CITYOF TOLAR  ANNUAL FINANCIAL AND COMPLIANCE: REPORT YEAR ENDED SEPTEMBER 30, 2022    CITYOFTOLAR TABLE OF CONTENTS  Page  Financial Section Independent Auditors' Report- Management's Discussion and Analysis Basicl Financial Statements  Government-wide Financial Statements: Statement of Net Position Statement of Activities--- Governmental Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation oft the Governmental Funds Balance Sheet tot the Statement ofNet] Position- Statement of Revenues, Expenditures, and Changes inl Fund Balance - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, Changes in Fund Balance of Governmental Funds tot the Statement of Activities Proprietary Fund Financial Statements Statement of Fund Net Position - Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds- Notes tol Financial Statements Required Supplementary Information Actual - General Fund- Schedule ofl Pension Contributions Other Supplementary Information Actual - Utility Fund Other Information Required by GAO  15 16 17 18 19 20  Statement of Revenues, Expenditures and Changes in Fund Balance- - Budget and Schedule of Changes in Net Pension Liability and Related Ratios--- Schedule of Changes in) Net OPEBI Liability and Related Ratios--  43 44 45  Statement of Revenues, Expenses and Changes in Fundl Net Position - Budget and  46  Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of] Financial Statements Performed  In Accordance with Government. Auditing Standards  47 19 51  Schedule of Findings and Responses Schedule of Prior Year Findings-    FINANCIAL: SECTION    INDEPENDENT AUDITORS' REPORT  To thel Honorable Mayor and Members oft the City Council City ofTolar, Texas Opinions  Report on the Audit of thel Financial Statements  We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of the City of Tolar, Texas, as of and for the year ended September 30, 2022, and the related notes to the financial statements, which collectively comprise the City of Tolar, In our opinion, the finançial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, and each major fund ofthe City ofTolar, Texas, as of September 30, 2022, and the respective changes ini financial position, and, where applicable, cash flows thereof, fort the year then endedi in accordance with accounting principles 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 City of Tolar, Texas and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence wel have obtained iss sufficient and appropriate to provide a basis for our audit opinions. Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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 of Tolar, Texas' ability to continue as a going concern for twelve months beyond the financial statement date, including any currently Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are: free from material misstatement, whether due toi fraud or error, and toi issue an auditor's report that includes our opinions. Reasonable assurance is al 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 ofnot detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud  Texas' basic financial statements as listed in the table of contents,  generally accepted in the United States of America.  Basis for Opinions  Responsibilities of Management) for thel Financial Statements  known information that may raise substantial doubt shortly thereafter. Auditors' Responsibilities, for the Audit of the Financial, Statements  -1-    may involve collusion, forgery, intentional omissions, mistrepresentations, or the override of internal control. Misstatements are considered material ift therei is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on thef financial statements. Inp performing an audit in accordance with generally accepted auditing standards and Government Auditing Exercise professionalj 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 at test basis, evidence regarding the amounts and disclosures in 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 of Tolar, Texas' internal control. Accordingly, no such 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 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City ofTolar, Texas' ability to continue as a going concern 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 Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and required TMRS information, on pages 4 through 10 and 41 through 45 bej presented to: supplement the basic financial statements. Such information isther responsibility oft management and, although not aj part oft the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Tolar, Texas' basic financial statements. The budgetary comparison - utility fund is presented for purposes of additional analysis andi is not at required part oft the basic financial statements. The budgetary comparison - utility fund has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any In accordance with Government. Auditing Standards, we have also issued our report dated April 5, 2023, on our consideration of the City of1 Tolar, Texas' internal control over financial reporting and on our tests ofi its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe thes scope of our testing ofi internal control over financial reporting  Standards, we:  the financial statements. opinion is expressed. financial statements. forar reasonable period oft time.  that we identified during the audit. Required Supplementary. Information  evidence to express an opinion or provide any assurance.  Other Information  assurance oni it,  Other Reporting Required by Government. Auditing Standards  -2-    and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Tolar, Texas' internal control over  financial reporting and compliance.  MERRITT, MCLANE & HAMBY,P.C.  Abilene, Texas April5,2023    MANAGEMENT'S DISCUSSION AND ANALYSIS    MANAGEMENT'S DISCUSSION AND. ANALYSIS  This section of City of Tolar's annual financial report presents our discussion and analysis of the City's financial performance during the fiscal year that ended on September 30, 2022. Please read it in  conjunction with the City's financial statements, which follow this section.  FINANCIAL: HIGHLIGHTS  The City's total net position increased $690,817 from prior year. Net Position of our business- type activities increased $232,625 (13.7%). Net position of our governmental activities increased During the year, the City's expenses were $458,192 less than the $1,128,161 generated in taxes, Int the City's business-type activities, revenues were $743,004, including transfers, while expenses  $458,192 (or 28.8%) were $510,379.  and other revenues: for governmental programs. Thet total cost ofthe City's programs was $1,173,500. The general fund reported fund balance of$1,142,232. OVERVIEW OF THE FINANCIALSTATEMENTS  Management's Discussion and Analysis introduces the City's basic financial statements. The basic financial statements include: (1). government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. The City also includes in this report additional information to The City's annual report includes two govemment-wide financial statements. These statements provide both long-term and short-term information about the City'soverall status. Financial reporting at this level uses a perspective similar to that found in the private sector with its basis in full accrual accounting and The first of these government-wide statements is the Statement of Net Position. This is the City-wide statement of financial position presenting information that includes all of the City's assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position oft the City as a whole is improving or deteriorating. Evaluation of the overall economic health of the City would extend to other nonfinancial factors such as diversification oft thet taxpayer base or the condition ofCity infrastructure in addition to the financial information provided in thist report, The second government-wide statement is the Statement of Activities which reports how the City's net position changed during the current fiscal year. All current year revenues and expenses are included regardless of when cash is received or paid. An important purpose of the design of the statement of activities is to show the financial reliance oft the City's distinct activities or functions on revenues provided  supplement the basic financial statements. Govermment-wide Financial Statements  elimination or reclassification ofi internal activities.  by the City'staxpayers.    Both government-wide financial statements distinguish governmental activities of the City that are principally supported by taxes and intergovernmental revenues, such as grants, from business-type activities that are intended to recover all or a significant portion of their costs through user fees and charges. Governmental activities include general government, public safety, and public service. Business- The City's financial reporting entity does not include the funds for which the City is not accountable (component units). These organizations, such as the Tolar Economic Development Corporation are reported separately from the primary government though included in the City's overall reporting entity. This entity operates more independently or provides services directly to the citizens though the City A fund is an accountability unit used to maintain control over resources segregated for specific activities or objectives. The City uses funds to ensure and demonstrate compliance with finance-related laws and regulations. Within the basic financial statements, fund financial statements focus on the City's most significant funds rather than the City as a whole. Major funds are separately reported while all others are  type activities include water and sewer activities.  remains accountable for their activities. Fund Financial Statements  combined into a single, aggregated presentation. The City has two kinds of funds:  Governmental finds are reported in the fund financial statements and encompass essentially the same functions reported as governmental activities in the government-wide financial statements. However, the focus is very different with fund statements providing a distinctive view of the City's governmental funds. These statements report short-term fiscal accountability focusing on the use of spendable resources during thes year and balances of spendable resources available at the end oft the year. They are useful in evaluating annual financing requirements of governmentat programs and the commitment of spendable resources for Since the government-wide focus includes the long-term view, comparisons between these two perspectives may provide insight into the long-term impact of short-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 the government-wide statements to assist in Ab budgetary comparison schedule for the general fund can bei found in required supplementary information. This statement demonstrates compliance with the City's adopted and final revised budget. In addition, a budgetary comparison schedule for thej proprietary fund can be found in other supplementary information. Proprietary. funds are required in the fund financial statements and generally report services for which the City charges customers a fee. There are two kinds of proprietary funds. These are enterprise funds and internal service funds. Enterprise funds essentially ençompass the same functions reported. as business-type activities in the government-wide statements. Services are provided to customers external to the City organization such as the water and sewer. Internal service funds provide services and charge fees to customers within the City organization such as equipment services (repair and maintenance of City vehicles) and the print shop (mail and printing services for City departments). The City has no internal Proprietary fund statements provide both long-term and short-term financial information consistent with the focus provided by the government-wide financial statements, but with more detail for major enterprise The accompanying notes to the financial statements provide information essential to a full understanding of the government-wide and fund financial statements. The notes to the financial statements begin  the near-term.  understanding the differences between these two perspectives.  service funds. funds.  Notes to the Financial. Statements  immediately following the basic financial statements.  -5-    Other Information  In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information, other supplementary information, and other information required by  Government Accounting Office (GAO). Financial Analysis oft the City as a Whole  Net Position. As year-to-year financial information is accumulated on a consistent basis, changes in net position may be observed and used to discuss the changing financial position oft the City as a whole. The City's net position at fiscal year-end is $3,981,990. This is a $690,817 increase over last year's net position of $3,291,173. The following Table A-1 provides a summary of the City's net position at  September. 30, 2022.  