Dallas, Oregon ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2016 · 2017-02-22 · Craig...

Dallas, Oregon

ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2016

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COMMISSIONERS TERM EXPIRATION

Craig Pope January 7, 2019

15040 Airlie Rd.

Monmouth, OR 97361

Mike Ainsworth January 7, 2019

PO Box 652

Monmouth, OR 97361

Jennifer Wheeler January 4, 2021

441 N. 13th

Independence, OR 97351

Linda Fox, Treasurer

Douglas Schmidt, Assessor

Valerie Unger, Clerk

Mark Garton, Sheriff

Aaron Felton, District Attorney

ADMINISTRATIVE OFFICER

POLK COUNTY

For the Year Ended June 30, 2016

OFFICERS AND MEMBERS OF THE GOVERNING BODY

ELECTED OFFICIALS

Gregory P. Hansen

POLK COUNTY

TABLE OF CONTENTSFor The Year Ended June 30, 2016

Page

INDEPENDENT AUDITOR’S REPORT.................................................................................. A - C

MANAGEMENT’S DISCUSSION AND ANALYSIS.............................................................. i - viii

BASIC FINANCIAL STATEMENTS Government-wide Financial Statements: Statement of Net Position.......................................................................................................... 1 Statement of Activities.............................................................................................................. 2 Fund Financial Statements: Governmental Funds Balance Sheet .......................................................................................................................... 3 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position...................................................................................................... 4 Statement of Revenues, Expenditures and Changes in Fund Balances .................................. 5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ................................ 6 Statements of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual:

General................................................................................................................................... 7 – 12Public Works ......................................................................................................................... 13, 14Behavioral Health .................................................................................................................. 15, 16Health Services ...................................................................................................................... 17

Proprietary Funds Statement of Net Position........................................................................................................ 18 Statement of Revenues, Expenses and Changes in Net Position ............................................ 19 Statement of Cash Flows......................................................................................................... 20 Fiduciary Funds Statement of Net Position........................................................................................................ 21 Notes to Basic Financial Statements ............................................................................................ 22 – 56

REQUIRED SUPPLEMENTARY INFORMATION Schedule of the Proportionate Share of the Net Pension Liability Oregon Public

Employees Retirement System .................................................................................................. 57Schedule of Contributions Oregon Public Employees Retirement System................................. 58

COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Major Governmental Fund:

Building Improvement Fund Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual ........................................................................................... 59 Nonmajor Governmental Funds

Combining Balance Sheet ..................................................................................................... 60Combining Statement of Revenues, Expenditures and Changes in Fund Balances .............. 61

Special Revenue Funds Combining Balance Sheet ................................................................................................. 62, 63 Combining Statement of Revenues, Expenditures and Changes in Fund Balance ........... 64, 65

TABLE OF CONTENTS (Continued) Page

COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES (Continued)Nonmajor Governmental Funds (continued)

Special Revenue Funds (continued) Schedules of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual Polk Interagency Narcotics Team ..................................................................................... 66 Multi-Disciplinary Intervention ........................................................................................ 67 Domestic Mediation .......................................................................................................... 68 Court Security ................................................................................................................... 69

Public Land Corner ........................................................................................................... 70 Dog Control....................................................................................................................... 71 Marine Patrol..................................................................................................................... 72

Law Library....................................................................................................................... 73 Public Health..................................................................................................................... 74

Juvenile ............................................................................................................................. 75 Youth Programs ................................................................................................................ 76 Fair .................................................................................................................................... 77 County School................................................................................................................... 78 Economic Development .................................................................................................... 79 Household Hazardous Waste ............................................................................................ 80 Extension........................................................................................................................... 81

Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual................................................................................... 82

Capital Projects FundsCombining Statement of Revenues, Expenditures and Changes in Fund Balance................ 83Schedules of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual

OTIA III Bridge Replacement .......................................................................................... 84 Doaks Ferry Road/Hwy 22 and 51 ................................................................................... 85Internal Service Funds

Combining Statement of Net Position ........................................................................................ 86Combining Statement of Revenues, Expenses and Changes in Net Position ............................. 87Combining Statement of Cash Flows.......................................................................................... 88Schedules of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual

Management Services .............................................................................................................. 89 - 91 Insurance .................................................................................................................................. 92Agency Fund Statement of Changes in Assets and Liabilities ........................................................ 93Schedule of Accountability for Independently Elected Officials .................................................... 94

