CITY OF TOLAR  ANNUAL FINANCIAL. AND COMPLIANCE: REPORT YEAR ENDED SEPTEMBER 30, 2018    CITY OF TOLAR TABLEOF CONTENTS  Page  Financial Section Independent Auditors' Report Management's Discussion and Analysis Basic Financial Statements  Government-wide, Financial Statements: Statement ofl Net Position-- Statement of Activities Governmental. Fund] Financial Statements: Balance Sheet - Governmental Funds- Reconciliation ofthe Governmental Funds Balance Sheet tot the Statement ofl Net Position- Statement ofl Revenues, Expenditures, and Changes in Fund! Balance- Governmental Funds- Reconciliation oft the Statement of] Revenues, Expenditures, Changes inl Fund Balance of Governmental Funds to 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 ofCash! Flows - Proprietary Funds- Notes to Financial Statements Required Supplementary Information Actual - General Fund Schedule of] Pension Contributions- Other Supplementary Information  10 1 12 13 14 16 17 18 19  Statement of] Revenues, Expenditures and Changes in Fund Balance - Budget and Schedule ofChanges inj Net Pension Liability andl Related Ratios Schedule ofChanges in Net OPEB Liability and) Related Ratios  39 41 42 43  Statement ofl Revenues, Expenses and Changes inl Fund) Net Position - Budget and  Actual - Water Fund Other Information Required by GAO  Independent Auditors' Report on Internal Control over. Financial! Reporting and on Compliance and Other Matters Based on an Audit ofl Financial Statements Performed  In Accordance with Government. Auditing Standards  45 47 49  Schedule of] Findings and Responses Schedule of] Prior Year Findings    FINANCIALSECTION    Merritt, McLane & Hamby, P.C.  401 Cypress Street, Suite 303 Abilene, TX 79601  INDEPENDENT AUDITORS' REPORT  To the Honorable. Mayor and Members oft the City Council City ofTolar, Texas  Report on thel Financial Statements  We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, and each major fund of the City of Tolar, Texas, as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listedi ini the table of contents. 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 toi fraud or error. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are: free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's, judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by Wel believe that the audit evidence we have obtained is sufficient and appropriate to provide al basis for our In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, and each major fund of the City ofTolar, Texas, as of September 30, 2018, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of  Management's. Responsibility for the. Financial Statements  Auditor's Responsibility  management, as well as evaluating the overall presentation oft the financial statements.  audit opinions. Opinions  America.  -1- www.mmh-cpa.com  Phone:. 325-672-9323  Fax. 325-672-9491    Emphasis ofl Matter  As described in Note 14 to the financial statements, in 2018, the City adopted new accounting guidance, GASB No. 75, Accounting and Financial Reporting. for Postemployment Benefits Other than Pensions. Because GASB No. 75 implements new measurement criteria and reporting provisions, significant information has been added to the Government Wide Statements. The statement of net position discloses the City's Net OPEB liability and some deferred resource outflows related to the City's plan. The statement of activities discloses the adjustment to the City's beginning net position. Our opinion is not  modified with respect to this matter. Other Matters Required: Supplementary. Information  Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and pension funding schedules on pages 3 through 9 and pages 39 through 43 be presented to supplement the basic financial statements,. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures tot 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 thel limited procedures dor not provide us with sufficient evidence to express an opinion Our audit was conducted for the purpose off forming opinions on the financial statements that collectively comprise the City's basic financial statements. The budgetary information - proprietary fund is presented for purposes ofa additional analysis and is not ai required part oft thel basic financial statements. The budgetary information proprietary 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 February 6, 2019, on our consideration of the City ofTolar, Texas' internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Tolar, Texas' internal control  or provide any assurance. Other Information  assurançe on it.  Other Reporting Required by Government. Auditing Standards  over financial reporting and compliance.  Mexsa,Vichane dbul,Pc. MERRITT, MCLANE & HAMBY, P.C.  Abilene, Texas February 6, 2019  -2-    MANAGEMENT'SISCUSSION AND ANALYSIS    CITY OFTOLAR P.O. BOXI 100 8712 W.1 HWY377 TOLAR,TEXAS 76476  ESTABLI SHED  MANAGEMENTS 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, 2018. Please read it in  conjunction with the City's financial statements, which follow this section.  FINANCIALHICHLIGHTS  The City's total net position increased $407,039 from prior year. Net Position of our business- type activities increased $302,611 (22.9%), after the prior period adjustment. Net position of our governmental activities increased $104,428 (or 9.1%), after the prior period adjustment. During the year, the City's expenses were $104,428 less than the $498,306 generated in taxes, In the City's business-type activities, revenues were $694,996, while expenses were $392,385,  other revenues, and transfers for governmental programs. Thet total cost of the City'sp programs was $784,651. The general fund reported: fund balance ofs $269,749. OVERVIEW OF THE FINANCIAL STATEMENTS  including transfers.  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 government-wide financial statements. These statements provide both long-term and short-term information about the City's overall 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 of 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 of the taxpayer base or the condition ofCity infrastructure in addition to thei financial information provided in this 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 thel basic financial statements. Govermment-wide Financial Statements  elimination or reclassification ofi internal activities.  by the City's taxpayers.  Phone: 254-835-4390  Fax:254,835-4392  cityoftolar.org    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 Af 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 as single, aggregated presentation. The City has twol kinds of funds:  Governmental funds 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 the year and balances ofs spendable resources available at the end oft the year. They are useful in evaluating annual financing requirements of governmental 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 ini required supplementary information. This statement demonstrates compliance with the City's adopted and final revised budget. In addition, a budgetary comparison schedule for the 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 encompass 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 and statements for discretely presented component units (reporting is similar to proprietary funds) 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 funds. The accompanying notes tot 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  ther near-term.  understanding the differences between these two perspectives.  service: funds.  Notes to the Financial, Statements  immediately following thel basic financial statements.    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 of 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 $2,875,509. This is a $407,039 increase over last year's net position of $2,468,470, after the prior period adjustment. The following Table A-1 provides a summary of  the City's net position at September 30, 2018.  TableA-1 City ofTolar's! Net Position Govemmental Activitics 2018 2017 308,623 207,201 20,851 1,962 32,722 28,070 17,097 45,550 49,819 73,620 6,510 103 20,270 20,270 274,025 156,420  Business-type Activities 2018 2017 320,023 215,566 1,392 11,121 85,271 51,472. 62,347 96,618 147,618 148,090 9,094 195  Totals 2018 2017 628,646 422,767 22,243 13,083 117,993 79,542 79,444 142,168 197,437 221,710 15,604 20,270 475,328 304,137  Current and Other Assets Capital and Non-Current. Assets Total Assets Deferred Outflows ofl Resources Current] Liabilities Long7 Term] Liabilities Totall Liabilities Deferred Inflows of Resources Net Position Neti investment: inc capital assets Restricted Unrestricted Totall Net] Position  978,899 1,020,686 1,458,762 1,255,397 2,437,661 2,276,083 1,287,522 1,227,887 1,778,785 1,470,963 3,066,307 2,698,850  298 20,270  957,749 979,436 1,422,162 1,186,082 2,379,911 2,165,518 1,252,044 1,156,126 1,623,465 1,333,799 2,875,509 2,489,925  201,303 147,717  Net Position in the City's governmental activities increased 9.1%, after the prior period adjustment, to $1,252,044. Net Position increased 22.9%, after the prior period adjustment, to $1,623,465 in business- type activities of the government. $2,378,911 oft total net] position is invested in capital assets (distribution and collection system, equipment, etc) and $20,270 is restricted for debt service. Consequently, Changes in Net Position. The City's total revenues were $1,191,690, including transfers. Nearly half (44%) of the City's revenue comes from fees charged for serviçes, and 35 cents of every dollar raised The total cost of all programs and serviçes was $784,651. The City's expenses cover a range of services,  unrestricted: net position showed a $475,328 balance at the end ofthis year.  comes from some type oftax. (See Figure. A-1)  with) half(509)related tol business-type activities. (See Figure A-2).    