CITY OFTOLAR  ANNUAL: FINANCIAL. ANDO COMPLIANCE REPORT YEAR: ENDED SEPTEMBER 30, 2017    CITY OFTOLAR TABLE OF CONTENTS  Page  Financial Section Independent Auditors' Report-- Management's) Discussion and Analysis Basic Financial Statements  Government-wide Financial Statements: Statement of Net Position- Statement of Activities Governmental Fund Financial Statements: Balance Sheet- - Governmental Funds- Reconciliation of the Governmental Funds Balance Sheet to the Statement ofl Net Position Statement of Revenues, Expenditures, and Changes inl Fund) Balance- - Governmental Funds- Reconciliation oft the Statement of Revenues, Expenditures, Changes in Fund Balance of Governmental Funds tot the Statement of Activities- Proprictary Fund] Financial Statements Statement of Fund Net Position - Proprietary Funds Statement of Revenues, Expenses and Changes inl Fund Net Position - Proprietary Funds Statement of Cash Flows- - Proprietary! Funds Notes tol Finançial Statements Required Supplementary Information Actual - General Fund Schedule of Contributions- Other Supplementary Information Actual - Water Fund- Other Information Required by GAO  5 6 17 18  Statement of] Revenues, Expenditures and Changes in) Fund Balance- Budget and Schedule of Changes in] Net Pension Liability and Related Ratios-  38 0  Statement of] Revenues, Expenses and Changes in Fund Net Position - Budget and  Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements. Performed  In Accordance with Government Auditing Standards-  Schedule of] Findings and] Responses Schedule of] Prior Year Findings    FINANCIALSECTION    INDEPENDENT AUDITORS' REPORT  Tot the Honorable Mayor and Members of 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 ofTolar, Texas, as of and for the year ended September 30, 2017, and the related: notes to the financial statements, which collectively comprise the City'sbasic financial statements asl listed in the table of contents. Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted. ini the United States of America; thisi includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of finançial 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 finançial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Thej procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation oft the financial statements. We believe that the audit evidence wel have obtained is sufficient and appropriate toj 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 oft the City ofTolar, Texas, as of September 30, 2017, 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 thel Financial Statements  Auditor's Responsibility  audit opinions. Opinions  America,  -1-    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 38 through 41 be presented to supplement the basic financial statements,. Such information, although not a part of the basic finançial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted ofi inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The budgetary information - proprietary fund is presented for purposes of additional analysis andi is not ai required part of the basic financial statements. The budgetary information proprietary fund has not been subjected to the auditing procedures appliedi in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any Ina accordance with Government Auditing Standards, we have also issued our report dated February 2, 2018, on our consideration of the City of Tolar, 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 toj provide an opinion oni 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  assurance oni it.  Other Reporting Required by Government. Auditing Standards  over financial reporting and compliançe.  MERRITT, MCLANE. & HAMBY, P.C.  Abilene, Texas February 2, 2018    MANAGEMENT'S DISCUSSION AND ANALYSIS    MANAGEMENT'S DISCUSSION AND. ANALYSIS  This section of City of Tolar's annual financial report presents our discussion and analysis of the City's financial performance during the fiscal year that ended on September 30, 2017. Please read it in  conjunction with the City's financial statements, which follow this section.  FINANCIAL HIGHLIGHTS  The City's total net position increased $71,716 from prior year. Net Position of our business-type activities increased $65,781 (5.2%), while net position of our governmental activities increased During the year, the City's expenses were $5,935 less than the $427,125 generated in taxes and In the City's business-type activities, revenues were $477,681, including transfers of $10,531,  $5,935 (or less than 1.0%). other revenues for governmental programs. while expenses were: $411,900. The total çost oft the City's programs was $825,484. The general fund reported fund balance of $170,779. OVERVIEW OF THE FINANCIAL STATEMENTS  Management's Discussion and Analysis introduces the City's basic financial statements. The basic finançial 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  supplement the basic financial statements. Government-wide. Financial. Statements  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 aj 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 of City infrastructure in addition to the 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 ist to show the financial reliance ofthe City's distinct activities or functions on revenues provided  elimination or reclassification ofi internal activities.  by the City'st taxpayers.  -3-    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  type activities include water and sewer activities.  remains accountable for their activities. Fund Financial. Statements  A fund is an accountability unit used to maintain control over resources segregated for specific activities or objectives. The City uses funds to ensure and demonstrate compliance with finance-related laws and regulations. Within the basic financial statements, fund financial statements focus on the City's most significant funds rather than the City as a whole. Major funds are separately reported while all others are  combined into a single, aggregated presentation, The City has two kinds ofi funds:  Govermmental, 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 provides a reconçiliation to the government-wide statements to assist in A budgetary comparison schedule for the general fund can bei found in required supplementary information. This statement demonstrates compliance with the City's adopted and final revised budget. In addition, a budgetary comparison schedule for 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 byt the government-wide financial statements, but with more detail for major enterprise funds.  the near-term.  understanding the differençes between these twoj perspectives.  service funds.    Notes to the Financial. Statements  The accompanying notes to thei financial statements provide information essential to a full understanding of the government-wide and fund finançial statements. The notes to the financial statements begin  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 $2,489,925. This is a $71,716 increase over last year's net position of $2,418,209. The following Table A-1 provides a summary of the City's net position at  September 30,2017 and 2016.  Table A-1 Cityo ofTolar's Net Position Govemmental Activities 2017 2016 207,201 176,876 1,962 18,752 28,070 34,988 45,550 59,838 73,620 94,826 103 979,436 989,033 20,270 20,270 156,420 140,888  Business-type Activities 2017 2016 215,566 96,244 11,121 28,521 51,472 42,853 96,618 126,346 148,090 169,199 195  Totals 2017 2016 422,767 273,120 13,083 47,273 79,542 77,841 142,168 186,184 221,710 264,025 298  Current and Other Assets Capital andl Non-Current. Assets Total Assets Deferred Outflows of] Resources Current Liabilities Long TermI Liabilities Total Liabilities Deferred Inflows of Resources Net Position Net investment inc capital assets Restricted Unrestricted Total Net Position  1,020,686 1,050,383 1,255,397 1,313,964 2,276,083 2,364,347 1,227,887 1,227,259 1,470,963 1,410,208 2,698,850 2,637,467  994  1,512  2,506  1,186,082 1,212,056 2,165,518 2,201,089  20,270 20,270 304,137 196,850  147,717 55,962  1,156,126 1,150,191 1,333,799 1,268,018 2,489,925 2,418,209  Net Position in the City's governmental activities increased less than 1.0%. Net Position increased 5.2%t to $1,333,799 in business-type activities of the government. $2,165,518 of total net position is invested in capital assets (distribution and collection system, equipment, etc) and $20,270 is restricted for debt service. Consequently, unrestricted: net position showeda! $304,137 balance at the end oft this year. Changes in Net Position. The City's total revenues were $897,200, including transfers. Over half(54%) oft the City's revenue comes from fees charged for services, and 38 cents ofe every dollar raised comes from The total cost of all programs and services was $825,484. The City's expenses cover a range of serviçes,  some type oftax. (See Figure A-1)  withl half(50%) related to business-type activities. (Seel Figure A-2).    Figure A-1 Other 3%  Figure A-2  City Soarces dfE Revenue for Fiscal Year 2017  City Functional Epenses for Facal Year 2017  Property Taves 20%  General Govemment 46%  Business- type activities. 