INDEPENDENT AUDITOR’S REPORT REQUIRED BY OREGON STATE REGULATIONS ............................................................................................................. 95, 96

TABLE OF CONTENTS (Continued) Page

GRANT COMPLIANCE – SINGLE AUDIT Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards..................................................................... 97, 98 Independent Auditor’s Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by Uniform Guidance..................................................................... 99, 100 Schedule of Findings and Questioned Costs.................................................................................. 101, 102 Schedule of Expenditures of Federal Awards................................................................................ 103 – 104 Notes to Schedule of Expenditures of Federal Awards ................................................................. 105

A

INDEPENDENT AUDITOR’S REPORT

To the Board of CommissionersPolk CountyDallas, Oregon

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Polk County, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

B

INDEPENDENT AUDITOR’S REPORT (Continued)

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Polk County, as of June 30, 2016, the respective changes in financial position, and, where applicable, cash flows thereof, and the budgetary comparisons for the General, Public Works, Behavioral Health, and Health Services Funds for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages i-ix and the schedules of the proportionate share of the net pension liability and contributions on pages 57 and 58 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information 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 Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County’s basic financial statements. The combining and individual fund financial statements and schedules are presented for purposes of additional analysis and are not arequired part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.

The combining and individual fund financial statements and schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements and schedules and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole.

C

INDEPENDENT AUDITOR’S REPORT (Continued)

Reports on Other Legal and Regulatory Requirements

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 1, 2017, on our consideration of the County’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the County’s internal control over financial reporting and compliance.

Other Reporting Required by Oregon State Regulations

In accordance with the Minimum Standards for Audits of Oregon Municipal Corporations, we have issued our report dated February 1, 2017 on our consideration of the District’s compliance with certain provisions of laws and regulations, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules. The purpose of that report is to describe the scope of our testing of compliance and the results of that testing and not to provide an opinion on compliance.

Boldt Carlisle + Smith Certified Public Accountants Salem, OregonFebruary 1, 2017

By:

Bradley G. Bingenheimer, Member

MANAGEMENT’S DISCUSSION AND ANALYSIS

i

POLK COUNTYMANAGEMENT’S DISCUSSION AND ANALYSIS

JUNE 30, 2016

The management of Polk County, Oregon presents this narrative overview and analysis of the financial activities, for the fiscal year ended June 30, 2016. This discussion and analysis is intended to serve as an introduction to the basic financial statements as well as provide additional information to readers. We encourage readers to consider this information in conjunction with the accompanying financial statements. This narrative is based on currently known facts, decisions and conditions that existed as of the date of the independent auditors’ report.

Financial Highlights The County’s assets exceeded its liabilities by $41,278,334 at June 30, 2016, on its government-wide statement of

net position. Of this amount, $42,627,016 is the net investment in capital assets and $9,576,690 is restricted for various purposes.

The County’s total net position decreased $4,497,266 during the current fiscal year. This decrease is attributable toexpenses in excess of revenue. Expenses include $3,454,704 for depreciation, a non-cash expense.

At June 30, 2016, unassigned fund balance for the General Fund was $4,595,132, or approximately 27.8% of totalGeneral Fund expenditures for the year.

At June 30, 2016, the Building Improvement Fund had a deficit fund balance of $637,607 caused by prior years’expenditures in excess of revenue related mostly to the Academy building remodel. This deficit is not expected tocause cash flow concerns and it is planned to be eliminated with future rental revenue.

Due to a 2015 change in governmental accounting standards (GASB 68), reporting for the County’s participation inthe Oregon Public Employee Retirement System (PERS) has changed dramatically. Previously, pension expense hadbeen recognized when paid and there were no assets or liabilities for the pension shown on the statement of netposition. Starting with the fiscal year ended June 30, 2015, pension costs, and pension-related assets and liabilitiesare recognized in accordance with the new standard. Actual pension costs paid during this fiscal year were$3,011,123, but due to adjustments required by the new accounting standards, pension expense for the year wasincreased by $9,666,823. Total pension expense included in the current financial statements is $12,677,946. Thisnew standard is likely to produce large shifts in pension costs and pension liability from year to year in the future.