TableA A-1 Cityo ofTolar's Net Position Govemmental Activities 2022 2021 1,480,223 997,514 12,014 88,958 76,341 827,865 888,509 916,823 964,850 18,683  Business-type Activities 2022 2021  Totals 2022 2021  Current and Other Assets Capital and) Non-Current. Assets TotalA Assets Deferred Outflows of Resources Current Liabilities Long Terml Liabilities Totall Liabilities Deferred Inflows of Resources Net Position Neti investment inc capital assets Restricted Unrestricted Total Net] Position  815,561 619,615 2,295,784 1,617,129  1,492,760 1,560,247 1,213,501 1,173,774 2,706,261 2,734,021 2,972,983 2,557,761 2,029,062 1,793,389 5,002,045 4,351,150  9,976  18,020 14,964 9,163 21,026 77,395 70,072 28,025 17,381  30,034 24,940 98,121 97,367 905,260 958,581 46,708 28,969 507,704 458,532  86,558 91,098 1,003,381 1,055,948  11,588  594,273 620,813 1,213,501 1,173,774 1,807,774 1,794,587 2,049,491 1,591,299 1,932,499 1,699,874 3,981,990 3,291,173  507,704 458,532 947,514 511,954  718,998 526,100 1,666,512 1,038,054  Net Position in the City's governmental activities increased 28.8% to $2,049,491. Net Position increased 13.7% to $1,932,499 in business-type activities of the government. $1,807,774 of total net position is invested in capital assets (distribution and collection system, equipment, etc) and $507,704 is restricted for economic development and construction. Consequently, unrestricted net position showed a $1,666,512 Changes in Net Position. The City's total revenues were $1,864,317. Over half (55%) of the City's revenue comes from fees charged for services, and 31 cents of every dollar raised comes from some typeo of Thet total cost of all programs and services was $1,173,500. The City's expenses cover a range of services,  balance at the end oft this year. tax. (Seel Figure A-1)  with nearly half(43%) related tob business-type activities. (Seel Figure A-2).  6-    Figure A-1  Figure A-2  City Sources of Revenue for Fiscal Year 2022  City Functional Expenses for Fiscal Year 2022  Property Taxes 15%  Other 14%  Business- type activities 43%.  General Govemment 46%  Non- property Taxes 16%   Debt. Service 3%  Charges for/ Services 55%  Streets 8%  Governmental. Activities  Revenues for the City's governmental activities were $1,128,161 while total expenses were $669,969, including transfers. The City is increasing its tax base by bringing in new businesses and homes. The increase of new business adds revenue through two avenues; 1)p property tax, and 2) sales tax.  Table A-2  Changes in City ofTolar,Texas' Net Position Governmental Activities 2022 2021 249,269 264,419 219,46! 275,584 256,589 33,052 32,576 8,214 458 8,271 9,709 1,128,161 628,436 542,263 385,430 89,431 75,220 31,427 32,478 663,121 493,128 465,040 135,308 (6,848) (13,320) 458,192 121,988  Business-type Activities 2022 2021  Total 2022 2021 249,269 264,419 275,584 33,052 12,539 8,271 542,263 89,431 31,427 510,379 522,824 690,817  Revenues Program! Revenues Charges for Services Capital grants and contributions General Revenues Sales tax Property tax Righto ofy way fees Investment Eamings Otheri income Total Revenues Expenses General govemment Streets Debts service Water utilities Total) Expenses Excess (deficiency) before transfers Transfers Increase (decrease) inr netp position  289,352 $ 109,643 $ 731,831 $ 477,521 $ 1,021,183 $ 587,164  219,461 256,589 32,576 722 9,709 385,430 75,220 32,478 90,269 90,269  4,325  264  736,156 477,785 1,864,317 1,106,221  510,379 522,824 225,777 6,848 232,625  510,379 522,824 1,173,500 1,015,952  (45,039). 13,320 (31,719)$ 690,817  -7-    Governmental Funds balances of$1,448,479. and grant income. Major Governmental: Funds Proprietary Funds Major Proprietary Funds  As discussed, governmental funds are reported in the fund statements with a short-term, inflow and outflow of spendable resources focus. This information is useful in assessing resources available at the end oft the year in comparison with upcoming financial requirements. Governmental funds reported ending fund The total ending fund balances of governmental funds show an increase of $478,238 over the prior year. This increase is primarily the result ofi increases in property tax revenue, sales tax revenue, license and fees, The General Fund is the City's primary operating fund and the largest source of day-to-day service The proprietary fund statements share the same focus as the government-wide statements, reporting both The City's major proprietary fund is the Water Fund. Total net position at the end of the year was The General Fund Budget for fiscal year 2022 was approximately $689,000. This was an increase of The City amended the budget during the fiscal year, with a total increase of $3,600. Several line items were adjusted to better reflect the actual expenditures including increases ini insurance, contract sanitation, economic development, miscellaneous, payroll, health insurance, printing & copies, reference books, and software, and decreases in capital outlay, protessional services, repair & maintenance, and travel, Actual  delivery. The fund balance of the General Fund increased to $1,142,232. short-term and long-term information about financial status.  $1,932,499. The Water Fund had an increase in net position of$232,625. approximately $311,000: from thep previous year's actual expenditures.  General Fund Budgetary Highlights  expenditures were $172,224 under budget. CAPITAL ASSET. AND DEBT ADMINISTRATION  Capital Assets  The City's investment in capital assets, net of accumulated depreciation, for governmental and business- type activities as of September 30, 2022, were $1,460,382 and $1,164,933, respectively. The total change ini net capital assets was a decrease of5.5% in the governmental and an increase of1.1% for business-type activities. The overall decrease was 2.7% for the City as a whole. The major capital addition in the current year was equipment in the general fund and equipment and construction for the water treatment plant in the water fund. See Table A-3 for additional information about changes in capital assets during the: fiscal year.    City ofTolar City's Capital Assets Governmental Activities 2022 2021 58,837 58,837 734,642 734,642 63,944 53,248 1,350,199 1,350,199  Business-type Activities 2022 2021 71,605 71,605 70,061 283,941 267,861  Total 2022 2021 130,442 130,442 70,061 734,642 734,642 347,885 321,109 1,350,199 1,350,199  Land Construction inp progress Buildings and improvements Distribution and collection system Furniture and equipment Infrastructure Total at historical cost Total accumulated depreciation Net capital assets Long-term Debt  2,954,138 2,918,878 2,954,138 2,918,878  2,207,622 2,196,926 3,379,745 3,258,344 5,587,367 5,455,270 747,240 651,299 2,214,812 2,106,500 2,962,052 2,757,799 1,460,382 1,545,627 1,164,933 - 1,151,844 2,625,315 2,697,471  Atyear-end, the City had $858,000 in bonds payable and $8,109 in notes payable. See Table A-4.  Table A-4 City'sOutstanding: Debt  Governmental Activities 2022 2021 8,109 9,814 858,000 915,000 866,109 $ 924,814  Business-type Activities 2022 2021  Total 2022 2021 8,109 $ 9,814 858,000 915,000 866,109 $ 924,814  Note payable Bonds payable  ECONOMIC FACTORS ANDI NEXT YEAR'S BUDGETS  The City is working on bringing residents into the City ofTolar by adding residential areas. By bringing in new residents, revenue of the City is increased through salest tax revenues and property tax revenues. Appraised property value used for the 2022-2023 budget preparation decreased approximately Water rates increased in the year ended September 30, 2023 by approximately 20%. Sewer sales These indicators were taken into account when adopting theg general fund and water fund budgets for 2023. The general funds expenditures are budgeted at $898,899, which is an increase of approximately $378,000 from prior year expenditures. The City has added no major new programs or initiative to the 2023 budget. If these estimates are realized, the City's budgetary general fund fund balance is expected to increase  $183,000, or less than 1.0% from the previous year. are expected to remain substantially the same for the fiscal year 2023.  approximately $474,500 by the end of fiscal year 2023.    CONTACTING THE CITY'S FINANCIAL MANAGEMENT  This financial report is designed to provide our citizens, taxpayers, customers, andi investors and creditors with a general overview of the City's finances andt to demonstrate the City's accountability for the money it receives. Ifyoul have questions about this report or need additional financial information, contact the City  ofTolar'sl Mayor, 8712 W.Hwy 377,Tolar, Texas 76476.  -10-    BASIC FINANCIALSTATEMENTS    CITY OF TOLAR, TEXAS STATEMENT OF NETI POSITION SEPTEMBER 30, 2022  Primary Government Activities  Governmental Business-lype Activities  Total  ASSETS  Current Assets Cash and cash equivalents Restricted cash Receivables: Property tax Allowance for uncollectible tax Accounts receivable, net Righto ofway Salest tax Inventory Total current assets Non-current Assets Netp pension asset Capital assets: Land Construction inp progress Buildings andi improvements Distribution and collection system Furniture and equipment Infrastructure Total non-current assets Total Assets DEFERRED OUTFLOWS OFI RESOURCES Deferred outflows related to" TMRS Deferred outflows related to OPEB Total Deferred Outflows ofResources  $  683,729 $ 726,693 $ 1,410,422  745,280 6,082 (1,268) 7,122 39,278 1,480,223 32,378 58,837 504,399 19,605 877,541 1,492,760 2,972,983 9,687 2,327 12,014  745,280 6,082 (1,268) 50,277 7,122 39,278 38,591 80,946 130,442 70,061 504,399 972,207 70,665 877,541 5,002,045 24,218 5,816 30,034  50,277 38,591 815,561 2,295,784 48,568 71,605 70,061 972,207 51,060 1,213,501 2,706,261 2,029,062 14,531 3,489 18,020  The accompanying notes are an integral part oft thiss statement.    Primary Govemment Activities  Governmental Business-Type Activities  Total 22,775 950 10,968 1,400 2,028 60,000 98,121 45,985 16,902. 38,292 6,081 798,000 905,260 1,003,381 46,035 673 46,708 1,807,774 507,704 1,666,512  LIABILITIES  Current Liabilities Accounts payable Salest tax payable Accrued liabilities Deposits Notes payable- current Bonds payable- current Total current liabilities Non-current! Liabilities Utility deposits Accrued vacation Net OPEBI Liability Notes payable noncurrent Bonds payable- noncurrent Total non-current liabilities Totall Liabilities DEFERRED INFLOWS OFI RESOURCES Deferred inflows related to TMRS Deferred inflows related to OPEB Totall Deferred Inflows of Resources Neti investment in capital assets Restricted Unrestricted Totall Net] Position  14,178 950 10,402 1,400 2,028 60,000 88,958 8,467 15,317 6,081 798,000 827,865 916,823 18,414 269 18,683 594,273 507,704 947,514 2,049,491  8,597 566 9,163 45,985 8,435 22,975 77,395 86,558 27,621 404 28,025 1,213,501 718,998 1,932,499 3,981,990  NET POSITION  -11-    CITY OFT TOLAR,TEXAS STATEMENTOF ACTIVITIES YEARI ENDED SEPTEMBER: 30, 2022  Program Revenues Charges for Services 289,352 $ 289,352 731,831 731,831  Capital Grants and Contributions 249,269 249,269  Functions/Programs Primary Government Governmental. Activities: General govemment Publics service Streets Debts service Total governmental activities Business-type Activities: Water utilities Total business-type activities Total Primary Government  Expenses e 542,263 $ 89,431 31,427 663,121 510,379 510,379  1,173,500 $ 1,021,183 $  249,269  General Revenues: Taxes: Salest tax Property tax Right ofway Investment Earnings Miscellaneous Income Transfers Total General Revenues and' Transfers Change inj Net] Position Net Position Beginning Netl Position Ending  The accompanying notes are an integral part oft this statement.    Net (Expense) Revenue and Changes inl Net Position Govemmental Business-Iype Activities $ (3,642)$ (89,431) (31,427) (124,500)  Activities  Total $ (3,642) (89,431) (31,427) (124,500) 221,452 221,452 96,952 264,419 275,584 33,052 12,539 8,271 593,865 690,817 3,291,173  221,452 221,452 221,452  (124,500) 264,419 275,584 33,052 8,214 8,271 (6,848) 582,692 458,192 1,591,299 2,049,491 $  4,325 6,848 11,173 232,625 1,699,874 1,932,499 $ 3,981,990  -12-    GOVERNMENTAL FUND FINANCIALSTATEMENTS    CITY OF TOLAR, TEXAS BALANCE SHEET- COVERNMINTALEEUNDS SEPTEMBER 30, 2022  Economic Corporation $ 294,554  Total Funds $ 683,729 745,280 1,759 6,082 (408) (1,268) 7,122 39,278 13,093 1,351 1,493,316 14,178 950 10,402 1,400 13,093 40,023 4,814 4,814 306,247 201,457 249,269 691,506 1,448,479  General Development Debt Service Governmental  Fund $ 683,729 $ 450,726 4,323 (860) 7,122 39,278 1,184,318 $ 14,178 $ 950 10,402 13,093 38,623 3,463 3,463  Fund  ASSETS:  Current: Cash and cash equivalents Restricted cash Receivables: Property tax Allowance: for uncollectible tax Right ofw way Sales tax Due from other funds Total Assets Current Liabilities Accounts payable Salest tax payable Accrued liabilities Deposits Due to EDC Total Liabilities  13,093 307,647  LIABILITIES:  $ 1,400 1,400  $  DEFERRED. INFLOWS OF RESOURCES: Unavailable: revenue- -1 property tax Total Deferred Inflows ofl Resources  1,351 1,351  FUND BALANCE:  Restricted: Economic Development Construction Federal grant Unassigned Totall Fund Balance Totall Liabilities, Deferred Inflows of Resources, and Fund Balances  306,247 306,247  201,457 249,269 691,506 1,142,232  1,184,318 $ 307,647 $  1,351 1,493,316  The accompanying notes are an integral parto of thiss statement.,  -13-    CTYOFTOLAR,TEXAS TO THESTATEMENT OFNETE POSITION SEPTEMBER: 30,2 2022  RECONCILIATION OF THE GOVERMMENTALFUNDS BALANCE SHEET  Total fund balances- - governmental funds! balance sheet (SNP) are different because:  1,448,479  Amounts reported for governmental activities int the statement ofr net position  Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these assets was  $2,196,926 and the accumulated depreciation was $651,299. Depreciation expense decreases net position in SNP. capital assets in the government wide: statements.  