CITY OF BERTRAM, TEXAS BASIC FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES AND INDEPENDENT AUDITOR'S REPORT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2024 CITY OF BERTRAM, TEXAS TABLE OF CONTENTS Page Independent Auditor's Report 1-2 Management's Discussion and Analysis 3-9 Basic Financial Statements Government Wide Statements: Statement ofl Net Position 10 Statement of Activities 11 Fund Financial Statements: Balance Sheet - Governmental Funds 12 Reconciliation of the Balance Sheet of Governmental Funds 13 To the Statement ofNet Position Statement ofRevenues and Expenditures and Changes in 14 Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and 15 Changes in Fund Balances to the Statement of Activities Statement of Net Position - Proprietary Fund 16 Statement of Revenues, Expenses, and Changes in 17 Net Position = Proprietary Fund Statement of Cash Flows Proprietary Fund 18 Notes to Financial Statements 19-35 Schedule ofF Revenues, Expenditures, and Changes in Fund Balance-Budget 37 To Actual-General Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance-Budget 38 To Actual-Proprictary Fund Note to Schedule of Revenues, Expenditures, and Changes in Fund Balance- 39 Budget to Actual-General Fund Schedule of Outflows and Inflows Current and Future Expense 40 Schedule of Changes in Net Pension Liability and Related Ratios 41 Schedule of Contributions 42 Compliance and Internal Control, Section Independent Auditors' Report on Compliance and on Internal Control over 44 Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Governmental. Auditing Standards The Apceunting Fim Donald L. Allman, CPA, PC of 4749 Williams Drive, Suite # 322 Donalil L Allman, CPA Georgetown, Texas 78633 Email: ilimmAdomalmamgyacom CERTIFIED PUBLIC. ACCOUNTANT INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and City Council City of Bertram, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Bertram, Texas, as of and for the year ended September 30, 2024, and the related notes to the financial statements, which collectively comprise the City of Bertram, Texas's basic financial statements as listed in the table of contents, In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Bertram, Texas, as of September 30, 2024, 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 America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City of Bertram, Texas and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Bertram, Texas's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibillties for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence thej judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City of Bertram, Texas's internal control. Accordingly, no such opinion is expressed. 1 Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City of Bertram, Texas's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the managements discussion and analysis and budgetary comparison information on pages 3-9 and 37-38 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 9, 2025, on our consideration of the City of Bertram, 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Bertram, Texas's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Bertram, Texas internal control over financial reporting and compliance. Donald L. Allman, CPA, P.C. K Georgetown, TX January 9, 2025 MEMBER TEXAS SOCIETY OF CERTIFIED: PUBLIC. ACCOUNTANTS. &. AMERICAN INSTITUTE OF CERTIFIED PUBLIC. ACCOUNTANTS 4749 Williams Drive, Ste, 322, GEORGETOWN, TEXAS 78633 512-422-3700: FAX: 512-240-5460 WEBSITE www.donalimancpacom 2 Management's Discussion and Analysis City of Bertram, Texas MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis of the City of Bertram's S financial performance provides an overview and analysis of the City's financial activities for the fiscal year ended September 30, 2024. Please read it in conjunction with the independent Auditors' Report on page 1, and the accompanying basic financial statements. FINANCIAL HIGHLIGHTS The City's government-wide net position increased by $676,825 as a result of the year's operations. The City's business-type activities net position increased by $397,803 as a result of this year's operations. The City's general fund activities net position increased by $279,022 as a result of this year's operations. Total revenues from all sources were $4,768,315, an increase of$172,336 from the prior year. This was primarily due to increases in water service income and property tax income. During the year, the City's cost of all programs was $4,091,490 which represents an increase of$594,195 from the prior year. At September 30, 2024,, the City's governmental funds reported an ending balance of $1,515,645, which represents an increase of$161,675 from the prior year. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The government-wide financial statements include the Statement of Net Position (on page 9). These provide information about the activities of the City as a whole and present a longer-term view of the City's property and debt obligations and other financial matters. They reflect the flow of total economic resources in a manner similar to the financial reports of al business enterprise. Fund financial statements (starting on page 12). report the City's operations in more detail than the government-wide statements by providing information about the City's most significant funds. For governmental activities, these statements tell how services were finances in short term as well as what resources remain for future spending. They reflect the flow of current financial resources, and supply the basis for tax levies and appropriations budget. Proprietary statements provide the same type of information as the government-wide financial statements, only in more detail. The notes to the financial statements (starting of page 19) provide narrative explanations or additional data needed for full disclosure in the government-wide statements and the fund financial statements. 3 Management's Discussion and Analysis City of Bertram, Texas Reporting the City as a Whole The Statement of Net Position and the. Statement of Activities The analysis ofthe City's overall financial condition and operations begins on page 9, Its primary purpose. is to show whether the City is better off or worse off as a result of the year's activities. The Statement of Net Position includes all the City's assets and liabilities at the end of the year while the Statement of Activities includes all the revenues and expenses generated by the City's operations during the year. These statements are presented using the accrual basis ofaccounting, which means that all ofthe current year's revenues and expenses are taken into account regardless of when the cash is received or paid. These two statements report the City's net position and changes in them, The City's net position (the difference between assets and liabilities) provide one measure of the City's financial health, or financial position. Over time, increases or decreases in the City's net position are one indicator of whether its financial health is improving or deteriorating. To fully assess the overall health of the City, however, you should consider non financial factors as well, such as changes in property tax base and condition of the City's facilities. In the Statement of Net Position and the Statement of Activities, the City is divided into two kinds of activities. Governmental activities Most of the City's basic services are reported here, including police, and general government. Property taxes, sales taxes, and franchise fees finance most oft these activities. Business-type activities - The City charges a fee to customers to help cover all of most ofthe cost of certain services it provides. The City's water and sewer system activity are reported here. Reporting the City's Most Significant Funds Fund Financial Statements The fund financial statements provide detailed information about the most significant funds - not the City as a whole. Some funds are required to be established by state law and by bond covenants. The City's two kinds of funds governmental and proprietary - utilize different accounting approaches. 