Overview of the Financial StatementsThe County’s basic financial statements are made up of three components: 1) government-wide financial statements, 2) fund financial statements and 3) notes to basic financial statements. Thisreport also contains supplementary information in addition to the basic financial statements.

Government-wide financial statements are designed to provide readers with a broad overview of the County’s finances, in a manner similar to private-sector business.

The statement of net position presents information on all assets and liabilities of the County, with the differencebetween the two reported as net position. Over time, increases or decreases in net position may be a useful indicatorof whether the financial position of the County is improving or deteriorating.

The statement of activities presents a summary of current fiscal year income and expense and shows how theCounty’s net position changed during the year on an accrual basis. All changes in net position are reported as soonas the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus,revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscalperiods (e.g. uncollected taxes and earned but unused employee vacation leave).

ii

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)

Overview of the Financial Statements (continued)

It is required that both government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). All functions of Polk County are classified as governmental activities.

The government-wide financial statements can be found on pages 1 and 2 of this report.

Fund financial statements are financial reports that provide more detail than the government-wide financial statements. A fund is a group of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. Polk County, like other state and local governments, uses fund accounting to demonstrate compliance with finance-related legal requirements. All funds of the County can be divided into three categories: governmental, proprietary and fiduciary.

Governmental funds are used to account for essentially the same functions reported as governmental activities inthe government-wide financial statements. However, unlike the government-wide statements, governmental fundfinancial statements are presented on a modified-accrual basis. The measurement focus for the fund statements isbased on the acquisition and use of current spendable resources, as well as on balances of spendable resourcesavailable at the end of the fiscal year. This information may be useful in evaluating the County’s near-term financingrequirements.

The County maintains 24 individual governmental funds. Information is presented separately in the governmentalfunds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balancesfor the General, Public Works, Behavioral Health, Health Services and Building Improvement Funds, all of whichare considered to be major governmental funds. Data for the other 19 governmental funds are aggregated in a singlecolumn. The Polk County Extension District is considered a component unit of the County and, for the purposes ofthe financial statements, is included with the County governmental funds. Financial information for governmentalfunds is included on pages 3 through 17 in this report and is reconciled to the government-wide statements on pages4 and 6. Individual fund data for each of the nonmajor funds is provided in the form of combining and individualfund statements and schedules on pages 59 through 85 in this report.

Proprietary funds are used by the County to allocate costs internally among various functions and to reportbusiness-type activities. The County currently maintains no business-type activities, but uses proprietary internalservice funds to account for overall management activities including finance, Board of Commissioners, insuranceand risk management, fleet management, telephone and data processing, mail processing and facilities management.Because these services benefit governmental functions, they have been included with governmental activities in thegovernment-wide financial statements. Summary information about Polk County’s internal service funds iscontained on pages 18-20 and detailed fund information can be found on pages 86 through 92 of this report.

Fiduciary funds (agency funds) are used to account for resources held for the benefit of parties outside the County.Fiduciary funds are not included in the government-wide financial statements because the resources of these fundsdo not belong to the County and are not available to support County programs. The County maintains agency fundsfor taxing districts, for inmates at the jail and various other miscellaneous trust accounts as the need arises.Information about Agency fund activity for the year is located on pages 21 and 93 of this report.

The County adopts and appropriates an annual budget for all governmental and proprietary funds. Budgetary comparison statements have been provided for each fund to demonstrate compliance with the appropriation resolution.

iii

MANAGEMENT’S DISCUSSION AND ANALYSIS (Continued)Overview of the Financial Statements (continued)

Notes to Basic Financial StatementsThe notes provide additional information that is essential to a full understanding of the financial data provided in thegovernment-wide and fund financial statements. The notes to the basic financial statements can be found beginning on page 22 of this report.

Required Supplementary InformationAccounting standards generally accepted in the United States of America provide for certain required supplementary information to accompany the County’s basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board. This required supplementary information is presented on pages 57 and 58.

Supplementary InformationIn addition to the basic financial statements and accompanying notes, this report presents supplementary information required by State regulations and by the Federal government. This supplementary information is presented on pages 59-105.

Government-wide Financial AnalysisAssets exceeded liabilities by $41,278,334 at June 30, 2016. Net investment in capital assets is $42,627,016 which is greater than the total net position. The County uses these capital assets to provide services to citizens. Consequently, these assets are not available for future spending. Although the County’s investment in 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.