1,545,627 (95,941) 10,696 (924,814) 58,705 23,651  Capital outlay is recorded as expenditures in the fund financial statements, but as an increase in Long-term debt, including bonds payable of $915,000, are not due and payable in the current period, and therefore, are not reported asl liabilities in the governmental funds balance sheet. Long-term debt principal payments are expenditures in the fund financial statements but they should bes shown as reductions in long-term debti int the government-wide financial statements. Included in the noncurrent assets is the recognition of the city's net pension asset required by GASB 68i in the amount of $32,378, a deferred resource inflow in the amount of $18,414, and a deferred resource outflow in the amount of $9,687. This resulted in an increase in net position of Included int the noncurrent liabilities ist the recognition oft the city's net OPEB liability required by GASB 75 in the amount of $15,317, a deferred resource inflow in the amount of $269, and a deferred resource outflow in the amount of $2,327. This resulted in a decrease in net position of Vacation accrual is recorded in the statement ofr net position. The balance decreases net position Various other reclassifications and eliminations including recognizing unavailable revenue as revenue and adjusting current year revenue tos show the revenue eamed from the current year's tax  $23,651.  $13,259.  (13,259) (8,467) 4,814 2,049,491  levy.  Net position ofg govemmental activities statement ofr net position  The accompanying noles are ani integral part of this statement.  -14-    CITYOFTOLAR,TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUNDI BALANCE- GOVERNMENTAL FUNDS YEAR ENDED: SEPTEMBER 30, 2022  Economic Corporation 66,105 $  Total Funds 264,419 280,407 33,052 226,139 55,213 8,000 8,214 8,271 883,715 535,666 23,805 88,427 647,898 235,817 249,269 (6,848) 242,421 478,238 970,241 1,448,479  General Fund $ 198,314 $ 190,601 33,052 226,139 55,213 8,000 6,418 8,271 726,008 493,403 23,805 3,290 520,498 205,510 249,269 (34,005) 215,264 420,774 721,458 1,142,232 $  Development Debt Service Governmental  Fund 89,806  REVENUES Salest tax Property tax Righto ofway License and permits Garbage collection income Fines and forfeitures Investment income Miscellaneous income Total) Revenues EXPENDITURES Current: General government Public service Streets Debts service Total Expenditures Expenditures Other Financing Uses Granti income Operating transfers Total Other Financing Uses Net Change in) Fund Balances Fund Balance. Beginning Fund Balance Ending  1,796 67,901 42,263 42,263 25,638 31,826 31,826 57,464 248,783 306,247 $  89,806  85,137 85,137 4,669 (4,669) (4,669)  Excess (Deficiency) of Revenues over (Under)  The accompanying notes are an integral part of this statement.  -15-    CITYOFTOLAR,TEXAS YEAR ENDED: SEPTEMBER: 30, 2022  RECONCILIATION OFTHE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES INF FUNDI BALANCES OF GOVIRMMENTALFUNDS TO1 THES STATEMENT OFACTIVITIES  Total change in fund balances total governmental funds  $ 478,238  Amounts reported for govermental activities int the statement ofa activities Depreciation expense decreases net position in SNP. capital assets int the government wide statements.  (SOA) are different because:  (95,941) 10,696 58,705  Capital outlay is recorded as expenditures in the fund finançial statements, but as an increase in Long-term debt principal payments are expenditures in the fund financial statements but they should be shown as reductions in! long-term debti in the goverment-wide: financial statements. The implementation of GASB No. 68 required that certain expenditures be de-expended and recorded as deferred resource outflows. The contributions made after the measurement date of December 31, 2021, caused the change in the ending net position to increase in the amount of $8,650. Contributions made before the measurement date but after the previous measurement date were reversed from deferred resource outflows and recorded as a current year expense. This caused a decrease in the change in net position totaling $7,117. The City's reported TMRS net pension expense had to be recorded. The net pension expense increased the change in net position by $11,265. The result of these changes is to increase the change in net position by The implementation of GASB No. 75 required that certain expenditures be de-expended and recorded as deferred resource outflows. The contributions made after the measurement date of December 31, 2021, caused the change in the ending net position to increase in the amount of $195. Contributions made before the measurement date but after the previous measurement date were reversed from deferred resource outflows and recorded as a current year expense. This caused a decrease in the change in net position totaling $87. The City's reported TMRS net OPEB expense had to be recorded. The net OPEB expense decreased the change in net position by $1,278. The result ofthese changes is to decrease the changei ini net position by $1,170. Vacation accrual is reçorded in the statement of net position. The decrease in the balance Various other reclassifications and eliminations including recognizing unavailable revenue as revenue and adjusting current year revenue tos show the revenue earned from the current year's tax  12,798  $20,798.  (1,170) (311)  increases net position.  levy.  (4,823) 458,192  Total change ini net position ofg governmental. activities- statement ofa activities  The accompanying notes are an integral part oft this statement.  -16-    PROPRIETARY FUND FINANCIAL STATEMENTS    CITY OF1 TOLAR, TEXAS SEPTEMBER: 30, 2022  STATEMENTOFI FUNDI NETI POSITION- PROPRIETARYI FUNDS  Total Proprietary Funds 726,693 50,277 38,591 815,561 48,568 71,605 70,061 972,207 51,060 1,213,501 2,029,062 14,531 3,489 18,020 8,597 566 9,163 45,985 8,435 22,975 77,395 86,558 27,621 404 28,025 1,213,501 718,998 1,932,499  Water 726,693 $ 50,277 38,591 815,561 48,568 71,605 70,061 972,207 51,060 1,213,501 2,029,062 14,531 3,489 18,020 8,597 566 9,163 45,985 8,435 22,975 77,395 86,558 27,621 404 28,025 1,213,501 718,998 1,932,499 $  ASSETS  Current: Cash and cash equivalents Receivables, net Inventory Total current Non current: Net pension asset Land Construction inp progress Distribution and collection system, net of depreciation Equipment, net of depreciation Totalr non current TOTALASSETS  DEFERRED OUTFLOWS OFI RESOURCES Deferred outflows related to" TMRS Deferred outflows related to OPEB Total Deferred Outflows ofl Resources LIABILITIES  Current Accounts payable Accrued expenses Total current Non current: Utility deposits Accrued vacation Net OPEBI liability Total non current TOTAL LIABILITIES  DEFERRED: INFLOWS OF RESOURCES Deferred inflows related to TMRS Deferred inflows related to OPEB Totall Deferred Inflows of Resources NETPOSITION Net investment in capital assets Unrestricted TOTAL NETPOSITION  The accompanying notes are an integral part of this statement.  -17-    CIYOFTOLARIEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES! IN FUNDI NETI POSITION- PROPRIETARYI FUNDS YEARI ENDED: SEPTEMBER: 30, 2022  Total Proprietary Funds 731,831 731,831 510,379 510,379 221,452 4,325 6,848 11,173 232,625 1,699,874 1,932,499  Water 731,831 $ 731,831 510,379 510,379 221,452 4,325 6,848 11,173 232,625 1,699,874 1,932,499 $  Operating Revenues: Charges for services Waters sales and fees Total operating revenues Operating Expenses: Water department Total operating expenses Neto operating income Nonoperating revenues (expenses): Interest income Transfers Change inl Net Position Net Position- Beginning of Year Net] Position End ofYear  $  Total nonoperating revenues (expenses)  >  The accompanying notes are an integral part of this statement.  -18-    CITY OFTOLAR, TEXAS STATEMENT OF CASHI FLOWS- PROPRIETARYI FUNDS YEARI ENDED SEPTEMBER 30, 2022  Total Enterprise Funds 730,334 (184,068) (238,119) 308,147 6,848 (17,440) (10,592) (121,401) (121,401) 4,325 4,325 180,479 546,214 726,693  Water 730,334 $ (184,068) (238,119) 308,147 6,848 (17,440) (10,592) (121,401) (121,401) 4,325 4,325 180,479 546,214 726,693  Cash flows from operating activities: Cash received from customers Cash payments for salary and related expenses Cash payments tos suppliers for goods ands services Net cash provided by operating activities Cash flows from noncapital financing activities: Transfers from/to other funds Pension funding  Net cash used by noncapital financing activities Cash flows from capital and related financing activities: Acquisition of property and equipment Net cash used in capital and related financing activities Cash flows from investing activities Interesti income Net cash provided fromi investing activities Net Increase in Cash Cash at) Beginning of Year Cash atl End of Year  Reconciliation of operating income tot net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operatingi income (loss) to net cash provided (used) by operating activities: Depreciation (Increase) decrease inc operating assets Receivables Inventory Increase (decrease) in operating liabilities Accounts payable Utility deposits Accrued expenses  $  221,452 $ 108,312 (1,497) (13,970) (3,754) 5,280 (7,676) 308,147  221,452 108,312 (1,497) (13,970) (3,754) 5,280 (7,676) 308,147  Net cash provided by operating activities  The accompanying notes are ani integral part ofthiss statement.  -19-    CITY OF TOLAR NOTES TOI INANCIALSTATEMENTS  NOTEI: SUMMARYOF, SICMPCMTACCOUNTINO POLICIES  The accounting and reporting framework and the more: significant accounting principles and practices of the City ofTolar, Texas (City) are discussed in subsequent sections oft this Note. The remainder of the Notes is organized to provide explanations, including required disclosures, oft the City's financial activities for the fiscal year ended September: 30,2022. The City is a Type A "general law" municipality and operates under al Mayor-Council form of government. The City provides the following services as authorized by its charter: public As required by the accounting principles generally accepted in the United States of America, these financial statements present the primary government and its component unit, an entity for which the goverment is considered to be financially accountable. The blended component unit is reported in a separate column in the governmental funds financial  Financial Reporting Entity  safety, public works, waterworks, and general government.  statements. Component Unit:  The Tolar Economic Development Corporation was incorporated in the State of Texas on November 18, 2013. The Corporation was organized exclusively for the purpose of benefiting and accomplishing public purposes of the City of Tolar, Texas, by promoting, assisting, and enhancing economic development activities for the city as provided under Section 4A of the Texas Development Corporation Act of 1979, and as authorized by the governing body of the City of Tolar, Texas. The Corporation receives its primary funding from al local salest tax approved by the voters. A Board of Directors manages the affairs ofthe Corporation. The fiscal year oft the Corporation is the same as the City ofTolar, Texas.  Government-wide and Fund) Financial Statements Government-wide, financial statements  The government-wide financial statements include the statement of net position and the statement of activities. These statements report financial information for the City as a whole. The primary government and component units are presented separately within the financial statements with the focus on the primary government. Individual funds are not displayed but the statements distinguish governmental activities, generally supported by taxes and City general revenues, from business-type activities, generally financed in whole or in part with The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program, A function is an assembly of similar activities and may include portions ofa fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (I) charges for services which report fees, fines and forfeitures, and other charges and uses of the City's services; and (2) operating grants and contributions which finance annual operating activities including restricted investment income. These revenues are: subject to externally imposed. restrictions to these program uses. Taxes and other revenue sources not properly included with program revenues are reported as general Fund financial statements are provided for governmental and proprietary funds. Major individual governmental and enterprise funds are reported in separate columns.  fees charged to external customers.  