, Series 2016 2038 5,450,000 3,940,000 389,488 Water and Sewer Refunding Revenue Bonds, Series 2021 2042 5,075,000 5,075,000 74,837 1,723,597 2,782,943 61.9% Public Service Taxes, Franchise Fees, Communications Services Taxes, 1/2 Cent Sales Tax Public Improvement Refunding, Series 2015 2041 3,165,000 2,105,000 283,741 5,740,773 4.9% 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 8,542,187 857,544 3,144,294 27.3% 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 451,652 372,813 50,520 137,232 36.8% Except that $49,137 Due June 2029 and $49,973 Due June 2030 is Not Secured by the 1/2 Cent Sales Tax Non-Ad Valorem Revenues Capital Improvement Revenue Bonds, Series 2022 2042 2,575,000 2,575,000 70,928 6,354,041 1.1% Page 61 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 51 At September 30, 2022, the City has $8,360,000 of bonds outstanding that are considered to be defeased. Note 8 - Leases The City leases its fleet of vehicles and two fire trucks. The City’s leased assets and accumulated amortization are included in Note 5 Capital Assets. Lease agreements in which the City is a lessee are summarized below. Principal and Interest requirements to maturity are presented below. Note 9 - 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. Governmental Activities Lease Lease Initial Outstanding Inception End Payment Interest Lease Balance Description Date Date Amount Rate Liability 9/30/2022 2 Fire Trucks 5/23/2016 6/23/2023 $109,590 Annual*2.89%897,927$ 360,280$ 43 Vehicles Various 48 Month Terms $26,052 Monthly 3.65-3.80%1,144,866 783,452 Total Lease Agreements - Governmental Activities 2,042,793$ 1,143,732$ *A balloon payment of $261,885 is also required on 6/23/2023. Business-Type Activities Lease Lease Initial Outstanding Inception End Payment Interest Lease Balance Description Date Date Amount Rate Liability 9/30/2022 15 Vehicles Various 48 Month Terms $9,180 Monthly 3.65-3.80%398,387$ 317,462$ Total Lease Agreements - Business-Type Activities 398,387$ 317,462$ Year Ending September 30 Principal Interest Total 2023 651,998$ 32,096$ 684,094$ 2024 285,459 20,453 305,912 2025 150,159 10,759 160,918 2026 56,116 4,021 60,137 TOTAL 1,143,732$ 67,329$ 1,211,061$ Governmental Activities Year Ending September 30 Principal Interest Total 2023 100,891$ 9,273$ 110,164$ 2024 100,891 9,273 110,164 2025 78,971 7,258 86,229 2026 36,709 3,374 40,083 TOTAL 317,462$ 29,178$ 346,640$ Business-Type Activities Page 62 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 52 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, 2022, were $542,340. 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. Page 63 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 53 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, 2022, were $231,117. Membership of each plan consisted of the following on September 30, 2022, the date of the latest actuarial report. GERP POFRP Active Plan Members 124 87 Inactive Plan Members: Receiving Benefits 66 30 Entitled to but Not Receiving Benefits 36 12 Total 226 129 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, 2022: 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% Infrastructure 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, 2022, the annual money-weighted rate of return on the GERP and POFRP investments, net of pension plan investment expenses, was (13.31%) and (13.30%), respectively. More information about the Plan’s investments is discussed in Note 2. Page 64 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 54 Net Pension Liability of the Sponsor The components of the net pension liability of the sponsor on September 30, 2022, were as follows: GERP POFRP Total Pension Liability $ 26,027,030 $ 29,627,739 Plan Fiduciary Net Position (20,856,762) (23,775,092) Sponsor’s Net Pension Liability $ 5,170,268 $ 5,852,647 Plan Fiduciary Net Position as a Percentage of Total Pension Liability 80.14% 80.25% Differences between plan fiduciary net position presented above and the amounts presented in the financial statements are due to certain accruals which are the result of timing differences. These differences are not considered to be significant. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended September 30, 2022, the City recognized pension expense of $1,370,830 for the GERP and $2,034,131 for the POFRP. At September 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Amounts reported as deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended September 30, GERP POFRP 2023 $ 927,772 $ 977,802 2024 865,058 781,923 2025 841,917 875,349 2026 1,134,486 1,388,388 2027 - 23,464 Total $ 3,769,233 $ 4,046,926 Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of October 1, 2021 updated to September 30, 2022, using the following actuarial assumptions applied to all measurements periods. GERP POFRP Inflation 2.50% 2.50% Investment Rate of Return 7.00% 7.00% Discount Rate 7.00% 7.00% Projected Salary Increases Service based Age based 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 728,009$ 39,487$ 546,716$ 160,951$ 1,274,725$ 200,438$ Changes in Assumptions 646,008 - 858,598 36,240 1,504,606 36,240 Difference Between Projected and Actual Earnings on Investments 2,434,703 - 2,838,803 - 5,273,506 - Balance as of September 30, 2022 3,808,720$ 39,487$ 4,244,117$ 197,191$ 8,052,837$ 236,678$ GERP POFRP Total Page 65 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 55 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. All rates are projected generationally with Mortality Improvement Scale MP-2018. The previously described mortality assumption rates were mandated by Chapter 2015 -157, Laws of Florida. This law mandates the use of the assumptions used in either of the two most recent valuations of the Florida Retirement System (FRS). The above rates are those outlined in Milliman’s July 1, 2021 FRS valuation report for non-special-risk employees, with appropriate adjustments made based on plan demographics. The actuarial assumptions used in the October 1, 2021 valuation were based on the results of an actuarial experience study dated November 30, 2021 for GERP and November 24, 2021 for POFRP. 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, 2022 (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% Fixed Income (Non-Core) 2.50% 2.50% Global Fixed Income 3.50% 3.50% Real Estate 4.50% 4.50% Infrastructure 4.50% 4.50% 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. Page 66 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 56 GERP POFRP 1% Decrease of Discount Rate to 6.00% for GERP and POFRP $ 8,580,609 $ 9,861,413 Current Discount Rate of 7.00% for GERP and POFRP 5,170,268 5,852,647 1% Increase of Discount Rate to 8.00% for GERP and POFRP 2,358,662 2,564,222 Changes in Net Pension Liability – GERP Change in Net Pension Liability – POFRP The City has allocated the net pension liabilities above across funds based on payroll costs of each fund. The City’s net pension liabilities are reported as follows: GERP POFRP Net Pension Net Pension Liability Liability Governmental Activities $ 3,594,133 $ 5,852,647 Business-Type Activities 1,576,135 - Total $ 5,170,268 $ 5,852,647 Total Pension Plan Fiduciary Net Net Pension Liability Position Liability (Asset) Balance at September 30, 2022 24,447,463$ 24,618,572$ (171,109)$ Changes for the Year: Service Cost 738,764 - 738,764 Interest 1,707,653 - 1,707,653 Difference Between Expected and Actual Experience 715,508 - 715,508 Contribution - Employer - 772,579 (772,579) Contribution - Employee - 380,383 (380,383) Net Investment Income - (3,251,481) 3,251,481 Benefit Payments, Including Refunds of Employee Contributions (1,582,358) (1,582,358) - Administration Expense - (80,933) 80,933 Balance at September 30, 2022 26,027,030$ 20,856,762$ 5,170,268$ Total Pension Plan Fiduciary