Figure A-1  Figure A-2  City Sources of Revenue for Fiscal Year 2018  City Functional Expenses for Fiscal Year 2018  Property Other Taxes 2% 17%  General Govemment 45%  Business- type activities. 50%  Charges for. Services 44%  Non- property Taxes 18%  Streets 5%  Operating. grants 19%  DebtJ Service 0%  Governmental. Activities  Revenues for the City's governmental activities were $498,306, including transfers, while total expenses were $393,878. The City is increasing its tax base by bringing in new businesses and homes, and the increasing property tax rate should increase property tax revenue. The increase of new business adds  revenue through two avenues; 1)property tax, and 2) sales tax.  Table A-2  Changes in City ofTolar, Texas' Net Position Governmental Activities 2018 2017  Business-type Activities 2018 2017 230,054 41,900  Total 2018 2017 41,900 27,486 1,563  Revenues Program) Revenues Charges for Services Capital Grants and Contributions General Revenues Sales tax Property tax Right ofv way fees Investment Eamings Other income Totall Revenues Expenses General govemment Streets Debt service Water utilities Total Expenses Excess (deficiency) beforet transfers Transfers Increase (decrease)i int net position  $ 64,152 $ 61,176 $ 462,095 $ 424,676 $ 526,247 $ 485,852  230,054 179,760 135,532 203,492 183,063 31,282 6,817 11,536 18,879 1,189,188 894,275 356,334 377,573 35,440 2,104 390,773 411,900 784,651 825,484 404,537 2,502 407,039  179,760 135,532 203,492 183,063 31,282 27,486 3,970 11,536 18,879 494,192 427,125 356,334 377,573 35,440 32,902 2,104 393,878 413,584. 100,314 13,541 4,114 (7,606) 104,428 5,935  989  2,847 694,996  574 467,150  32,902 3,109 68,791 2,925 71,716  3,109  390,773 411,900 390,773 411,900 304,223 (1,612) 302,611  55,250 10,531 65,781  -6-    Governmental Funds balances of$ $290,019.  As discussed, governmental funds are reported. ini the fund statements with as short-term, inflow and outflow ofs spendable resources focus. This information is useful in assessing resources available at the end of 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 $98,970 over the prior year. 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 2018 was approximately $387,000. This was an increase of approximately $28,000: from thej previous year's actual expenditures. Int the current year, the City budgeted The City amended the budget several times during the fiscal year. The City's budget decreased slightly. Several line items were adjusted to better reflect the actual expenditures including increases in insurance, building inspector, sanitation, miscellaneous, professional services, postage and delivery, reference books, software, technical support, telephone, and travel, and decreases in election expense and street repair..  Thisi increasei is] primarily thei result of an increase inj property tax. delivery. The fund balance of the General Fund increased to $98,970. short-term and long-term information about financial status.  Major Governmental. Funds Proprietary Funds  Major Proprietary Funds  $1,623,465. The Water Fund had ani increase in net position of$302,611.  General Fund Budgetary Highlights  for thej payments to the Economic! Development Corporation.  Actual expenditures were $10,760 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, 2018, was $978,899 and $1,458,762, respectively. The total change in net capital assets was a decrease of 4.1% in the governmental and an increase of 16.2% for business-type activities. The overall increase was 7.1% for the City as a whole. Major capital asset additions during the current fiscal year included the purchase ofa a sludge box construction in progress on the lift station. The project is approximately 95% complete. See Table A-3 for additional information about changes in capital  assets during thei fiscal year.  7-    City ofTolar City's Capital Assets  Governmental Activities 2018 2017 58,837 58,837 734,642 734,642 40,386 113,341 544,802 544,802  Business-type Activities 2018 2017 41,605 41,605 267,861 210,867 285,701 41,900  Total 2018 2017 100,442 100,442 734,642 734,642 308,247 324,208 544,802 544,802 285,701  Land Buildings andi improvements Distribution and collections system Furniture and equipment Infrastructure Construction: inj progress Total ath historical cost Total accumulated depreciation Net capital assets Long-term Debt  2,630,177 2,630,177 2,630,177 2,630,177  41,900  1,378,667 1,451,622 3,225,344 2,924,549 4,604,011 4,376,171 399,768 430,936 1,766,582 1,669,152 2,166,350 2,100,088 978,899 1,020,686 _1,458,762 $_1,255,397 2,437,661 $ 2,276,083  Atyear-end, the City had $55,000 in bonds] payable and $2,750 ini notes payable. See' Table A-4.  Table A-4 City'sC Outstanding Debt  Governmental Activities 2018 2017 21,150 41,250 21,150 $ 41,250  Business-type Activities 2018 2017 2,750 $ 5,565 33,850 63,750 36,600 $ 69,315  Total 2018 2017 2,750 $ 5,565 55,000 105,000 57,750 $ 110,565  Note payable Bonds payable  ECONOMIC FACTORS AND! 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 oft the City isi increased through sales taxi revenues and property tax revenues.  Appraised property value used for the 2018-2019 budget preparation increased approximately: $2.1 Water rates remained consistent with prior year. Sewer sales are expected to remain substantially the same for the fiscal year 2019. The City budgeted for increases in street repair with the sale of These indicators were taken into account when adopting the general fund and water fund budgets for 2019. The General Funds expenditures are budgeted at $1,505,993, which is an increase of approximately $1,128,000 from prior year expenditures due to bond sales for street repairs. The City has added no major new programs ori initiative to the 2018 budget. Ift these estimates are realized, the City's budgetary general  million, or 4.9% from the previous year.  bonds.  fund fund balance is expected to decrease by $50,000.  -8-    CONTACTING THE CITY'S FINANCIAL MANAGEMENT  This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview ofthe City's finances and to demonstrate the City's accountability for the money it receives. Ify youl have questions about this report or need additional financial information, contact the City  ofTolar'sM Mayor, 8712 W.H Hwy 377, Tolar, Texas 76476.  -9-    BASIC FINANCIAL STATEMENTS    Primary Government Activities  Governmental Business-Type Activities  Component Unit  Total  LIABILITIES  Current. Liabilities Accounts payable Sales tax payable Accrued liabilities Note payable current Bonds payable current Total current liabilities Non-current Liabilities Utility deposits Accrued vacation Net pension liability Net OPEBI Liability Total non-current liabilities Total Liabilities DEFERRED INFLOWS OFI RESOURCES Deferred inflows related to TMRS Total Deferred Inflows ofl Resources  5,780 812 4,980 21,150 32,722 1,812 5,169 10,116 17,097 49,819 6,510 6,510  43,637 5,034 2,750 33,850 85,271 35,752 3,344 7,863 15,388 62,347 147,618 9,094 9,094  49,417 812 10,014 2,750 55,000 117,993 35,752 5,156 13,032 25,504 79,444 197,437 15,604 15,604  NETI POSITION  Neti investment in capital assets Restricted Unrestricted Total Net Position  957,749 20,270 274,025 1,252,044  1,422,162 201,303 1,623,465 2,875,509  2,379,911 20,270 475,328  165,255 165,255  -10-    Net (Expense) Revenue and Changes in] Net Position  Governmental Activities (292,182)$ (35,440) (2,104) (329,726)  Business-Type Activities  Component Unit  Total $ (292,182) (35,440) (2,104) (329,726) 301,376 301,376 (28,350)  $  301,376 301,376 301,376  (329,726)  (934) (934) 59,920 1,826 (2,502) 59,244 58,310 106,945 106,945 165,255  179,760 203,492 31,282 3,970 11,536 4,114 434,154 104,428 1,156,126 (8,510) 1,147,616 1,252,044 $  179,760 203,492 31,282 6,817 11,536 2,502 435,389 407,039 2,489,925 (21,455) 2,468,470  2,847 (1,612) 1,235 302,611 1,333,799 (12,945) 1,320,854  1,623,465 $ 2,875,509 $  -11-    GOVERNMENTAL FUND FINANCIALSTATEMENTS    CITY OF TOLAR, TEXAS BALANCE! SIEET-COVERMMENTAL FUNDS SEPTEMBER. 30, 2018  Total Funds 281,887 8,512 (1,480) 5,464 21,360 20,270 336,013  General Fund $ 281,887 $ 7,230 (1,317) 5,464 21,360 314,624  Debt Service Governmental Fund  ASSETS:  Current: Cash and cash equivalents Receivables: Property tax Allowance for uncollectible: tax Right ofv way Sales tax Duei from other funds Total Assets Current Liabilities Accounts payable Sales tax payable Accrued liabilities Due to other funds Duet tol EDC Total Liabilities  $ 1,282 (163) 20,270 21,389 $  LIABILITIES:  $  5,780 $ 812 4,980 20,270 7,120 38,962 5,913 5,913  $  5,780 812 4,980 20,270 7,120 38,962 7,032 7,032 20,270 269,749 290,019 336,013  DEFERRED INFLOWS OFI RESOURCES:  Unavailable: revenue property tax Total Deferred Inflows of Resources  1,119 1,119 20,270 20,270 21,389 $  FUND BALANCE:  Restricted: Debts service Unassigned Total Fund Balance  269,749 269,749 $ 314,624 $  Total) Liabilities, Deferred Inflows ofl Resources, and! Fund] Balances  The accompanying notes are an integral part oft thiss statement.  -12-    CITY OF TOLAR, TEXAS TOTHE STATEMENT OF) NETI POSITION SEPTEMBER: 30, 2018  RECONCILIATION: OF THE GOVERNMENTAL: FUNDSI BALANCE! SHEET  Total fund balances governmental: funds balance sheet  $ 290,019  Amounts reported: for governmental activities int the statement ofi net position  (SNP) are different because:  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 Long-term liabilities at the beginning oft the year of$41,250 are not due andj payable in the current Long-term debt principal payments are expenditures in the fund financial statements but they should be shown as reductions inl long-term debti int the government-wide financial statements. Included in the noncurrent liabilities is the recognition of the city's net pension liability required by GASB 68 in the amount of $5,169, a deferred resource inflow ini the amount of $6,510, and a deferred resource outflow in the amount of $19,984. Thist resulted: in ani increase ini net position of Included in the noncurrent liabilities is the recognition oft the city's net OPEB liability required by GASB 75 in the amount of $10,116 and a deferred resource outflow in the amount of $867. This Vacation accrual isi recordedi int the statement ofr net] position. Thel balance decreases net position Various other reclassifications and eliminations including recognizing unavailable revenue as revenue and adjusting current year revenue to show the revenue earned from the current year's tax  $1,451,622 and the accumulated depreciation was $430,936. period, and therefore are not reported asl liabilities in the funds.  1,020,686 (41,250) 20,100  $8,305.  8,305 (9,249) (1,812) 7,032 (41,787) 1,252,044  resulted in a decrease ini net position of$9,249.  levy.  Depreciation expense decreases net position in SNP. Net position of governmental activities- statement ofr net] position  The accompanying notes are ani integral part of this statement.  -13-    CITYOFTOLAR, TEXAS  STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES. IN FUNDI BALANCE-GOVERMMENTALFUNDS YEARI ENDED SEPTEMBER: 30, 2018  Total Debt Service Governmental Fund Funds $ 179,760 23,029 204,642 31,282 15,288 47,452 1,412 3,970 11,536 495,342 354,386 23,896 22,204 400,486 94,856 4,114 4,114 98,970 191,049 290,019  General Fund $ 179,760 $ 181,613 31,282 15,288 47,452 1,412 3,970 11,536 472,313 354,386 23,896 378,282 94,031 4,939 4,939 98,970 170,779 269,749 $  REVENUES Sales tax Property tax Right of way License and permits Garbage collection income Fines and forfeitures Investment income Miscellaneous income Totall Revenues EXPENDITURES Current: General government Publics service Streets Debt service Total Expenditures Expenditures Other Financing Uses Operating transfers out Total Other Financing Uses Net Changei inl Fund Balances Fund Balance Beginning Fund Balance - Ending  23,029  22,204 22,204 825 (825) (825) 20,270 20,270 $  Excess (Deficiency) of Revenues over (Under)  The accompanying notes are ani integral part of this statement.  -14-    CITY OF TOLAR,TEXAS  RECONCIIATION OF THE STATEMENT OFI REVENUES, EXPENDITURES, AND CHANGES INFUNDI BALANCES OF GOVERNMENTAL FUNDS TOTHES STATEMENT OF ACTIVITIES  YEAR ENDED SEPTEMBER 30, 2018  Total change in fund balances total governmental funds  $  98,970  Amounts reported for governmental activities in the: statement of activities  (SOA) are different because:  Depreciation expense decreases net position in SNP.  (41,787) 20,100  Long-term debt principal payments are expenditures in the fund financial statements but they should bes shown as reductions inl long-term debti int the government-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, 2017, caused the change in the ending net position to increase in the amount of $30,961. Contributions made before the measurement date but after the previous measurement date were reversed from deferred resource outlfows and recorded as a current year expense. This caused a decrease in the change in net position totaling $5,088. The City's reported TMRS net pension expense had to be recorded. The net pension expense decreased the change in net position by $1,351. 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, 2017, caused the change in the ending net position to increase in the amount of $93. Contributions made before the measurement date but after the previous measurement date were reversed from deferred resource outlfows and recorded as a current year expense. This caused a decrease in the change in net position totaling $90. The City's reported TMRS net OPEB expense had to be recorded. The net OPEB expense decreased the change in net position by $742. Thei result oft these changes ist to decrease the change in net position by $739. Vacation accrual is recorded 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 to show the revenue earned: from the current year'st tax  24,522  $24,522.  (739) 4,512 (1,150) 104,428  increases net position. levy.  Total change in net position of governmental activities- statement ofa activities  The accompanying notes are an integral part oft this statement.  -15-    PROPRIETARY FUND FINANCIAL STATEMENTS    CITYOFTOLAR,TEXAS SEPTEMBER 30, 2018  STATEMENT OF FUNDI NETI POSITION- - PROPRIETARYI FUNDS  Total Proprietary Funds 226,903 54,726 32,430 5,964 320,023 41,605 285,701 1,052,151 79,305 1,458,762 1,778,785 73 1,319 1,392 43,637 5,034 2,750 33,850 85,271 35,752 3,344 7,863 15,388 62,347 147,618 9,094 9,094 1,422,162 201,303 1,623,465  Water 226,903 $ 54,726 32,430 5,964 320,023 41,605 285,701 1,052,151 79,305 1,458,762 1,778,785 73 1,319 1,392 43,637 5,034 2,750 33,850 85,271 35,752 3,344 7,863 15,388 62,347 147,618 9,094 9,094 1,422,162 201,303 1,623,465 $  ASSETS  Current: Cash and cash equivalents Receivables, net Grant receivable Inventory Total current Non current: Land Construction inj progress Distribution and collection system, net of depreciation Equipment, net of depreciation Total non current TOTALASSETS  $  DEFERRED OUTFLOWS OF) RESOURCES Deferred outflows related to TMRS Deferred outflows related to OPEB Total Deferred Outflows of] Resources LIABILITIES  Current Accounts payable Accrued expenses Current portion notes payable Current portion bonds payable Total current Non current: Utility deposits Accrued vacation Net pension liability Net OPEB. liability Total non current TOTALLIABILITES  DEFERRED INFLOWS OFI RESOURCES Deferred inflows relatedi to' TMRS Total Deferred Inflows of Resources NETI POSITION Net investment in capital assets Unrestricted TOTALNET POSITION  $  The accompanying notes are ani integral part of this statement.  -16-    CITYOFTOLAR, TEXAS  STATEMENT OF REVENUES, EXPENSES. AND CHANGES IN FUND NHTPOATON-POPNITAV FUNDS YEARI ENDED SEPTEMBER 30, 2018  Total Proprietary Funds 462,095 462,095 389,180 389,180 72,915 2,847 230,054 (1,593) (1,612) 229,696 302,611 1,333,799 (12,945) 1,320,854 1,623,465  Water 462,095 $ 462,095 389,180 389,180 72,915 2,847 230,054 (1,593) (1,612) 229,696 302,611 1,333,799 (12,945) 1,320,854 1,623,465 $  Operating Revenues: Charges for services Water sales andi fees Total operating revenues Operating Expenses: Water department Total operating expenses Net operating loss Nonoperating revenues (expenses): Interest income Granti income Interest expense Transfers out Change in Net Position Net Position Beginning of Year Prior Period Adjustment Net Position Beginning of Year, As Restated Net Position End of Year  $  Total nonoperating revenues (expenses)  The accompanying notes are an integral part of this statement.  -17-    CITY OF TOLAR, TEXAS STATEMENT OF CASH) FLOWS-F PROPRIETARYI FUNDS YEARI ENDED SEPTEMBER: 30, 2018  Total Enterprise Funds 437,485 (162,126) (86,615) 188,744 (1,612) 1,440 (172) (303,695) 230,054 (1,593) (2,815) (29,900) (107,949) 2,847 2,847 83,470 143,433 226,903 1,593 72,915 100,330 (3,076) 3,623 29,991 5,135 1,360 210,278  Water $ 437,485 $ (162,126) (86,615) 188,744 (1,612) 1,440 (172) (303,695) 230,054 (1,593) (2,815) (29,900) (107,949) 2,847 2,847 83,470 143,433 226,903 $ 1,593 $ 72,915 $ 100,330 (3,076) (21,534) 3,623 29,991 5,135 1,360 188,744  Cash flows from operating activities: Cashi received from customers Cashj payments for salary and related expenses Cash payments to suppliers for goods and services Net cash provided by operating activities Cash flows from noncapital financing activities: Transfers from/to other funds Pension funding Net cash provided by noncapital financing activities  Cash flows from capital andi related financing activities: Acquisition ofproperty and equipment Granti inçome Interest paid on longt term debt Principal paid on capital leases Principal paid on! bonds and notes payable Net cash used by capital andi related financing activities Cash flows from investing activities Interest income Net Increasei in Cash Cash at Beginning of Year Casha atl End of Year Supplementary Information Interest paid  Net cash provided from investing activities  Reconciliation of operating income tor net cash provided by operating activities: Operating income (loss) Adjustments tor reconcile operating income (loss) tor net cash provided (used) by operating activities: Depreciation (Increase) decreasei in operating assets Receivables Grant receivable Inventory Increase (decrease) in operating liabilities Accounts payable Utility deposits Accrued expenses Net cash provided by operating activities  $  The accompanying notes are ani integral part oft this statement.  -18-    CITY OF TOLAR  NOTES TOFINANCIAL STATEMENTS  NOTE1: SUMMARYOFSIGNIFICANTACCOUNTING, 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, of the City's financial activities for the fiscal year ended September 30, 2018. 