4 Management's Discussion and Analysis City of Bertram, Texas Governmental funds - The majority of the City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for spending. These funds are reported using an accounting method identified as the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view ofthe City's general government operations and the basic service it provides. Governmental fund information helps you determine whether there arej more or fewer financial resources that can be spent in the near future to finance the city's programs. By comparing information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements, readers may better understand the long-term impact of the government's: near-term financing decisions. Proprietary funds - The City charges customers for the services it provides, whether to outside customers or to other units within the City. These services are generally reported in proprietary funds. Proprietary funds are: reported in the same way that all activities are reported in Statement ofNet Position and the Statement of Activities. In fact, The City's enterprise funds are identical to the business-type activities that are: reported in the government-wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. GOVERNMENT-WIDE FINANCIAL ANALYSIS The City's combined net position was $8,680,256 of September 30, 2024. When analyzing the net position and net expenses of governmental and business-type activities separately, the business type activities net position is $5,816,629. The analysis focuses on net position (Table I) and general revenues and significant expenses ofthe City's governmental and business-type activities (Table II). 5 Management's Discussion and Analysis City of Bertram, Texas Table I NET POSITION Total Governmental Business-type Primary Activities Activities Government 2024 2023 2024 2023 2024 2023 Current and other assets $ 1,680,145 $ 1,507,724 $1,883,874 $2,221,784 $3,564,019 $3,729,508 Capital assets, net 939,996 940,766 5,173,474 4,898,654 6,113,470 5,839,420 Restricted assets 1,476,185 558,074 21,193,344 17,255,868 22,669,529 17,813,942 Total assets 4,096,326 3,006,564 28,250,692 24,376,306 32,347,018 27,382,870 Deferred Outflows of Resources 57,203 79,033 51,208 70,566 108,411 149,599 Current liabilities 196,301 122,844 764,385 704,033 960,686 826,877 Long-term liabilities 928,000 244,190 21,573,000 18,204,188 22,501,000 18,448,378 Total liabilities 1,124,301 367,034 22,337,385 18,908,221 23,461,686 19,275,255 Deferred Inflows ofResources 165,601 133,958 147,886 119,825 313,487 253,783 Net Position: Net Investment in Capital Assets 701,996 683,766 4,225,648 3,469,185 4,927,644 4,152,951 Restricted for: Debt service 121,285 30,223 820,335 620,384 941,620 650,607 Street maintenance 190,543 120,730 190,543 120,730 Othernon-major funds 357,931 407,121 357,931 407,121 Unrestricted 1,491,872 1,342,765 770,646 1,329,257 2,262,518 2,672,022 Total net position 2,863,627 2,584,605 5,816,629 5,418,826 8,680,256 8,003,431 6 Management's Discussion and Analysis City of Bertram, T'exas Table I CHANGE IN NET POSITION Total Govermmental Business-type Primary Activities Activities Government 2024 2023 2024 2023 2024 2023 Revenues Program Revenues: Charges forservices $ 240,525 $ 490,026 $ 1,985,088 $ 1,756,372 $ 2,225,613 $ 2,246,398 General Revenues: Property tax 1,066,928 791,993 1,066,928 791,993 Sales tax 621,302 752,338 621,302 752,338 Franchise Tax 69,783 70,008 69,783 70,008 Hotel Tax & Alcohol 25,810 24,307 25,810 24,307 Court fines & fees 129,959 170,352 129,959 170,352 Grant income 53,601 67,938 484,190 385,235 537,791 453,173 Other: income 32,771 45,497 13,701 2,871 46,472 48,368 Investment eamings 22,100 14,907 22,557 24,135 44,657 39,042 Total revenues 2,262,779 2,427,366 2,505,536 2,168,613 4,768,315 4,595,979 Expenses: General government 1,610,544 1,340,572 14,061 1,624,605 1,340,572 Public safety 211,775 134,781 211,775 134,781 Public works 47,702 50,475 47,702 50,475 Court expenses 69,482 45,735 69,482 45,735 Parks and recreation 44,254 86,586 44,254 86,586 Grant expenses 500 500 Water and sewer 2,093,672 1,838,646 2,093,672 1,838,646 Total expenses 1,983,757 1,658,649 2,107,733 1,838,646 4,091,490 3,497,295 Increase in net position Before transfer 279,022 768,717 397,803 329,967 676,825 1,098,684 Transfers Increase in net position 279,022 768,717 397,803 329,967 676,825 1,098,684 Net position beginning 2,584,605 1,815,888 5,418,826 5,088,859 8,003,431 6,904,747 Net position - ending 2,863,627 2,584,605 5,816,629 5,418,826 8,680,256 8,003,431 7 Management's Discussion and Analysis City of Bertram, Texas GOVERNMENT-WIDE FINANCIAL ANALYSIS (continued) A large portion of the City's net position (57%) reflects its investment in capital assets (e.g., land, buildings, infrastructure, machinery, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to its citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion ofthe City's net position (17%). represents resources that are subject to external restrictions on how they may be used. The balance of unrestricted net position, $2,262,518 or 26%, may be used to meet the government's ongoing obligations to citizens and suppliers. For the fiscal year 2024, revenues from governmental activities totaled $2,262,779. Property taxes and sales taxes are the largest components of revenue 74%. For fiscal year 2024, expenses for governmental activities totaled $1,983,757. The City's two largest funded programs are public safety and general government. Revenues of the city's business-type activities were $2,505,536 for the fiscal year ending September 30, 2024. Expenses for the City's business-type activities were $2,107,733. The City's largest expenses are personnel services and repairs and maintenance. THE CITY'S FUNDS As the City completed the year, its governmental funds (as presented in the balance sheet on page 12) reported a combined fund balance of $1,515,645 which is more than last year's total of$1,353,970. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of 2024, the city has invested $6,113,470 in capital assets, including equipment and land. This amount represents a net increase of $274,050 due to current year additions and depreciation. More detailed information about the City's capital assets is presented in the Notes to the Financial Statements starting on page 26. Debt At year-end, the City had $22,501,000 in long-term debt outstanding, versus $18,448,378 last year. This increase is due to new bonds payable and loans added in 2024. More detailed information about the City's long-term liabilities is presented in the Notes to the Financial Statements starting on page 27. 