Net Net Pension Liability Position Liability Balance at September 30, 2022 27,375,803$ 26,916,864$ 458,939$ Changes for the Year: Service Cost 865,242 - 865,242 Interest 1,946,306 - 1,946,306 Share Plan Allocation 172,965 - 172,965 Difference Between Expected and Actual Experience 140,783 - 140,783 Contribution - Employer - 653,302 (653,302) Contribution - State - 423,143 (423,143) Contribution - Employee - 329,224 (329,224) Net Investment Income - (3,579,721) 3,579,721 Benefit Payments, Including Refunds of Employee Contributions (873,360) (873,360) - Administration Expense - (94,360) 94,360 Balance at September 30, 2022 29,627,739$ 23,775,092$ 5,852,647$ Page 67 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 57 Pension expense for the year ending September 30, 2022, was as follows: Governmental Activities $ 2,987,069 Business-Type Activities 417,892 Total $ 3,404,961 Note 10 - 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, 2020 (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 Not 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. Total OPEB Liability At September 30, 2022, the City reported total OPEB liability of $2,095,668 for the single-employer plan. Total OPEB liability was measured as of September 30, 2020. The measurement period for OPEB expense was October 1, 2020 through September 30, 2021. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of September 30, 2020, using the following actuarial assumptions: Page 68 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 58 Inflation Rate 2.50% Salary Increase Rate(s) Varies by Service Discount Rate 2.43% 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 2.43%. 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. Increase (Decrease in Total OPEB Liability Balance as of October 1, 2021 $ 1,975,924 Changes for the Year: Service Cost 188,921 Interest 45,777 Changes of Assumptions (63,227) Benefit Payments (51,727) Balance as of September 30, 2022 $ 2,095,668 Page 69 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 59 Changes of assumptions reflect a change in the discount rate from 2.14% for the reporting period ended September 30, 2021 to 2.43% for the reporting period ended September 30, 2022. 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 (1.43%) (2.43%) (3.43%) Total OPEB Liability $ 2,322,379 $ 2,095,668 $ 1,892,664 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 $ 1,812,547 $ 2,095,668 $ 2,437,209 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended September 30, 2022, the City recognized OPEB expense of $262,099. At September 30, 2022, 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 $ - $ 156,531 Changes in Assumptions 414,709 104,160 Employer Contributions Subsequent to the Measurement Date 59,468 - Total $ 474,177 $ 260,691 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ending September 30, Amount 2023 $ 18,101 2024 18,101 2025 18,098 2026 28,235 2027 45,248 Thereafter 26,235 Total $ 154,018 Page 70 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 60 Note 11 - 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 12 - 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 $ 2,545,381 Restricted for Reserve and Replacement 250,000 Restricted for Debt Service 317,160 Total $ 3,112,541 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, 2022, consist of the following: Page 71 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 61 Note 13 - 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 and CH2M. Total fees under the contract for the year ended September 30, 2022 were $1,034,255. 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 collections as payment for managing the collections. The remainder of the collections are remitted to Waste Pro of Florida, Inc. Net collections remitted to Waste Pro of Florida amounted to $3,690,708 for the year ended September 30, 2022. Other Total General Governmental Governmental Fund Funds Funds Non-Spendable Prepaid Expenditures 241,995$ 2,298$ 244,293$ Permanent Fund - 53,285 53,285 Total Non-Spendable 241,995$ 55,583$ 297,578$ Restricted For Impact Fees 281,813$ 48,020$ 329,833$ Debt Service 387,001 23,795 410,796 Building Permits - 1,324,426 1,324,426 Redevelopment - 474,294 474,294 Total Restricted 668,814$ 1,870,535$ 2,539,349$ Assigned For Subsequent Year's Budget 2,575,178$ -$ 2,575,178$ Grants - 1,162 1,162 Debt Service - 283,533 283,533 Law Enforcement - 4,493 4,493 Library - 2,913 2,913 Total Assigned 2,575,178$ 292,101$ 2,867,279$ Page 72 of 138 CITY OF CRESTVIEW, FLORIDA NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2022 62 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 200 5, 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 14 - Subsequent Events Subsequent to year-end, the City entered into three clean water state revolving fund loan agreements with the State of Florida Department of Environmental Protection for the design, planning, and construction of a wastewater treatment facility. The planning loan amount was for $700,000 at an interest rate of 1.84% plus a loan service fee with a repayment term of 10 years. The planning and design loan amount was for $800,000 at an interest rate of 1.6% plus a loan service fee with a repayment term of 20 years. The construction loan amount was $5,012,000 at an interest rate of .31% plus a loan service fee with a repayment term of 20 years. On May 25, 2023, the City entered into a lease-purchase agreement with PNC Bank for the purchase of two fire trucks in the amount of $1,604,094. Terms of the agreement require the City to make seven annual payments of $221,714 and a balloon payment of $455,771 the following month of year seven. Interest on the loan was imputed at 5.02%. Page 73 of 138 REQUIRED SUPPLEMENTARY INFORMATION Page 74 of 138 Reporting Period Ending 9/30/2022 9/30/2021 9/30/2020 9/30/2019 9/30/2018 Measurement Date 9/30/2021 9/30/2020 9/30/2019 9/30/2018 9/30/2017 Total OPEB Liability Service Cost 188,921$ 129,806$ 110,071$ 107,956$ 112,421$ Interest 45,777 56,991 55,819 48,482 39,333 Differences Between Expected and Actual Experience - (142,530) - (99,269) - Changes of Assumptions (63,227) 478,917 88,837 (36,901) (81,027) Benefit Payments (51,727) (18,598) (17,220) (20,602) (18,944) Net Change in Total OPEB Liability 119,744 504,586 237,507 (334) 51,783 Total OPEB Liability, Beginning of Year 1,975,924 1,471,338 1,233,831 1,234,165 1,182,382 Total OPEB Liability, End of Year 2,095,668$ 1,975,924$ 1,471,338$ 1,233,831$ 1,234,165$ Covered Payroll (Projected)10,313,701$ 9,749,221$ 10,002,787$ 9,414,388$ 9,803,788$ Total OPEB Liability as a Percentage of Covered Employee Payroll 20.32%20.27%14.71%13.11%12.59% *Information is presented for those years in which information is available. Notes to Schedule: September 30, 2022:2.43% 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: Benefit Payments:The City did not provide actual net benefits for the fiscal year ended on September 30,2022.