NET ASSETS

Assets 6/30/2015 6/30/2016 Changes

Current assets 12,149,353$ 16,491,191$ 4,341,838$

Capital assets, net 49,389,847 47,662,269 (1,727,578)

Net pension asset 4,998,965 - (4,998,965)

Total Assets 66,538,165 64,153,460 (2,384,705)

Deferred outflows of resources 1,504,827 2,621,160 1,116,333

Liabilities

Current liabilities 5,260,254 5,665,162 404,908$

Long-term liabilities 6,952,866 4,024,075 (2,928,791)

Net pension liability - 12,124,527 12,124,527

Total Liabilities 12,213,120 21,813,764 9,600,644

Deferred inflows of resources 10,054,272 3,682,522 (6,371,750)

Net Position

Net investment in capital assets 41,604,288 42,627,016 1,022,728

Restricted 4,758,324 9,576,690 4,818,366

Unrestricted (587,012) (10,925,372) (10,338,360)

Total Net Position 45,775,600$ 41,278,334$ (4,497,266)$

iv


Government-wide Financial Analysis (continued)

During the year, current assets increased $4,341,838. Cash and investments increased $4,000,356, and other current assets increased $341,482.

Net capital assets decreased $1,727,578. During the year, the capital asset balance increased $1,761,328 for assetsacquired, decreased $3,454,704 for depreciation expense, and decreased $34,202 for asset dispositions. Details of capital assets acquired appears later in this narrative.

At June 30, 2016, the net pension asset was $0, a decrease of $4,998,965 from the prior year. Deferred outflows, also related to pensions, was $2,621,160, an increase of $1,116,333.

Liabilities increased $9,600,644 during the year. This change includes $404,908 increase in current liabilities, $2,928,791 decrease in long term liabilities and $12,124,527 increase in net pension liability. Current liabilities hadincreases in accounts payable ($141,631), the current portion of long-term obligations ($259,321) and the unamortized premium on long-term obligations ($3,956). The change in long-term liabilities includes $2,958,154 decrease in long-term debt, the result of principal payments on bonds and other debt and $29,363 increase in other post-employment benefits. Deferred inflows, related to pensions, decreased $6,371,750.

Net position of the County decreased $4,497,266 during the year. This change includes an increase of $1,022,728 in net investment in capital assets, increase of $4,818,366 in restricted net position, and a decrease of $10,338,360 inunrestricted net position. Net investment in capital assets is defined as the total purchase price of the capital assets owned reduced by the accumulated depreciation on those assets, less the balance of debt relating to these assets. The remainingdeficit fund balance of $10,925,372 is designated as unrestricted fund balance.

v



Key elements of the change in net position and a comparison with the prior year are as follows:

CHANGES IN NET ASSETS

6/30/2015 6/30/2016 Changes Inc/Dec

Program revenues:

Charges for services 3,327,471$ 3,721,245$ 393,774$ 11.8%

Program grants and contributions 20,651,835 21,134,279 482,444 2.3%

General revenues:

Property taxes 11,561,444 13,504,618 1,943,174 16.8%

Other taxes 878,889 1,262,596 383,707 43.7%

Other grants and contributions 4,330,156 4,553,951 223,795 5.2%

Forest and timber receipts 839,269 781,681 (57,588) -6.9%

Interest earnings 38,325 82,872 44,547 116.2%

Miscellaneous 91,592 213,469 121,877 133.1%

Total Revenues 41,718,981 45,254,711 3,535,730 8.5%

Expenses:

General government 3,107,394 5,269,989 2,162,595 69.6%

Public safety 10,082,227 16,996,873 6,914,646 68.6%

Highways and streets 6,633,515 8,433,771 1,800,256 27.1%

Health and welfare 10,230,515 18,398,659 8,168,144 79.8%

Education 369,423 383,081 13,658 3.7%

Interest on long-term obligations 392,786 269,604 (123,182) -31.4%

Total Expense 30,815,860 49,751,977 18,936,117 61.4%

Increase (decrease) in net assets 10,903,121 (4,497,266) (15,400,387) -141.2%

Beginning net assets 34,872,479 45,775,600 10,903,121 31.3%

Ending net assets 45,775,600$ 41,278,334$ (4,497,266)$ -9.8%

Total revenues for the year were $45,254,771, an increase of $3,535,730 over the prior year. Revenues include direct program revenues of $24,855,524 and general revenues of $20,399,187. Program revenue is defined as charges for services and operating grants and revenues, which are allocable directly to programs. General revenues increased $2,659,512 (15.0%) and program revenues increased $876,218 (3.7%) when compared to the prior year. Program revenues increased $482,444 for program grants and increased $393,774 for charges for services. General revenues decreased $57,588 for forest and timber receipts. General revenues increased in all other categories: property taxes ($1,943,174), general grants and contributions ($223,795), interest earnings ($44,547), other taxes ($383,707) and miscellaneous ($121,877). The primary reason for the increase in property tax is the new five year public safety levyapproved by voters in May 2015.