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 government is considered to be financially accountable. The discretely presented component unit is reported in a separate column int the government-wide statements  Financial Reporting Entity  safety, public works, waterworks, and general government.  toe emphasize iti is legally separate from thej primary government.  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 sales tax approved by the voters. Al Board ofl Directors manages the affairs ofthe Corporation. The fiscal year ofthe 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 thej 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 inj 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 of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) 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 tot 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  -19-    CITY OFTOLAR  NOTESTOFINANCIALSTATEMENTS  NOTE1: SUMMARYOFSIGNIFICANT. ACCOUNTING POLICIES- continued  Measurement Focus, Basiso of Accounting, and] Financial Statement Presentation The financial statements of the City are prepared in accordançe 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)pronouneemens, 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 finançial 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 al liability is incurred, regardless ofthe timing ofr related cash flows. Property tax revenues are recognized in the year for which they are 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), intergovermmental. 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 cash is received.  non-operating in thei 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: alli financial resources not reported in other funds.  General Fund - reports as the primary fund of the City. This fund is used to account for In addition, the City reports thei following as ai fund, not considered tol be ai major fund: Debt Service Fund = accounts for resources accumulated and payments made for principal andi interest on long-term general obligation debt of governmental: funds.  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.  -20-    CITY OFTOLAR  NOTESTOFINANCIALSTATEMENTS  NOTE1: SUMMARYOFSIGNIFICANTACCOUNTING. POLICIES-continued  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 ofir inventory is recorded as expenditures when used (consumption: method). The City'sp property, plant, and equipment with usefull lives ofr more 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 the 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  Imventory  Capital assets, depreciation, and amortization  government-wide statements.  Estimated useful lives for depreciable assets are as follows:  Water and sewer lines Buildings Equipment Vehicles  40 years 30 years 10y years 5years  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 Deferred outflows of resources refer to the consumption of net assets that are applicable to a future reporting period. Deferred outflows ofr resources have aj 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 $22,243 and $1,392 of deferred outflows related toTMRS in the government -wide financial statements and the proprietary fund statements,  vacation benefits that havel been earned through thel last day ofwork.  Deferred Outflows/I Inflows of Resources  respectively.  -21-    CITY OFTOLAR NOTEST TOFNANCALSTATEMNTIS  NOTE1: SUMMARYOFSIGNIFICANTACCOUNTING, POLICIES- continued  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 difference in delinquent taxes receivable and the associated allowance for uncollectible taxes of $7,032 is considered a deferred inflow of resources in the governmental fund financial statements, while $15,604 and $9,094 of deferred inflows related to TMRS is considered deferred inflow of resources in the government-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 toj 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 aj pay-as- The governmental fund financial statements present fund balances based on classifications that comprise al 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 usedi in the governmental fund financial statements are Nonspendable - This classification includes amounts that cannot be spent because they are either a) noti in spendable form or b) are legally or contractually required to be maintained intact. The City has no amounts classified. as nonspendable at September 30, 2018. Restricted- - This classification includes amounts for which constraints have 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 are to be used for future servicing of the revenue note and are: restricted through debt covenants. The City classified $20,270 as restricted for debt service at September 30, 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 taking the same type of action (ordinance or resolution) that was employed when the funds were initially committed. This classification also includes contractual obligations tot the extent that existing resources have been specifically committed: for use in  Pensions  Other Post Employment. Benefits  you-go] plan and all cash is heldi in a cash account.  Fund balance classification  asf follows:  2018.  -22-    CITYOFTOLAR  NOTESTOFINANCIALSTATEMENTS  NOTE1: SUMMARYOFSIGNIFICANTACCOUNTING. POLICIES- continued  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 Cityl has no amounts classified as assigned at September 30, 2018. 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 the 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.  committed funds at September 30, 2018.  amounts.  classified funds. Estimates  NOTE2: STEWARDSHIP, COMPLLANCEANDACCOUNTABILITT  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 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 ofaccounting. 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. Thel budget and actual statements are reported on this basis. The budget for  ine estimated revenues and appropriations.  Basis ofbudgeting  revisions at this level are subject to final review by the City Council.  -23-    CITY OF TOLAR  NOTES TOI EIMANCIALSTATEMENIS  NOTE2: STEWARDSHIP, COMPLIANCE, AMBACOMANIT--  the general fund is presented as required supplementary information and the budget for the  water fund is presented as supplementary information. The City had negative budget variancesi int the following departments:  Genral Fund General services  $ 12,571  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 ofa 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 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 al 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 practices. Audit procedures in this area conducted as aj 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 Statutes authorize the entity to invest in (1) obligations of the U.S. Treasury, certain U.S. agencies, and the. State of Texas; (2) certificates of deposit, (3) certain municipal securities, (4) money market savings accounts, (5) repurchase agreements, (6) bankers acceptances, (7) mutual funds, (8) investment pools, (9) guaranteed investment contracts, (10) and common The City's general policy is to report money market investments and short-term participating interest-eaming investment çontracts 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 ofthe credit standing oft the issuer or by other factors, it is reported at fair value. The term "short-term" refers to investments which have ai remaining term of one year orl less at time ofp purchase. The term nonparticipating"  (FDIC) insurance. Cash) Deposits  held by the City's agent bank in the City's name at September 30, 2018.  insurance at September 30, 2018. Investments  owned by the entity.  oft the City were in accordance with local policies.  trust funds. The City has demand deposits and money market accounts.  Investment. Accounting. Policy  -24-    CITY OFTOLAR  NOTES TOI FINANCIAL STATEMENTS  NOTE3: DEPOSITS. AND INVESIMENIS- continued  means that the investment's value does not vary with market interest rate changes. Nonnegotiable certificates of deposit are examples of nonparticipating interest-earning  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. At year 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 not in the city's name. At September 30, 2018, 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 of a government's investment in a single issuer. At September 30, 2018, since the City has noi investments, the City was note 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, 2018, the City was not exposed to  nots significantly exposed to credit risk.  risk.  the exposure to interest rate: risk. foreign currencyrisk.  NOTE4: RECEIVABLES, UNCOLLECTIBLEACCOUNIS, AND UNAVAILABLE. REVENUE  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 of the amount of accounts receivable that are uncollectible based on collection history and individual specific circumstances. As of September 30, 2018, the Cityl had recorded an allowance for uncollectible accounts of$3,523.  Receivables at September: 30, 2018 are: shown as follows:  Primary government: Water fund Total primary government  $. 