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, 2022 SCHEDULE OF CHANGES IN THE TOTAL OPEB LIABILITY AND RELATED RATIOS REQUIRED SUPPLEMENTARY INFORMATION 63 Page 75 of 138 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Total Pension Liability Service Cost 738,764$ 682,347$ 667,898$ 611,990$ 555,982$ 522,311$ 565,716$ 536,574$ 538,171$ 498,306$ Interest 1,707,653 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 715,508 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 (1,582,358) (1,245,998) (2,175,488) (800,956) (761,657) (823,522) (668,726) (806,243) (663,463) (625,281) Net Change 1,579,567 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 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 13,381,078 Total Pension Liability, Ending (a)26,027,030$ 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 772,579$ 669,775$ 629,053$ 455,980$ 343,359$ 248,704$ 298,505$ 556,922$ 756,791$ 779,531$ Contributions - Employee 380,383 340,203 317,003 303,409 285,401 269,713 263,011 246,579 240,968 242,185 Net Investment Income (3,251,481) 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 (1,582,358) (1,245,998) (2,175,488) (800,956) (761,657) (823,522) (668,726) (806,243) (663,463) (625,281) Administrative Expense (80,933) (76,073) (55,909) (58,103) (55,635) (56,085) (45,495) (43,915) (35,530) (31,453) Other - - - - - - - - 44,105 - Net Change (3,761,810) 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 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 12,330,166 Plan Fiduciary Net Position, Ending (b)20,856,762 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)5,170,268$ (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 80.14%100.70%93.62%93.54%94.74%94.80%97.00%96.62%103.87%99.25% Covered Employee Payroll 5,942,914$ 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 87.00%-3.22%28.76%29.79%24.45%23.83%12.52%14.17%-15.79%2.83% 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 64 Page 76 of 138 Notes to Schedule: Changes of Assumptions: For measurement date 9/30/21, as a result of an Experience Study dated November 30, 2021, the Board has approved the following changes: 1. The investment return assumption was lowered from 7.25% to 7.00%, net of investment related expenses. 2. The salary increase rate assumption was changed, generally resulting in lower assumed rates. 3. The retirement rate assumption was changed, generally resulting in earlier assumed retirements. 4. The termination rate assumption was changed, generally resulting in fewer terminations. 5. The disability rate assumption was changed, reducing the rates at all ages by 33%. 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 65 Page 77 of 138 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Total Pension Liability Service Cost 865,242$ 855,640$ 829,996$ 810,126$ 781,326$ 736,601$ 675,767$ 650,319$ 704,926$ 645,804$ Interest 1,946,306 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 140,783 485,335 211,677 (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 172,965 139,291 110,280 119,721 113,414 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 (873,360) (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 2,251,936 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 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 13,240,600 Total Pension Liability, Ending (a)29,627,739$ 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 653,302$ 575,632$ 537,980$ 378,613$ 121,687$ 121,961$ 111,296$ 429,649$ 576,763$ 746,119$ Contributions - State 423,143 378,243 339,563 352,151 343,741 310,487 300,086 296,275 296,686 291,738 Contributions - Employee 329,224 320,388 304,695 295,647 288,434 278,697 267,931 255,354 235,503 264,486 Contributions - Buy Back - - - - 18,708 - - - - - Net Investment Income (3,579,721) 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 (873,360) (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 (94,360) (74,336) (69,573) (62,363) (66,003) (70,281) (47,835) (46,407) (37,041) (30,354) Other - - - - - - - - (44,105) - Net Change (3,141,772) 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 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 12,781,015 Plan Fiduciary Net Position, Ending (b)23,775,092 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)5,852,647$ 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 80.25%98.32%93.31%92.52%94.01%96.40%100.59%105.72%107.41%104.88% Covered Employee Payroll 5,144,131$ 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 113.77%9.17%33.53%35.94%28.29%16.37%-2.43%-22.25%-31.25%-17.25% 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 66 Page 78 of 138 Notes to Schedule: Changes of Assumptions: For measurement date 9/30/21, as a result of an Experience Study dated November 24, 2021, the Board has approved the following changes: 1. The investment return assumption was lowered from 7.25% to 7.00%, net of investment related expenses. 2. The salary increase rate assumption was changed, generally resulting in lower assumed rates. 3. The retirement rate assumption was changed, generally resulting in earlier assumed retirements. 4. The termination rate assumption was changed, generally resulting in fewer terminations. 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 67 Page 79 of 138 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Actuarially Determined Contribution 772,579$ 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 772,579 669,775 629,053 455,980 343,359 248,704 298,505 556,922 756,791 779,531 Contributions Deficiency (Excess)1,545,158$ 1,339,550$ -$ 41,800$ 35,688$ (462)$ 5,601$ (83,027)$ -$ -$ Covered Employee Payroll 5,942,914$ 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 13.00%12.60%12.70%9.62%7.70%5.90%7.26%14.45%20.10%20.60% Notes to Schedule: Valuation Date October 1, 2020 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 All assets are valued at market value with an adjustment to uniformly spread actuarial investment gains and losses over a 5-year period. Amortization Method New UAAL amortization bases are amortized over 15 years. 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 1.96% for purposes of amortizing the Unfunded Actuarial Accrued Liability Interest Rate 7.25% 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 68 Page 80 of 138 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: PubS.H-2010 for Employees Male: PubS.H-2010 for Employees Disabled Lives: PubG.H-2010 for Disabled Retirees, set forward three years Other Information Termination Rates Table Service Rate Service Rate 0-1 25.0%20 0.03% 2 20.0%25 0.03% 3 15.0%30 0.03% 4 10.0%35 0.03% 5 9.5%40 0.06% 6 9.0%45 0.11% 7 8.5%50 0.21% 8 8.0%55 0.45% 9 7.5%60 0.81% 10 7.0%65+1.40% 11 6.5% 12 6.0% 13 5.5% 14 5.0% 15 4.5% 16+4.0% Disability Rates Table 69 Page 81 of 138 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Actuarially Determined Contribution 900,223$ 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 903,480 814,585 767,263 611,043 352,014 353,034 330,709 623,233 762,470 929,835 Contributions Deficiency (Excess)(3,257)$ 1,404$ 18,279$ 21,827$ 80,636$ (26,436)$ (111,295)$ (80,605)$ -$ -$ Covered Employee Payroll 5,144,131$ 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 17.56%16.27%16.12%13.23%7.81%8.11%7.90%15.62%20.60%22.50% Notes to Schedule: Valuation Date October 1, 2020 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 All assets are valued at market value with an adjustment to uniformly spread actuarial investment gains and losses over a 5-year period. Amortization Method Level of percentage of pay, closed over 20 years. Inflation 2.5% per year. Salary Increases For service over 25 years - 10%; For service between 25-39 years - 6.5%; For service of 40 years and over - 5.5%. Payroll Growth 1.82% for purposes of amortizing the Unfunded Actuarial Accrued Liability. Interest Rate 7.25% per year compounded annually, net of investment related expenses. Normal Retirement Age For 10-24 years of service age 55-56, a rate of 50% and 100% at age 57+. For 25 years of service or more, a rate of 100% is assumed. Early Retirement Commencing with the earliest retirement age (45). Members are assumed to retire with immediate subsidized benefit at the rate of 7.5% per year. Termination Rates See table below. Disability Rates See table below. CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS - POLICE OFFICERS' AND FIREFIGHTERS' RETIREMENT PLAN LAST 10 FISCAL YEARS* 70 Page 82 of 138 CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS - POLICE OFFICERS' AND FIREFIGHTERS' RETIREMENT PLAN LAST 10 FISCAL YEARS* Mortality Healthy Lives: Female: PubS.H-2010 (Below Median) for Employees, set