8 Management's Discussion and Analysis City of Bertram, Texas ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES The City's elected and appointed officials considered population growth and available resources from state revenues and tax revenues when setting the fiscal year budget and tax rate. For the 2024 fiscal year, the City adopted a $2,451,493 budget for the General Fund and a $20,206,760 budget for the Enterprise Fund. It will be funded through property taxes via a $0.4650 property tax rate and water and sewer revenue. If the City does not incur any unforeseen expenditures or reductions in revenue, it should accomplish the task of providing services in the City within its available resources and not further reduce the current fund balance. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have any questions about this report or need additional information, contact the City's business office, at City of Bertram, 110 East Vaughan Street, Bertram, Texas 78605. 9 BASIC FINANCIAL STATEMENTS CITY OF BERTRAM, TEXAS STATEMENT OF NET POSITION September 30, 2024 Primary Government Governmental Business-type Component Activities Activities Total Unit Assets Cash and cash equivalents $ 1,550,943 $ 1,718,400 $ 3,269,343 $ 806,848 Accounts receivable, net of allowance for doubtful accounts 129,202 165,474 294,676 Capital assets, net 939,996 5,173,474 6,113,470 Prepaid expenses Net Pension Asset 31,426 30,170 61,596 Restricted assets: Cash and investments 1,444,759 21,163,174 22,607,933 Total assets 4,096,326 28,250,692 32,347,018 806,848 Deferred Outflows of Resources 57,203 51,208 108,411 Liabilities Accounts payable Accrued expenses 111,301 24,150 135,451 Customer deposits 202,235 202,235 Noncurrent liabilities Due within one year 85,000 538,000 623,000 Due in more than one year 928,000 21,573,000 22,501,000 Net Pension Liability Total liabilities 1,124,301 22,337,385 23,461,686 Deferred Inflows ofResources 165,601 147,886 313,487 Net Position Net Investment in Capital Assets 701,996 4,225,648 4,927,644 Restricted for: Debt service 121,285 820,335 941,620 Street maintenance 190,543 190,543 Court technology 10,143 10,143 Court building fund 16,069 16,069 Hotel/Motel tax account 46,319 46,319 LEOSE Training account 4,151 4,151 Municipal Development district 281,249 281,249 Economic development 806,848 Unrestricted net position 1,491,872 770,646 2,262,518 Total Net Position $ 2,863,627 $ 5,816,629 $ 8,680,256 $ 806,848 The accompanying notes are an integral part ofthe financial statements. 10 THIS PAGE LEFT BLANK INTENTIONALLY CITY OF BERTRAM, TEXAS BALANCE SHEET GOVERNMENTAL FUNDS September 30, 2024 Total Governmental General Funds ASSETS Cash and investments $ 1,550,943 $ 1,550,943 Accounts receivable (net) 129,202 129,202 Prepaid Expenses Total Assets $ 1,680,145 $ 1,680,145 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ $ Accrued liabilities 89,556 89,556 Unearned revenue 74,944 74,944 Total Liabilities 164,500 164,500 Fund Balances: Nonspendable Restricted Committed 548,474 548,474 Assigned Unassigned 967,171 967,171 Total Fund Balances 1,515,645 1,515,645 Total Liabilities and Fund Balances $ 1,680,145 $ 1,680,145 The accompanying notes are an integral part of the financial statements. 12 CITY OF BERTRAM, TEXAS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION September 30, 2024 Total fund balance (deficit) - governmental funds $ 1,515,645 Net Pension Asset is not included in governmental funds 31,426 Amounts reported for governmental activities in the statement of net assets are different because: Deferred Outflows of Resources are not included in Govt. Funds 57,203 Capital assets used in governmental activities are not fmancial resources and therefore are not reported in the funds. These assets consist of: Land 19,415 Buildings & Improvements 520,206 Machinery & Equipment 822,880 Parks and Recreation 33,332 Infrastructure 384,924 Accumulated Depreciation (840,761) Total Capital Assets 939,996 Deferred revenue for Governmental Funds 74,944 Other long-term assets are not available to pay for current period expenditures and, therefore, are deferred in the fund cash reserved 1,444,759 Deferred Inflows of Resources are not included in Governmental funds (165,601) Some long-term liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of: Compensated absences (21,745) Long-term debt (1,013,000) TotalLong-Term Liabilities (1,034,745) Net Position of governmental activities $ 2,863,627 The accompanying notes are an integral part of the financial statements. 13 CITY OF BERTRAM, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN GOVERNMENTAL FUNDS For the Year Ended September 30, 2024 General REVENUE General property taxes $ 1,065,996 Sales taxes 621,302 Franchise and other taxes 95,593 Fines 129,959 Fees and permits 240,525 Other charges and service income Interest 22,100 Other income 32,771 Grant Income 53,601 Total Revenue $ 2,261,847 EXPENDITURES General government $ 1,536,201 Public safety 146,031 Public works 28,128 Parks and recreation 44,254 Court expenses 69,482 Pension expense Debt service: Principal 19,000 Capital outlay 127,178 Total Expenditures $ 1,970,274 EXCESS OF REVENUE OVER (UNDER) EXPENDITURES $ 291,573 OTHER FINANCING SOURCES (USES) Transfers in Transfers from Restricted Assets (129,898) Total Other Financing Sources (Uses) $ (129,898) EXCESS OF REVENUE AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER FINANCING USES $ 161,675 FUND BALANCE, BEGINNING OF YEAR 1,353,970 FUND BALANCE, END OF YEAR 1,515,645 The accompanying notes are an integral part of the financial statements. 14 CITY OF BERTRAM, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the Year Ended September 30, 2024 Change in net position of governmental funds $ 279,022 Amounts reported for governmental activities in the statement of activities (page 14) are different because: Net change in fund balances - total governmental funds Difference in property tax revenues for govt. funds (932) Total Pension Expense not included in Govt. Funds 15,857 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation (127,948) was more than capital outlays (127,168) in the current 770 Governmental funds report debt proceeds as current financial resources. In contrast, the statement of activities treats the incurrence of debt as a liability. Governmental funds report repayment of debt as an expenditure. In contrast, the statement of activities treats such repayments as a reduction in long-term labilities. This is the amount of debt payments. (19,000) Increase in accrued absences 15,856 Increase in Restricted Investment Funds not recognized as a revenue source (129,898) Change in net position of governmental activities (page 11) $ 161,675 The accompanying notes are an integral part oft the financial statements. 15 CITY OF BERTRAM, TEXAS STATEMENT OF NET POSITION PROPRIETARY FUND September 30, 2024 Business-type Activities Enterprise Fund Assets Current assets: Cash and cash equivalents $ 1,718,400 Prepaid expenses Accounts receivable, net 165,474 Total current assets 1,883,874 Noncurrent assets: Net Pension Asset 30,170 Restricted cash and investments 21,163,174 Capital assets, net 5,173,474 Total noncurrent assets 26,366,818 Total assets $ 28,250,692 Deferred Outflows of Resources 51,208 Liabilities Current liabilities: Accounts payable $ Accrued expenses 24,150 Customer deposits 202,235 Current portion of long-term debt 538,000 Total current liabilities 764,385 Noncurrent liabilities Net Pension Liability Revenue Bonds 21,573,000 Notes Payable Total liabilities $ 22,337,385 Deferred Inflows of Resources 147,886 Net Position Net Investment in Capital Assets 4,225,648 Restricted for debt service 820,335 Unrestricted 770,646 Total net position $ 5,816,629 Total liabilities and net position $ 28,154,014 The accompanying notes are an integral part oft the financial statements 16 CITY OF BERTRAM, TEXAS STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN NET POSITION - PROPRIETARY FUND Year Ended September 30, 2024 Business-Type Activities Enterprise Fund OPERATING REVENUE Charges for services $ 1,985,088 Total Operating Revenue 1,985,088 OPERATING EXPENSES Cost of water 59,411 Cost of sanitation 190,330 Personnel services 545,656 Utilities 61,823 Maintenance and repairs 306,593 Administration 435,232 Insurance 26,995 Depreciation 331,585 Total Operating Expenses 1,957,625 OPERATING GAIN (LOSS) 27,463 NON-OPERATING REVENUE (EXPENSES) Grant income 484,190 Interest income 22,557 Interest expense (136,047) Grant expense Total Pension Expense (14,061) Other income 13,701 ToltalNon-operating Revenue (Expenses) 370,340 Interfund transfers: Transfers (out) $ Total interfund transfers NET GAIN (LOSS) 397,803 Net Position - beginning of year 5,418,826 Net Position - end of year 5,816,629 The accompanying notes are an integral part of the financial statements. 