vi



Total expenses increased $18,936,117 when compared to the prior year. Per the statement of activities, expenses increased in all categories except interest expense: $2,162,595 (69.6%) for general government, $8,168,144 (79.8%) for health and welfare, $6,914,646 (68.6%) for public safety, $1,800,256 (27.1%) for highways and streets, and $13,658(3.7%) for education. Interest on long term obligations decreased $123,182 (31.4%).

Of the total increase in expenses detailed above, all except $3,111,218 is the effect on pension expense caused by the new accounting rules first applied in the year ended June 30, 2015. If expenses included only pension costs actually paid during both years, changes in expense categories would be as follows: general government increase $428,459 (13.8%), public safety increase $834,084 (8.3%), highways and streets increase $341,877 (5.2%), health and welfare increase $1,619,852 (15.8%), education increase $10,128 (2.7%) and interest on long-term obligations decrease $123,182 (31.4%).

The chart above compares direct program revenue with program expenses. During the past year, all governmental activities relied on general revenues. Revenue from road taxes in the amount of $4,553,951 is not included in direct program revenue. Because it is defined as a tax, it is included in general grant revenue rather than program revenue for highways and streets.

Interest on debt

General government

Health and human services

Highways and streets

Public safety

Education

Governmental ActivitiesExpense and Program Revenues

Expense

Revenue

vii



The chart below shows sources of revenue for the fiscal year. 48.5% of revenues is from grants and contributions, 29.8% from property taxes, 8.2% from charges for services, 11.1% from other taxes, $781,681 (1.7%) from O & C timber receipts and .7% from investment income and miscellaneous receipts.

Financial Analysis of the County’s FundsAs required, the County uses fund accounting to demonstrate compliance with finance-related legal requirements.

The focus of the County’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

At June 30, 2016, the County’s governmental funds have combined ending fund balances of $12,647,033, which represents an increase of $4,493,717 during the current fiscal year. The ending fund balance consists of $335,798 defined as nonspendable, $8,618,513 defined as restricted and $31,057 defined as committed. Nonspendable fund balances include inventory and prepaid expenses which are nonspendable due to their nature. Restricted fund balances arerestricted by agencies or funding sources outside the County. Committed fund balances are committed for purposes by the County Board of Commissioners. Fund balances not included in these categories are considered unassigned and available for appropriation in the subsequent year at the Board’s discretion. The County’s unassigned fund balance at June 30, 2016 is $3,661,665, compared to the $1,741,752 unassigned fund balance at June 30, 2015.

The General Fund is the chief operating fund of the County. At June 30, 2016, unassigned General Fund balance was $4,368,666, approximately 95% of the total General Fund balance. The General Fund balance increased $1,211,304during the current fiscal year, compared to an increase of $813,949 in the prior year. Compared to the previous year, General Fund revenues increased $2,677,597, expenditures increased $2,139,806, transfers to other funds increased$143,295, and sale of capital assets increased $2,859.

Charges for services

8.2%

Grants and contributions

48.5%Property

taxes29.8%

Other taxes11.1%

O&C timber receipts

1.7%Other0.7%

Governmental ActivitiesRevenues by Source

viii


Financial Analysis of the County’s Funds

All five major funds showed increases in fund balances this year. Increases were $1,211,304 for General Fund, $81,579for Public Works Fund, $2,875,335 for Behavioral Health Fund, $130,198 for Health Services Fund and $437,555 for the Building Improvement Fund. The increases for all of these funds were the result of revenues in excess of expenditures. Nonmajor governmental funds showed a fund balance decrease of $242,254.