54.726 $ 54,726  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 1 for all real and business personal property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on1 receipt oft thet tax bill and are delinquent if not paid before February 1 ofthe year following the year in which taxi isi imposed. Onl February 1 ofeachy year, at tax lien  -25-    CITY OFTOLAR NOTES TOIMANCALSTATEMENIS  NOTE4: RECEIVABLES, UNCOLLECTIBLE ACCOUNIS, AND UNAVAILABLE REVENUE-  continued  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 Cityi 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, the receivables represent delinquent tax receivables. Ifthe receivables are not] paid within 60 days ofy 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 cashi ist 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: CAPITALASSETS  The following schedule provides as summary of changes in capital assets:  Beginning Balance $ 58,837 58,837 734,642 113,341 544,802 1,392,785 (127,385) (98,638) (204,913) (430,936) 961,849 1,020,686 $ $  Ending Balance 58,837 58,837 734,642 40,386 544,802 1,319,830 (147,986) (30,905) (220,877) (399,768) 920,062 978,899  Increases  Decreases  Governmental, activities: Capital assets noth being depreciated: Land Total capitai assets notb beingd depreciated Capital assets beingd depreciated Buildings Equipment Infrastructure Total capital assets being depreciated Less accumulated depreciation for: Buildings Equipment Infrastructure Total accumulated depreciation Total capital assetst beingd depreciated, net Governmental activities capitala assets, net Depreciation was charged toi functions ast follows: Governmental activities: General govemment Streets Total depreciation expense govemmental activities  72,955 72,955 (72,955) (72,955)  (20,601) (5,222) (15,964) (41,787) (41,787) (41,787) 30,243 11,544 41,787  -26-    CITY OF TOLAR  NOTES TOI FINANCIAL STATEMENTS  NOTE5: CAPITALASSETS- continued  Beginning Balance 41,605 41,900 83,505 2,630,177 210,867 2,841,044 (1,491,614) (177,538) (1,669,152) 1,171,892 1,255,397 2,276,083 $ 161,578  Ending Balance 41,605 285,701 327,306 2,630,177 2,900 267,861 2,900 2,898,038 (1,578,026) (2,900) (188,556) (2,900) (1,766,582) 1,131,456 1,458,762 2,437,661  Increases 243,801 243,801 59,894 59,894 (86,412) (13,918) (100,330) (40,436) 203,365  Decreases  Business-o type activities: Capitala assets noth being depreciated: Land Construction: inp progress Total capitala assets notb beingà depreciated Capital assets beingd depreciated Distribution and collections system Equipment Total capital assets being depreciated Less accumulated depreciationi for: Distribution and collections system Equipment Total accumulated depreciation Total capital assets! beingd depreciated, net Business-type: activities, net Totall Primary Govemment  NOTE6: LONG-TERMI DEBT  Combination Tax and Revenue Certificate ofObligation, Series. 2005  A series of bonds dated January 13, 2005, for $425,000, was issued for the construction of public works and the purchase of materials, supplies, equipment, machinery, buildings, land and rights-of-way for authorized needs and purposes and for the payment of contractual obligations for professional services. The bonds were issued with interest rates ranging from 3.00% to 5.15% and mature annually through September 15, 2019, with interest due semiannually. The balance of these bonds at September 30, 20181 is as follows:  Governmental activities Business-type activities  $ 8,400 31,600 $ 40,000  General Obligation Refunding Bonds, Series 2005  A series of bonds dated January 13, 2005, for $415,000, was issued for the purpose of refunding the Series 2001 bonds in the amounts of $285,000 and $215,000, for a total of $500,000. The bonds were issued with interest rates ranging from 3.00% to 5.15% and mature annually through September 15,2019, withi interest due semiannually. The balance of  thesel bonds at September 30, 2018 is as follows: Governmental activities Business-type activities  $ 12,750 2.250 $ 15,000  -27-    CITYOFTOLAR  NOTES TOI FIMANCIALSTATEMENTS  NOTE6: LONG-TERM. DEBT- continued  Note Payable to Heritage National Bank  On September 8, 2004, the City took out ai note payable to purchase the property at 409 Tolar Cemetery Road, Tolar, Texas. The principal amount oft the note was $33,000 with an interest rate of4.5%, secured by the property. Payments are due monthly with the final payment due October 1,2 2019. Payments are $252 per month. Thel balance oft this note payableis52,750at  September 30, 2018.  The following provides as summary of changes in long-term debt:  Balance at  Balance at Due Within  9/30/2017 Additions Retirements 9/30/2018 One Year  Governmental. Activities Combination Tax &1 Revenue CertofObl, Series 2005 $ 15,750 $ General Obligation. Refunding Bonds Series 2005 Business-type. Activities Combination Tax & Revenue CertofObi, Series 2005 $ 59,250 $ General Obligationl Refunding Bonds Series 2005 Heritage National Bank  $  7,350 $ 8,400 $ 8,400  25,500 41,250  12,750 20,100  12,750 21,150  12,750 21,150  $ 27,650 $ 31,600 $ 31,600  4,500 5,565 69,315  2,250 2,815 32,715  2,250 2,750 36,600  2,250 2,750 36,600  Annual requirements to amortize debt outstanding as of September 30, 2018 are as follows:  Governmental. Activities Interest 2019$ 1,090 1,090 Business-bype. Activities  Principal 21,150 $ 22,240 21,150 $ 22,240  Total  2019$ 1,827 $ 36,600 $ 38,427  1,827 $ 36,600 $ 38,427  The amount of interest cost charged to expenses during the year ended September 30, 2018,  was $3,697.  NOTE: 7: AISKMAMGEMENT-CanINSANDAIDGENENS  The Cityi 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, ap 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 to the Pool are limited to the amount of premiums as calculated at the beginning of each fund year. The Pool's liability is limited to the coverage that the City elects as stated in the Pool's Declaration of Coverage for that fund year. Settled claims have not exceededi insurance coverage limits for the past three years.  -28-    CITY OFTOLAR NOTES TOF FINANCIAL STATEMENTS  NOTE8: TRANSFERVPAYMENTS WITHIN: THE REPORTING ENTITY  Transfers and) Payments subsidizing operating functions.  Transfers and payments within the reporting entity are substantially for the purposes of Thei following schedule reports transfers andj payments within the reporting entity:  Transfer In Transfer Out Total  General fund Debt service fund Water fund  4,939 $ 4,939  4,939 (825) (1,612) (2,502). 0  (825) (1,612) (2,502) (4,939) $  Economic Development Corporation  The following schedule reports payables and receivables with funds. Economic Development Corporation General Fund  Due' To  Due From General Fund  Debt Service Fund  $ 20,270 7,120  NOTE 9: DEFINED BENEFIT. PENSION) PLAN  Plan Description  The City of Tolar participates as one of 866 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS. Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the System with a six- member Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS's defined benefit pension plan is a tax-qualified plan under Section 401(a) of the Internal Revenue Code. TMRS issues a publicly available comprehensive annual financial report  (CAFR) that can be obtained at www.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 benefit is calculated as if the sum of the employee's contributions, with interest, and the city-financed monetary credits with interest were used to purchase an annuity. Members may choose to receive their retirement benefit in one of seven payment options. Members may also choose to1 receive aj portion of their benefit as al Partial Lump Sum Distribution in an amount equal to 12, 24, or 361 monthly payments, which cannot exceed 75% The plan provisions are adopted by the governing body of the City, within the options available ini the state statutes governing' TMRS. Planj provisions for the City were as follows:  oft the member's deposits andi interest.  -29-    CITYOFTOLAR  NOTES TOI FINANCIAL STATEMENTS  NOTE9: DEFINED BENEFITI PENSIONI PLAN- continued  Plan Year 2018 2017 7.0% 7.0% 2tol 2to1 5 5 60/5,0/25 60/5,0/25 0% 0% 0%ofCPI 0%ofCPI  Employee deposit rate Matchingi portion (city 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, 2017 valuation and measurement date, the following employees were  2016 2017 1 2 9 9 5 6 15 17  Inactive employees orl beneficiaries currently receiving benefits Inactive employees entitled tol but not yeti receiving benefits  The contribution rates for employees in TMRS are either 5%, 6%, or 7% of employee gross earnings, and the city matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of 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 actuarially determined rate is the estimated amount necessary to finance the cost ofbenefits earned by employees during the year, with an additional amount to Employees for the City ofTolar were required to contribute 7% ofi their annual gross earnings during the fiscal year. The contribution rates for the City of Tolar were 9.12% and 9.41% in calendar years 2017 and 2018, respectively. The city's contributions to TMRS for the year ended September 30, 2018, were: $21,581, and were equal to the required contributions. The City's Net Pension Liability (NPL) was measured as of] December 31, 2017 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, 2017 actuarial valuation was determined  finance any unfunded accrued liability.  