17 CITY OF BERTRAM, TEXAS STATEMENT OF CASH FLOWS PROPRIETARY FUND September 30, 2024 Business-type Activities Enterprise Fund Cash Flows from Operating Activities Cash received from customers $ 1,986,013 Cash payments to suppliers (1,073,695) Cash payments to employees (545,656) Net Cash Provided by Operating Activities 366,662 Cash Flows from Non-Capital. Financing Activities Transfers from (to) other funds other income 13,701 Grant income 484,190 Net cash (used) in non-capital financing activities 497,891 Cash Flows from Capital and Related Financing Activities Acquisition of capital assets (606,405) Payments on long-term bonds (484,337) Interest paid (136,047) Grant expense Net Cash Provided by Capital and Related Financing Activities (1,226,789) Cash Flows from Investing Activities Bond Debt Proceeds 3,910,000 Interest received 22,557 (Increase) decrease in restricted cash, CDs (3,907,306) Net Cash Provided by Investing Activities 25,251 Net Increase in Cash and Cash Equivalents (336,985) Cash and cash equivalents - beginning of year 2,055,385 Cash and cash equivalents end of year $ 1,718,400 Reconciliation of operating loss to net cash provided by operating activities: Operating income (loss) $ 27,463 Adjustments to reconcile operating loss to net cash provided by Operating Activities: Depreciation expense 331,585 (Increase) decrease in accounts receivable 925 (Increase) decrease in prepaid expenses Increase (decrease) in accounts payable (19,904) Increase (decrease) in accrued expenses 12,023 Increase (decrease) in customer deposits 14,570 Total adjustments 339,199 Net Cash Provided by Operating Activities $ 366,662 The accompanying notes are an integral part oft the financial statements, 18 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A. REPORTING ENTITY The City of Bertram, Texas (the City), is a general law city in Burnet County, Texas which operates under a Council form of government and provides such services as public safety (police and EMS), highways and streets, water and sanitation, public improvements, planning and zoning, judicial, general administrative and other services as are authorized by its code of ordinances and its citizens. The City Council consists of al Mayor and five Aldermen, constituting an ongoing entity and is thel level of government which has governing responsibilities over all activities related to the City. The City is not included in any other government reporting entity. The Mayor and Aldermen are elected by the public and have decision making authority, the power to designate management, the responsibility to significantly influence operations and primary accountability for fiscal matters. In evaluating the City's financial reporting entity, management has considered all potential component units. The decision to include a potential component unit was made set forth in GASB Statement No. 14. The component units discussed below have been included based on this criteria. Bertram Economic Development Corporation is included as a component unit because of its operational and financial relationship with the City. The Corporation receives its funding from a one- half percent sales tax assessed by the City, and the City appoints the members of the governing board. The Corporation was created by the City to enhance the economic development of the Bertram community. The Bertram Economic Development Corporation is presented as a discretely presented component unit. B. FINANCIAL REPORTING MODEL In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements andi Management's. Discussion and. Analysis for State andLocal Govermments. This statement known as the "Reporting Model" statement, affects the way the City prepares and presents financial information. State and local governments traditionally have used a financial reporting model substantially different from the one used to prepare private-sector financial reports. GASB Statement No. 34 established new requirements and a new reporting model for the annual financial reports of state and local governments. The Statement was developed to make annual reports more useful to the people who use, governmental financial information to make decisions. 19 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. FINANCIAL REPORTING MODEL (Continued) Management's Discussion and Analysis GASB Statement No. 34 requires that financial statements be accompanied by a narrative introduction and analytical overview of the government's financial activities (MD&A). This analysis is similar to the analysis the private sector provides in the annual reports. Govermment-vide Financial Statements The reporting model includes financial statements prepared using full accrual accounting for all of the government's activities. This approach includes not just current assets and liabilities (such as cash and accounts payable) but also capital assets and long-term liabilities (such as buildings and general obligation debt). Accrual accounting also reports all of the revenues and costs of providing services each year, not just those received or paid in the current year or soon thereafter. Statement of Net Position The Statement of Net Position is designed to display the financial position of the primary government (government and business-type activities) and its discretely presented component units. Governments report all capital assets, including infrastructure, in the govemment-wide Statement ofNet Position and report depreciation expense- the cost of "using up" capital assets - in the Statement of Activities. The net position of the government will be broken down in three categories - 1) net investment in capital assets; 2) restricted; and 3) unrestricted. Statement of Activities - The government-wide: statement of activities reports expenses and revenues in a format that focuses on the cost of each of the government's functions. The expense of individual functions is compared to the revenues generated directly by the function (for instance, through user charges or intergovemmental grants). C. MEASUREMENT OF FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Govermental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to claims and judgments, are recorded only when payment is due. Property taxes, sales taxes, franchise taxes, and interest associated with the current fiscal period are all considered to be susceptible to accrual and SO have been recognized as revenues of the current fiscal period. Fines and miscellaneous revenues are considered to be: measurable and