50%  Charges for. Services 54%  Non- property Taxs 18%  Streets 4%  Operating. grants 5%  DebtJ Service 0%  Governmental Activities  Revenues for the City's governmental activities were $427,125, while total expenses, including transfers were $421,190. 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  Changesi in ChyofTolar,Tear) Netl Position Governmental Activities 2017 2016  Business-type Activities 2017 2016  Total 2017 2016 46,061 26,924 655 5,434  Revenues Progm) Revenues Charges for Services Operating Grants and Contributions General Revenues Salest tax Propertyt tax Righto ofv way foes Investment! Eamings Otheri income Total Revenucs Espenses General govemment Police Streets Debts service Water utilities Totall Espenses  $ 61,176 $ 63,117 $ 424,676 $ 324,162 $ 485,852 $ 387,279  41,900  46,061  41,900 135,532 146,572 183,063 167,576 27,486 1,563 18,879 894,275 780,501 377,573 312,645 32,902 3,109 411,900 408,897 825,484 754,647  135,532 146,572 183,063 167,576 27,486 26,924 989 18,879 427,125 410,163 377,573 312,645 32,902 28,166 3,109 413,584 345,750  540 5,434  574 467,150 370,338  115  28,166 4,939  4,939  411,900 408,897 411,900  408,897  -6-    Excess (deficiency) beforet transfers Transfers Increase (decrease)i int net position Governmental Funds  13,541 64,413 (7,606) 11,317 5,935 75,730  55,250 10,531 65,781  (38,559) 13;312  68,791 25,854 2,925 24,629  (25,247)S 71,716 50,483  As discussed, governmental funds are reported in the fund statements with as short-term, inflow and outflow of spendable resources focus. This information is useful in assessing resources available at the end oft the year in comparison with upcoming financial requirements. Governmental funds reported ending fund The total ending fund balances of governmental funds show an increase of $33,939 over the prior year.,  balançes of$191,049.  This increase is primarily the result of an increase inj property tax.  Major Governmental. Funds  The General Fund is the City's primary operating fund and the largest source of day-to-day service  delivery. The fund balance ofthe General Fund increased to $33,939.  Proprietary Funds  The proprietary fund statements share the same focus as the govemment-wide statements, reporting both  short-term and long-term information about financial status.  Major Proprietary Funds  The City's major proprietary fund is the Water Fund. Total net position at the end of the year was  $1,333,799. The Water Fund had ani increase ini net position of$65,781.  General Fund Budgetary Highlights  The General Fund Budget for fiscal year 2017 was approximately $353,000. This was an increase of approximately $42,000: from the previous year's actual expenditures. In the current year, the City budgeted for the payments to thel Economic Development Corporation, increases in insurance, election, professional services, software, and telephone, and decreases in building inspector, capital outlay, miscellaneous, office supplies, printing & copies, repair & maintenance, reference books, technical support, travel, and street 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. Actual expenditures were $5,778  expenses. over 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, 2017, was $1,020,686 and $1,255,397, respectively. The total change in net capital assets was a decrease of 2.8% in the governmental and a decrease of 4.5% for business-type activities. The overall decrease was 3.7% for the City as a whole. Major capital asset additions during the current fiscal year included the purchase ofai mower, street improvements and construction inj progress on the lift station. The project is approximately 15% complete. See Table A-3 for additional information  about changes in capital assets during the fiscal year.  -7-    City ofTolar City'sCapital Assets  Governmental Activities 2017 2016 58,837 58,837 734,642 734,642 113,341 135,252 478,498 478,498  Business-type Activities 2017 2016 41,605 41,605 210,867 213,767 41,900  Total 2017 2016 100,442 100,442 734,642 734,642 324,208 349,019 478,498 478,498 41,900  Land Buildings and improvements Distribution: and collection system Furniture and equipment Infrastructure Construction inp progress Total at! historical cost Totala accumulated depreciation Net capital assets Long-term Debt  2,630,177 2,630,177 2,630,177 2,630,177  1,385,318 1,407,229 2,924,549 2,885,549 4,309,867 4,292,778 430,936 414,650 1,669,152 1,571,585 2,100,088 1,986,235 954,382 992,579 1,255,397 1,313,964 $ 2,209,779 2,306,543  At year-end, the City had $105,000 in bonds payable and $5,565 in notes payable. See Table. A-4.  Table A-4 City's Outstanding Debt  Governmental Activities 2017 2016 41,250 61,350 41,250 $ 61,350  Business-type Activities 2017 2016 5,565 $ 8,258 63,750 93,650 69,315 $ 101,908  Total 2017 2016 5,565 $ 8,258 105,000 155,000 110,565 $ 163,258  Note payable Bonds payable  ECONOMICFACTORS 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 is increased through sales tax revenues and property tax revenues.  Appraised property value used for the 2017-2018 budget preparation increased approximately $4.0 Water rates remained consistent with prior year. Sewer sales are expected to remain substantially the same for the fiscal year 2018. The City budgeted fori increases in street repair and salary and These indicators were taken into account when adopting the general fund and water fund budgets for 2018. The General Funds expenditures are budgeted at $389,498, which is an increase of approximately $30,000 from prior year expenditures. The City! has added no major new programs or initiative to the 2018 budget. Ifthese estimates are realized, the City's budgetary general fund fund balance is expected to decrease by  million, or 10.5% from thej previous year.  related expenses.  $2,104.  -8-    CONTACTING THE CITY'S FINANCIAL MANAGEMENT  This financial report is designed toj provide our citizens, taxpayers, customers, andi investors and creditors with a general overview oft the City's finançes and to demonstrate the City's accountability fort the moneyit receives. If you have questions about this report or need additional financial information, contact the City  ofTolar's Mayor, 8712 W. Hwy 377, Tolar, Texas 76476.    BASIC FINANCIALSTATEMENTS    CTYOFTOLAR,TEXAS STATEMENT OFN NETI POSITION SEPTEMBER: 30, 2017  Primary Government Activities  Governmental Business-Type Activities $ 177,046 $ 9,636 (1,454) 4,968 25,508 (8,503) 207,201 58,837 673,561 14,703 273,585 1,020,686 1,227,887 1,962 1,962  Component Unit 98,443  Total  ASSETS  Current Assets Cash and cash equivalents Receivables: Property tax Allowance: for uncollectible tax Accounts receivables Grant Right ofv way Salest tax Duet to/from otherf funds Inventory Total current assets Non-current Assets Capital assets: Land Construction inp progress Buildings and improvements Distribution and collection system Furniture and equipment Infrastructure Total non-current assets Total Assets  143,433 $ 320,479  9,636 (1,454) 51,650 10,896 4,968 25,508 (8,503) 9,587 422,767 100,442 41,900 673,561 1,138,563 48,032 273,585 2,276,083 2,698,850 13,083 13,083  51,650 10,896 9,587 215,566 41,605 41,900 1,138,563 33,329 1,255,397 1,470,963 11,121 11,121  8,503 106,946  106,946  DEFERRED OUTFLOWS OFI RESOURCES Deferred outflows related to TMRS Totall Deferred Outflows of Resources  The accompanying notes are ani integral part of this statement.    Primary Government Activities  Governmental Business-Type Activities  Component Unit  Total 17,220 776 8,730 2,816 50,000 79,542 30,617 8,232 45,570 2,749 55,000 142,168 221,710 298 298  LIABILITIES  Current Liabilities Accounts payable Sales tax payable Accrued wages payable Note payable- current Bonds] payable- current Total current liabilities Non-current Liabilities Utility deposits Accrued vacation Net pension liability Note payable- non current Bonds payable non current Total non-current liabilities Totall Liabilities DEFERRED INFLOWS OF RESOURCES Deferred inflows related to' TMRS Total Deferred Inflows of Resources  3,574 776 3,620 20,100 28,070 6,324 18,076 21,150 45,550 73,620 103 103  13,646 5,110 2,816 29,900 51,472 30,617 1,908 27,494 2,749 33,850 96,618 148,090 195 195  NETI POSITION  Net investment in capital assets Restricted Unrestricted Totall Net Position  979,436 20,270 156,420 1,156,126  1,186,082 147,717 1,333,799  2,165,518 20,270 304,137 2,489,925  106,945 106,945  -10-    CITY OF TOLAR, TEXAS STATEMENT OF ACTIVITIES YEAR ENDED SEPTEMBER 30, 2017  Program Revenues Charges for Services 61,176 $ 61,176 424,676 424,676 485,852 $  Operating Grants and Contributions  Functions/Programs Primary Government Governmental Activities: General government Public service Streets Debt service Total governmental activities Business-type Activities: Water utilities Total business-type activities Total Primary Government Component Unit  Expenses $ 377,573 $ 32,902 3,109 413,584 411,900 411,900 825,484 $  41,900 41,900 41,900  Economic Development Corporation  General Revenues: Taxes: Salest tax Property tax Right of way Investment Earnings Contribution Miscellaneous Income Transfers Total General Revenues and Transfers Changei inl Net Position Net] Position- Beginning Net Position Ending  Thec accompanying notes are an integral part oft this statement.    