forward one year. Male: PubS.H-2010 (Below Median) for Employees, set forward one year. Disabled Lives: 80% PubG.H-2010 for Disabled Retirees / 20% PubS.H-2010 for Disabled Retirees Other Information Termination Rates Table Service Rate Service Rate 0 - 2 20.0%20 0.070% 3 15.0%25 0.080% 4 10.0%30 0.090% 5 9.0%35 0.120% 6 8.0%40 0.150% 7 7.0%45 0.260% 8 6.0%50 0.500% 9 5.5%55 0.780% 10 5.0%60+1.05% 11 4.5% 12 4.0% 13+3.5% Disability Rates Table Termination and Disability Rates Table 71 Page 83 of 138 For the Year Ended September 30,2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Annual Money Weighted Rate of Return, Net of Investment Expense -13.31%19.42%8.65%4.64%8.35%12.40%7.54%-1.99%9.70%12.28% CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF INVESTMENT RETURNS - GENERAL EMPLOYEES' RETIREMENT PLAN LAST 10 FISCAL YEARS 72 Page 84 of 138 For the Year Ended September 30,2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 Annual Money Weighted Rate of Return, Net of Investment Expense -13.30%19.40%8.12%3.94%8.12%12.45%6.60%-2.25%9.92%12.04% CITY OF CRESTVIEW, FLORIDA REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF INVESTMENT RETURNS - POLICE OFFICERS' AND FIREFIGHTERS' RETIREMENT PLAN LAST 10 FISCAL YEARS 73 Page 85 of 138 COMBINING FINANCIAL STATEMENTS Page 86 of 138 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 87 of 138 Law Community Enforcement Redevelopment Building and Debt Permanent Trust Agency CDBG Permitting Service Fund Total Assets Cash and Cash Equivalents 4,493$ 571,440$ 8,950$ 1,327,211$ 283,533$ 2,913$ 2,198,540$ Cash and Cash Equivalents, Restricted - - - - 71,815 - 71,815 Investments - - - - - 53,285 53,285 Prepaids - 237 - 2,061 - - 2,298 Due from Other Governments - 250,000 51,771 - - - 301,771 Total Assets 4,493 821,677 60,721 1,329,272 355,348 56,198 2,627,709 Liabilities Accounts Payable - 97,146 7,788 1,530 - - 106,464 Accrued Expenses - - - 1,255 - - 1,255 Interfund Payables - 250,000 51,771 - - - 301,771 Total Liabilities - 347,146 59,559 2,785 - - 409,490 Fund Balances Non-Spendable - 237 - 2,061 - 53,285 55,583 Restricted - 474,294 - 1,324,426 71,815 - 1,870,535 Assigned 4,493 - 1,162 - 283,533 2,913 292,101 Total Fund Balances 4,493 474,531 1,162 1,326,487 355,348 56,198 2,218,219 Total Liabilities and Fund Balances 4,493$ 821,677$ 60,721$ 1,329,272$ 355,348$ 56,198$ 2,627,709$ CITY OF CRESTVIEW, FLORIDA COMBINING BALANCE SHEET NON-MAJOR GOVERNMENTAL FUNDS SEPTEMBER 30, 2022 Special Revenue Funds 74 Page 88 of 138 Law Community Enforcement Redevelopment Building and Debt Permanent Trust Agency CDBG Permitting Service Fund Total Revenues Taxes -$ 85,186$ -$ -$ -$ -$ 85,186$ Licenses and Permits - - - 854,878 - - 854,878 Intergovernmental - 250,000 184,904 - - - 434,904 Miscellaneous - 1,779 - 1,293 - 160 3,232 Total Revenues - 336,965 184,904 856,171 - 160 1,378,200 Expenditures Current: General Government - 933,679 - - - - 933,679 Public Safety - - - 395,337 - - 395,337 Economic Environment - - 139,742 - - - 139,742 Debt Service: Principal - - - 12,997 205,000 - 217,997 Interest - - - 1,320 79,491 - 80,811 Total Expenditures - 933,679 139,742 409,654 284,491 - 1,767,566 Excess (Deficiency) Revenues Over (Under) Expenditures - (596,714) 45,162 446,517 (284,491) 160 (389,366) Other Financing Sources (Uses) Transfers in - 162,395 - - 283,741 - 446,136 Transfers out - - (44,000) (85,000) - - (129,000) Total Other Financing Sources (Uses)- 162,395 (44,000) (85,000) 283,741 - 317,136 Net Change in Fund Balances - (434,319) 1,162 361,517 (750) 160 (72,230) Fund Balances, Beginning of Year 4,493 908,850 - 964,970 356,098 56,038 2,290,449 Fund Balances, End of Year 4,493$ 474,531$ 1,162$ 1,326,487$ 355,348$ 56,198$ 2,218,219$ 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, 2022 75 Page 89 of 138 Stormwater Crestview Fund Unlimited Total Assets Current Assets: Cash and Cash Equivalents 215,999$ 86,736$ 302,735$ Accounts Receivable, Net 21,383 8,362 29,745 Prepaid Expenses 2,943 - 2,943 Inventories - 70,895 70,895 Total Current Assets 240,325 165,993 406,318 Non-Current Assets: Capital Assets: Assets Being Depreciated, Net 195,813 195,813 Total Non-Current Assets 195,813 - 195,813 Total Assets 436,138 165,993 602,131 Deferred Outflows of Resources Other Postemployment Benefits 5,380 - 5,380 Pensions 89,678 - 89,678 Total Deferred Outflows of Resources 95,058 - 95,058 Liabilities Current Liabilities: Accounts Payable 7,390 35,740 43,130 Accrued Expenses 1,616 44,737 46,353 Due to Other Funds - 72,326 72,326 Unearned Revenue - 1,773 1,773 Current Portion of Long-Term Debt: Compensated Absences 1,773 - 1,773 Revenue Bonds, Notes, and Capital Leases Payable 7,147 - 7,147 Total Current Liabilities 17,926 154,576 172,502 Non-Current Liabilities: Revenue Bonds, Notes, and Leases Payable 18,311 - 18,311 Other Postemployment Benefits Obligation 23,776 - 23,776 Compensated Absences 5,320 4,166 9,486 Net Pension Liability 121,736 - 121,736 Total Non-Current Liabilities 169,143 4,166 173,309 Total Liabilities 187,069 158,742 345,811 Deferred Inflows of Resources Other Postemployment Benefits 930 - 930 Pensions 2,958 - 2,958 Total Deferred Inflows of Resources 3,888 - 3,888 Net Position Net Investment in Capital Assets 170,355 - 170,355 Unrestricted 169,884 7,251 177,135 Total Net Position 340,239$ 7,251$ 347,490$ CITY OF CRESTVIEW, FLORIDA COMBINING STATEMENT OF NET POSITION NON-MAJOR ENTERPRISE FUNDS SEPTEMBER 30, 2022 76 Page 90 of 138 Stormwater Crestview Fund Unlimited Total Operating Revenue Charges for Service 399,198$ 491,527$ 890,725$ Other - 550 550 Total Operating Revenue 399,198 492,077 891,275 Operating Expenses Personnel Expenses 234,817 455,167 689,984 Purchased Services - 33,987 33,987 Repairs and Maintenance 35,398 62,760 98,158 Depreciation and Amortization 4,667 - 4,667 Materials and Supplies 55,003 300,461 355,464 Other Expenses 14,468 123,487 137,955 Total Operating Expenses 344,353 975,862 1,320,215 Operating Income 54,845 (483,785) (428,940) Non-Operating Revenues and Expenses Interest Expense (551) (8,964) (9,515) Transfers Transfers in 238,162 - 238,162 Transfers (out)(513) - (513) Total Transfers 237,649 - 237,649 Change in Net Position 291,943 (492,749) (200,806) Net Position, Beginning of Year 48,296 500,000 548,296 Net Position, End of Year 340,239$ 7,251$ 347,490$ CITY OF CRESTVIEW, FLORIDA COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION NON-MAJOR ENTERPRISE FUNDS YEAR ENDED SEPTEMBER 30, 2022 77 Page 91 of 138 Stormwater Crestview Fund Unlimited Total Cash Flows from Operating Activities Cash Received from Customers 401,634$ 485,488$ 887,122$ Cash Paid to Suppliers for Goods and Services (103,434) (511,113) (614,547) Cash Paid to Employees for Services (224,562) (451,001) (675,563) Net Cash Provided by Operating Activities 73,638 (476,626) (402,988) Cash Flows from Non-Capital Financing Activities Due to/from Other Funds - 72,326 72,326 Transfers to Other Funds (513) - (513) Transfers from Other Funds 238,162 - 238,162 Net Cash Flows from Non-Capital Financing Activities 237,649 72,326 309,975 Cash Flows from Capital and Related Financing Activities Acquisition and Construction of Capital Assets (172,989) - (172,989) Interest Paid (551) (8,964) (9,515) Principal Payment of Bonds, Notes and Capital Leases (2,033) - (2,033) Net Cash Used in Capital and Related Financing Activities (175,573) (8,964) (184,537) Net Change in Cash and Cash Equivalents 135,714 (413,264) (277,550) Cash and Cash Equivalents, Beginning of Year 80,285 500,000 580,285 Cash and Cash Equivalents, End of Year 215,999$ 86,736$ 302,735$ Reconciliation of Operating Income to Net Cash Operating Income 54,845$ (483,785)$ (428,940)$ Operating Activities: Depreciation and Amortization Expense 4,667 - 4,667 Changes in Operating Assets and