available only when cash is received by the City. 20 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. FUND ACCOUNTING The City reports the following major governmental fund: General Fund - The general fund is the City's primary operating fund. It is used to account for all financial resources of the general government except those required to be accounted for in another fund. The City reports the following major proprietary fund: Water and Sewer Fund - The water and sewer fund accounts for the activities of the water distribution system, the sewage treatment plant, sewage pumping stations and collections systems. Additionally, the government reports the following fund type: Debt Service Fund accounts for the servicing of general long-term debt not being financed by proprietary funds. Private-sector standards of accounting and financial reporting issued prior tol December 1, 1989, generally are following in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The City has elected not to follow subsequent private-sector guidance. As a general rule, the effect of interfund activity has been eliminated from the government-wide: financial statements. Amounts reported as program reyenues include I) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources arei reported as general revenues rather than as program revenues. Likewise, all general revenues include all taxes. Proprietary fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses result from providing services and producing and delivering goods in connection with a proprietary fund's] principal ongoing operations. The principal operating revenues of the water and sewer enterprise funds are charges to customers for sales and services. The water and sewer funds also recognize as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses for the enterprise funds include the cost ofsales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. Pensions: For purposes of measuring the net pension liability, pension related deferred outflows and inflows of resources, and pension expense, City specific information about its Fiduciary Net Position in the Texas Municipal Retirement System (TMRS) and additions to/deductions from the City's Fiduciary Net Position have been determined on the same basis as they are reported by TMRS. For this 21 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 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. Information regarding the City's Total Pension Liability is obtained from TMRS through a report prepared for the City by TMRS consulting actuary, Gabriel Roeder Smith & Company, in compliance with Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. Deferred Outflows/Inflows of Resources: In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and SO will not be recognized as an outflow of resources (expenselexpenditure) until then. The City has the following items that qualify for reporting in this category. . Deferred charges on refunding A deferred charge on: refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. Pension contributions after measurement date These contributions are deferred and recognized in the following fiscal year. . Difference in projected and actual earnings on pension assets - This difference is deferred and amortized over a closed five year period. Difference in expected and actual pension experience This difference is deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows ofresources. This separate financial statements element, deferred inflows or resources, represents an acquisition of net position that applies to a future period(s) and SO will not be recognized as an inflow of resources (revenue) until that time. The City has only one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, this item is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from two sources: property taxes and municipal court fines. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. 22 CITY OF BERTRAM, TEXAS NOTES TO THE FIMANCIALSTATEMENTS September 30, 2024 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. ASSETS, LIABILITIES, AND NET POSITION a. Deposits and Investments The City's cash and cash equivalents for purposes of reporting cash flows of the proprietary fund consist of cash on hand and demand deposits. State statutes authorize the City to invest in obligations of the United States or its agencies and instrumentalities and state or local governments, fully insured certificates of deposit, commercial paper, guaranteed investment contracts, repurchase agreement, and certain governmental investment pools. The City's local investment policy limits the City to invest in obligations of the United States or its agencies and instrumentalities, fully insured certificates ofdeposit, fully collateralized repurchase agreements by obligations oft the United States or its agencies and instrumentalities, money market mutual funds, and local government investment pools. b. Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" or "advances to/from other funds." 2> All other outstanding balances between funds are reported as "due to/from other funds.' 3 All accounts receivables are shown net of an allowance for uncollectibles. C. Restricted Assets Certain resources of the City's enterprise fund are set aside for the repayment of its revenue bonds and are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants. d. Capital Assets Capital assets, which include land, buildings and improvement, machinery and equipment, infrastructure, and water and sewer facilities are reported in the applicable governmental or business-type activities columns in the goverment-wide financial statements. The City has elected not to report major general infrastructure assets retroactively as permitted by GASB Statement No. 34 for smaller goverments. The City will report newly acquired or constructed general infrastructure assets subsequent to October 1, 2003 in the statement ofnet assets in the period they acquire or construct those assets. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs or normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. 23 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. ASSETS, LIABILITIES, AND NET POSITION (Continued) d. Capital Assets (Continued) Capital assets ofthe City are depreciated using the straight line method over the following estimated useful lives: Assets Years Buildings and improvements 20-40 Pool and park improvements 10-15 Machinery and equipment 5-10 Water system 10-40 Sewer system 15-40 Software 3-5 e. General Obligation Enterprise Bonds The Enterprise Fund provides the annual debt service requirements on certain obligations enterprise bonds (not secured by system revenues) issued to finance system improvements. Accordingly, these obligations have been recorded on the balance sheet oft the Enterprise Fund. f. Compensated Absences The City accrues a liability for compensated absences which meet the following criteria: (a) The City's obligation relating to employees' rights to receive compensation for future absences is attributable to the employees' services already rendered. (b) The obligation relates to rights that vest or accumulate. (c) Payment of the compensation is probable. (d) The amount can be reasonably estimated. In accordance with the above criteria, the City has accrued a liability for vacation pay which has been earned but not taken by employees. As ofthe balance sheet date, the City expected that all ofthel liability for accrued vacation would be liquidated with expendable resources. Therefore, the liability for accrued vacation and sick leave is reflected as a current liability in the financial statements for the year ended September 30, 2019. g. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. h. Estimates The preparation offinancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the 24 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. ASSETS, LIABILITIES, AND NET POSITION (Continued) h. Estimates (continued) date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. BUDGETARY INFORMATION The City Council follows these procedures in establishing the budgetary data reflected in the financial statements. Prior to August 1 of each fiscal year, the Mayor submits to the City Council a proposed budget for the fiscal year beginning on the following October 1. The operating budget includes proposed expenditures and the means of financing them for the upcoming year, along with estimates for the current year and actual data from the preceding year. Public hearings are conducted to obtain taxpayer comments. Prior to September 30, the budget is legally enacted through passage by majority vote of the City Council. The Council may authorize supplemental appropriations during the year. The final amended budget is used in the report. Unused appropriations lapse at the end of the year unless carried forward to the next year by Council action. No encumbrances are recognized or recorded. The operating budget includes proposed expenditures for the General Fund. The City adopted the current year budget on a line item basis. 25 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 3. DETAILED NOTES ON ALL FUNDS A. DEPOSITS As of September 30, 2024, cash deposits were with a depository bank in interest bearing accounts. The carrying amounts of the City's General Funds and Utility Funds deposits and the bank accounts of the Economic Development Corporation deposits were $26,684,124 and the bank balances were $26,684,124 of which $26,184,124 is not insured by the Federal Deposit Insurance Corporation. These assets are valued at cost which approximates market value. Restricted cash from the 2019, 2020A 2020B and 2024 Bond obligations total $21,163,174, $4,214,102 is cash for the City of] Bertram and $806,848 is cash for the EDC. As of September 30, 2024, the City's depository bank for these funds had pledged securities sufficient to cover the amount above FDIC limits. 3. DETAILED NOTES ON ALL FUNDS (Continued) B. RESTRICTED TEMPORARY. INVESTMENTS Governmental. Activities Assets Restricted Temporary investments consist of cash and other highly liquid investments that are dedicated to the following: Street Maintenance $ 190,543 Other Non-Major Funds 357,931 $ 548,474 Business Type. Activities Assets Restricted Temporary investments consist of cash and other highly liquid investments that are dedicated to the following: Debt Service $ 820,335 C. PROPERTY TAXES AND RECEIVABLES The City's property tax is levied each October 1 on the assessed value listed as of the previous January 1 for all real and personal property located in the City. The lien date is January 1 of that year and they become delinquent on February 1. The tax levy for October, 2023 (fiscal year ended September 30, 2024) was $1,066,928. The tax assessment ofOctober 1, 2023 tax sets a tax levy at $.04650 per $100 of assessed valuation at 100 percent of market value. Delinquent property taxes estimated to be collected within the next fiscal year are recognized as revenues. Other delinquent property taxes receivable at year end that are deemed uncollectible are recorded as deferred revenues in the governmental fund balance sheet. Current property taxes receivable at 9/30/24 were $16,518 and delinquent property taxes receivable were $34,324 for a total due of$50,842. 26 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 3. DETAILED NOTES ON ALL FUNDS (Continued) D. CAPITAL ASSETS Changes in capital assets during the year ended September 30, 2024, were as follows: Balance Balance October 1, Transfers/ September 30, 2023 Additions Retirements 2024 Governmental Activities Capital assets not being depreciated: Land $ 19,415 $ $ $ 19,415 Capital assets being depreciated: Buildings and improvements 520,206 520,206 Pool and park improvements 33,332 33,332 Machinery and equipment, vehicles 735,805 87,075 822,880 Infrastructure 344,821 40,103 384,924 Total capital assets being depreciated 1,634,164 127,178 1,761,342 Less accumulated depreciation (712,813) (127,948) (840,761) Total capital assets, being depreciated, net 921,351 (770) 920,581 Govemmental activities capital assets, net 940,766 (770) 939,996 Business-type Activities Capital assets not being depreciated Land $ 250,773 $ $ $ 250,773 Total capital assets not being depreciated 250,773 250,773 Capital assets being depreciated: Buildings and improvements 78,599 78,599 Water system 5,266,333 515,772 5,782,105 Sewer system 3,951,778 3,951,778 Machinery, equipment, vehicles 1,140,516 90,633 1,231,149 Total capital assets, being depreciated 10,437,226 606,405 11,043,631 Less accumulated depreciation (5,789,345) (331,585) (6,120,930) Total capital assets, being depreciated, net 4,647,881 274,820 4,922,701 Business-type activities capital assets, net $ 4,898,654 $ 274,820 $ $ 5,173,474 27 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 3. DETAILED NOTES ON ALL FUNDS (Continued) D. CAPITAL. ASSETS (Continued) Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government 42,629 Public safety 65,744 Streets 19,574 Parks and recreation Total depreciation expense - govemmental activities $ 127,947 Business-type activities: Water and sewer $ 331,585 E. LONG-TERM DEBT The following is a summary of long-term debt transactions in the business-type activities for the year ended September 30, 2024: Balance Balance October 1, 2023 Increases Decreases September 30, 2024 2024 Tax: and Revenue Bonds $ 3,910,000 $ $ 3,910,000 2015 Gov. Cap. Corp. 23,337 23,337 1991 Certificate ofObligation 443,000 45,000 398,000 2013 Refunding Bonds 970,000 280,000 690,000 2019 Taxand Revenue Bonds 149,000 48,000 101,000 2020A Combination Taxand. Junior Lien Revenue Certificates ofOblig: 12,440,000 12,440,000 2020B Combination Taxand Junior Lien Revenue Certificates ofObliga 4,660,000 88,000 4,572,000 18,685,337 3,910,000 484,337 22,111,000 28 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 3. DETAILED NOTES ON ALL. FUNDS (Continued) E. LONG-TERM DEBT (Continued) Long-term debt for business-type activities at September 30, 2024 consists of the following: Payee and' Terms Government Capital Corporation - The City entered Public Property Finance Act Contracts with annual principal and interest payments to begin in November of 2016 and end November of2022, with an interest rate of3.021%. $ Series 1991 Certificate of Obligation - The City issued a combination tax and revenue certificates of obligation in the amount of $700,000 maturing annually until the year 2033, plus interest at a rate of5%. $ 398,000 Series 2013 Refunding Bonds - The City issued revenue certificates ofobligation in the amount of $1,575.000 maturing annually until the year 2033, plus average interest at a rate of3.38%. $ 690,000 Tax and Revenue Note, Series 2019 with interest rate of3.33% and payments on 5/15 and 11/15, interest only on 5/15 and principal payments from $44,000 to 51,000 until 2025. 101,000 Combination Tax and Junior Lien Revenue Certificates ofObligation, Series 2020A. Interest rates from 0.04 to 0.6%, annual payments on 9/30 from $275,000 to $510,125. Matures 9/30/2052. 