Net Pension Liability actuarial valuation as oft that date. Actuarial. Assumptions using the following actuarial assumptions: Inflation Overall payroll growth Investment. Rate ofReturn  2.5%] per year 3.0%] per year including inflation  6.75%, net of pension investment expense,  Salary increases were based on a service-related table. Mortality rates for active members, retirees, and beneficiaries were based on the gender-distinct RP2000 Combined Healthy Mortality Table with Blue Collar Adjustment, with male rates multiplied by 109% and female rates multiplied by 103%. Because the cityi is considered: a small city by" TMRS, these  -30-    CITYOFTOLAR  OTETOIRANGASAIKANTN  NOTE9: DEFINED BENEFIT. PENSIONI PLAN- continued  percentages were reduced by 4% for a load of life factor to create a more conservative estimate. The rates are projected on a fully generational basis by scale BB to account for future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Combined Healthy Mortality Tables with Blue Collar Adjustment are used with males rates multiplied by 109% and female rates multiplied by 103% with a 3-year set-forward for both males and females. In addition, a 3% minimum mortality rate is applied to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by scale BB1 to account for future mortality improvements subject to the 3% Actuarial assumptions usedi in thel December 31, 2017, valuation were based on the results of actuarial experience studies. The experience study in' TMRS was for the period December 31, 2010 through December 31, 2014. Healthy post-retirement mortality rates and annuity purchase rates were updated based on a Mortality Experience Investigation Study covering 2009 through 2011, and dated December 31, 2013. These assumptions were first used in the December 31, 2013 valuation, along with a change to the Entry Age Normal (EAN) actuarial cost method. Assumptions are reviewed annually. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in 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 retum 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, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (2) the geometric mean (conservative). with an adjustment for time (aggressive). At its meeting on. July 30,2015, the TMRS Board approved a new portfolio target allocation. The target allocation and best estimates of real rates of  floor.  order to satisfy the short-term and long-term funding needs ofTMRS.  return for each major asset class are summarized in the following table:  Asset Class U.S. Equities International Equities Corel Fixed Income Non-Core. Fixed Income Real Retum Reall Estate Absolute Return Private Equity Cash Equivalents Discount. Rate  Minimum % Target % Maximum %  12.5% 12.5% 5.0% 15.0% 5.0% 5.0% 5.0% 0.0% 0.0%  17.5% 17.5% 10.0% 20.0% 10.0% 10.0% 10.0% 5.0% 0.0%  22.5% 22.5% 15.0% 25.0% 15.0% 15.0% 15.0% 10.0% 10.0%  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 employee 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.  -31-    CITY OF TOLAR  NOTES TOI FINANCIAL STATEMENTS  NOTE9: DEFINED BENEFITPENSIONI PLAN- continued  Changes in the Net Pension. Liability  Increase( (Decrease) Plan Fiduciaryl Net Position (b) 452,423 $  Total Pension Liability (a) 497,993 $ 29,899 34,152 (1,109)  Net Pension Liability (ç) 45,570 29,899 34,152 (1,109) (18,690) (14,345) (62,786) 325 16 (32,538) 13,032  Balancea atl 12/31/16 Changesf fort they year: Service Cost Interest Changes ofbenefitt terms Differencei between expected anda actuale experience Changes ofa assumptions Contributions- employer Contributions- employee Neti investmenti income Administrative expenes Other charges Neto changes Balance at 12/31/17  18,690 14,345 62,786 (13,971) (325) (16) 81,509 533,932  Benefitp paymencts, including refundso ofe employee contributions  (13,971) 48,971 546,964  Sensitivity oft the net pension liability to changes in 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 a discount rate that is -percentag-point lower (5.75%) or l-percentage point higher (7.75%)  than the current rate:  1%1 Decrease inI Discount 81,875 $  1%1 Increase inl Discount (44,197)  Discount 13,032 $  Rate (5.75%) Rate (6.75%) Rate (7.75)%  City's Net Pension) Liability Pension. Plan Fiduciary. Net Pension  Detailed information about the pension plan's Fiduciary Net Position is available in a separately-issued TMRS financial report. That report may be obtained on the Internet at Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources For the year ended September 30, 2018, the city recognized pension expense of$22,102. At September 30, 2018, the city reported deferred outflows of resources and deferred inflows  www.tmrs.com. Related tol Pensions  ofresources related toj pensions fromi the following sources:  -32-    CITYOFTOLAR  OTSTOIRANGASATNENT  NOTE9: DEFINED BENEFIT. PENSION. PLAN- continued  Deferred Outflows of Resources $ 1,351 $ 2,962 15,744 20,057  Deferred Inflows of Resources 854 14,750 15,604.  Difference between expected and actual economice experience Changesi ins actuarial assumptions Difference between projected and actual investment eamings Contributions subsequent tot the measurement date Total  $15,744 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date willl be recognized as ai reduction of the net pension liability for the year ending September 30, 2018. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized inj pension expense  as follows: Year Ended) December! 31: 2019 2020 2021 2022  $  3,149 (1,530) (6,462) (6,448)  NOTE10: DEFINED OTHER POST-EMPLOIMENTEENEPITPLANS  Plan Description  Texas Municipal Retirement System ("TMRS") administers a defined benefit group-term life insurance plan known as the Supplemental Death Benefits Fund ("SDBF"). This is a voluntary program in which participating member cities may elect, by ordinance, to provide group-term life insurance coverage for their active members, including or not including retirees. As the SDBF covers both active and retiree participants, with no segregation of assets, the SDBF is considered tol be an unfunded OPEB plan (i.e., no assets are accumulated). Ass such, the SDBF is considered tol be a single-employer unfunded OPEB plan (and not a cost sharing plan) with benefit payments treated as being equal to the employer's yearly The death benefit for active employees provides al 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 post-employment benefit ("OPEB") andi is ai fixed amount of$7,500. At December 31, 2017, valuation and measurement date, the following employees were  contributions for retirees. Benefits Provided  covered by the benefit terms:  -33-    CITY OFTOLAR  NOTES TOFRANCALSTATMENIS  NOTE10: DEFINED OTHER. POST-EMIPLO/MENT: BENEFITPLANS-G continued  2017 2 5 6 13  Inactive employees currently receiving benefits Inactive employees entitled to but not yet receiving benefits  Active employees Total Contributions  The contribution rates for the City were 0.16% and 0.14% in calendar years 2017 and 2018, respectively. The City's contributions to OPEB for the year ended September 30, 2018 were  $337 and were equal tot thei required contributions.  Total OPEB Liability Balance at 12/31/16 Changes for the year: Service cost Interest Change inl benefit terms Difference between expected/actual experience Changes of assumptions Benefit payments Neto changes Balance at 12/31/17 Actuarial Assumptions effective in. January 13, months later.  Total OPEB Liability 21,681 471 828 2,524 3,823 25,504  Actuarially determined contribution rates are calculated as of December 31, and become  Methods and Assumptions Used tol Determine Contribution Rates:  Inflation Salaryi increases Discount rate* Retirees' share ofbenefit-relatedo costs Administrative expenses Mortality rates- servicer retirees  2.50% 3.31% $0  3.50%to 10,50%i including inflation  All administrative expenses are paid through the Pension Turst and accounted for under reporting requirements under GASB Statement! No. 68. RP2000 Combined Mortality Table with Blue Colar Adjustment with male rates multiplied by 109% and femaler rates multiplied by 103% witha a3 years set-forward for both males and females. These rates are projected on a fully generational basis and scale BB to account for futurer mortalityi improvementss subjectt tot the 3%1 floor.  Thec discount rate was based ont thel Fidelity Index's' 20-Yearl Municipal GO AAI Index" ratea as of December 31, 2017  -34-    CITY OF' TOLAR  NOTES TO FINANCIAL STATEMENTS  NOTE10: DEFINED OTHIER. POST-EMPLOMENT BENEFIT. PLANS-C continued  The actuarial assumptions used in the December! 31, 2017 valuation were based on the results of an actuarial experience study fort thej period December 31,2010t tol December 31, 2014. Thei following schedule shows thei impact oft thel Net OPEB Liability ift the discount rate used was 1% less than and 1% greater than the discount rate that was used (3.31%) in measuring  Discount Rate Sensitivity Analysis thel Net OPEB Liability.  1%Decrease inl Discount 32,280 $  1%1 Increasei in Discount 20,489  Discount 25,504 $  Rate (2.31%) Rate (3.31%) Rate (4.31%)  City ofBangs' net OPEBI liability Related to OPEB $1,871.  OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources For the year ended September 30, 2018, the City recognized OPEB expense in the amount of At September 30, 2018, the City reported deferred outflows ofresources and deferred inflows  ofresources: related toj pensions from the following sources:  Deferred Outflows of Resources 1,952 234 2,186 $  Deferred Inflows of Resources  Differences between expected and actual economic experience Changes ins actuarial assumptions Contributions subsequent tot thei measurement date  Total  $234 reported as deferred outflows ofr 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, 2019. Other amounts reported as deferred outflows andi inflows ofresources related to OPEB willl be recognized inj pension expense as follows:  Year ended December 31: 2019 2020 2021 2022  $  572 572 572 236  NOTE. 11: HEALTH CARE COVERAGE  The City pays the employee's portion of health coverage. The city's annual cost was $42,835. Employees are responsible for the cost of dependent coverage and any additional coverage over the basic amount. All premiums were paid to a licensed insurer. The Plan was authorized by Article 3.51-2, Texas Insurance Code and was documented by contractual  agreement.  -35-    CITYOFT TOLAR  NOTEST TOI FINANCIAL STATEMENTS  NOTE12: GARBAGIE COLLECTIONSERVICE CONTRACT  The City has a sanitation contract with Progressive Waste Solutions of Texas wherein Progressive Waste Solutions of Texas 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  they year ended September 30, 2018 was $47,452.  NOTEI 13: SURSEQUENTEVENIS  City ofTolar, Texas Certificate ofObligation, Series 2018, was issued on October 1,2018, in the amount of $1,025,000, to finance the cost of city-wide road improvements, and for payment for professional services related thereto. The interest rate is 3.17% and is due on each April 15th and October 15th. Bond payments are due on October 15th of each year, and  matures on October 15, 2033.  NOTE. 14: PRIOR PERIODAD/ISIMENT  During the fiscal year 2018, the City adopted GASB Statement No. 75, Accounting for Financial. Reporting for Postemployment Benefits Other than. Pensions. With GASB No. 75, the City must record the net OPEB liability. Adoption of GASB No. 75 required a prior period adjustment to report the effect of GASB No. 75 retroactively. The adoption of GASB No. 75 resulted in a decrease to the beginning net position of governmental activities and business-type activities in the amount of $8,510 and $12,945, respectively. The restated net position for the governmental activities and the business-type activities were $1,147,616 and  $1,320,854, respectively.  NOTEI 15: NEWACCOUNTING PRONOUNCEMENTS  In November 2016, the GASB issued Statement No. 83 Certain. Asset Retirement Obligations. This statement establishes criteria for determining the timing and pattern of recognition ofa liability and a corresponding deferred outflow ofresources for AROS. This statement requires that recognition occur when the liability is both incurred and reasonably estimable. The determination of when the liability is incurred should be based on the occurrence of external laws, regulations, contracts, or court judgments, together with the occurrence of an internal event that obligates a government toj perform asset retirement activities. Laws and regulations may require governments to take specific actions to retire certain tangible capital assets at the end of the useful lives of those capital assets, such as decommissioning nuclear reactors and dismantling and removing sewage treatment plants. Other obligations to retire tangible capital assets may arise from contracts or courtj judgments. Internal obligating events include the occurrence of contamination, placing into operation a tangible capital asset thati is required to be retired, abandoning a tangible capital asset before it is placed into operation, or acquiring a tangible capital asset that has an existing ARO. The requirements of this Statement are effective for reporting periods beginning after June 15, 2018. The City has not determined the impact, if any, upon its financial position, results of operations or cash flows In January 2017, the GASB issued Statement No. 84 Fiduciary Activities. The objective of this statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus oft the criteria generally is on (1) whether a government is  upon adoption.  -36-    CITY OFTOLAR  NOTES TO FINANCIAL STATEMENTS  NOTEI 15: NEWACCOUNIING PRONOUNCEMENTS. continued  controlling the assets of the fiduciary activity and (2) thel beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. The requirements of this statement are effective for reporting periods beginning after December 15, 2018. The City has not determined thei impact, if any, upon its financial position, results ofo operations or cash In March 2017, the GASB issued Statement No. 85 Omnibus 2017. The objective of this statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEBI). The requirements of this Statement are effective for reporting periods beginning after June 15, 2017. The City determined there was no impact upon its financial position, In May 2017, the GASB issued Statement No. 86 Certain Debt Extinguishment Issues. The objective oft this statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources resources other than the proceeds of refunding debt = are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt thati is extinguished andi notes toi financial statements for debt thati is defeased in substance. The requirements of this statement are effective for reporting periods beginning after June 15, 2017. The City determined there was no impact upon its financial In. June 2017, the GASB issued Statement No. 87 Leases. The objective ofthis statement is 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 ofresources or outflows of resources based on the payment provisions oft the contract. Ite establishes a single model for lease accounting based on the foundational principle that leases are: finançings of the right to use an underlying asset. Under this statement, al lessor is required to recognize al lease receivable and a deferred inflow ofresources, thereby enhancing the relevance and consistency of information about governments' leasing activities. The requirements of this statement are effective for reporting periods beginning after December 15,2019. The City has not determined the impact, if any, upon its financial position, results In April 2018, the GASB issued Statement No. 88 Certain Disclosures Related to Debt, Including Direct Borrowings and Direct Placements. The objective of this statement is to improve the information that is disclosed in notes to government financial statements related to debt, including direct borrowings and direct placements. It also clarifies which liabilities governments should include when disclosing information: related to debt. The requirements of this statement are effective. for reporting periods beginning after. June 15, 2018. The City has not determined the impact, if any, upon its financial position, results of operations or cash  flows upon adoption.  results of operations or cash flows upon adoption.  position, results of operations or cash flows upon adoption.  ofoperations or cash flows upon adoption.  flows upon adoption.  -37-    CITYOFTOLAR  NOTESTOFINANCIALSTATEMENTS  NOTE15: NEWACCOUNTING, PRONOUNCEMENIS-continued  In June 2018, the GASB issued Statement No. 89 Accounting. for Interest Cost Incurred Before the End ofa Construction Period. The objectives of this statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for ai reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. The City has not determined the impact, ifa any, upon its financial position, results of operations or cash flows upon adoption. In August 2018, the GASB issued Statement No. 90 Majority Equity Interest = An Amendment of GASB Statements No. 14 and. No. 61. The objectives of this statement are to improve the consistency and comparability of reporting a government's majority equity interest in al legally separate organization and to improve the relevance of financial statement information for certain component units. It defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government's holding of the equity interest meets the definition of an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held bya as special-purpose government engaged only in fiduciary activities, ai fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund. Those governments and funds should measure the majority equity interest at fair value. The requirements of this statement are effective for reporting periods beginning after December 15, 2018. The City has not determined the impact, ifany, upon its financial position, results of operations or cash flows upon adoption.  -38-    REQUIRED SUPPLEMENTARY INFORMATION    CITYOFT TOLAR,' TEXAS BUDGET AND ACTUAL- GENERALFUND YEARI ENDED SEPTEMBER 30, 2018  STATEMENT OFI REVENUES, EXPENDITURES, AND CHANGES! INI FUND. BALANCE-  Variance with Final Budget Positive (Negative) 57,760 2,538 60,298 6,782 2,228 9,010 812 3,370 5,452 5,986 84,928  Budgeted. Amounts Original  Final 179,075 301,075 24,500 13,060 37,560 600 600 42,000 5,550 387,385  Actual  REVENUES Taxes: Salest tax Property tax Total taxes License & permits Right of way License and permits Total license &j permits Fines and forfeitures Investment income Garbage collection income Miscellaneous: income Total Revenues EXPENDITURES General govemment General services: Insurance Building inspector Contract labor Contract sanitation Election expense Economic Development Corporation Miscellaneous Office supplies Payroll Payroll Tax Retirement Printing & copies Professional services Repair & maintenance Postage and delivery Referencel books Software Technical support Telephone Travel Utilities Public service: Streets Repair  $ 122,000 $ 122,000 $ 179,760 $  179,075 301,075 24,500 13,060 37,560 600 600 42,000 5,550 387,385  181,613 361,373 31,282 15,288 46,570 1,412 3,970 47,452 11,536 472,313  4,864 1,000 45,400 4,200 38,330 2,250 3,500 140,893 8,627 10,686 2,560 21,708 14,000 600 300 6,000 3,000 5,595 2,500 19,310 335,323 52,070 52,070 387,393  5,098 3,500 45,400 38,330 2,450 3,500 140,893 8,627 10,686 2,560 24,108 14,000 700 450 6,800 3,800 6,345 3,600 19,310 340,157 47,227 47,227 387,384  4,847 3,325 1,658 47,266 59,920 1,990 2,722 137,420 8,627 10,686 2,902 23,501 10,468 643 436 7,517 5,355 5,986 3,194 15,923 354,386 23,896 23,896 378,282  251 175 (1,866) (21,590) 460 778 3,473 (342) 607 3,532 57 14 (717) (1,555) 359 406 3,387 (12,571) 23,331 23,331 10.760  Total general government  Total expenditures  -39-    CITYOFTOLAR, TEXAS  STATEMENT OFI REVENUES, EXPENDITURES, AND CHANGES INI FUNDI BALANCE-  BUDGET AND ACTUAL GENERALI FUND- CONTINUED YEAR ENDED SEPTEMBER. 