revenues. Fundj financial. statements  -20-    CITY OF TOLAR NOTES TOI FINANCIAL: STATEMENTS  NOTE1: SUMMARYOF: SICNPICANTACCOUNTINO POLICIES- continued  Measurement Focus. Basis of Accounting, and Financial Statement Presentation The financial statements of the City are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The City's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide statements report using the economic resources measurement focus and the accrual basis of accounting, generally including the reclassification or elimination of internal activity (between or within funds). Reimbursements are reported as reductions to expenses. Proprietary financial statements also report using this same focus and basis of accounting, although internal activity is not eliminated in these statements. Revenues are recorded when earned and expenses are recorded when a liability isi incurred, regardless oft the timing oft related cash flows. Property tax revenues are recognized in the year for which they arel levied, while grants are recognized when grantor eligibility requirements are met. Governmental fund financial statements report using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to pay current liabilities. Expenditures are recorded when Major revenue: sources susceptible to accrual include: sales and use taxes, property taxes, right of way (fees), intergovermental revenues, and investment income. In general, other Operating income reported in proprietary fund financial statements includes revenues and expenses related to the primary, continuing operations of the fund. Principal operating revenues for proprietary funds are charges to customers for sales or services. Principal operating expenses are the costs of providing goods or services and include administrative expenses and depreciation of capital assets. Other revenues and expenses are classified as When both restricted and unrestricted resources are available for use, iti is the City's policy to  the related fund liability isi incurred.  revenues are recognized when cashi ist received.  non-operating in the financial statements.  use restricted: resources first, then unrestricted resources as needed.  Fund Types and Major Funds Governmental) funds  The City reports the following major governmental fund: all financial resources not reported in other funds.  General Fund - reports as the primary fund oft the City. This fund is used to account for Ina addition, the City reports the following as ai fund, not considered to be a major fund: Debt Service Fund - accounts for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. Special Revenue Fund - accounts for resources accumulated and payments made for the  purpose of economic development,  -21-    CITYOFTOLAR NOTES TO FINANCIALSTATEMIENIS  NOTE1: SUMMARYOFSIGNIFICANTACCOUNTING POLICIES- continued  Proprietary, funds  The City reports the following major enterprise fund:  Water Fund - reports for revenues and expenses associated with water services for the  citizens oft the City. Assets. Liabilities. and) Net Position or Equity Cash and cash equivalents  For purposes of the statement of cash flows, highly liquid investments are considered to be cash equivalents ift they have an original maturity of three months or less when purchased. Inventory is valued at cost which approximates market, using the first-in-first-out (FIFO) method. The cost ofi inventory is recorded as expenditures when used (consumption method). The City's property, plant, ande equipment with useful lives ofmore than one year are: stated at historical cost and comprehensively reported in the government-wide financial statements. Proprietary capital assets are also reported in their respective fund's financial statements. Donated assets are stated at fair value on the date donated. The City generally capitalizes assets with costs of $5,000 or more, as purchase and construction outlays occur. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets are depreciated using thes straight-line method. When capital assets are disposed of, the cost and applicable accumulated depreciation are removed from the respective accounts, and the. resulting gain or loss is recorded in non-operating revenues and expenses in the proprietary fund statements and on general revenues in the  Inventory  Capital assets, depreciation, and amortization  govemment-wide statements.  Estimated useful lives for depreciable assets are as follows:  Water and: sewer lines Buildings Equipment Vehicles  40 years 30 years 10ycars Syears  Long-term debt liabilities. expenditures. Compensated. absences  In the government-wide and proprietary financial statements, outstanding debt is reported as The governmental fund financial statements recognize the proceeds for debt as other financing sources of the current period. Issuance costs and debt payments are reported as The City's policy permits employees to accumulate up to 128 hours of earned but unused vacation benefits. Upon termination of employment, employees will be paid for any unused  vacation benefits that have been earned through the last day of work.  -22-    CITY OF' TOLAR NOTES1 TOFNANCALSTATMENITS  NOTE1: SUMMARYOFSIGNIFICANTACCOUNTING POLICIES- continued  Deferred Outflows/1 Inflows of Resources  Deferred outflows of resources refer to the consumption of net assets that are applicable to a future reporting period. Deferred outflows of resources have a positive effect on net position, similar to assets. The City has no amounts recorded as deferred outflows of resources in the governmental fund financial statements and $30,034 and $18,020 of deferred outflows related to TMRS in the government -wide financial statements and the proprietary fund statements, Deferred inflows of resources refer to the acquisition of net assets that are applicable to a future reporting period. Deferred inflows of resources have a negative effect on net position, similar to! liabilities. For the current period, the differençe in delinquent taxes receivable and the associated allowance for uncollectible taxes of $4,814 is considered a deferred inflow of resources in the governmental fund financial statements, while $46,708 and $28,025 of deferred inflows related to TMRS is considered deferred inflow of resources in the govemment-wide financial statements and the proprietary fund statements, respectively. 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 Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. The fiduciary net position of the Texas Municipal Retirement System (TMRS) has been determined using the flow of economic resource measurement focus and full accrual basis of accounting. This includes for purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to other post-employment benefit, OPEB expense, and information about assets, liabilities and additions to/deductions from TRS-Care's fiduciary net position. Benefit payments are recognized when due and payable in accordance with the benefit terms. There are no investments as this is a pay-as- The governmental fund financial statements present fund balances based on classifications that comprise a hierarchy that is based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the respective governmental funds can be spent. The classifications used int the governmental fund financial statements are Nonspendable - This classification includes amounts that cannot be spent because they are either a) not in spendable form or b) are legally or contractually required to be maintained intact. The City hast no amounts classified as nonspendable at September 30, 2022. Restricted- - This classification includes amounts for which constraints havel been placed on the use of the resources either a) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or b) imposed by law through constitutional provisions or enabling legislation. Debt service resources aret to be used for future servicing oft the revenue note and are restricted through  respectively.  Pensions  Other Post Employment. Benefits  you-go plan and all cash is heldi in a cash account. Fund balance classification  asi follows:  -23-    CITY OFTOLAR NOTESTOFINANCIALSTATEMENTS  NOTE1: SUMMARTOFSIGNIFICANTACCOUNING POLICIES- continued  debt covenants. The City classified $306,247 restricted for economic development, $201,457 restricted for street construction, and $249,269 restricted for covid relief spending Committed - This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the City Council, These amounts cannot be used for any other purpose unless the Council removes or changes the specified use by takingt the: same type ofa action (ordinance or resolution) that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. The City had no amounts classified as Assigned- - This classification includes amounts that are constrained by the Council's intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the City Council or through the Council delegating this responsibility to the City Secretary through the budgetary process. This classification also includes the remaining positive fund balance for all governmental funds except for the General Fund. The City has no amounts classified as assigned at September 30,2022. Unassigned- - This classification includes the residual fund balance for the General Fund. The unassigned classification also includes negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of assigned fund balance The City would typically use restricted fund balances first, followed by committed fund balances, and then assigned fund balances, as appropriate opportunities arise, but reserves the right to selectively spend unassigned fund balances first to defer the use of these other The preparation of thef financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. As such, actual results could differ from those estimates.  at September 30, 2022.  committed funds at September 30, 2022.  amounts.  classified funds. Estimates  NOTE2: STEWARDSHIP, COMPLIANCE, ANDACCOUNTARLITE  Budgetary Information Budget policy and practice  The City Secretary submits an annual budget to the City Council in accordance with the requirements of the State of Texas. The budget is presented to the City Council for review, and public hearings are held to address citizen concerns. In September, the City Council adopts the annual fiscal year budgets for City operating funds, Once approved, the City Council may amend the legally adopted budget when unexpected modifications are required  in estimated revenues and appropriations.  -24-    CITYOF TOLAR NOTESTOFINANCIALSTATEMENTS  NOTE2: STEWARDSHIP, COMPLIANCE, AND ACCOUNTABLITF- continued  Basis of budgeting  Each fund's appropriated budget is prepared on a detailed line-item basis. Revenues are budgeted by source. Expenditures are budgeted by department and class as follows: general governmental services, public service - highways and streets, and debt service. Budget Budgets for the governmental funds and proprietary fund operations are budgeted on the modified accrual basis of accounting. Revenues are budgeted in the year receipt is expected; and expenditures are budgeted in the year that the expenditure is incurred. The budget and actual financial statements are reported on this basis. Budgets for the proprietary fund are prepared on the accrual basis of accounting with the exception of depreciation expense and capital outlay. The budget and actual statements are reported on this basis. The budget for the general fund is presented as required supplementary information and the budget for the None of the City's departments had negative budget variance, however there were several line-items with negative budget variances. The City had adequate funds to cover the  revisions at this level are subject to final review by the City Council.  water fundi is presented as supplementary information.  variances.  NOTE3: DEPOSITSAND INVESTMENTS  The City's funds are required to be deposited and invested under the terms of a depository contract. The depository bank deposits for safekeeping and trust with the City's agent bank approved pledged securities in an amount sufficient to protect City funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation The City's cash deposits were entirely covered by FDIC insurance or by pledged collateral held by the City's agent bank in the City'st name at September 30, 2022. Tolar Economic Development Corporation's cash deposits were entirely covered by FDIC The City is required by Government Code Chapter 2256, The Public Funds Investment Act ("ACT"), to adopt, implement, and publicize an investment policy. That policy must be written; primarily emphasize safety of principal and liquidity; address investment diversification, yield, and maturity and the quality and capability ofi investment management; and include a list of the types of authorized investments in which the investing entity's funds may be invested; and the maximum allowable stated maturity of any individual investment The ACT requires an annual audit of investment practiçes. Audit procedures in this area conducted as a part of the audit of the general-purpose financial statements disclosed that in the areas of investment practices, management reports an establishment of appropriate policies, the City adhered to the requirements of the ACT. Additionally, investment practices  (FDIC) insurance. Cash Deposits  insurance at September 30, 2022. Investments  owned by the entity.  ofthe City were in accordance with! local policies.  -25-    CITY OFTOLAR NOTES TOI FINANCIAL STATEMENTS  NOTE3: DEPOSITSAND INVESTMENTS- continued  Statutes authorize the entity to invest in (1) obligations of the U.S. Treasury, certain U.S. agencies, and the State ofTexas; (2) certificates of deposit, (3) certain municipal securities, (4) money market savings accounts, (5) repurchase agreements, (6) banker's acceptances, (7) mutual funds, (8) investment pools, (9). guaranteed. investment contracts, (10), and common trust funds. The City has demand deposits and money market accounts. The City's general policy is to report money market investments and short-term participating interest-earning investment contracts at amortized cost and to report nonparticipating interest- earning investment contracts using a cost-based measure. However, if the fair value of an investment is significantly affected by thei impairment oft the credit standing of the issuer or by other factors, it is reported at fair value. The term "short-term" refers to investments which have a remaining term of one year or less at time of purchase. The term nonparticipating" means that the investment's value does not vary with market interest rate changes. Nonnegotiable certificates of deposit are examples of nonparticipating interest-carning  Investment Accounting Policy  investment contracts.  Analysis of Specific Deposit and Investment Risks  Credit Risk the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The ratings of securities by nationally recognized rating agencies are designed to give an indication of credit risk. Atyear end, the City was Custodial Credit Risk Deposits and investments are exposed to custodial credit risk ifthey are not covered by depository insurance and the deposits are uncollateralized, collateralized with securities held by the pledging financial institution, or collateralized with securities held by the pledging financial institution's trust department or agent but noti in the city's name. At September 30, 2022, the City's deposits were entirely collateralized and therefore, not exposed to custodial credit Concentration of Credit Risk the risk of loss attributed to the magnitude ofa government's investment in a single issuer. At September 30, 2022, since the City has no investments, the City was not exposed to concentration of credit risk. Interest Rate Risk - the risk that changes in interest rates will adversely affect the fair value of an investment. In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the maturity of investments to less than one year. The City monitors the interest rates to minimize Foreign Currency Risk - the risk that exchange rates will adversely affect the fair value of an investment. As of September 30, 2022, the City was not exposed. to  nots significantly exposed to credit risk.  risk.  the exposure to interest rate risk. foreign currency risk.  NOTE4: RECEIVABLES, UNCOLLECTIBLEACCOUNTS, AND UNAVAILABLE REVENOE  Enterprise Receivables  Significant receivables include amounts due from customers primarily for utility services. These receivables are due within one year. The City estimates an allowance for uncollectible accounts which represent the City's estimate oft the amount of accounts receivable that are  -26-    CITY OF TOLAR NOTES" TOI NANCIALSTATEMENTS  NOTE4: RECEIVABLES, UNCOLLECTIBLE ACCOUN7S, AND UNAVAILABLE REVENUE-  continued $19,309.  uncollectible based on collection history and individual specific circumstances. As of September 30, 2022, the City had recorded an allowance for uncollectible accounts of  Receivables at September 30, 2022 ares shown as follows:  Primary government: Water fund Total primary government  $ 50,277 $ 50,277  Property Taxes Receivable. Unavailable Revenue and Property Tax Calendar Property taxes are levied by October 1 on the assessed value listed as of the prior January I for all real and business personal property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent ift not paid beforel February 1 oft the year following they yeari in which tax is imposed. On February lofe each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. Property tax revenues are considered available when they become due or past due Allowance for uncollectible taxes receivable within the General Fund are based upon historical experience in collecting property taxes. Uncollectible personal property taxes are periodically reviewed and written off, but the City is prohibited from writing off real property In the governmental fund financial statements, property tax receivables are recorded in the General Fund. At fiscal year-end, ther receivables represent delinquent tax receivables. Ifthe receivables are not paid within 60 days of year-end, they are recorded as unavailable revenue. In the government-wide financial statements, property tax receivable and related revenue include all amounts due the City regardless of when cash is received. Over time, substantially  and receivable within the current period.  taxes without specific statutory authority from the' Texas Legislature.  all property taxes are collected.  NOTES: CAPITAL. ASSETS  The following schedule provides as summary of changes in capital assets:  Beginning Balance 58,837 58,837 734,642 53,48 1,350,199 2,138,089  Ending Balance 58,837 58,837 734,642 63,944 1,350,199 2,148,785  Increases  Decreases  Governmental activities: Capital assets notb being depreciated: Land Total capital assets noth being depreciated Capital assets beingd depreciated Buildings Equipment Infrastructure Total capital assets being depreciated  10,696 10,696  -27-    CITY OF TOLAR NOTES TO FINANCIAL STATEMENTS  NOTE5: CAPITALASSETS- continued  Beginning Balance (209,789) (38,509) (403,001) (651,299) 1,486,790 1,545,627 $ 30,315 65,626 95,941 Beginning Balance 71,605 71,605 2,918,878 267,861 3,186,739 (1,880,566) (225,934) (2,106,500) 1,080,239 1,151,844 2,697,471  Ending Balance (230,243) (44,339) (472,658) (741,240) 1,401,545 1,460,382  Increases (20,454) (5,830) (69,657) (95,941) (85,245) (85,245)  Decreases  Less accumulated depreciation for: Buildings Equipment Infrastructure Total accumulated depreciation Total capital assets beingo depreciated, net Governmental: activities capital assets, net Depreciation waso chargedtof functionsa asf follows: Governmental activities: Generalg govemment Streets Total depreciation expense- governmental activities  Ending Balance 71,605 70,061 141,666 2,954,138 283,941 3,238,079 (1,981,931) (232,881) (2,214,812) 1,023,267 1,164,933 2,625,315  Increases 70,061 70,061 35,260 16,080 51,340 (101,365) (6,947) (108,312) (56,972) 13,089 (72,156)S  Decreases  Business-type activities: Capital assets notb being depreciated: Land Constructioni inp progress Total capitala assets not being depreciated Capital assets being depreciated Distribution ando collection system Equipment Total capitala assets being depreciated Less accumulated depreciation for: Distribution and collection system Equipment Total accumulated depreciation Total capitala assets beingd depreçiated, net Business-type: activities, net Total Primary Government  NOTE6: LONG-TERM DEBT  Certificate afObligation. Bonds, Series 2019  City ofTolar, Texas Certificate of Obligations Bonds, Series 2019, were issued on October 1, 2018, in the amount of $1,025,000, to finance the cost of city-wide road improvements and for payment of professional services related thereto. The interest rate is 3.17% and due on each April 15th and October 15th. Bond principal payments are due on October 15th of each The City entered into a note agreement with Marlin Business Bank in December 2020 in the amount of $10,912 for the purchase and installation ofa security system. The loan is due in monthly payments of $274, including interest at 17.5%. The note matures on December 5,  year. Thel bonds mature October 15, 2033.  2025.  -28-    CITY OF TOLAR NOTES TO1 EMANCIALSTATEMENIS  NOTE6: LONG-TERM. DEBT- continued  Thei following provides a summary of changes in long-term debt:  Balancea at $ 9,814 $ 915,000 924,814  Balance at Due Within 1,705 $ 8,109 $ 2,028 858,000 866,109 $ 8,467 8,435 16,902  9/30/2021 Additions Retirements 9/30/2022 One Year  Governmental. Activities Security system note Certificate of Obligations Series 2019 Other Long-term Debt Governmental. Activities Compensated absences $ 8,156 $ Business-type Activities Compensated absences  $ 57,000 58,705  60,000 62,028  311 $ 433 744  8,002 16,158  The following shows the maturity oft the bonds.  Governmental. Activities Bonds Interest 2024 62,000 2025 64,000 2026 66,000 2027 68,000 2028-2032 372,000 2033-2034 166,000 858,000 Notes 2023 $ 2,028 $ 2024 2,413 2025 2,871 2026 797 8,109  Principal 24,314 22,317 20,256 18,132 56,521 5,294 173,082 1,031,082 1,262 $ 3,290 877 419 23 2,581  Total 86,314 86,317 86,256 86,132 428,521 171,294  2023 $ 60,000 $ 26,248 $ 86,248  3,290 3,290 820 10,690  The amount of interest cost charged to expenses during the year ended September 30, 2022,  was $29,722.  NOTE: 7: RISK MANAGEMENT- CLAIMS, ANDJUDGEMENTS  The City is exposed to various risks ofl loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These risks are covered by commercial insurance purchased from independent third parties and through the Texas Municipal League (TML) Intergovernmental Risk Pool, aj public entity risk pool for the benefit of 2,800 individual governmental units located within the state. TML Intergovernmental. Risk Pool (Pool) is considered a self-sustaining risk pool that provides coverage for its members. The City's.contributions: tot the Pool arel limited tot the amount of  -29-    CITY OFT TOLAR NOTES TOINANCALSTATMENTS  NOTE7: RISK MANAGEMENT- CADSAND/UDCENENS: continued  premiums as calculated at the beginning of each fund year. The Pool's liability is limited to the coverage that the City elects as statedi in the Pool's Declaration of Coverage for that fund year. Settled claims haver not exceededi insurance coverage limits for the past three years.  NOTE8: TRANSFERS/PAYMENTS WITHIN THE REPORTING ENTITY  Transfers and Payments subsidizing operating functions.  Transfers and payments within the reporting entity are substantially for the purposes of The following schedule reports transfers and payments within the reporting entity:  Transfer In Transfer Out Total  General fund Economic development fund Debt service fund Water fund  (34,005)$ (34,005) (4,669) (38,674)  31,826 6,848 38,674 Due From  31,826 (4,669) 6,848  The following schedule reports payables and receivables with funds. Economic Development Corporation General Fund  Due To  $. 13,093 13,093  NOTE9: DEFINED BENEFIT. PENSION, PLAN  Plan Description  The City of Tolar participates as one of 901 plans in the defined benefit cash-balance plan administered by the Texas Municipal Retirement System (TMRS). TMRS is a statewide public retirement plan created by the State ofTexas and administered in accordance with the TMRS Act, subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multple-employer retirement system for employées Texas participating cities. The TMRS Act places the general administration and management of TMRS with a six-member, Governor-appointed Board ofTrustees; however, TMRS is not fiscally dependent on the State ofTexas. TMRS issues a publicly available annual comprehensive financial report (Annual  Report) that can be obtained at tmrs.com.  All eligible employees of the city are required toj participate in TMRS.  Benefits Provided. TMRS.  TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the city, within the options available in the state statutes governing At retirement, the Member's benefit is calculated based on the sum of the Member's contributions, with interest, and the city-financed monetary credits with interest. The retiring Member may select one of seven monthly benefit payment options. Members may also choose tor receive ap portion oft their benefit as a lumps sum distribution in an amount equal to  -30-    CITVOFTOLAR NOTES TOF FINANCIALSTATEMENIS  NOTE9: DEFINED BENEFIT. PENSION. PLAN- continued  12,24, or 361 monthly payments, which cannot exceed 75% oft thet total member's deposits and The plan provisions are adopted by the governing body of the City, within the options available in the state statutes governing' TMRS. Plan provisions for the City were as follows:  interest.  Plan Year 2022 2021 7.0% 7.0% 2tol 2tol 5 5 60/5,0/25 60/5,0/25 0% 0% 0%ofCPI 0%ofCPI  Employee deposit rate Matchingi portion (cityt to employee) Years required for vesting Service retirement eligibility (expressed as age/years of service). Updated Service Credit Annuity Increase (to retirees) Employees covered by benefit terms. covered by the benefit terms: Active employees Contributions  At the December 31, 2021, valuation and measurement date, the following employees were  2021 2020 4 8 8 6 5 17  Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled tol but not yet receiving benefits  Member contribution rates in TMRS are either 5%, 6%, or 7% of the Member's total compensation, and the city matching percentages are either 1:1 (1 to 1), 1.5:1 (1 %to 1),or 2:1 (2to 1), both as adopted by the governing body oft the city. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the Entry Age Normal (EAN) actuarial cost method. The city's contribution rate is based on the liabilities created from the benefit plan options selected by the city and any changes in Employees for the City of Tolar were required to contribute 7.0% of their annual gross earnings during the fiscal year. The contribution rates for the City ofTolar were 8.89% and 8.87% in calendar years 2021 and 2022, respectively. The city's contributions to TMRS for the year ended September 30, 2022, were $29,101, and were equal to the required The City's Net Pension Liability (NPL) was measured as of December 31, 2021, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an The total Pension Liability in the December 31, 2021, actuarial valuation was determined  benefits or actual experience over time.  contributions. Netl Pension Liability actuarial valuation as oft that date. Actuarial. Assumptions  using the following actuarial assumptions:  -31-    CITYOFTOLAR NOTES TOI FIMANCIALSTATEMIENTS  NOTE9: DEFINED. BENEFIT. PENSION. PLAN- continued  Inflation Overall payroll growth declines, ifany Investment Rate ofl Return  2.5% pery year including inflation  2.75% per year, adjusted down for population 6.75%, net of pension investment expense,  Salary increases were based on a service-related table. Mortality rates for active members are based on the PUB(10) mortality tables with the Public Safety table used for males and the General Employeet table used for females. Mortality rates fork healthy retirees and beneticiaries are based on the Gender-distinct: 20191 Municipal Retirees of Texas mortality tables. The rates for active, healthy retirees and beneficiaries are projected on a fully generational basis by Scale UMP to account for future mortality improvements. For disabled annuitants, the same mortality tables for healthy retirees are used with a 4-year set-forward for males and a 3-year set-forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is applied, for males and females respectively, to reflect the impairment for younger members who become disabled. The rates are projected on ai fully generational basis by Scale UMP to account for The actuarial assumptions were developed primarily from the actuarial investigation of the experience ofTMRS over the four-year period from December 31, 2014 to December 31, 2018. They were adopted in 2019 and first used in the December 31, 2019 actuarial valuation. The post-retirement mortality assumption for Annuity Purchase Rates (AORs) is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production ofi income in order to satisfy the short-term and 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. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, the actuary focused on the area between (I) arithmetic mean (aggressive) without an adjustment for the time (conservative) and (2) the geometric mean (conservative) with an adjustment for time (aggressive). The target allocation and best estimates of real rates of return for each major asset class ini fiscal year 2021 ares summarized in the following table:  future mortality improvements subject to the floor.  long-term funding needs of TMRS.  Asset Class Core Fixed Income Non-Core Fixed] Income Global Public Equity Reall Estate Other Public &I Private Mkts Hedge Funds Private Equity Cash) Equivalents  Minimum % 1% 15% 25% 7% 7% 0% 5% 0%  Target % 6% 20% 35% 12% 12% 5% 10% 0%  Maximum % 11% 25% 45% 17% 17% 10% 15% 3%  -32-    CITYOFTOLAR NOTES TOI FINANCIAL STATEMENTS  NOTE9; DEFINED BENEFIT. PENSION. PLAN- continued  Discount. Rate  The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that Member and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the 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. Changes ini the Net Pension. Liability  Increase (Decrease) Plan Fiduciary! Net Position (b) 671,126 $  Total Pension Liability (a) 634,576 $ 37,426 43,034 3,897  Net Pension Liability (C) (36,550) 37,426 43,034 3,897 (23,219) (18,282) (87,654) 405 (3) (44,396) (80,946)  Balanceat! [2/31/21 Changesf fort they year: Service Cost Interest Changeso ofbenefit terms Differenceb between expecteda anda actual experience Changes ofassumptions Contributions- employer Contributions- employee Netin investmenti income Administratived expenes Othero charges Neto changes Balance atl 12/31/22  23,219 18,282 87,654 (31,483) (405) 3 97,270 768,396  Benefitp paymenels, includingr refundso ofemployee contributions  (31,483) 52,874 687,450  Sensitivity of the net pension liability to changes ini the discount rate  The following presents the net pension liability of the City, calculated using the discount rate of6.75%, as well as what the City's net pension liability would be ifit were calculated using ac discount rate that is 1-percentage point lower (5.75%) or 1-percentage point higher (7.75%)  than the current rate:  1%1 Decrease inl Discount  1%1 Increase inl Discount (153,843)  Discount Rate (5.75%) Rate (6.75%) Rate (7.75)% 6,699 $ (80,946) $  City's Net Pension Liability Pension Plan Fiduciary Net Position obtained att tmrs.com.  Detailed information about the pension plan's Fiduciary Net Position is available in the Schedule of Changes in Fiduciary Net Position, by Participating City. That report may be Pension Expense and Deferred Outflows of Resources Related to] Pensions For the year ended September 30, 2022, the city recognized pension expense of $(4,944). At September 30, 2022, the city reported deferred outflows of resources related to pensions  from the following sources:  -33-    CITYOFTOLAR NOTEST TOI FINANCIAL STATEMENTS  NOTE9: DEFINED BENEFIT. PENSION. PLAN- continued  Deferred Outflows of Resources 2,594 $  Deferred Inflows of Resources 1,119 11 44,905 46,035  Differencel between expected and actual economic experience Changes in actuarial assumptions Difference between projected and actuali investment earnings Contributions subsequent tot the measurement date Total  21,624 24,218  $21,624 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date will be recognized as a reduction oft thet net pension liability for the year ending September 30, 2023. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense  as follows: Year Ended December 31: 2023 2024 2025 2026  $  (7,949) (17,495) (9,528) (8,469)  NOTE. 10: DEFINED OTHER POST-EMPLOMMENT BENEFITI PLANS  Plan Description  The City participates in a defined benefit group-term life insurance plan known as the Supplemental Death Benefits Fund ("SDBF") administered by TMRS. This is a voluntary program in which participating member cities may elect, by ordinance, to provide group-term life insurance coverage (Supplemental Death Benefits) for their active members, including or not including retirees. Employers may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance before November 1 of any year to be Payments from this fund are similar to group-term life insurance benefits and are paid to the designated beneficiaries upon the receipt of an approved application for payment. The death benefit for active employees provides a lump-sum payment approximately equal to the employee's annual salary (calculated based on the employee's actual earnings for the 12- month period preceding the month of death). The death benefit for retirees is considered an other employment benefit and is a fixed amount of $7,500. The obligations of this plan are payable only from the SDBF and are not an obligation of, or a claim against, the Pension Contributions are made monthly based on the covered payroll of employee members of the participating member city. The contractually required contribution rate is determined annually for each city. The rate is based on the mortality and service experience of all employees covered by the SDBF and the demographics specific to the workforce of the city. There isa one-year delay between the actuarial valuation that serves ast the basis for the employer  effective the following January 1. Benefits Provided  Trust Fund. Contributions  -34-    CITYOFTOLAR NOTES TOI MANCIALSTATMINIS  NOTE10: DEFINED OTHER. POST-EMPLOYMENT: BENEFIT. PLANS- continued  contribution rate and the calendar year when the rate goes into effect. The contributions to the SDBF are pooled for investment purposes with those of the Pension Trust Fund. The TMRS Acti requires the Pension Trust Fund to allocate investment income to the SDBF on an annual basis. The funding policy of this plan is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; thei intent is not to prefund retiree term life insurance during employees' entire careers. As such, contributions are utilized to fund active member deaths on aj pay-as-you-go basis; any excess contributions andi investment income over Employees oft the City were required to contribute 0.0% oft their annual gross earnings during the fiscal year. The contribution rates for the City were 0.18% and 0.20% in calendar years 2021 and 2022, respectively. The City's contributions to OPEB for the year ended September  payments then become net position available for benefits.  30,2022 were $639 and were equal to the required contributions.  Total OPEB Liability  The actuarial assumptions used in the calculation of the funding valuation for the Supplemental Death Benefits Fund (SDBF) are based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. These assumptions were first used in the December 31, 2013 valuation. For purposes of developing the SDBF contribution rates, no other demographic assumptions are applicable. A. Mortality Rates Same as for the Pension Trust Fund. B. Investment Return - A statutory interest credit of 5% is allocated annually and is not dependent on investment earnings. Actuarial Cost Method For the purpose of calculating an employer's actuarially determined contribution rate, the one-year term cost is used. D. Valuation of Assets - Assets in the SDBF are valued at fund value (or fund balance); however, since the contribution rates are based just on the one-year term cost, assets are not included in developing the rate. Changes in Actuarial Assumptions and Methods There were no changes since the A. Participation in SDBF - Participation in the SDBF is optional and may be rescinded. Each municipality that chooses to participate can elect to cover. just active members, B. Benefit Eligibility Benefits are payable if the death occurs during the period in which a municipality has elected to participate in the SDBE. For retirees who had service with multiple TMRS employers, benefits are payable only ift the municipality from which the member retired participates in the SDBF when the death occurs, Benefit Amount - The death benefit for active employees provides a lump sum payment approximately. equal to the employee's: annual salary (calculated based on the employee's actual earnings for the 12-month period preceding the month of death). The discount rate used to measure the' Total OPEB Liability was 1.84%. The projection of cash flows used to determine the discount rate assumed that employee and employer  LAssumptions  prior valuation. II. Benefit Provisions  orb both active and retired members.  The death benefit for retirees is a fixed amount of $7,500..  Discount rate.  contributions will be made at the rates specified in statute.  -35-    CITYOFTOLAR NOTES TOI FINANCIAL STATEMENTS  NOTE. 10: DEFINED OTHER. POST-EMPLOYMENT: BENEFIT. PLANS- continued  Changes in the Total OPEB Liability Balance at 12/31/20 Changes for the year: Service cost Interest Changei int benefit terms Difference between expected/actual experience Changes of assumptions Benefit payments Netc changes Balance at 12/31/21  Total OPEB Liability 35,609 888 718 88 1,328 (339) 2,683 38,292  Sensitivity of the total OPEB liability to changes in the discount rate  The following shows the total OPEB liability calculated using the discount rate of1.84%, as well as what the City's total OPEB liability would have been ifit were calculated using a discount rate that is 1 percentage point lower (0.84%) or 1 percentage point higher (2.84%)  than the current rate.  1%1 Decrease inl Discount 47,831$  1%1 Increasei in Discount 31,032  Discount 38,292 $  Rate(0.84%)€ Rate(1.84%) Rate(2.849)  Cityo ofTolar'sn net OPEBI liability OPEB Plan Total Liability  Detailed information about the OPEB plan's Total OPEB Liability is available in a separately issued' TMRS financial report. That report may be obtained on thel Internet at www.tmrs.com. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources For the year ended September 30, 2022, the City recognized OPEB expense in the amount of At September 30, 2022, the City reported deferred outflows of resources and deferred inflows  Related to OPEB $3,537.  ofr resources related to pensions from the following sources: Differences between expected and actual economic experience Changes in actuarial assumptions Contributions subsequent tot the measurement date  Deferred Deferred Outflows of Inflows of Resources Resources 67$ 473 5,261 200 488 5,816 673  Total  $488 reported as deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability for the year ended! September 30, 2023. Other amounts reported as deferred outflows andi inflows of resources related to OPEB will be recognized inj pension expense as follows:  -36-    CITYOFTOLAR NOTES TO FINANCIAL STATEMENTS  NOTEI 10: DEFINED OTHER POST-EMPLOYMENT BENEFIT, PLANS- continued  Year ended) December 31; 2023 2024 2025 2026  $  2,004 1,443 1,132 76  NOTEI1: HEALTH CARE COVERAGE  The City pays the employee's portion of health coverage. The city's annual çost was $53,610. Employees are responsible for the cost of dependent coverage and any additional coverage over the basic amount. All premiums were paid to al licensed insurer. Thel Plan was authorized by Article 3.51-2, Texas Insurance Code and was documented by contractual  agreement.  