12,440,000 Combination Tax and Junior Lien Revenue Certificates ofObligation, Series 2020B. Interest rates from 0.13 to 1.22%, annual payments on 3/15 from $45,000 to $241,464. Matures 3/15/2051. 4,572,000 Combination Tax: and Junior Lien Revenue Certificates ofObligation, Series 2024 Interest rates from 0.13 to 1.22%, annual payments on 3/15 from $45,000 to $241,464. Matures 3/15/2051. 3,910,000 Total $ 22,111,000 Less current portion 538,000 Total Long-Term Debt $ 21,573,000 The annual requirements to amortize the long term debt outstanding in thel business-type activities as of September 30, 2024, are as follows: September 30, Principal Interest Total 2025 538,000 282,335 820,335 2026 579,000 270,646 849,646 2027 594,000 263,958 857,958 2028 604,000 250,267 854,267 2029 606,000 254,619 860,619 2030-2035 4,089,000 1,518,505 5,607,505 2036-2054 15,101,000 2,206,124 17,307,124 Total $ 22,111,000 $ 5,046,454 $ 27,157,454 29 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 3. DETAILED NOTES ON ALL FUNDS (Continued) E. LONG-TERM DEBT (Continued) The following is a summary of long term debt transactions in the governmental activities for the year ending September 30, 2024: Balance Balance October 1. 2023 Increase Decrease September 30. 2024 Wells Nelson &. Asso $ 257,000 $ $ (19,000) $ 238,000 SIBI Loan $ 775,000 $ $ 775,000 257,000 775,000 (19,000) 1,013,000 Govemment Capital Corporation The City entered a Public Finance Act Contract with annual principal and interest payments that began in May 2014 and ends May 2034 for the purchase ofpolice cars. $ 238,000 SIB Loan 775,000 Total $1 1,013,000 Less current portion 85,000 $ 928,000 Long term debt for governmental activities as September 30, 2024 consists of the following: Payee and Terms Year ended September 30, Principal Interest Total 2025 85,000 36,285 121,285 2026 91,000 29,575 120,575 2027 91,000 26,581 117,581 2028 97,000 23,514 120,514 2029 98,000 20,331 118,331 2030 104,000 17,028 121,028 2031-2034 447,000 32,691 479,691 Total $ 1,013,000 $ 186,005 $ 1,199,005 3. DETAILED NOTES ON ALL FUNDS (Continued) 4. OTHER INFORMATION A. RISK MANAGEMENT The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City has joined together with other governments in the State ofTexas to form the Texas Municipal League Intergovernmental Risk Pool (the Pool), a public entity risk pool currently operating as a common risk management and insurance program for liability, property, and workmen's compensation coverage. The City pays a quarterly contribution to the Pool for its insurance coverage. The agreement for formation of the Pool provides that the Pool will be self-sustaining through member contributions and will reinsure through commercial companies for claims in excess ofs specific limits. The City has experienced no significant reductions in coverage through the Pool over the past year. There have been no insurance settlements exceeding Pool coverage for any ofthe last three years. 30 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 4. OTHER INFORMATION (Continued) D. SANITATION SERVICES In April, 1998, the City entered into a contract with a trash disposal company for garbage collection within the City. Fees are billed monthly to the City based upon a fee schedule included in the contract. During the years ended September 30, 2024 and 2023, payments by the city under the contract totaled $190,330 and 184,914, respectively. E. WATER PURCHASE AGREEMENT The City of Bertram uses well water, The contract provides for an annual review of the price to be paid for the water. The contract specifies that the price will be the amount charged by the Lower Colorado River Authority for the diversion ofwater from area lakes plus 15 percent. The term of the contract is 50 years. During the years ended September 30, 2024 and 2023, the total amount paid by the City for water purchased under the contract was $59,411 and $64,619 respectively. F. PENSION. PLAN Plan Description The City of Bertram participates as one of 860 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State ofTexas. 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 report (CAFR) that can be obtained at www.tmrs.com. All eligible employees of the city are required to participate in TMRS. B. Benefits Provided 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 TMRS. At retirement, the benefit is calculated as ift 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 a 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% of the member", S deposits and interest. 31 CITY OF BERTRAM, TEXAS NOTES TO THE FINANCIAL STATEMENTS September 30, 2024 II. DETAILED NOTES ON ALL FUNDS (Continued) I. PENSION PLAN (Continued) Employees covered by benefit terms. At the December 31, 2023 valuation and measurement date, the following employees were covered by the benefit terms. Inactive employees or beneficiaries currently receiving benefits 6 Inactive employees entitled to but not yet receiving benefits 22 Active employees 22 Total 50 C. Contributions The contribution rate for the employees in TMRS is 5%, 6% and 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 the state law governing TMRS, the contribution rate for each city is annually determined 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 of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees for the City of Bertram were required to contribute 5% of their annual gross earnings during the fiscal year. The contribution rates for the City of Bertram were 5% and 5% in calendar years 2024 and 2023 respectively. The city's contributions to TMRS for the year ended September 30, 2024 were 47,592 and were equal to the required contributions. D. Net Pension Liability The city's Net Pension Liability (NPL) was measured as of December 31, 2023, and the Total Pension Liability (TPL) used to calculate the Net Pension Liability was determined by an actuarial valuation as of that date. Actuarial assumptions: The Total Pension Liability in the December 31, 2023 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 3.5-10.5% per year Investment Rate of Return 6.75% net of pension plan investment expense, including inflation 32 CITY OF BERTRAM, TEXAS NOTES TO FINANCIAL STATEMENTS (Continued) III. DETAILED NOTES ON ALL FUNDS (Continued) 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 male rates multiplied by 109% and female rates multiplied by 103%. The rates are projected on a fully generational basis by scale BB o account fort future mortality improvements. For disabled annuitants, the gender-distinct RP2000 Disabled Retiree Mortality Table is used, with slight adjustments. Actuarial assumptions used in the December 31, 2023, valuation were based on the results of actuarial experience studies. The experience study in TMRS was for the period January 1, 2010 through December 31, 2014, first used in the December 31, 2017 valuation. 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 2020 valuation. The long-term expected rate of return on pension plan investments is 6.75%. The pension plan's policy in regard to the allocation of invested assets is established and may be amended by the TMRS Board of Trustees. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income, in order to satisfy the short-term and long-term funding needs of TMRS. 