Net (Expense) Revenue and Changes in! Net] Position Governmental Business-Type Activities $ (316,397)$ (32,902) (3,109). (352,408)  Component Unit  Activities  Total $ (316,397) (32,902) (3,109) (352,408) 54,676 54,676 (297,732)  54,676 54,676 54,676  (352,408)  135,532 183,063 27,486 989 11,040 7,839 (7,606) 358,343 5,935 1,150,191 1,156,126 $  135,532 183,063 27,486 1,563 11,040 7,839 2,925 369,448 71,716 2,418,209  45,177 364 (2,925) 42,616 42,616 64,329 106,945  574 10,531 11,105 65,781 1,268,018  1,333,799 $ 2,489,925 $  -11-    GOVERNMENTAL FUND FINANCIALSTATEMENTS    CIYOFTOLARTEXAS BALANCE SHEET- GOVERNMENTALFUNDS SEPTEMBER 30, 2017  Total Funds $ 177,046 1,746 9,636 (185) (1,454) 4,968 25,508 20,270 20,270 21,831 235,974 3,574 776 3,620 20,270 8,503 36,743 8,182 8,182 20,270 170,779 191,049 235,974  General Fund 177,046 $ 7,890 (1,269) 4,968 25,508 214,143 3,574 $ 776 3,620 20,270 8,503 36,743 6,621 6,621  Debt Service Govermental Fund  ASSETS:  Current: Casha ando cash equivalents Receivables: Property tax Allowance for uncollectible tax Right of way Sales tax Due from other funds Total Assets Current Liabilities Accounts payable Salest tax payable Accrued liabilities Due to other funds Duet tol EDC Totall Liabilities  LIABILITIES:  $  DEFERRED INFLOWS OF RESOURCES:  Unavailable: revenue- property tax Totall Deferred Inflows of Resources  1,561 1,561 20,270 20,270 21,831 $  FUNDI BALANCE:  Restricted: Debt service Unassigned Total) Fund Balance  170,779 170,779 214,143 $  Totall Liabilities, Deferred Inflows ofl Resources, and] Fund] Balances  The accompanying notes are ani integral parto of this statement,  -12-    CITY OFTOLAR, TEXAS TOTHE: STATEMENT OFI NETI POSITION SEPTEMBER: 30,2017  RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET  Total fund balances governmental funds balance sheet  191,049  Amounts reported for governmental: activities int the statement ofr 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 Current year capital outlays are expenditures in the fund financial statements, but are shown as Long-term liabilities at the beginning oft the year of$61,350 are not due and payable int the current Long-term debt principal payments are expenditures in the fund financial statements but they should bes shown asi reductions inl long-term debti int the government-wide financial statements. Included int the noncurrent liabilities is the recognition of the city's net pension liability required by GASB 68 in the amount of $18,076, a deferred resource inflow in the amount of $103, and a deferred resource outflow in the amount of $1,964. This resulted in a decrease ini net position of Vacation açcrual is recordedi int the: statement oft net position. The 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  $1,465,033 and the accumulated depreciation was $414,650. increases to capital assets in the statement oft net position. period, and therefore are not reported as liabilities int the funds.  1,050,383 19,440 (61,350) 20,100  $16,215.  (16,217) (6,324) 8,182 (49,137) 1,156,126  levy.  Depreciation expense decreases net position in SNP. Net position ofg governmental activities statement ofr net position  The accompanying notes are an integral part of thiss statement.  -13-    CITY OF TOLAR, TEXAS STATEMENT OFI REVENUES, EXPENDITURES, AND CHANGES IN FUND] BALANCE- GOVIRMMENTALFUNDS YEAR ENDED: SEPTEMBER 30,2017  Total Debt Service Governmental Fund Funds $ 135,532 23,107 179,759 27,486 14,263 46,018 895 989 11,040 7,839 423,821 337,709 21,358 23,209 382,276 41,545 (7,606) (7,606) 33,939 157,110 191,049  General Fund $ 135,532 $ 156,652 27,486 14,263 46,018 895 989 11,040 7,839 400,714 337,709 21,358 359,067 41,647 (7,708) (7,708) 33,939 136,840 170,779 $  REVENUES Salest tax Property tax Right ofway License and permits Garbage collection income Fines and forfeitures Investment income Donations Miscellaneous inçome Totall Revenues EXPENDITURES Current: General government Public service Streets Debt service Total Expenditures Expenditures Other Financing Uses Operating transfers out Total Other Financing Uses Net Changei in Fund Balances Fund Balance Beginning Fund Balance- Ending  23,107  23,209 23,209 (102) 102 102 20,270 20,270 $  Excess (Deficiency) of Revenues over (Under)  Thec accompanying notes are ani integral part oft this statement,  -14-    CITY OF TOLAR, TEXAS YEAR ENDED SEPTEMBER 30,2017  RECONCILIATION OF THES STATEMENT OFI REVENUES, EXPENDITURES, AND CHANGES INFUNDI BALANCES OF GOVERNMENTAL: FUNDS TOTHE STATEMENT OF ACTIVITIES  Total change ini fund balances total governmental funds  33,939  Amounts reported for governmental: activities int the statement ofactivities Depreciation expense decreases net position in SNP. increases to capital assetsi int the statement ofr net position.  (SOA) are different because:  (49,137) 19,440 20,100  Current year capital outlays are expenditures in the fund financial statements, but are shown as Long-term debt principal payments are expenditures in the fund financial statements but they should bes shown asi reductions inl long-term debti in the goverment-wide: financial statements. The implementation of GASB No. 68 required that certain expenditures be de-expended and reçorded as deferred resource inflows. The contributions made after the measurement date of December 31, 2016, caused the change in the ending net position to increase in the amount of $5,191. Contributions madel before the measurement date but after the previous measurement date were reversed from deferred resource outlfows and recorded as a current year enxpense. This caused a decrease in the change in net position totaling $4,618. The City's reported TMRS net pension expense had tob bet recorded. The net pension expense decreased the change in net position by$1,770. Ther result oft these changes ist to decrease the change ini net position by $1,197. Vacation accruali ist recorded int the statement oft 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  (17,550) (4,161) 3,304 5,935  levy.  Total change in net position of governmental: activities- statement of activities  The accompanying notes are an integral part of thiss statement.  -15-    PROPRIETARY FUND FINANCIAL STATEMENTS    CITY OF TOLAR, TEXAS SEPTEMBER: 30, 2017  STATEMENT OF] FUNDI NET POSITION- - PROPRIETARY FUNDS  Total Proprietary Funds 143,433 51,650 10,896 9,587 215,566 41,605 41,900 1,138,563 33,329 1,255,397 1,470,963 11,121 11,121 13,646 5,110 2,816 29,900 51,472 30,617 1,908 27,494 2,749 33,850 96,618 148,090 195 195 1,186,082 147,717 1,333,799  Water 143,433 $ 51,650 10,896 9,587 215,566 41,605 41,900 1,138,563 33,329 1,255,397 1,470,963 11,121 11,121 13,646 5,110 2,816 29,900 51,472 30,617 1,908 27,494 2,749 33,850 96,618 148,090 195 195 1,186,082 147,717 1,333,799 $  ASSETS  Current: Cash and cashe 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 relatedt to TMRS Totall 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 Notes payable Bonds payable Totalr non current TOTALLIABILITIES  DEFERRED. INFLOWS OF RESOURCES Deferred inflows related to' TMRS Total Deferred Inflows of] Resources NETI POSITION Neti investment inc capital assets Unrestricted TOTALNET POSITION  $  The accompanying notes are an integral parto of this statement,  -16-    CITYOFTOLAR, TEXAS STATEMENT OFI REVENUES, EXPENSES. AND CHANGES IN FUNDI NETI POSITION- PROPRIETARYFUNDS YEAR ENDED SEPTEMBER 30, 2017  Total Proprietary Funds 424,676 424,676 406,815 406,815 17,861 574 41,900 (5,085) 10,531 47,920 65,781 1,268,018 1,333,799  Water 424,676 $ 424,676 406,815 406,815 17,861 574 41,900 (5,085) 10,531 47,920 65,781 1,268,018 1,333,799 $  Operating Revenues: Charges for services Water sales and fees Total operating revenues Operating Expenses: Water department Total operating expenses Neto operating loss Nonoperating revenues (expenses): Interest income Granti income Interest expense Transfers in Changei inl Net Position Net Position Beginning of Year Net Position Endo ofYear  $  Totalt nonoperating revenues (expenses)  $  Thec accompanying notes are an integral part oft this statement,  -17-    CIYOFTOLARTEXAS STATEMENT OF CASITON-POPAETAEL FUNDS YEAR: ENDED SEPTEMBER 30, 2017  Total Enterprise Funds 404,961 (187,025) (108,847) 109,089 10,531 18,596 29,127 (41,900) 41,900 (5,085) (2,693) (29,900) (37,678) 574 574 101,112 42,321 143,433 5,085 17,861 100,467 (8,819) 1,505 9,882 (81) (830) 119,985  Water $ 404,961 $ (187,025) (108,847) 109,089 10,531 18,596 29,127 (41,900) 41,900 (5,085) (2,693) (29,900) (37,678) 574 574 101,112 42,321 143,433 5,085 $ 17,861 $ 100,467 (8,819) (10,896) 1,505 9,882 (81) (830) 109,089  Cashf flows from operating activities: Cash received from customers Cash payments for salary and related expenses Cash payments tos suppliers for goods ands services Net cashj provided by operating activities Cashf flows from noncapital financing activities: Transfers from/to other funds Pension funding Net cash provided byr noncapital financing activities Cash flows from capital and related financing activities: Acquisition of property and equipment Granti income Interest paid onl longt term debt Principal paid on capital leases Principal paid on bonds and notes payable Net cash used byo capital and related financing activities Cash flows fromi investing activities Interesti income Net] Increasei in Cash Casha at] Beginning of Year Casha atl End of Year: Supplementary Information Interest paid  Neto cash provided from investing activities  Reconciliation of operating income tot 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) decrease in operating assets Receivables Grant receivable Inventory Increase (decrease) in operating liabilities Accounts payable Utility deposits Accrued expenses Net cashj provided by operating activities  $  The accompanying notes are an integral parto of this. statement.  -18-    CITYOFTOLAR  NOTES TOI FINANCIAL: STATEMENTS  NOTE1: SUMMARTOFSIGNIFICANTACCOUNTING POLICIES  The accounting and reporting framework and the more significant accounting principles and practices of the City of Tolar, Texas (City) are discussed in subsequent sections of this Note. The remainder of the Notes is organized to provide explanations, including required disclosures, of the City's financial açtivities for thei fiscal year ended September 30,2017. The Cityi is a Type A "general law" municipality and operates under al Mayor-Counci 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 uniti is reported: in as separate column in the government-wide statements  Financial Reporting Entity  safety, public works, waterworks, and general government.  to emphasize iti is1 legally separate from the 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 a local sales tax approved by the voters. Al Board of Directors manages the affairs ofthe Corporation. Thei fiscal year ofthe Corporation is the same as the City ofTolar, Texas.  Goverment-wide and] Fund Financial Statements Govermment-wide, financial. statements  The government-wide finançial statements include the statement of net position and the statement ofactivities. These statements report financial information for the City as a whole. The primary government and component units are presented separately within the financial statements with the focus on the primary government. Individual funds are not displayed but the statements distinguish governmental activities, generally supported by taxes and City general revenues, from business-type activities, generally financed in whole or in part with fees charged to external customers. Fiduciary funds or component units that are fiduciary in 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: (I) charges for services which report fees, fines and forfeitures, and other charges and uses of the City's services; and (2) operating grants and contributions which finance annual operating activities including restricted investment income. These revenues are subject to externally imposed restrictions to these program uses. Taxes and other revenue sources not properly included with program revenues are reported as general  nature are excluded from goverment-wide financial statements.  revenues.  -19-    CITY OF TOLAR  NOTESTO: FIMANCIALSTAIEMENIS  NOTEI: SUMMARYOFSIGNIFICANTACCOUNTING. POLICIES- continued  Fund financial. statements  Fund finançial statements are provided for governmental and proprietary funds. Major individual governmental and enterprise funds are reported in separate columns. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The financial statements of the City are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The City's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. The government-wide statements report using the economic resources measurement focus and the accrual basis of accounting, generally including the reclassification or elimination of internal activity (between or within funds). Reimbursements are reported as reductions to expenses. Proprietary financial statements also report using this same focus and basis of accounting, although internal activity is not eliminated in these statements. Revenues are recorded when earned and expenses are recorded when al liability is incurred, regardless oft the timing of 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, Govermental 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. The City considers revenues to be available ift they are collected within 60 days of the end of the fiscal year. Expenditures are Major revenue sources susceptible to accrual include: sales and use taxes, property taxes, right of way (fees), intergovernmental revenues, and investment income. In general, other Operating income reported in proprietary fund finançial 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  recorded when thei related fund liability is incurred. revenues are recognized when cash is received.  non-operating in the financial statements.  use restricted resources first, then unrestricted resources as needed.  Fund Types and) Major Funds Governmental) funds  The City reports the following major governmental fund: all financial resources not reportedi in other funds.  General Fund - reports as the primary fund of the City. This fund is used to account for  -20-    CITY OFTOLAR  NOTES TO1 FINANCIAL STATEMENTS  NOTEI: SUMAARTOFSIGNIFICANTACCOUNTING POLICIES- continued  In addition, the City reports the following as a fund, not considered to be a major fund: Debt Service Fund accounts for resources accumulated and payments made for principal and interest on long-term general obligation debt ofg governmental funds.  Proprietaryfunds  The City reports thei following major enterprise fund:  Water Fund - reports for revenues and expenses associated with water services for the  citizens ofthe City. Assets. Liabilities, and Net Position or Equity Cash and cash equivalents  For purposes of the statement of cash flows, highly liquid investments are considered to be cash equivalents ift they have an original maturity of three months or less when purchased. Inventory is valued at cost which approximates market, using the first-in-first-out (FIFO) method. The cost ofi inventory is recorded as expenditures when used (consumption method). The City's property, plant, and equipment with useful lives ofmore than one year are stated at historical cost and comprehensively reported in the government-wide financial statements. Proprietary capital assets are also reported in their respective fund's financial statements. Donated assets are stated at fair value on the date donated. The City generally capitalizes assets with costs of $5,000 or more, as purchase and construction outlays occur, The çosts 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  Inventory  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 10 years 5y years  Long-term debt liabilities. expenditures.  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  -21-    CITYOF1 TOLAR NOTES TO FINANCIAL STATEMENTS  NOTE1: SUMMARYOFSTGNIFICANTACCOUNTING. POLICIES- continued  Compensated absences  The City's policy permits employees to accumulate up to 128 hours of earned but unused vacation benefits. Upon termination of employment, employces will be paid for any unused  vacation benefits that have been earned through thel last day ofv work.  Deferred Outflows / Inflows of Resources  Deferred outflows of resources refer to the consumption of net assets that are applicable toa future reportingi period. Deferred outflows of 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 $13,083 and $11,121 of deferred outflows related to TMRS in the government -wide financial statements and the proprietary fund statements, Deferred inflows of resources refer to the acquisition of net assets that are applicable to a future reporting period. Deferred inflows of resources have a negative effect on net position, similar tol liabilities. For the current period, the difference in delinquent taxes receivable and the associated allowance for unçollectible taxes of $8,182 is considered a deferred inflow of resources in the governmental fund financial statements, while $298 and $195 of deferred inflows related to TMRS is considered deferred inflow of resources in the government-wide  respectively.  financial statements and the proprietary fund statements, respectively.  Pensions  For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows ofr resources related to pensions, and pension expense, information about the Fiduciary Net Position of the Texas Municipal Retirement System (TMRS) and additions to/deductions from TMRS's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this purpose, plan contributions are recognized in the period that compensation is reported for the employee, which is when contributions are legally due. Benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Investments are: reported at fair value.  Fund balance classification  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 used 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 Cityl had $0 classified as nonspendable at September 30, 2017. 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,  as follows:  2017.  -22-    CITYOFTOLAR  NOTES TO) FINANCIAL: STATEMENTS  NOTEI: SUMMARYOFSIGNIFICANTACCOUNTING, POLICIES-continued  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 thes same type of action (ordinance or resolution) that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. The City classified $0 as committed funds at 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 byt 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, 2017. 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  September 30, 2017.  amounts.  classified funds. Estimates  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.  NOTE2: STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY  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  ine estimated revenues and appropriations.  -23-    CITYOF TOLAR  NOTESTO1 FINANCIAL STATEMENTS  NOTE2: STEWARDSHIP, COMPLIANCE, ANDACCOUNTABILITY-continued  Basis of budgeting  Each fund's appropriated budget is prepared on a detailed line item basis. Revenues are budgeted by source. Expenditures are budgeted by department and class as follows: general governmental services, public service highways and streets, and debt service. Budget Budgets for the governmental funds and proprietary fund operations are budgeted on the modified accrual basis of accounting. Revenues are budgeted: int the year receipt is expected; and expenditures are budgeted in the year that the expenditure is incurred. The budget and actual financial statements are reported on this basis. Budgets for the proprietary fund are prepared on the accrual basis of accounting with the exception of depreciation expense and capital outlay. The budget and actual statements are reported on this basis. The budget for the general fund is presented as required supplementary information and the budget for the  revisions at this level are: subject to final review byt the City Council.  water fundi is presented as supplementary information. The Cityl had negative budget variances int the following departments:  Genral Fund General services  $ 14,870  NOTE3: DEPOSITS. AND INVESTMENTS  The City's funds are required to be deposited and invested under the terms ofa depository contract. The depository bank deposits for safekeeping and trust with the City's agent bank approved pledged securities in an amount sufficient to protect City funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation  (FDIC) insurance. Cash Deposits  The City's cash deposits were entirely covered by FDIC insurance or by pledged collateral held by the City's agent banki in the City's name at September 30, 2017. Tolar Economic Development Corporation's cash deposits were entirely covered by FDIC  insurance at September 30, 2017. Investments  The City is required by Government Code Chapter 2256, The Public Funds Investment Act ("ACT"), to adopt, implement, and publicize an investment policy. That policy must be written; primarily emphasize safety of principal and liquidity; address investment diversification, yield, and maturity and the quality and capability ofi investment management; and include a list ofthe 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 a part of the audit of the general purpose financial statements disclosed that in the areas ofinvestment practices, management reports an establishment of appropriate  owned byt the entity.  -24-    CITYOFTOLAR  NOTEST TOI FINANCIAL STATEMENTS  NOTE3: DEPOSITS. AND INVESTMENTS- C continued  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 ofTexas; (2) certificatès 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  ofthe City were in accordance with local policies.  trust funds. The Cityl has demand deposits and money market accounts.  Investment. Accounting Policy  The City's general policy is to report money market investments and short-term participating interest-earning investment contracts at amortized cost and to report nonparticipating interest- earning investment contracts using a cost-based measure. However, ift the fair value of an investment is significantly affected byt the impairment oft the credit standing of thei issuer or by other factors, it is reported at fair value. The term "short-term" refers to investments which have a remaining term of one year or less at time of purchase. The term "nonparticipating" means that the investment's value does not vary with market interest rate changes. Nonnegotiable certificates of deposit are examples of nonparticipating interest-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 unçollateralized, 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, 2017, the City's deposits were entirely collateralized and therefore, not exposed to custodial credit Concentration of Credit Risk - the risk of loss attributed to the magnitude ofa government'si investment in a single issuer. At September 30, 2017, since the City has no investments, the City was not exposed to concentration of credit risk. Interest Rate Risk - the risk that changes in interest rates will adversely affect the fair value of an investment. In accordance with its investment policy, the City manages its exposure to declines in fair values by limiting the maturity of investments to less than one year. The City monitors the interest rates to minimize Foreign Currency Risk - the risk that exchange rates will adversely affect the fair value of an investment. As of September 30, 2017, the City was not exposed to  not significantly exposed to credit risk.  risk.  the exposure toi interest rate risk. foreign currency risk.  -25-    CITYOFTOLAR NOTES TOI FINANCIAL STATEMENTS  NOTE4: RECEIVABLES, UNCOLLECTIBLE. ACCOUNTS, 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 unçollectible 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, 2017, the Cityl had recorded an allowance for uncollectible accounts of$3,523.  Receivables at September 30, 2017 are shown as follows:  Primary government: Water fund Total primary government  $ 51,650 $ 51,650  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 oni receipt of the tax bill and are delinquent ifnot paid beforel February 1 of the year following the year in which tax is imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. Property tax revenues are considered available when they become due or past due Allowance for uncollectible taxes receivable within the General Fund are based upon historical experience in collecting property taxes. Uncollectible personal property taxes are periodically reviewed and written off, but the City is prohibited from writing off real property In the governmental fund financial statements, property tax receivables are recorded in the General Fund. At fiscal year-end, the receivables represent delinquent tax receivables. Ifthe receivables are not paid within 60 days ofyear-end, they are recorded as unavailable revenue. In the government-wide financial statements, property tax receivable and related revenue include all amounts due the City regardless of when cash is received. Over time, substantially  and receivable within the current period.  taxes without specific statutory authority for the' Texas Legislature.  all property taxes are collected.  NOTES 5: CAPITALASSETS  The following schedule provides a summary of changes in capital assets:  Beginning Balance $ 58,837 S 58,837  Ending Balance 58,837 58,837  Increases  Decreases  Governmental activities: Capital assets notb beingo depreciated: Land Total capital assets notb being depreciated  -26-    CITYOFTOLAR  NOTEST TO1 FINANCIALI STATEMENTS  NOTES: CAPITALASSETS- continued  Capital: assets being depreciated Buildings Equipment Infrastructure Total capital assets! being depreciated Less accumulated depreciation for: Buildings Equipment Infrastructure Total accumulated depreciation Total capitala assets being depreciated, net Govemmental activities capital assets, net Depreciation was chargedt tot functions asf follows: Govermmental activities: General government Streets Total depreciation expense- govermental activities Business-type activities: Capitala assets not being depreciated: Land Construction: inp progress Total capitala assets not beingd depreciated Capitalz assets beingd depreciated Distribution: ando collection system Equipment Total capitala assets being depreciated Less accumulated deprociation for: Distribution: and collection system Equipment Total accumulated depreciation Total capital assets beingd depreciated, net Business-typea activities, net Total Primary Govemment  734,642 135,252 478,498 1,348,392 (106,784) (118,917) (188,949) (414,650) 933,742 992,579 $ 37,593 11,544 49,137 41,605 41,605 2,630,177 213,767 2,843,944 (1,405,355) (166,230) (1,571,585) 1,272,359 1,313,964 2,306,543 da  734,642 113,341 478,498 1,326,481 (127,385) (98,638) (204,913) (430,936) 895,545 954,382  10,940 10,940 (20,601) (12,572) (15,964) (49,137) (38,197) (38,197)  32,851 32,851 (32,851) (32,851)  41,605 41,900 83,505 2,630,177 2,900 210,867 2,900 2,841,044 (1,491,614) (2,900) (177,538) (2,900) (1,669,152) 1,171,892 1,255,397 2,209,779  41,900 41,900  (86,259) (14,208) (100,467) (100,467) (58,567) (96,764)s  NOTE6: LONG-TERM. DEBT  Combination Tax and Revenue Certificate of Obligation, 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 oft these bonds at September 30, 2017is as follows:  -27-    CITYOFTOLAR NOTES TOI FINANCIAL STATEMENTS  NOTE6: LONG-TERM. DEBT- continued  Governmental activities Business-type activities  $ 15,750 59,250 $ 75,000  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, with interest due semiannually. The balance of  these bonds at September 30,2017is asi follows: Governmental activities Business-type activities Note Payable to. Heritage National Bank  $ 25,500 4,500 $, 30,000  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, 2019. Payments are $252 per month. Thel balance ofthis note payable is $5,565at  September 30, 2017.  