NOTE 12: GARBAGE COLLECTIONSERVICE CONTRACT  The City has as sanitation contract with Waste Connection wherein Waste Connection picks up all garbage of the City and disposes ofit. The rates charged flow through to the residents and are included in the water billings they receive. Revenue collected for garbage service is recorded in the General Fund. Total collected during the year ended September 30, 2022, was  $55,213.  NOTEI 13: SUBSEQUENTEVENT  On December 1, 2022, the City issued Certificate of Obligation Bonds, Series 2022, in the amount of $8,865,000, to (a) finance repairs and improvements to the City's water and wastewater system, including the construction ofa new wastewater treatment facility, a new 44,000 gallon storage tank and well, and (b) pay the costs incurred in connection with the execution and delivery of the Certificates. The interest rates range from 4.5% to 5.0%. Interest is due each May 15 and November 15, beginning May 15, 2023. Bond principal payments are due on November 15 of each year beginning November 15, 2027. The bonds  mature on) November 15, 2052.  NOTE14: NEWACCOUNTING PRONOUNCEMENIS  In. June 2017, the GASB issued Statement No. 87 Leases. The objective of this statement ist to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This statement increases the usefulness of governments' financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows oft resources or outflows of resources based on the payment provisions oft the contract. Itestablishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this resources, thereby enhancing the relevance and consistency ofinformation about governments' leasing activities. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. GASB 95 postponed the effective date 18 months. The City  implemented this Statement in the current year.  -37-    CITY OF TOLAR NOTES TOI FINANCIAL STATEMENTS  NOTE 14: NEWACCOUNTING PRONOUNCEMENIS- continued  In May 2019, the GASB issued Statement No. 91 Conduit debt obligations. The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related. note disclosures. This statement achieves those objectives by clarifying the existing definition ofa conduit debt obligation; establishing that a conduit debt obligation is not a liability ofthe issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required. note disclosures. The requirements of this Statement are effective for reporting periods beginning after December 15, 2020. GASB 95 postponed the effective date one year. The City has not determined the impact, if any, upon its financial position, results of operations or cash flows upon adoption. In. January 2020, the GASB issued Statement No. 92 Omnibus 2020. The objectives of this Statement are to enhance comparability in accounting and financial reporting and toi improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. The requirements of this Statement are effective for reporting periods beginning after June 15, 2020. Implementation of this standard has been extended until the reporting periods beginning after December 15, 2021. GASB No. 95 postponed the effective date for one year. The City has not determined the impact, if any, upon its financial position, results of In March 2020, the GASB issued Statement No. 93 Replacement of Interbank Offered. Rates. The objective of the Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. The requirements of this Statement are effective for reporting periods ending after December 15, 2021. Implementation of this standard has been extended until thet reporting periods beginning after December 15,2022. GASB 95 postponed the implementation by one year. The City has not determined the impact, ifany, upon its financial position, results of operations or cash flows In March 2020, the GASB issued Statement No. 94 Public-Private and Public-Public Partnerships and Availability Payment Arvangements. The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction.: Some PPPs meet the definition ofa service concession arrangement. (SCA), which the Board: defines in this statement as a PPP in which (1) the operator collects and is compensated by fees from third parties; (2) the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the: services, and the prices or rates that can be charged for the services; and (3) the transferor is entitled to significant residual interest in the service utility of the underlying PPP asset at the end oft the arrangement. The requirements oft this Statement are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter. The City has not determined the impact, if any, upon its financial position, results of operations or cash flows  operations or cash flows upon adoption.  upon adoption.  upon adoption.  -38-    CITY OFTOLAR NOTES TO FINANCIAL STATEMENTS  NOTE 14: NEWACCOUNTING PRONOUNCEMENTS- continued  InN May 2020, the GASB issued Statement No. 95 Postponement of the Effective Dates of Certain Authoritative Guidance. The primary objective of this Statement is to provide temporary relief to governments and other stakeholders in light of the COVID-19 pandemic. That objective is accomplished by postponing the effective dates of certain provisions in Statements and Implementation Guides that first became effective or are scheduled to become effective for periods beginning after June 15, 2018, and later. The following statements are postponed by one year: Nos. 83, 84, 88, 89,90,91,9 92 and 93. The following statement is postponed by 18 months: No. 87. The requirements of this Statement are effective immediately. The City has not determined the impact, if any, upon its financial position, In! May 2020, the GASB issued Statement No 96. Subscription-Based. Information Technology Arrangements. This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAS) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset- an intangible asset and a corresponding subscription liability; (3), provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. The requirements oft this Statement are effective for years beginning after June 15, 2022. The City has not determined the impact, ifa any, upon its financial position, In June 2020, the GASB issued Statement No. 97 Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation. Plans- An Amendment of GASB. Statements No 14 and 84, and a Supersession of GASB Statement No. 32. The primary objectives of this Statement are to (1) increase consistency and comparability related to reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements, and (3) enhance the relevance, consistency, and comparability oft the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition ofa pension plan and for benefits provided through those plans. The requirements of this Statement are effective for fiscal years beginning after June 15, 2021. The City determined there was noi impact upon its financial position, results of operations or cash flows In October 2021, the GASB issued Statement No. 98 The Annual Comprehensive Financial Report. This Statement establishes the term annual comprehensive, financial report and its acronym ACFR. That new term and acronym replace instances of comprehensive annual financial report and its acronym in generally accepted accounting principles for state and local governments. The requirements of this Statement are effective for fiscal years ending after December 15, 2021. Earlier application is encouraged. The City determined there was no impact upon its financial position, results of operations or cash flows upon adoption. In April 2022, the GASB issued Statement No. 99 Omnibus 2022. The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1). practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The requirements ofthis  results ofoperations or cash flows upon adoption.  results of operations or cash flows upon adoption.  upon adoption.  -39-    CITYOFTOLAR NOTESTOF FNANCALSTATEMENIS  NOTE 14: NEWACCOUNTING PRONOUNCEMENIS. continued  Statement are effective as follows: related to extension of the use of LIBOR, accounting for SNAP distributions, disclosures of nonmonetary transactions, pledges are effective upon issuance; related to leases, PPPs, and SBITAS are effective for fiscal years beginning after June 15, 2022; and related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement No. 53 are effective for fiscal years beginning after June 15, 2023. The City has not determined the impact, if any, upon its In June 2022, the GASB issued Statement No. 100 Accounting Changes and Error Corrections - an Amendment of GASB Statement No. 62. The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent and comparable information for making decisions or assessing accountability. The requirements of this Statement are effective for accounting changes and error corrections made in fiscal years beginning after. June 15, 2023. The City has not determined the impact, ifany, upon its financial position, results of operations or cash flows upon adoption. In. June 2022, the GASB issued Statement No. 101 Compensated. Absences. The objective of this Statement ist to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023. The City hast not determined the impact, ifany, upon its financial position, results of operations or cash flows upon adoption.  financial position, results of operations or cash flows upon adoption.  -40-    REQUIRED SUPPLEMENTARY INFORMATION    CITY OF' TOLAR, TEXAS BUDGET AND ACTUAL- GENERALFUND YEARI ENDED: SEPTEMBER 30, 2022  STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES INI FUNDI BALANCE-  Variance with Finall Budget Positive (Negative). 43,314 11,281 3,052 57,647 201,139 201,139 8,000 6,218 6,213 1,261 280,478  Budgeted Amounts Original 155,000 179,320 30,000 364,320 25,000 25,000 200 49,000 7,010 445,530  Final 155,000 $ 198,314 $ 179,320 30,000 364,320 25,000 25,000 200 49,000 7,010 445,530  Actual 190,601 33,052 421,967 226,139 226,139 8,000 6,418 55,213 8,271 726,008  REVENUES Taxes: Sales tax Property tax Right ofway Total taxes License & permits License and permits Total license & permits Fines and forfeitures Investment income Garbage collection income Miscellaneous income Totall Revenues EXPENDITURES General government General services: Insurance Building inspection Capital outlay Contract: sanitation Election expense Economicl Development Corporation Miscellaneous Office supplies Payroll Payroll Tax Health insurance Retirement Printing & copies Professional services Repair & maintenance Postage and delivery Reference books Software Technical support Telephone Travel Utilities Total general govemment Publics service: Streets Repair Total public service Total expenditures  8,600 1,000 27,669 49,000 50,400 3,750 9,500 150,000 23,900 29,000 2,950 42,023 39,000 1,000 600 5,000 3,000 6,440 6,000 18,000 476,832 209,000 209,000 685,832  9,400 1,000 3,669 49,900 54,000 4,550 9,500 186,000 23,900 33,300 3,250 36,573 27,000 1,000 750 6,200 3,000 6,440 3,000 18,000 480,432 209,000 209,000 689,432  7,627 10,696 53,572 66,105 3,091 21,840 178,373 13,680 30,638 12,448 2,883 30,333 24,627 16 725 6,148 2,000 5,945 2,769 19,887 493,403 23,805 23,805 517,208  1,773 1,000 (7,027) (3,672) (12,105) 1,459 (12,340) 7,627 10,220 2,662 (12,448) 367 6,240 2,373 984 25 52 1,000 495 231 (1,887) (12,971) 185,195 185,195 172,224  -41-    CITYOFTOLAR, TEXAS BUDGETANDACTUAL-GENERALEUND-CONTINUED YEARI ENDED SEPTEMBER: 30, 2022  STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES INI FUNDI BALANCE-  Variance with Finall Budget Positive (Negative) 452,702 249,269 11,710 (34,005) 226,974 679,676 679,676  Budgeted. Amounts Original (240,302) (243,902)  Final  Actual 208,800 249,269 (3,290) (34,005) 211,974 420,774 721,458  Excess (Deficiency) of Revenues over( (Under) Expenditures OTHER FINANCING USES Granti income Debt payments Transfersi in Total Other Financing Uses Net change inf fund balance Fund] Balance Beginning Fund Balance Ending  (1,500) (1,500) (241,802) (258,902) 721,458  (15,000) (15,000) 721,458  479,656 $ 462,556 $ 1,142,232 $  -42-    CITYOFTOLAR YEAR ENDED: SEPTEMBER 30, 2022  SCHEDULEOF CHANGES INI NET PENSION LABILITYANDRELATEDRATIOS  Plan Year Ended December31, 2020 32,149 $ 40,152 (750) (31,483) 40,068 594,508 634,576 20,720 $ 16,260 47,063 (31,483) (304) (11) 52,245 618,881 671,126 (36,550) $ 105.76% 232,292 -15.73%  2021 $ 37,426 $ 43,034 3,897 (31,483) 52,874 634,576 687,450 23,219 $ 18,282 87,654 (31,483) (405) 3 97,270 671,126 768,396 (80,946) $ 111.77% 261,175 -30.99%  2019 35,850 38,547 (20,372) (308) (24,693) 29,024 565,484 594,508 22,797 17,810 80,928 (24,693) (456) (14) 96,372 522,509 618,881 (24,373) 104.10% 254,434 -9.58%  Totall Pension Liability Service cost Interest (ont the total pension. liability) Changes ofbenefit terms Differencel between expected and actual experience Change of assumptions Benefit payments, including refunds of employce contributions Net Changei in' Total Pension Liability Totall Pension Liability Beginning Total Pension Liability Ending Plan Fiduciary Net Position Contributions- employer Contributions- employee Neti investment income Administrative expense Other Net Change in Plan Fiduciary Net Position Planl Fiduciary Net Position Beginning Plan) Fiduciary Net Position Ending Net Pension! Liability Ending  Benefit payments, including refunds ofe employee contributions  Plan fiduciary Netl Position as a Perçentage ofTotal Pension Liability Net Pension Liability as a Percentage of Covered Payroll  Covered Payroll    2018 $ 32,324 $ 36,912 (18,152) (32,564) 18,520 546,964 565,484 21,496 $ 15,991 (16,020) (32,564) (309) (17) (11,423) 533,932 522,509 42,975 $ 92.40% 228,438 18.81%  2017 29,899 $ 34,152 (1,109) (13,971) 48,971 497,993 546,964 18,690 $ 14,345 62,786 (13,971) (325) (16) 81,509 452,423 533,932 13,032 $ 97.62% 204,930 6.36%  2016 31,112 $ 30,644 (343) (3,699) 57,714 440,279 497,993 15,684 $ 14,896 26,988 (3,699) (304) (16). 