Liabilities: Accounts Receivable 2,436 (8,362) (5,926) Prepaid Expenses (2,943) - (2,943) Inventories - (70,895) (70,895) Accounts Payable and Accrued Expenses 4,378 80,477 84,855 Unearned Revenue - 1,773 1,773 Compensated Absences (127) - (127) Other Postemployment Benefits and Related Deferred Inflows and Outflows (629) 4,166 3,537 Net Pension Liability and Related Deferred Inflows and Outflows 11,011 - 11,011 Total Adjustments 18,793 7,159 25,952 Net Cash Provided by Operating Activities 73,638$ (476,626)$ (402,988)$ CITY OF CRESTVIEW, FLORIDA COMBINING STATEMENT OF CASH FLOWS NON-MAJOR ENTERPRISE FUNDS YEAR ENDED SEPTEMBER 30, 2022 78 Page 92 of 138 COMPLIANCE SECTION Page 93 of 138 Assistance Pass Through Listing Entity Pass Through Grant Grantor/Pass-Through Agency Number Identifying Number to Subrecipients Expenditures Federal Awards CDBG Entitlement Grants Cluster U.S. Department of Housing and Urban Development Community Development Block Grant Program 14.218 2021-2022 -$ 184,904$ Total CDBG Entitlement Grants Cluster - 184,904 U.S. Department of Treasury Direct Program COVID-19: Coronavirus State and Local Fiscal Recovery Funds*21.027 SLT-8655 - 2,044,666 Total U.S. Department of Treasury - 2,044,666 Total Expenditures of Federal Awards -$ 2,229,570$ * Denotes major federal awards program. CITY OF CRESTVIEW, FLORIDA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE FOR THE YEAR ENDED SEPTEMBER 30, 2022 79 Page 94 of 138 CSFA Identifying Pass Through Grantor Agency Number Number to Subrecipients Expenditures State Financial Assistance State of Florida, Department of Financial Services Direct Program: Local Government Fire Service Gants 43.009 FM682 -$ 480,553$ Total State of Florida, Department of Financial Services - 480,553 State of Florida, Department of State Direct Program: Emergency Management Preparedness and Assistance Base Grant 45.032 22.h.sc.900.008 - 250,000 Total State of Florida, Department of State - 250,000 Total Expenditures of State Financial Assistance -$ 730,553$ STATE FINANCIAL ASSISTANCE FOR THE YEAR ENDED SEPTEMBER 30, 2022 (Concluded) CITY OF CRESTVIEW, FLORIDA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND 80 Page 95 of 138 81 CITY OF CRESTVIEW, FLORIDA NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND STATE FINANCIAL ASSISTANCE FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2022 Note 1 - General The accounting policies and presentation of the accompanying schedule of expenditures of federal awards and state financial assistance of the City of Crestview, Florida (the City) have been designed to conform with generally accepted accounting principles applicable to governmental units, including the reporting and compliance requirements of the Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) (federal awards); and Chapter 10.550, Rules of the Auditor General of the State of Florida. The City reporting entity is defined in Note 1 to the City’s basic financial statements for the year ended September 30, 2022. All federal awards and state financial assistance received directly from federal or state agencies, as well as federal awards and state financial assistance passed through other governmental agencies, are included in the schedule. Note 2 - Basis of Accounting The accompanying schedule of expenditures of federal awards and state financial assistance is presented using the same basis of accounting as the fund in which the grant is recorded, generally the accrual or modified accrual basis, as described in Note 1 D to the City’s financial statements. Note 3 - Indirect Costs The City did not elect to use the 10% de minimis cost rate in 2022 as covered in 2 CFR 200.414. Page 96 of 138 82 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 September 30, 2022, 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 22, 2023. Report on 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 97 of 138 83 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 2022-01 – Financial Reporting Criteria: To maintain a well-functioning and accurate internal and external financial reporting framework, financial information must be recorded, reconciled, and prepared in accordance with generally accepted accounting principles in the United States of America (GAAP). Condition: While the City made significant improvements in the financial reporting system since the prior fiscal year, a number of audit adjustments were needed to properly record transactions in accordance with GAAP in the following areas: ■ Reporting of fixed asset balances and depreciation expense. The City 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. In addition, we identified certain construction projects dating back many years that were not properly closed into the capital asset accounts and, therefore, were not being depreciated. ■ Over and under statements of accounts payable at year-end. The cutoff of accounts payable related to ongoing construction projects that crossed fiscal years required material adjustments. Effect: By not maintaining an adequate framework for complete and accurate financial reporting, the City’s financial records required material audit adjustments in order to prepare accurate financial statements in accordance with GAAP. Recommendation: We recommend the City implement processes, procedures, and, where necessary, technology appropriate for the level of transactional activity occurring within the City’s financial reporting system in order to ensure the financial statements are prepared in accordance with GAAP. Management’s Response: The Finance department has taken the audit team’s recommendation to automate and computerize the acquisition and depreciation of assets by utilizing software designed for the purpose. The City of Crestview is currently procuring this type of software. Additionally, the Finance Department has already begun the process of taking inventory and identifying capital projects that need to be placed in service or assets that have been taken out of service and/or fully depreciated with the intent to implement the software with a clean depreciation schedule free of retired or outdated assets. The City has numerous major projects that are often on-going at fiscal year-end. Certain projects with expenditures in the current fiscal year (2022/2023) were inadvertently accrued at fiscal year-end. The City is developing methods and processes to verify transactions are recorded in the correct period. Page 98 of 138 84 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 Report on 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, non-compliance 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 City’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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. June 22, 2023 Tallahassee, Florida Page 99 of 138 85 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Honorable Mayor and City Council City of Crestview Crestview, Florida Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited the City of Crestview, Florida’s (the City) compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended September 30, 2022. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended September 30, 2022. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City’s federal programs. Page 100 of 138 86 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material non-compliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material non-compliance when it exists. The risk of not detecting material non-compliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Non-compliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we: ■ Exercise professional judgment and maintain professional skepticism throughout the audit. ■ Identify and assess the risks of material non-compliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. ■ Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control Over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, non-compliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material non-compliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control Page 101 of 138 87 Honorable Mayor and City Council City of Crestview Crestview, Florida INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. June 22, 2023 Tallahassee, Florida Page 102 of 138 88 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, 2022 CITY OF CRESTVIEW, FLORIDA SECTION I - SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of Auditor’s Report Issued on Whether the Financial Statements Audited Were Prepared in Accordance with GAAP: Unmodified Internal Control Over Financial Reporting: Material weakness(es) identified? Yes Significant deficiency(ies) identified? None Reported Non-compliance material to financial statements noted? No Federal Awards Internal Control Over Major Federal Programs: Material weakness(es) identified? No Significant deficiencies identified? None Reported Type of Auditor’s Report Issued on Compliance for Major Federal Programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? No Identification of Major Federal Programs: Assistance Listing Number Coronavirus State and Local Fiscal Recovery Funds 21.027 Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low risk auditee? No SECTION II - FINANCIAL STATEMENT FINDINGS No matters are reported. SECTION III - FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS No matters are reported. Page 103 of 138 89 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, 2022, and have issued our report thereon dated June 22, 2023. 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 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, which are dated June 22, 2023, 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. Certain items with the prior year finding 2021-01 were considered to have been resolved in the current year. The remaining uncorrected items from the prior year finding 2021-01 are included in finding 2022-01 on page 83. 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 104 of 138 90 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 22, 2023 Tallahassee, Florida Page 105 of 138 91 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, 2022. 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. We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement. In our opinion, the City complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2022. 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 22, 2023 Tallahassee, Florida Page 106 of 138 Page 107 of 138 Page 108 of 138 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA SEPTEMBER 30, 2022 TABLE OF CONTENTS Independent Auditor’s Report .................................................................................................................. 1-3 Management’s Discussion and Analysis ................................................................................................... 4-7 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Position ...................................................................................................................... 8 Statement of Activities ........................................................................................................................... 9 Fund Financial Statements: Balance Sheet – Governmental Fund ................................................................................................... 10 Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Fund .............................................................................. 11 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund ....................................................... 12 Notes to Financial Statements ............................................................................................................ 13-17 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 ........................................................................... 18-19 Management Letter ............................................................................................................................ 20-22 Independent Accountant’s Report on Compliance with Section 218.415, Florida Statutes ......................................................................................................... 23 Independent Accountant’s Report on Compliance with Section 163.387(6) and (7), Florida Statutes ........................................................................................ 24 Page 109 of 138 1 INDEPENDENT AUDITOR’S REPORT The Board of Commissioners Community Redevelopment Agency Crestview, Florida Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities, the major fund, and the budgetary comparison for the General Fund of the Community Redevelopment Agency (the Agency), a component unit of the City of Crestview, Florida (the City), as of and for the year ended September 30, 2022, and the related notes to the financial statements, which collectively comprise the Agency’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and the major fund of the Agency as of September 30, 2022, and the respective changes in financial position and the budgetary comparison for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions 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. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Agency and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Agency’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Page 110 of 138 2 The Board of Commissioners Community Redevelopment Agency Crestview, Florida INDEPENDENT AUDITOR’S REPORT Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and, therefore, is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: ■ Exercise professional judgment and maintain professional skepticism throughout the audit. ■ Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. ■ Obtain an understanding of internal control relevant to the audit 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 Agency’s internal control. Accordingly, no such opinion is expressed. ■ Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. ■ Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Agency’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Page 111 of 138 3 The Board of Commissioners Community Redevelopment Agency Crestview, Florida INDEPENDENT AUDITOR’S REPORT 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 our report dated June 22, 2023, 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 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 Agency’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 Agency’s internal control over financial reporting and compliance. June 22, 2023 Tallahassee, Florida Page 112 of 138 4 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 2022. HIGHLIGHTS Financial Highlights ■ The assets of the Agency exceeded its liabilities at the close of the most recent fiscal year by $474,531 (net position). ■ The Agency’s total net position decreased by $434,319 or 48%. ■ At the close of fiscal year 2022, the Agency’s General Fund reported an ending fund balance of $474,531, a decrease of $434,319. Revenues increased by $252,525, or 299%. This was primarily due to grant revenues for Bush House renovations. Total expenditures increased by $649,748 or 229%. The expenditures include efforts to improve Main Street's aesthetics through the Agency's Awning Improvement Grants program and renovations for the Bush House. 