30, 2018  Variance with Final Budget Positive (Negative)  Budgeted. Amounts Original  Final  Actual  OTHER FINANCING USES Transfers out Total Other Financing Uses Net change ini fund balance Fund Balance Beginning Fund Balance- Ending  4,939 4,939 98,970 170,779  4,939 4,939 15,699 15,699  387,393 170,779  387,384 170,779  558,172 $ 558,163 $ 269,749 $  -40-    CITYOFTOLAR  SCHEDULEOF CHANGES. INI NETI PINSIONLIABILITYKANDI RELATEDRATIOS  YEAR: ENDED SEPTEMBER: 30, 2018  Plan Year Ended) December 31, 2016 31,112 $ 30,644 (343) (3,699) 57,714 440,279  2017 $ 29,899 $ 34,152 (1,109) (13,971) 48,971 497,993 546,964 $ 497,993 18,690 $ 14,345 62,786 (13,971) (325) (16) 81,509 452,423 533,932 $ 13,032 $ 97.62% 204,930 6.36%  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%  Total Pension Liability Service cost Interest (on thet total pension liability) Changes of! benefit terms Difference between expected and actual experiençe Change of assumptions Benefit payments, including refunds ofe employee contributions Net Changei in' Totall Pension Liability Total Pension Liability Beginning Totall Pension Liability Ending Plan Fiduciary Net Position Contributions employer Contributions employee Neti investment income Administrative expense Other Net Change inl Plan Fiduciary Net Position Plan Fiduciary Net Position Beginning Plan Fiduciary Net Position Ending Net Pension Liability- Ending Covered Employee Payroll  $  15,684 $ 14,896 26,988 (3,699) (304) (16) 53,549 398,874 452,423 45,570 $ 90.85% 212,803 21.41%  Benefit payments, including refunds of employee contributions  Plan fiduciary Net Position as al Percentage ofTotal Pension Liability Net Pension Liability as a Percentage of Covered Employee Payroll  -41-    CITY OF TOLAR  SCHEDULEOFI PENSION CONTRIBUTIONS YEAR: ENDED SEPTEMBER 30, 2018  Fiscal Year Ended September 30, 2017 17,488 $ (17,488) $  2018 21,581 $ (21,581)  2016 2015 14,787 $ 12,036 (14,787) (12,036) $  Actuarially determined contribution Contribution deficiency (excess) Covered employee payroll  Contributions ini relation tos actuarially determined contribution  $ $ 231,307 $ 9.33%  199,403 $ 203,094 $ 185,434  Contributions as aj percentage ofc covered employee payroll  8.77%  7.28%  6.49%  Notes to Schedule of Contributions Valuation. Date:  Actuarially determined contribution rates are calculated as of December 31 and  become effective in. January, 13: months later.  Methods and. Assumptions Used tol Determine Contribution Rates:  Actuarial Cost! Method Amortization Method Remaining Amortization Period Asset Valuation Method Inflation Salary Increases Investment Rate ofl Return Retirement Age Mortality  Entry Agel Normal Level Percentage of! Payroll, Closed 26; years 2.50% 6.75%  10 Year Smoothed. Market; 15% Soft Corridor 3.50%1 to! 10.5%i including inflation  Experienc-based table based on rates that are specific to the city's plan of benefits. Last updated for the 2015 valuation pursuant to an experience study of RP2000 Combined Mortality Table with Blue Collar Adjustment with male rates multiplied by 109% andi female rates multiplied by 103% and projected on ai fully  the period 2010-2014.  enerational basis with scalel BB. There were: no benefit changes during the year.  Other Information  -42-    CITY OF TOLAR  SCHEDULE OF CHANGES INI NET OPEB) LIABILITY ANDI RELATED) RATIOS  YEARI ENDED SEPTEMBER: 30, 2018  Plan Year Ended December 31, 2017 471 828 2,524 3,823 21,681 25,504 204,930 12.45%  Total OPEB Liability Service cost Interest (on thet total OPEBI liability) Changes ofbenefitt terms Difference between expected and actual experience Change of assumptions Benefit payments, including refunds of employee contributions Net Change in' Total OPEBI Liability Total OPEBI Liability- Beginning Total OPEB Liability- Ending Covered Employee Payroll  $  $  Net] Pension Liability as al Percentage ofCovered! Employee Payroll  -43-    OTHER SUPPLEMENTALINFORMATION    CITY OFTOLAR, TEXAS BUDGET AND ACTUAL- WATER) FUND YEAR ENDED SEPTEMBER 30, 2018  STATEMENT OF REVENUES, EXPENSES. AND CHANGES! INI FUNDI NETI POSITION-  Adjustments Actual tol Budgetary Budgetary Basis  Variance Favorable (Unfavorable) 42,620 42,620 (2) 656 (356) 557 5,955 (2,107) 8,873 8,848 (3,837) 784 1,635 308 2,605 (2,096) 21,823 64,443 2,547 (13,942) 1,924 (1,612) (11,083) 53,360  Budgeted Amounts Original  Final 419,475 1,200 72,868 10,842 7,500 6,500 147,702 9,068 12,671 9,900 22,800 17,750 18,200 4,000 3,000 1,000 33,540 5,000 383,541 35,934 300 243,996  Actual 462,095 1,202 100,330 (100,330) 10,186 7,856 5,943 141,747 9,068 12,671 12,007 13,927 8,902 22,037 3,216 1,365 692 30,935 7,096 389,180 (27,462) 72,915 27,462 2,847 230,054 (1,593) (276,713) (1,612)  Basis 462,095 $ 462,095 1,202 72,868 10,186 7,856 5,943 141,747 9,068 12,671 12,007 13,927 8,902 22,037 3,216 1,365 692 30,935 7,096 361,718 100,377 2,847 230,054 (278,306) (1,612) (47,017) 53,360 1,333,799 1,333,799  OPERATING REVENUES: Water sales OPERATING EXPENSES: Contract labor Capital purchases Depreciation expense Insurance Labt tests Office expense Payroll expenses Payroll taxes Retirement Permit: fees Professional services Repairs andi maintenance Supplies Telephone Travel Uniforms Utilities Vehicle expense Net operating income (loss) Nonoperating revenues (expenses) Interest income Granti income Interest expense Transfers: in Total nonoperating revenues (expenses)  $ 419,475 $ 419,475 $ 462,095 $  Total Operating Revenues 419,475  1,200 316,864 10,842 7,500 6,500 147,702 9,068 12,671 9,900 22,800 17,750 18,200 4,000 3,000 1,000 33,540 5,000 (208,062) 300 243,996 (36,234) (280,230) 208,062  72,868  Total Operating Expenses 627,537  (35,934) 229,696 (276,713)  Neti income (loss) Net Position Beginning of Year Prior period adjustment Net! Position End of Year  302,611 (249,251) (12,945) 12,945  1,333,799 1,333,799 1,333,799 1,333,799 1,333,799 1,320,854  12,945  $ 1,333,799 $ 1,333,799 $ 1,623,465 $ (236,306)$ 1,387,159  53,360  -44-    OTHER INFORMATION REQUIRED BY GAO    Merritt, McLane & Hamby, P.C.  401 Cypress Street, Suite 303 Abilene, TX 79601  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 AUDITINGSTANDARDS  Tot 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, the aggregate discretely presented component unit, and each major fund of the City ofTolar, Texas, as of and for the year ended September 30, 2018, and the related notes to the financial statements, which collectively comprise the City of Tolar, Texas' basic financial statements Inj planning and performing our audit of the financial statements, we considered the City of Tolar, Texas' internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for thej purpose of expressing our opinions on1 the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Tolar, Texas' internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Tolar, Texas' 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 of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control thati is less severe than a material weakness, yeti important enough toi 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 tol be material weaknesses as identified As part of obtaining reasonable assurance about whether the City ofTolar, Texas' financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed noi instances of noncompliance or other matters that is required  andl have issued our report thereon dated February 6, 2019. Internal Control over. Financial Reporting  internal control.  as2 2018-001.  Compliance and Other Matters  tol bei reported under Government. Auditing Standards.  -45- www.mmh-cpa.com  Phone: 325-672-9323  Fax 325-672-9491    City ofTolar's Response to 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 int the audit of the financial statements and, accordingly, we express no opinion on it. The purpose of this report is solely to describe the scope of our testing ofi internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly,  Purpose of this Report  this communication is not suitable for any other purpose.  MeMda dowy.Pc. MERRITT,MCLANE & HAMBY,P.C.  Abilene, Texas February 6, 2019  -46-    CITY OF' TOLAR, TEXAS SCHEDULE OFI FINDINGS AND) RESPONSES YEAR ENDED SBPTEMBER 30, 2018  LSummary of Auditor's! Results:  a. The type of report issued on the financial statements of the City ofTolar, Texas was an unqualified b.One material weakness was disclosed during the audit of the financial statements, reported as c.Noi instances ofr noncompliance material to the financial statements of the City of Tolar, Texas were II. Findings Relating to the Financial Statements which are Required to be Reported in  opinion.  Finding 2018-001. No significant deficiencies were reported  disclosed during the audit.  Accordance with Generally. Accepted Government. Auditing Standards.  2018-001 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. Iti is the responsibility of management  from material misstatement.  Condition:  oft the City's financial statements.  Cause: Effect:  course oft the year.  Recommendation:  -47-    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  considerations.  View of Responsible Officials:  foundi itl beneficial to outsource this service.  Contact:  Joyce. Johnson, City Secretary 254-835-4390  -48-    CITY OF TOLAR, TEXAS SCHEDULEOF PRIOR YEAR FINDINGS YEAR: ENDED SEPTEMBER 30, 2018  PRIOR YEAR  indingvAoncomplane None  -49-