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 expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset class Target allocation Long-Term Expected Real Rate of Return (Arithmetic) Domestic Equity 17.5% 4.80% International Equity 17.5% 6.05% Core Fixed Income 30.0% 1.50% Non-Core Fixed Income 10.0% 3.50% Real Return 5.0% 1.75% Real Estate 10.0% 5.25% Absolute Return 5.0% 4.25% Private Equity 5.0% 8.50% Total 100.0% 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 employee and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan's Fiduciary Net Position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the Total Pension Liability. 33 CITY OF BERTRAM, TEXAS NOTES TO FINANCIAL STATEMENTS (Continued) III. DETAILED NOTES ON ALL FUNDS (Continued) I. PENSION PLAN (Continued) City of Bertram Schedule of Changes in Net Pension Liability and Related Ratios Current Period September 30, 2024 A. Total pension liability 1. Service Cost $ 101,756 2. Interest (on the Total Pension Liability) 62,761 3. Changes of benefit terms 4. Difference between expected and actual experience (27,460) 5. Changes of assumptions (5,323) 6. Benefit payments, including refunds of employee contributions (34,350) 7. Net change in total pension liability $ 97,384 8. Total pension liability - beginning 896,086 9. Total pension liability - ending $ 993,470 B. Plan fiduciary net position 1. Contributions - employer $ 47,592 2. Contributions - employee 52,998 3. Netinvestment income 102,776 4. Benefit payments, including refunds of employee contributions (34,350) 5. Administrative Expense (653) 6. Other (5) 7. Net change in plan fiduciary net position $ 168,358 8. Plan fiduciary net position - beginning 886,708 9. Plan fiduciary net position - ending $ 1,055,066 C. Net pension liability [A.9-B.9] $ (61,596) D. Plan fiduciary net position as a percentage of the total pension liability [B.9 / A.9] 106.20% E. Covered-employee payroll $ 1,059,958 F. Net pension liability as a percentage of covered employee payroll [C/E] -5.81% 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 of 6.75%, as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (5.75%) or 1 percentage point higher (7.75%) than the current rate: 1% Decrease in 1% Increase in Discount Rate (5.75%) Discount Rate (6.75%) Discount Rate (7.75%) City's net pension liability $70,675 $(61,596) $(170,696) Pension Plan Fiduciary Net Position 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 iInternet at www.tmrs.com 34 CITY OF BERTRAM, TEXAS NOTES TO FINANCIAL STATEMENTS (Continued) II. DETAILED NOTES ON ALLI FUNDS (Continued) I. PENSION PLAN (Continued) CITY OF BERTRAM SCHEDULE OF PENSION EXPENSE SEPTEMBER 30, 2024 1. Total Service Cost $101,756 2. Interest on the Total Pension Liability 62,761 3. Current Period Benefit Changes 4. Employee Contributions (Reduction of Expense) (52,998) 5. Projected Earnings on Plan Investments (Reduction of Expense) (59,853) 6. Administrative Expense 653 7. Other Changes in Fiduciary Net Position 5 8. Recognition of Current Year Outflow (Inflow) of Resources - Liabilities (7,418) 9. Recognition of Current Year Outflow (Inflow) of Resources - Assets (8,585) 10. Amortization of Prior Year Outflows (Inflows) of Resources Liabilities (11,124) 11. Amortization of Prior Year Outflows (Inflows) of Resources - Assets 4,721 12. Total Pension Expense $ 29,918 35 CITY OF BERTRAM SCHEDULE OF OUTFLOWS AND INFLOWS - CURRENT AND FUTURE EXPENSE SEPTEMBER 30, 2024 Recognition 2023 Period (or Total (Inflow) Recognized Deferred amortization or Outflow of in current] (Inflow) Outflow yrs) Resources pension expense in future expense Due to Liabilities: Difference in expected and actual experience 4.4200 $ (27,460) $ (6,213) $(21,247) [actuarial (gains) orlosses] Difference in assumption changes 4.4200 $ (5,323) $ (1,205) $ (4,118) [actuarial (gains) or losses] $ (7,418) $(25,365) Due to Assets: Difference in projected and actual earnings 5.0000 $ (42,924) $ (8,585) $(34,339) on pension plan investments [actuarial (gains) or losses] $ (8,585) $(34,339) Total: $(59,704) Deferred Outflows and Deferred Inflows of Resources, by year, to be recognizedin future pension expense as follows: Net deferred outflows (inflows) of resources 2024 $ (11,602) 2025 (9,947) 2026 8,728 2027 (11,695) 2028 Thereafter Total $ (24,516) Subsequent Events/Pending Litigation No items of audit significance or audit materiality noted. 36 REQUIRED SUPPLEMENTARY INFORMATION CITY OF BERTRAM, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN NET ASSETS BUDGET TO ACTUAL - GENERAL FUND For the year ended September 30, 2024 Variance Original Amended Favorable Budget Budget Actual (Unfavorable) Revenues General property taxes 1,079,760 1,079,760 1,065,996 (13,764) Sales tax 632,500 632,500 621,302 (11,198) Franchise tax & other taxes 100,825 100,825 95,593 (5,232) Fines, fees and court revenue 127,400 127,400 129,959 2,559 Fees and permits 266,500 266,500 240,525 (25,975) Interest 16,570 16,570 22,100 5,530 Other income 115,640 115,640 32,771 (82,869) Total Revenues 2,339,195 2,339,195 2,208,246 (130,949) Expenses General government 929,061 929,061 1,536,201 (607,140) Public safety 995,482 995,482 146,031 849,451 Public works 246,250 246,250 28,128 218,122 Court expenses 178,200 178,200 69,482 108,718 Parks and recreation 102,500 102,500 44,254 58,246 Debt service: Principal 19,000 (19,000) Capital outlay 127,178 (127,178) Total Operating Expenses 2,451,493 2,451,493 1,970,274 481,219 Operating Income (Loss) (112,298) (112,298) 237,972 350,270 Other Financing Sources (Uses) Grant receipt 53,601 53,601 Grant expense Transfers from Restricted Funds 112,298 112,298 (129,898) (242,196) Transfers to Proprietary Fund Total 112,298 112,298 (76,297) (188,595) Change in Net Assets 161,675 161,675 Fund Balance-Beginning of Year 772,040 772,040 1,353,970 Fund Balance-End of Year 772,040 772,040 1,515,645 743,605 The accompanying notes are an integral part of the financial statements. 37 CITY OF BERTRAM, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN NET ASSETS - BUDGET TO ACTUAL For the year ended September 30, 2024 Variance Original Amended Favorable Budget Budget Actual (Unfavorable) Revenues Sewer Income 472,000 472,000 473,701 1,701 Sanitation income 241,000 241,000 229,325 (11,675) Water income 943,000 943,000 898,569 (44,431) Tap & Impact fees 320,750 320,750 265,682 (55,068) Penalties and service charges 25,000 25,000 48,210 23,210 Interest 25,000 25,000 22,557 (2,443) Miscellaneous income 296,169 296,169 83,300 (212,869) Total Revenues 2,322,919 2,322,919 2,021,344 (301,575) Expenses Water purchase 60,000 60,000 59,411 589 Garbage collection 188,500 188,500 190,330 (1,830) Salaries & personnel expenses 591,930 591,930 545,656 46,274 Repairs & Maintenance 315,750 315,750 306,593 9,157 Administration expenses 83,550 83,550 524,050 (440,500) Miscellaneous 760,088 760,088 4,009 756,079 Loan Principal Payments 512,550 512,550 484,337 28,213 Interest expense 156,469 156,469 146,097 10,372 Capital outlay 822,732 822,732 606,405 216,327 Total Operating Expenses 3,491,569 3,491,569 2,866,888 624,681 Operating Income (Loss) (1,168,650) (1,168,650) (845,544) 323,106 Other Financing Sources (Uses) Loan Disbursements 16,660,444 16,660,444 (16,660,444) Loan Expenditures (16,385,444): (16,385,444): 16,385,444 Grant receipt 350,000 350,000 484,190 134,190 Grant expenditures (310,000) (310,000) 310,000 Transfers (in) 873,397 873,397 (873,397) Transfers (out) (19,747) (19,747) 19,747 Total 1,168,650 1,168,650 484,190 (684,460) Change in Net Assets (692,939) (361,354) Depreciation 331,585 331,585 Addback Capital outlay for GAAP 606,405 606,405 Addback Loan Principle/Proceeds for GAAP 484,337 484,337 Fund Balance - Beginning of Year 5,418,826 GAAP basis change in net assets 1,090,742 1,090,742 Fund Balance-End of Year 5,816,629 5,816,629 38