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 113 of 138 5 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 114 of 138 6 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 $474,531 (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 2022 and 2021 Statements of Net Position. The following schedule shows a comparison of the fiscal year 2022 and 2021 Statements of Activities. Cash and Cash Equivalents $571,440 $909,188 Due from Other Governments 250,000 - Prepaid Items 237 - Total assets 821,677 909,188 Accounts Payable 97,146 338 Due to City of Crestview 250,000 - Total liabilities 347,146 338 Net position: Restricted 474,531 908,850 Total net position $474,531 $908,850 2022 2021 Governmental Activities General revenues: Capital Grants and Contributions $250,000 $- Property taxes 85,186 82,570 Miscellaneous 1,779 1,870 Total revenues 336,965 84,440 Expenses: General government 475,749 203,399 Community Redevelopment 457,930 80,482 Total expenses 933,679 283,881 Increase (decrease) in net position before transfers (596,714) (199,441) Net Transfers 162,395 155,000 Increase (decrease) in net position $(434,319) $(44,441) Governmental Activities 2022 2021 Page 115 of 138 7 CITY OF CRESTVIEW, FLORIDA COMMUNITY REDEVELOPMENT AGENCY A COMPONENT UNIT OF THE CITY OF CRESTVIEW, FLORIDA MANAGEMENT’S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2022 (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 $474,531, a decrease of $434,319 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 pertaining to the renovations of the Bush House. General Fund Budgetary Highlights During the fiscal year 2022, actual revenues and transfers exceeded the final budget by $17,579. Total expenditures were $457,290 less than the final budgeted appropriations for the year ended September 30, 2022. This was largely due to undistributed grant funding due to lack of applications and slower than expected movement on anticipated improvement projects. Economic Factors and Next Year’s Budget The following economic factors were considered in establishing the Agency’s 2023 budget: ■ The property valuations in the Agency district increased approximately 22% from the previous year. ■ In fiscal year 2023, the Agency budgeted to implement many of the downtown improvements and upgrades identified in the recently completed mobility study. Request for Information This financial report is designed to provide a general overview of the Agency’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the City of Crestview Community Redevelopment Agency at Crestview City Hall, 198 N . Wilson Street, Crestview, Florida 32536, phone (850) 682-1560. Page 116 of 138 BASIC FINANCIAL STATEMENTS Page 117 of 138 Governmental Activities Assets Current Assets: Cash and Cash Equivalents 571,440$ Due from Other Governments 250,000 Prepaid Items 237 Total Current Assets 821,677 Total Assets 821,677 Liabilities Accounts Payable 97,146 Due to City of Crestview 250,000 Total Liabilities 347,146 Net Position Restricted for: Community Redevelopment 474,531 Total Net Position 474,531 Total Liabilities and Net Position 821,677$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY SEPTEMBER 30, 2022 STATEMENT OF NET POSITION See accompanying notes. 8 Page 118 of 138 Net (Expense) Program Revenues Revenue and Changes Capital in Net Position Grants and Governmental Expenses Contributions Activities Functions Governmental: General Government 475,749$ -$ (475,749)$ Community Redevelopment 457,930 250,000 (207,930) Total Functions 933,679$ 250,000$ (683,679)$ General Revenues Taxes 85,186 Miscellaneous 1,779 Total General Revenues 86,965 Transfers from City of Crestview 162,395 Change in Net Position (434,319) Net Position - Beginning of Year 908,850 Net Position - End of Year 474,531$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY FOR THE YEAR ENDED SEPTEMBER 30, 2022 STATEMENT OF ACTIVITIES See accompanying notes. 9 Page 119 of 138 Assets Cash and Cash Equivalents 571,440$ Due from Other Governments 250,000 Prepaid Items 237 Total Assets 821,677 Liabilities Accounts Payable 97,146 Due to City of Crestview 250,000 Total Liabilities 347,146 Fund Balance Non-Spendable 237 Restricted for: Community Redevelopment 474,294 Total Fund Balance 474,531 Total Liabilities and Fund Balance 821,677$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY BALANCE SHEET - GOVERNMENTAL FUND SEPTEMBER 30, 2022 See accompanying notes. 10 Page 120 of 138 Revenues Taxes 85,186$ Intergovernmental 250,000 Miscellaneous 1,779 Total Revenues 336,965 Expenditures Current: General Government 475,749 Community Redevelopment 457,930 Total Expenditures 933,679 (Deficiency) of Revenues (Under) Expenditures (596,714) Other Financing Sources Transfers from City of Crestview 162,395 Total Other Financing Sources 162,395 Net Change in Fund Balance (434,319) Fund Balance - Beginning of Year 908,850 Fund Balance - End of Year 474,531$ CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY STATEMENT OR REVENUES, EXPENDITURES, AND CHANGES FOR THE YEAR ENDED SEPTEMBER 30, 2022 IN FUND BALANCE - GOVERNMENTAL FUND See accompanying notes. 11 Page 121 of 138 Variance with Final Budget - Positive Original Final Actual (Negative) Revenues Taxes 89,555$ 85,386$ 85,186$ (200)$ Intergovernmental 250,000 250,000 250,000 - Miscellaneous Income 3,000 3,000 1,779 (1,221) Total Revenues 342,555 338,386 336,965 (1,421) Expenditures Current: General Government 509,650 509,650 475,749 33,901 Community Redevelopment 807,977 881,319 457,930 423,389 Total Expenditures 1,317,627 1,390,969 933,679 457,290 Excess (Deficiency) of Revenues Over (Under) Expenditures (975,072) (1,052,583) (596,714) 455,869 Other Financing Sources Transfers in from City of Crestview 162,395 162,395 162,395 - Transfers (out) to City of Crestview (19,000) (19,000) - 19,000 Total Other Financing Sources (Uses)143,395 143,395 162,395 19,000 Appropriation of Fund Balance 831,677 909,188 - (909,188) Net Change in Fund Balance -$ -$ (434,319)$ (434,319)$ FOR THE YEAR ENDED SEPTEMBER 30, 2022 CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY Budgeted Amounts STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND 12 Page 122 of 138 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 13 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 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 the non-fiduciary 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 123 of 138 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 14 The following is the current property tax calendar: Assessment Date January 1, 2022 Levy Date November 1, 2022 Due Date March 31, 2023 Delinquency Date April 1, 2023 The City grants discounts of 1% for each month taxes are paid prior to March. Revenue recognition criteria for property taxes under Governmental Accounting Standards Board (GASB) require 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 for 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 Page 124 of 138 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 15 obligations unconditionally guaranteed by the United States Government, and other similarly 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 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 125 of 138 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 16 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 126 of 138 NOTES TO FINANCIAL STATEMENTS THE CITY OF CRESTVIEW COMMUNITY REDEVELOPMENT AGENCY CRESTVIEW, FLORIDA 17 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, 2022, the Agency received a transfer from the City in the amount of $162,395 for its portion of tax increment financing. Page 127 of 138 OTHER REPORTS Page 128 of 138 18 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 governmental activities and the major fund of the City of Crestview Community Redevelopment Agency (the Agency), as of and for the year ended September 30, 2022, and the related notes to the financial statements, which collectively comprise the Agency’s financial statements and have issued our report thereon dated June 22, 2023. Report on Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Agency’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 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 material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. Page 129 of 138 19 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 Report on 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 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. 