53,549 398,874 452,423 45,570 $ 90.85% 212,803 21,41%  2015 26,769 $ 26,831 5,248 11,509 70,357 369,922 440,279 11,914 $ 13,280 551 (336) (17) 25,392 373,481 398,873 41,406 $ 90.60% 189,713 21.83%  2014 22,156 23,895 (6,404) 39,647 330,275 369,922 10,360 11,641 19,038 (199) (16) 40,824 332,657 373,481 (3,559) 100.96% 166,300 -2,14%  $  -43-    CITYOFTOLAR SCHEDULE OF PENSION CONTRIBUTIONS YEARI ENDED SEPTEMBER 30, 2022  Fiscal Year Ended September 30, 2021 23,738$ (23,738)  2022 29,101$ (29,101) $  2020 21,108 (21,108)  Actuarially determined contribution Contribution deficiency (excess) Covered payroll  Contributions ini relation to actuarially determined contribution  $ 327,895 $ 263,595 $ 236,323  Contributions as a percentage of covered payroll Notes to Schedule of Contributions Valuation! Date:  8.88%  9.01%  8.93%  Actuarially determined contribution rates are calculated as of December 31 and' become effective  in January, 131 months later. Entry Age Normal Level Percentage of Payroll, Closed  Methods and Assumptions Used tol Determine Contribution Rates:  Actuarial Cost Method Amortization Method Remaining Amortization Period N/A Asset Valuation Method Inflation Salary Increases Investment Rate of! Return Retirement Age Mortality  10 Year Smoothed Market; 12% Soft Corridor 3.50%to1 11.5%i including inflation  2.50% 6.75%  Experience-based tablel based on rates that are specific to the city's plan ofbenefits. Last updated fort the 2019 valuation pursuant to an experience study oft the period 2014-2018. Post-retirement: 20191 Municipal Retirees of" Texas Mortality Tables. Thet rates are projected on af fully generational basis with scale UMP. Pre-retirement: PUB(10) mortality tables, with the Public Safety table used for males and the General Employee table used for females. The rates  are projected on a fully generational basis with scale UMP. There were no benefit changes duringt thes year.  Other Information    2019 22,363 ) 21,581 $ (22,363) $  2018 (21,581)  2017 (17,488)  2016 (14,787)  2015 (12,036)  17,488 $ 14,787$ 12,036  $ 246,516 $ 231,307 $ 199,403 $ 203,094 $ 185,434  9.07%  9.33%  8.77%  7.28%  6.49%  -44-    CITYOFTOLAR YEARI ENDED: SEPTEMBER 30, 2022  SCHEDULEOF CHANGES INI NETOPEBI LIABILITY AND RELATED RATIOS  Plan Year Ended December: 31, 2020 627 $ 806 (72) 5,301 (93) 6,569 29,040 35,609 232,292 15.33%  2021 $ 888 $ 718 88 1,328 (339) 2,683 35,609 38,292 261,175 14.66%  2019 585 $ 898 (1,514) 5,161 (25) 5,105 23,935 29,040 254,434 11.41%  2018 617 854 (881) (2,136) (23). (1,569) 25,504 23,935 228,438 10.48%  Total OPEBI Liability Service cost Interest (ont the total OPEB. liability) Changes ofbenefit terms Differencel between expected and actual experience Change ofa assumptions Benefit payments, including refunds ofe employee contributions Net Changei in Total OPEBI Liability Total OPEBI Liability Beginning Total OPEB Liability Ending Covered Employee Payroll  Net Pension! Liability as al Percentage of Covered Employee Payroll    2017 471 828 2,524 3,823 21,681 25,504 204,930 12.45%  -45-    OTHER SUPPLEMENTALINFORMATION    CITYOFTOLAR, TEXAS BUDGETAND ACTUAL-WATERI FUND YEAR ENDED SEPTEMBER 30, 2022  STATEMENT OF REVENUES, EXPENSES. AND CHANGES INI FUNDNETPOSIION-  Adjustments Actual tol Budgetary Budgetary Basis  Variance Favorable Basis (Unfavorable) 731,831 $ (221,119) 731,831 (221,119) 250 2,250 8,975 1,425 11,950 250 3,808 8,842 171,847 76,816 11,480 20,520 (6,935) 6,935 25,513 (11,513) 12,293 76,707 62,191 68,809 45,804 2,696 5,522 878 3,732 2,768 989 2,011 31,889 1,111 12,759 (11,459) 402,067 249,046 329,764 27,927 4,325 2,825 6,848 6,848 11,173 9,673 340,937 37,600 1,699,874 37,600  Budgeted Amounts Original  Final 952,950 2,500 10,400 12,200 12,650 248,663 32,000 14,000 89,000 131,000 48,500 6,400 6,500 3,000 33,000 1,300 651,113 301,837 1,500 1,500 303,337  Actual 731,831 250 108,312 (108,312) 8,975 11,950 3,808 171,847 11,480 (6,935) 25,513 12,293 62,191 45,804 5,522 3,732 989 31,889 12,759 510,379 (108,312) 221,452 108,312 4,325 6,848 11,173 232,625 108,312  OPERATINGREVENUES: Water sales OPERATING EXPENSES: Contract labor Depreciation expense Insurance Labi tests Office expense Payroll expenses Payroll taxes Retirement Permit fees Professional services Repairs and maintenance Supplies Telephone Travel Uniforms Utilities Vehicle expense Net operating income (loss) Nonoperating revenues (expenses) Interest income Transfers in Total nonoperating revenues (expenses) Neti income (loss) Net Position Beginning of Year Net Position End ofYear  694,650 $ 952,950 $ 731,831 $  Total Operating Revenues 694,650  5,000 11,900 11,500 10,500 194,000 28,000 13,500 63,000 160,700 29,500 6,400 5,000 2,700 35,000 7,500 110,450 250 250 110,700  Total Operating Expenses 584,200  1,699,874 1,699,874 1,699,874  1,810,574 $ 2,003,211 $ 1,932,499 $ 108,312 $ 2,040,811 $  -46-    OTHER INFORMATION REQUIRED BY GAO    INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL  STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERMMENTAUDITAUDITINGSTANDARPS  To the City Council City ofTolar, Texas  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, and each major fund of the City ofTolar, Texas, as of and for the year ended September 30, 2022, and the related notes to the financial statements, which collectively comprise the City of Tolar, Texas' basic financial statements, and have issued our report thereon dated Inj planning and performing our audit of the financial statements, we considered the City ofTolar, Texas' internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose ofe 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 of Tolar, Texas' internal A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement ofthe entity's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiencyi is a deficiency, or a combination of deficiencies, in internal control that is less severe than ai material weakness, yeti 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 did identify certain deficiencies in internal control, described in the accompanying schedule of findings and responses that we consider to be material weaknesses as identified As part of obtaining reasonable assurance about whether the City ofTolar, Texas' finançial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, noncompliance with which could havea a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be  April 5, 2023.  Report on Internal Control over Financial Reporting  control.  as 2022-001.  Report on Compliance and Other Matters  reported under Government. Auditing Standard.  -47-    City ofTolar's Response tol Findings  The City of Tolar's response to the findings identified in our audit is described in the accompanying schedule of findings and responses. The City of Tolar's response was not subjected to the auditing procedures applied in the audit oft the financial statements and, accordingly, we express no opinion on it. Thej purpose of this report is solely to describe the scope of our testing ofinternal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Governmental Auditing Standards in considering the entity's internal control and compliance.  Purpose of this Report  Accordingly, this communication is not suitable: for any other purpose.  MERRITT, MCLANE &1 HAMBY, P.C.  Abilene, Texas April 5,2023  -48-    CITYOFTOLAR,TEXAS SCHEDULEOFI FINDINGS ANDI RESPONSES YEAR ENDED SEPTEMBER 30, 2022  Summary of Auditor's Results:  a. Thet type of report issued on the financial statements of the City of Tolar, Texas was an unmodified b.One material weakness was disclosed during the audit of the financial statements, reported as c. No instances of noncompliance material to the financial statements of the City ofTolar, Texas were L.Findings Relating to the Financial Statements which are Required to be Reported in Accordance with Generally. Accepted Government. Auditing Standards.  opinion.  Finding 2022-001. No significant deficiencies were reported  disclosed during the audit.  2022-001 Financial Reporting Type ofl Finding: Criteria:  Material Weakness  Management of the City is responsible for the preparation and fair presentation of the financial statements in accordance with generally accepted accounting principles (GAAP). This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free The City does not have an internal control system designed to provide for the preparation of the financial statements and related financial statement disclosures being audited. In addition, we recorded numerous audit adjustments to the City's recorded account balances, which if not recorded, would have resulted in a material misstatement The City does not prepare and has not developed an internal control system to provide for the preparation of the financial statements and related disclosures without significant adjustments. Although this circumstance is not unusual for a City of this size, the preparation of financial statements and adjusting journal entries as a part of the audit engagement may result in financial statements and related information included in financial statement disclosures not being available for management purposes as timely as it would be if prepared by City personnel. The need for the audit adjustments indicates that the City's interim financial information is not materially correct, which may affect management decisions made during the Auditing standards require that auditors communicate this deficiency; however, the City prepares budgetary and other financial reports for Board review on a routine basis. Itis the responsibility of management and those charged with governance to determine whether to accept the  from material misstatement.  Condition:  oft the City's financial statements.  Cause: Effect:  course oft thes year.  Recommendation:  -49-    risk associated with this condition because of cost or other considerations. This finding wasi included in the audit for 2021. Management is aware of the noted finding. Management weighed the costs and benefits of preparing its own financial statements; including proposing the adjusting journal entries that would be necessary and  View ofl Responsible Officials:  foundi itb beneficial to outsource this service.  Contact:  Michelle Burdette, City Secretary 254-835-4390  -50-    CITY OF TOLAR, TEXAS SCHEDULE OF PRIOR YEAR FINDINGS YEAR ENDED SEPTEMBER 30, 2022  PRIOR YEAR  FindingyAoncomplance 2021-001 Financial Reporting Type of Finding: Criteria:  Material Weakness  Management of the City is responsible for the preparation and fair presentation of the financial statements in accordance with generally accepted accounting principles (GAAP). This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free The City does not have an internal control system designed to provide for the preparation of the financial statements and related financial statement disclosures being audited. In addition, we recorded numerous audit adjustments to the City's recorded account balances, which if not recorded, would have resulted in a material misstatement The City does not prepare and has not developed an internal control system to provide for the preparation of the financial statements and related disclosures without significant adjustments. Although this circumstance is not unusual for a City of this size, the preparation of financial statements and adjusting journal entries as a part of the audit engagement may result in financial statements and related information included in financial statement disclosures not being available for management purposes as timely as it would be if prepared by City personnel. The need for the audit adjustments indicates that the City's interim financial information is not materially correct, which may affect management decisions made during the Auditing standards require that auditors communicate this deficiency; however, the City prepares budgetary and other financial reports for Board review on a routine basis. Itis the responsibility ofr management and those charged with governance to determine whether to accept the risk associated with this condition because of cost or other Management is aware of the noted finding. Management weighed the costs and benefits of preparing its own financial statements; including proposing the adjusting journal entries that would be necessary and  from material misstatement.  Condition:  ofthe City's financial statements.  Cause: Effect:  course of the) year.  Recommendation:  considerations.  View of Responsible Officials:  foundi it beneficial to outsource this service.  -51-