The followingi provides as summary of changes in long-term debt:  Balance at  Balance at Due Within  9/30/2016 Additions Retirements 9/30/2017 One Year  Governmental. Activities Combination' Tax &I Revenue Certo ofObl, Series 2005 $ 23,100 $ General Obligation Refunding Bonds Series 2005 Business-lype Activities Combination Tax &1 Revenue CertofObl, Series 2005 $ 86,900 $ General Obligation Refunding Bonds Series 2005 Heritage National Bank  $ 7,350 $ 15,750 $ 7,350  38,250 61,350  12,750 20,100  25,500 41,250  12,750 20,100  $ 27,650 $ 59,250 $ 27,650  6,750 8,258 101,908  2,250 2,693 32,593  4,500 5,565 69,315  2,250 2,816 32,716  -28-    CITY OF TOLAR  NOTES TOI FINANCIAL STATEMENTS  NOTE6: LONG-TERM. DEBT- continued  Annual requirements to amortize debt outstanding as of September 30, 2017 are as follows:  Governmental. Activities 2018 Business-type. Activities 2018  Interest 1,090 1,827  Principal 21,150 36,599  Total 22,240 38,426  2017$ 2,104 $ 20,100 $ 22,204 2017$ 3,467 $ 32,716 $ 36,183 $ 5,294 $ 69,315 $ 74,609  3,194 $ 41,250 $ 44,444  The amount of interest cost charged to expenses during the year ended September 30, 2017,  was $8,194.  NOTE: 7: RISK MAMAGEMENT-CLAINSAND/UDGEMENES  The City is exposed to various risks ofl loss related to torts; theft of, damage to and destruction ofa 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, a 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 thel Pool are limited to the amount of premiums as calçulated at the beginning of each fund year. The Pool's liability is limited to the coverage that the City elects as stated in thel Pool's Declaration of Coverage for that fund year. Settled claims have not exceeded insurance coverage limits for the past three years.  NOTE8: TRANSFERS/PAYMENTS WITHIN THE REPORTING ENTITY  Transfers and Payments subsidizing operating functions.  Transfers and payments within the reporting entity are substantially for the purposes of Thei following schedulei reports transfers andj payments within the reporting entity:  Transfer In Transfer Out Total  General fund Debt service fund Water fund  (7,708) (2,925)  (7,708) 102 10,531 (2,925)  102 10,531  Economic Development Corporation  The following schedule reports payables and receivables with funds.  Due" To  Due From Debt Service fund $ 20,270 General Fund  General fund  Economic development Corporation  (8,503)  -29-    CITY OF TOLAR  NOTES TO1 FINANCIAL STATEMENTS  NOTE9: DEFINED BENEFIT) PENSION. PLAN  Plan] Description  The City of Tolar participates as one of 872 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 witht 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 ofTexas. 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 to receive aj portion of their benefit as a Partial Lump Sum Distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% The plan provisions are adopted by the governing body of the City, within the options available ini thes state statutes governing' TMRS. Planj provisions for the City were as follows:  oft the member's deposits andi interest.  Plan Year 2017 2016 7.0% 7.0% 2to1 2to1 5 5 60/5,0/25 60/5,0/25 0% 0% 0%ofCPI 0%ofCPI  Employee deposit rate Matching ration (city to employee) Years required for vesting Service retirement eligibility (expressed as agelyears of service). Updated Service Credit Annuity Increase (tor retirees) Employees covered by benefit terms. covered by thel benefit terms:  At the December 31, 2016 valuation and measurement date, the following employees were  -30-    CITY OFTOLAR  NOTES TOI FMANCIALSTATMENES  NOTE9: DEFINED. BENEFIT. PENSION. PLAN- continued  2015 2016 0 6 9 5 5 1I 15  Inactive employees or beneficiaries currently receiving benefits Inactive employees entitled tol but not yet receiving benefits  Active employees Contributions  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 oft the city. Under thes 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 thes year, with an additional amount to Employees fort the City ofTolar were: required to contribute 7% oft their annual gross earnings during the fiscal year. The contribution rates for the City ofTolar were 7.54% and 9.28%in calendar years 2016 and 2017, respectively. The city's contributions to TMRS for the year ended September 30, 2017, were $17,488, and were equal to the required contributions. The City's Net Pension Liability (NPL) was measured as ofDecember 31, 2016 and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an  finance any unfunded accrued liability.  Net] Pension Liability  actuarial valuation as ofthat date. Actuarial. Assumptions  The Total Pension Liability in the December 31, 2016 actuarial valuation was determined  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 city is considered a small city by TMRS, these 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 bys scale BB to account: for future mortalityi improvements subjectt to the 3%  floor,  -31-    CITYOFTOLAR  NOTEST TOI FINANCIAL STATEMENTS  NOTE9: DEFINED BENEFIT PENSION. PLAN-C continued  Actuarial assumptions used in thel December 31, 2015, valuation were based on the results of actuarial experience studies. The experience studyi in' TMRS was for thej 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. No additional changes were made for the 2014 valuation. After the Asset Allocation Study analysis and experience: investigation study, the Board amended the long-term expected rate of retum on pension plan investments from 7% to 6.75%. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production ofi income, in order to satisfy the short-term and The long-term expected rate of return on pension plan investments was determined using a building-block method in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for cach major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. In determining their best estimate of a recommended investment return assumption under the various alternative asset allocation portfolios, GRS focused on the area between (1) arithmetic mean (aggressive) without an adjustment for time (conservative) and (20 the geometric mean (conservative) with an adjustment for time (aggressive). Ati its meeting on July 30, 2015, the TMRS Board approved ar new portfolio target allocation. The target allocation and best estimates of real rates of  long-term funding needs OfTMRS.  return for each major asset class are summarized in the following table:  Long-Term Expected) Real Rate of Retum (Arithmetic) 4.55% 6.35% 1.00% 4.15% 4.15% 4.75% 4.00% 7.75%  Target Allocation 17.5% 17.5% 10.0% 20.0% 10.0% 10.0% 10.0% 5.0% 100.0%  Asset Class Domestic Equity International: Equity Core FixedI Income Non-Corel Fixed Inçome Real Retum Reall Estate Absolute Return Private Equity Total Discount. Rate  The discount rate used to measure the Total Pension Liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that employce 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 employces. 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.  -32-    CITY OF TOLAR  NOTES TOI FINANCIAL STATEMENTS  NOTE9: DEFINED BENEFITI PENSION. PLAN- continued  Changes in the Net Pension Liability  Increase (Decrease) Plan Fiduciaryl Net Position (b) 398,874 $  Total Pension Liability (a) 440,279 $ 31,112 30,644 (343)  Net Pension Liability (C) 41,405 31,112 30,644 (343) (15,684) (14,896) (26,988) 304 16 4,165 45,570  Balance atl 12/31/15 Changes fort they year: Service Cost Interest Changeso ofb benefitt terms Differenceb between expecteda anda actual experience Changeso ofa assumptions Contributions- employer Contributions- employee Neti investmenti inçome Administrative expenes Other charges Neto changes Balance: atl 12/31/16  15,684 14,896 26,988 (3,699) (304) (16) 53,549 452,423  Benefitp paymenets, includingr refundso ofe employee contributions  (3,699) 57,714 497,993  Sensitivity of 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 l-percentag-point lower (5.75%) or 1-percentage point higher (7.75%)  than the current rate:  1%1 Decrease inI Discount 110,144 $  1% Increase inl Discount (8,007)  Discount 45,570 $  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, 2017, the city recognized pension expense of $28,314. At September 30, 2017, the city reported deferred outflows of resources and deferred inflows  www.mrs.com. Related tol Pensions  ofresources: related toj pensions from the following sources:  -33-    CITYOFTOLAR  NOTES TO1 FMANCIALSTATMENIS  NOTE9: DEFINED, BENEFIT PENSION. PLAN- continued  Deferred Outflows of Resources $  Deferred Inflows of Resources 247 51 298  Difference between expected and actual economic experience Changes ina actuarial assumptions Difference between projected and actuali investment carnings Contributions subsequent tot the measurement date Total  13,085 13,085  $13,085 reported as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date willl be recognized as a reduction of the net pension liability for the year ending September 30, 2017. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense  as follows: Yearl Endedl December 31: 2018 2019 2020 2021  $  (109) (109) (68) (12)  NOTE. 10: SUPPLEMENTAL DEATH. BENEFITS. FUND  The City also participates in the cost sharing multiple-employer defined benefit group-term lifei insurance plan operated byt the Texas Municipal Retirement System (TMRS) knows as the Supplemental Death Benefits Fund (SDBF). The City elected, by ordinance, to provide group-term life insurance coverage to both current and retired employees. The City may terminate coverage under and discontinue participation in the SDBF by adopting an ordinance 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); retired employees are insured for $7,500; this  before November 1 ofa any year to be effective the following January 1.  coverage is an' "other postemployment benefit," or OPEB.  Contributions  The City contributes to the SDBF at a contractually required rate as determined' by an annual actuarial valuation. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death benefit payments for the upcoming year; the intent is not to pre-fund retiree  terml lifei insurance duringe employees' entire careers.  -34-    CITYOFTOLAR  NOTES TO] FINANCIAL: STATEMENTS Schedule ofContribution! Rates: (RETIREE-only portion oft the rate)  NOTE10: SUPPLEMENTAL DEATH., BENEFITS. FUND - continued  Plan/ Calendar Year 2013 2014 2015 2016 2017  Annual Required Contribution (Rate) 0.16% 0.17% 0.18% 0.17% 0.14%  Actual Contribution Made (Rate) 0.16% 0.17% 0.18% 0.17% 0.14%  Percentage of ARC Contributed 100.0% 100.0% 100.0% 100.0% 100.0%  NOTE11: 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 al licensed insurer. Thel Plan was authorized by Article 3.51-2, Texas Insurance Code and was documented by contractual  agreement.  NOTE. 12: GARBAGE COLLECTIONSERVICE CONTRACT  The City has a sanitation contract with Progressive Waste Solutions of Texas wherein Progressive Waste Solutions ofTexas 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 ist recorded in the General Fund. Total çollected during  the year ended September 30, 2017 was $46,018.  NOTE1 13: NEWGASB: STATEMENTS  In June 2015, the GASB issued Statement No. 75 Accounting and Financial Reporting, for Postemployment Benefits Other Than Pensions. This statement replaces the requirements of Statement No. 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57 OPEB Measurements by Agent Employers and Agent Multple-Employer Plans, for OPEB. Statement No. 74 Financial Reporting. for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2017.The City has not determined the impact, ifany, upon its financial position, results of operations or In June 2015, the GASB issued Statement No. 76 The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. This statement supersedes Statement No. 55 The Hierarchy of Generally Accepted. Accounting Principles for State and Local Governments. The requirements of this statement are effective for financial statements for periods beginning after June 15, 2015, and should be applied retroactively. The City  cash flows upon adoption.  implemented this statement.  -35-    CITYOFTOLAR  NOTES TO1 FINANCIAL STATEMENTS  NOTE 13: NEYGASESTATENENIS: continued  In August 2015, the GASB issued Statement No. 77 Tax Abatement Disclosures. This statement requires governments that enter into tax abatement agreements to disclose the Brief descriptive information, such as thet tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made Commitments made by a government, other than to abate taxes, as part of a tax The requirements oft this statement are effective for financial statements for periods beginning after December 15, 2015. The City determined there was no impact upon its financial In December 2015, the GASB issued Statement No. 78 Pensions Provided Through Certain Multple-Employer Defined Benefit Pension Plans. This statement amends the scope and applicability of Statement No. 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple-employer. defined benefit pension plan that (I)is not a state or local governmental pension plan, (2) is used toj provide defined benefit pensions both to employees of state or local governmental employers and to employces of employers that are not state or local governmental employers, and (3) has no predominant state or local governmental employer (either individually or collectively with other state or local governmental employers that provide pensions through the pension plan.) This statement establishes requirements for recognition and measurement ofj pension expense, expenditures, and liabilities; note disclosures; and required supplementary information for pensions that have the characteristics described above. The requirements of this Statement are effective for reporting periods after December 15, 2015. The City determined there was noi impact upon its financial position, results of operations or cash flows upon adoption. In December 2015, the GASB issued Statement No. 79 Certain External Investment Pools and. Pool Participants. This Statement establishes additional note disclosure requirements for qualifying external investment pools that measure all of their investments at amortized cost for financial reporting purposes and for governments that participate in those pools. Those disclosures for both the qualifying external investment pools and their participants include information about any limitations or restrictions on participant withdrawals. The requirements of this Statement are effective for reporting periods beginning after June 15, 2015, except for certain provisions on portfolio quality, custodial credit risk, and shadow pricing. Those provisions are effective for reporting periods beginning after December 15, 2015. The City determined there was no impact upon its financial position, results of In January 2016, the GASB issued Statement No. 80 Blending Requirements for Certain Component Units - an Amendment of GASB Statement No. 14. The objective of this statement is to improve financial reporting by clarifying the financial statement presentation requirements for certain component units. This statement amends the blending requirements established in paragraph 53 of Statement No. 14. The requirements of this statement are effective for reporting periods beginning after. June 15, 2016. The City determined there was noi impact upon its financial position, results of operations or cash flows upon adoption.  following information about the agreements:  byt tax abatement recipients. abatement agreement.  The gross dollar amount oftaxes abated during the period.  position, results ofoperations or cash flows upon adoption.  operations or cash flows upon adoption.  -36-    CITYOFTOLAR  NOTES TOI FINANCIAL STATEMENTS  NOTE13: NEWGASBSTATEMENIS-continuet  In March 2016, the GASB issued Statement No. 81 Irrevocable Split-Interest Agreements. The objective of this statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is al beneficiary of the agreement. The requirements oft this statement are effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively. The City has not determined the impact, ifa any, upon its financial position, results of operations or cash flows upon adoption. Ini March 2016, the GASB issued Statement No. 82 Pension Issues - An Amendment ofGASB Statements No. 67, No. 68, and No. 73. The objective of this statement is to address certain issues that have been raised with respect to Statements No. 67, No. 68, and No. 73. Specifically, this statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The requirements of this statement are effective for reporting periods beginning after. June 15, 2016. The City determined there was noi impact upon its financial position, results of operations or cash flows upon adoption. Inl 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 of resources 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 att 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 court) judgments. Internal obligating events include the occurrence of contamination, placing into operation a tangible capital asset that is required tob 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 of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the 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, ifany, upon its financial position, results of operations or cash  upon adoption.  flows upon adoption.  -37-    REQUIRED SUPPLEMENTARYINFORMATION    CITYOFTOLAR, TEXAS BUDGET ANDACTUAL- GENERALI FUND YEAR: ENDED: SEPTEMBER 30, 2017  STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES. INI FUNDI BALANCE-  Variance with Final Budget Positive (Negative) 13,532 (2,297) 11,235 3,486 6,713 10,199 595 639 1,866 11,040 3,339 38,913  Budgeted. Amounts Original 158,949 280,949 24,000 7,550 31,550 300 350 41,152 4,500 358,801  Final 158,949 280,949 24,000 7,550 31,550 300 350 44,152 4,500 361,801  Actual 156,652 292,184 27,486 14,263 41,749 895 989 46,018 11,040 7,839 400,714  REVENUES Taxes: Sales tax Property tax Totalt taxes License & permits Right ofway License andj permits Total license & permits Fines and forfeitures Investment income Garbage collectioni income Donation Miscellaneous income Totall Revenues EXPENDITURES General government General services: Insurance Buildingi inspector Contract sanitation Capital outlay Election expense Economic. Development Corporation Miscellaneous Offiçes supplies Payroll Payroll Tax Retirement Printing & copies Professional. services Repair & maintenance Postage and delivery Referençel books Software Technical support Telephone Travel Utilities Total general government Public service: Streets Repair  $ 122,000 $ 122,000 $ 135,532 $  3,605 7,500 41,152 16,000 3,500 40,667 3,548 3,500 101,514 7,420 7,606 400 33,647 13,000 500 300 4,645 3,560 4,440 3,000 19,310 318,814 34,500 34,500 353,314 -38-  4,640 6,000 41,152 14,400 4,171 40,667 1,350 2,800 101,514 7,420 7,606 350 44,507 10,500 500 51 5,861 2,500 5,840 1,700 19,310 322,839 30,450 30,450 353.289  4,555 4,675 45,800 19,440 4,171 45,177 1,512 2,923 108,639 6,270 7,207 2,557 37,933 14,146 448 45 5,860 2,491 6,186 458 17,216 337,709 21,358 21,358 359,067  85 1,325 (4,648) (5,040) (4,510) (162) (123) (7,125) 1,150 399 (2,207) 6,574 (3,646) 52 6 1 9 (346) 1,242 2,094 (14,870) 9,092 9,092 (5,778)  Total expenditures    CITYOFTOLAR,TEXAS  STATEMENT OFI REVENUES, EXPENDITURES, AND CHANGES INI FUND! BALANCE-  BUDGET AND ACTUAL- GENERALFUND- CONTINUED YEAR. ENDED: SEPTEMBER: 30,2017  Variance with Final Budget Positive (Negative)  Budgeted Amounts Original  Final  Actual 41,647 (7,708) (7,708) 33,939 136,840  Excess (Deficiency) ofl Revenues Over (Under) Expenditures OTHER FINANCING USES Transfers out Total Other Financing Uses Net change inf fund balance Fund Balance Beginning Fund Balance Ending  5,487  8,512  33,135 (7,708) (7,708) 25,427 25,427  5,487 136,840  8,512 136,840  142,327 $ 145,352 $ 170,779 $  -39-    CITY OFTOLAR YEARI ENDED: SEPTEMBER 30, 2017  SCHEDULEOF CHANGES. INI NETPENSIONLIABIITY, ANDE RELATED RATIOS  2016 $ 31,112 $ 30,644 (343) (3,699) 57,714 440,279 497,993 15,684 $ 14,896 26,988 (3,699) (304) (16) 53,549 398,874 452,423 45,570 $ 90.85% 212,803 21.41%  2015 26,769 $ 22,156 26,831 5,248 11,509 70,357 369,922 440,279 11,914 $ 10,360 13,280 551 (336) (17) 25,392 373,481 398,873 41,406 $ 90.60% 189,713 21.83%  2014 23,895 (6,404) 39,647 330,275 369,922 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 (ont the total pension liability) Changes oft benefit terms Difference between expected and actual experience Change of assumptions Benefit payments, including refunds of 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 Changei in Plan Fiduciary Net Position Plan) Fiduciary Net Position Beginning Plan Fiduciary Net Position Ending Net Pension Liability- Ending Covered Employce Payroll  $  Benefit] payments, including refunds ofe employee contributions  Plan fiduciary Net Position as a Percentage ofTotal Pension Liability Net Pension Liability as al Percentage of Covered Employee Payroll  -40-    CITY OFTOLAR CIBDEOFCONTNURLTONS YEARI ENDED SEPTEMBER: 30,2017  2017 17,488 $ (17,488) $ 8.77%  2016 14,787$ 12,036 (14,787)  2015 (12,036)  Actuarially determined contribution Contribution deficiency (excess) Covered employee payroll  Contributions int relation toa actuarially determined contribution  $ $  199,403 $ 203,094 $ 185,434  Contributions as a percentage ofo covered employee payroll  7,28%  6.49%  Notest to Schedule of Contributions Valuationl 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 Costl Method Amortization Method Remaining Amortization Period Asset Valuation Method Inflation Salary Increases Investment Rate of] Return Retirement. Age Mortality  Entry Age Normal Level Percentage of Payroll, Closed 25 years 2.50% 6.75%  10 Year Smoothedl Market; 15% Soft Corridor 3,50%t tol 10.5% includingi inflation  Experience-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% and female: rates multiplied by 103% and projected on a fully  thej period 2010-2014.  enerational basis with scale BB. There were nol benefit changes duringt the year,  Other Information  -41-    OTHER SUPPLEMENTAL INFORMATION    CITY OF TOLAR, TEXAS BUDGET AND ACTUAL- WATER FUND YEARI ENDED SEPTEMBER 30,2017  STATEMENT OF REVENUES, EXPENSES. AND CHANGES INI FUNDI NETI POSITION-  Adjustments Actual toF Budgetary Favorable Basis (Unfavorable) (Unfavorable)  Variance Favorable (32,499) (32,499) 368 895 (236) (183) 3,962 213 (17,721) 50 10,041 1,644 (307) 993 456 816 (555) 436 (32,063) 474 (233,100) (311) 10,531 (222,406) (254,469) (254,469)  Budgeted. Amounts Original  Final 457,175 1,200 11,994 7,513 5,386 150,762 9,890 11,997 9,075 11,640 32,500 11,057 4,200 2,780 750 31,540 4,500 306,784 150,391 100 275,000 (4,774) 270,326 420,717  Actual 424,676 832 100,467 (100,467) 11,099 7,749 5,569 146,800 9,677 29,718 9,025 11,640 22,459 9,413 4,507 1,787 294 30,724 5,055 406,815 (100,467) 17,861 100,467 574 41,900 (5,085) 10,531 47,920 65,781 100,467  OPERATING REVENUES: Water sales OPERATING EXPENSES: Contract labor Depreciation expense Insurance Lab tests Office expense Payroll expenses Payroll taxes Retirement Permit fees Professional services Repairs and maintenance Supplies Telephone Travel Uniforms Utilities Vehicle expense Net operating income (loss) Nonoperating revenues (expenses) Interesti income Granti income Interest expense Transfers in Total nonoperating revenues (expenses) Net income (loss) Net Position- Beginning of Year Net Position- End of Year  $ 457,175_$ 457,175_$ 424,676 $  424,676 $ 424,676 832 11,099 7,749 5,569 146,800 9,677 29,718 9,025 11,640 22,459 9,413 4,507 1,787 294 30,724 5,055 306,348 118,328 574 41,900 (5,085) 10,531 47,920 166,248 1,268,018  Total Operating Revenues 457,175  1,200 11,610 8,500 4,770 152,562 9,890 11,997 10,100 22,300 18,500 11,240 3,800 3,000 750 31,540 5,000 306,759 150,416 100 275,000 (4,799) 270,301 420,717  Total Operating Expenses  1,268,018 1,268,018 1,268,018  $ 1,688,735 $ 1,688,735 $ 1,333,799 $ 100,467 $ 1,434,266  -42-    OTHER INFORMATION REQUIRED BY GAO    INDEPENDENT AUDITORS' REPORT ONI INTERNAL CONTROL OVER. FINANCIAL REPORTING AND ON COMPLIANCE. AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL  STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERMMENTAUDTTAUDITINGSTANDARDS  To the City Council City ofTolar, Texas  We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, and each major fund oft the City ofTolar, Texas, as of and for the year ended September 30, 2017, and the related notes to the financial statements, which collectively comprise the City of Tolar, Texas' basic financial statements In planning and performing our audit of the financial statements, we considered the City ofTolar, Texas' internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the finançial statements, but not for the purpose of expressing an opinion on the etfectiveness 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, ini internal control that is less severe than a material weakness, yeti important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph oft 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 noti identified. Given these limitations, during our audit we didi noti identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist As part of obtaining reasonable assurance about whether the City of Tolar, 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  and havei issued our report thercon dated February 2, 2018. Internal Control over Financial Reporting  internal control.  that have not been identified. Compliance and Other Matters  to be reported under Government Auditing Standards.  -43-    Purpose of this Report  Thej purpose oft 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,  this communication is not suitable for any other purpose.  MERRITT, MCLANE & HAMBY,P.C.  Abilene, Texas February2,2018  -44-    CITY OFTOLAR, TEXAS SCHEDULE OF FINDINGS AND] RESPONSES YEAR ENDED SEPTEMBER 30, 2017  I. Summary of Auditor's) Results:  a." The type oft report issued on the financial statements of the City ofTolar, Texas was an unqualified b.No significant deficiencies or material weaknesses relating to the audit of the financial statements are reported in the report on intemal control over financial reporting and on compliance and other c.Noi instances of noncompliance material to the financial statements of the City ofTolar, Texas were II. Findings Relating to the Financial Statements which are Required to be Reported in  opinion.  matters required by the GAO's Government Auditing Standards.  disclosed during the audit.  Accordance with Generally. Accepted Government. Auditing Standards.  a. No findings required tol be reported.  -45-    CITY OFTOLAR, TEXAS SCHEDULEOFI PRIOR YEAR FINDINGS YEAR: ENDED SEPTEMBER 30, 2017  PRIOR YEAR  indingAoncomplance None  -46-