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 22, 2023 Tallahassee, Florida Page 130 of 138 20 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, 2022, and have issued our report thereon dated June 22, 2023. 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 the Financial Statements Performed in Accordance with Government Auditing Standards and Independent Accountant’s Reports on an 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, which are dated June 22, 2023, 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 the findings and recommendations in the preceding 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 and each component unit of the reporting entity be disclosed in this management letter, unless disclosed in the notes to the financial statements. This is disclosed in Note 1 of the financial statements. Page 131 of 138 21 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 to 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 for the Agency. 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 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 the special district component unit provided the necessary information for proper reporting in accordance with Section 218.39(3)(b), Florida Statutes. Specific Information As required by Section 218.39(3)(c), Florida Statutes, and Section 10.554(1)(i)6, Rules of the Auditor General, the Agency reported: a. The total number of district employees compensated in the last pay period of the district’s fiscal year was 0. The Agency 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 1. c. All compensation earned by or awarded to employees, whether paid or accrued, regardless of contingency was $0. As noted above, the Agency 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 $36,000. 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, together with the total expenditures for such project as $400,118. These expenditures pertain to renovations for the Bush House. Page 132 of 138 22 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 $77,511. A budget versus actual variance is presented on page 12. Additional Matters Section 10.554(1)(i)3., Rules of the Auditor General, requires that we 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 which 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 22, 2023 Tallahassee, Florida Page 133 of 138 23 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’s (the Agency) compliance with Section 218.415, Florida Statutes, as of and for the year ended September 30, 2022, 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. We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement. Our examination does not provide a legal determination of the Agency’s compliance with the specified requirements. In our opinion, the Agency complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2022. 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 22, 2023 Tallahassee, Florida Page 134 of 138 24 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, 2022, 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 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 evidence we obtained is sufficient and appropriate to provide a reasonable basis for our opinion. We are required to be independent and to meet our other ethical responsibilities in accordance with relevant ethical requirements relating to the engagement. Our examination does not provide a legal determination of the Agency’s compliance with the specified requirements. In our opinion, the Agency complied, in all material respects, with the aforementioned requirements for the year ended September 30, 2022. 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 22, 2023 Tallahassee, Florida Page 135 of 138 Page 136 of 138 CITY OF CRESTVIEW Item # 4.2. Staff Report CITY COUNCIL MEETING DATE: August 28, 2023 TYPE OF AGENDA ITEM: Action Item TO: Mayor and City Council CC: City Manager, City Clerk, Staff and Attorney FROM: Elizabeth Roy, CRA Director, Tim Bolduc, City Manager DATE: 8/23/2023 SUBJECT: Discussion/approval of CRA Grant Policy Exception BACKGROUND: At the August 14th Council meeting, consensus was given to examine the possibility of a policy exception on the CRA Grants for 3rd Planet Brewing to be located in Downtown Crestview. DISCUSSION: Normally, grants are once every 6 months for each property. Due to the nature of the work needed, staff is requesting a one time policy exception. • Code Compliance Grant for 3rd Planet not to exceed $50,000 Match • Code Compliance Grant for Building owner not to exceed $25,000 Match • Beautification Grant for 3rd Planet not to exceed $30,000 Match Granting of these policy exceptions would require an agreement that the property would not be eligible to reapply for additional grants at the end of the 6 month period that is a part of the normal grant process. The granting of the policy exceptions would speed the process of development of a new business on Main Street. GOALS & OBJECTIVES This item is consistent with the CRA Strategic Plan 2020 Gateway to Opportunities as follows: To revitalize the district capitalizing on current resources and recognized opportunities 1. Establish a revitalization task force to address economic and physical Revitalization 2. Maintain and Strengthen the Façade Grant Program 3. Develop green space, open space parks, and public plaza programs and promote connectivity within the community To provide infrastructure for current and future needs 1. Develop and enforce building and site maintenance codes 2. Eliminate the informality in the enforcement of regulations 3. Develop a sidewalk restoration and maintenance program Page 137 of 138 4. Review a realign downtown streets for efficiency/eliminate dangerous intersections Market the District 1. Build and develop an active marketing and branding program 2. Promote CRA district on website and all social media platforms 3. Clearly identify “Historic Downtown Crestview” and direct visitors and locals to the district 4. Develop “Gateways to Crestview” 5. Develop a cohesive “family” of wayfinding signs to the district Enhance Public and Private partnerships 1. Re-emphasize and incentivize the Crestview Main Street Program 2. Refocus the Historic Preservation Board 3. Enhance the SR 85 Bridge Enhance the Aesthetics of the District 1. Develop design guidelines for Facades, signage, landscaping , access and parking 2. Develop area around new courthouse/add public amenities 3. Eliminate informality of enforcement of regulations Expand Activity in the District 1. Promote Arts in the downtown and entire CRA district Economic Development in the District 1. Amend Comprehensive plan to mixed use for downtown district 2. Develop a commercial incentive program to encourage new development, economic activities and job creation Connectivity 1. Develop an access road from Industrial Drive to Twin Hills Park 2. Develop a Bike path/pedestrian trail link to between downtown and Twin Hills Park 3. Connect Industrial Drive to Twin Hills park with new entrance FINANCIAL IMPACT There are sufficient funds in the current CRA budget for these grants. RECOMMENDED ACTION Staff respectfully requests that the members of the CRA Board approve the one time CRA Grant policy exception as outlined above. Attachments None Page 138 of 138