General Fund Budgetary HighlightsDuring the fiscal year, one budget modification was adopted by the Board. This modification transferred $655,000 from operating contingency to various departments. Appropriation increases included the following: Emergency management - $200,000, County Clerk - $100,000, Community Development - $50,000 and other departments - $70,000. There was also an increase in transfers to other funds in the amount of $235,000.

Capital Assets and Debt AdministrationThe County’s investment in capital assets, at June 30, 2016, is $47,662,269. This investment in capital assets includes land, building and improvements, machinery and equipment, roads and bridges and vehicles. The total decrease during the current year was $1,727,578 (3.5%). Additions for assets purchased was $1,761,328. Assets acquired include $131,517 land acquisition and other costs for the Doaks Ferry Rd./Hwy 51 improvement project, $319,328 for land and building costs for the Monmouth Health Center, $61,531 for emergency management equipment and structures, $240,722 for eight Sheriff’s patrol vehicles and one jail transport van, $52,542 for jail camera/security system improvements, $99,613 for a new ballot scanning equipment, $562,675 for public works equipment and a vehicle, $69,470 for behavioral health security equipment and two vehicles, $32,223 for two fleet vehicles, $41,008 for computer servers, $39,402 for fairgrounds improvements and $77,547 for other equipment.

The capital asset balance was increased by asset acquisitions ($1,727,578), decreased by depreciation expense ($3,454,704) and decreased $34,202 for asset dispositions. There was no change in the condition of the County’s capital assets during the year. Additional detail about capital asset changes can be found beginning on page 34 in the notes to the basic financial statements.

At the end of the current fiscal year, the County owed $5,025,000 in general obligation bonds, which is the total of three bond issues. Bonds were issued March 2007 for the purpose of road improvements. Bonds (certificates of participation) in the amount of $2,250,000 were issued in 2011 for the primary purpose of debt payoff and remodeling to the Academy Building. Additional bonds ($790,000) were issued in April 2012 for the purpose of paying off debt which financed the 2004 Falls City road project. Principal payments of $2,730,000 and interest of $295,824 were paid on the bonds during the year. Bond payments for the Road Bond are made from property tax revenues. Bond payments for the certificates of participation are made from the Building Improvement Fund using savings in rental costs. Bond payments for the Falls City road project are made by the Public Works Fund from revenue.

During the year, the County incurred no additional debt. At the end of the fiscal year, the County owed $10,253 for a capital lease on office equipment. Total payments on the capital lease during this year included $20,306 principal and $1,280 interest. Additional details about debt and repayment terms are contained on pages 36 through 38 of the notes to the basic financial statements.

ix


Key Economic Factors and Next Year’s Budget Information Polk County’s fiscal year 2016-17 budgeted appropriations increased $6,292,540 (10.7%) compared to the prior year

budget. General Fund resources for fiscal year 2016-17 are budgeted at $22,253,500. This includes a beginning fund balance

of $4,700,000. Significant changes in fiscal year 2016-17 budgeted expenses, including percentage change from the prior year’s

final budget are: General Fund increase - $2,422,850 (12.2%), increased revenue provided by property taxes and increased

beginning fund balance. Increased appropriations include increases to public safety budgets ($769,354),operating transfers to other funds $307,500, operating contingency ($1,139,902) and increases to other GeneralFund budgets ($206,094)

Public Works Fund increase - $326,000 (5.5%), increased revenue and beginning fund balance Behavioral Health Fund increase - $4,636,000 (33.0%), increased revenue from the State and increased

beginning fund balance Health Services Fund increase - $288,000 (1.4%), increased revenues from grants General Services increase - $344,365 (6.9%), appropriation increases include $50,000 increased transfer to

Building Improvement Fund and other increased costs.

Requests for InformationThis report is designed to provide a general overview of Polk County’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be directed to:

Linda FoxPolk County Treasurer

850 Main StreetDallas, Oregon 97338Phone: 503-623-9264

BASIC FINANCIAL STATEMENTS

Governmental Activities

ASSETS

Cash and investments 12,351,083$

Receivables 3,713,586

Inventory 235,054

Prepaid items 191,468

Capital assets:

Land and construction in progress 2,324,392 Other capital assets, net 45,337,877

TOTAL ASSETS 64,153,460

DEFERRED OUTFLOWS OF RESOURCES

Pension related items 2,621,160

LIABILITIES

Accounts payable and accrued liabilites 1,722,019

Long-term obligations:

Unamortized premium on long-term obligations 3,956

Due within one year 3,939,187 Due in more than one year 16,148,602

TOTAL LIABILITIES 21,813,764

DEFERRED INFLOWS OF RESOURCES

Pension related items 3,682,522

NET POSITION

Net investment in capital assets 42,627,016

Restricted for:

Debt service 174,027

Road and street maintenance 1,045,990

Bicycle path construction/maintenance 210,457

Law enforcement 302,254

Health and welfare 7,095,287

Economic development 366,027

Education 41,868

Other purposes 340,780 Unrestricted (10,925,372)

TOTAL NET POSITION 41,278,334$

POLK COUNTY

STATEMENT OF NET POSITION

June 30, 2016

See accompanying notes1

Net (Expense)

Charges Operating Revenue and

for Grants and Changes in Expenses Services Contributions Net Position

Functions/Programs

Governmental activities

General government 5,269,989$ 1,626,531$ 880,272$ (2,763,186)$

Public safety 16,996,873 749,469 3,295,837 (12,951,567)

Highways and streets 8,433,771 517,312 446,369 (7,470,090)

Health and welfare 18,398,659 827,933 16,502,301 (1,068,425)

Education 383,081 - 9,500 (373,581) Interest on long-term obligations 269,604 - - (269,604)

TOTAL GOVERNMENTAL ACTIVITIES 49,751,977$ 3,721,245$ 21,134,279$ (24,896,453)

General revenues

Property taxes levied for:

General purposes 10,427,766

Education 383,977

Debt service 2,692,875

Other taxes 1,262,596

Other grants and contributions not restricted

for specific programs 5,335,632

Unrestricted investment earnings 82,872

Miscellaneous 198,560 Gain on disposition of capital assets 14,909

TOTAL GENERAL REVENUES 20,399,187

CHANGE IN NET POSITION (4,497,266)

NET POSITION - BEGINNING 45,775,600

NET POSITION - ENDING 41,278,334$

Program Revenues

POLK COUNTY

STATEMENT OF ACTIVITIES



General

Public

Works

Behavioral

Health Health Services

Building

Improvement

Total

Nonmajor

Funds

Total

Governmental

Funds

ASSETS

Cash and investments $ 3,720,156 $ 1,065,997 $ 5,425,750 $ 297,930 $ - $ 860,854 $ 11,370,687

Receivables 1,092,689 465,802 1,571,946 84,908 - 458,184 3,673,529

Inventory - 235,054 - - - - 235,054

Prepaid items 44,755 - 17,470 825 - 37,694 100,744

Due from other funds 725,190 - - - - - 725,190

TOTAL ASSETS $ 5,582,790 $ 1,766,853 $ 7,015,166 $ 383,663 -$ $ 1,356,732 $ 16,105,204

LIABILITIES

Accounts payable and accrued

liabilities $ 440,451 $ 510,406 $ 243,643 $ 153,078 $ 4,826 $ 157,212 $ 1,509,616

Due to General Fund - - - - 632,781 92,409 725,190

TOTAL LIABILITIES 440,451 510,406 243,643 153,078 637,607 249,621 2,234,806

DEFERRED INFLOWS OF

RESOURCES

Unavailable revenue 547,207 48,240 403,556 48,912 - 175,450 1,223,365

FUND BALANCES

Nonspendable 44,755 235,054 17,470 825 - 37,694 335,798

Restricted 181,711 973,153 6,350,497 180,848 - 932,304 8,618,513

Committed - - - - - 31,057 31,057

Unassigned 4,368,666 - - - (637,607) (69,394) 3,661,665

TOTAL FUND BALANCES 4,595,132 1,208,207 6,367,967 181,673 (637,607) 931,661 12,647,033

TOTAL LIABILITIES,

DEFERRED INFLOWS OF

RESOURCES, AND FUND

BALANCES $ 5,582,790 $ 1,766,853 $ 7,015,166 $ 383,663 -$ $ 1,356,732 $ 16,105,204

POLK COUNTY

BALANCE SHEET

GOVERNMENTAL FUNDS

June 30, 2016


Total fund balances - governmental funds 12,647,033$

Amounts reported for governmental activities in the statement of net

position are different because:

Governmental activities report a net pension liability which is not reported in

the fund (12,124,527)

Capital assets used in governmental activities are not financial resources and

therefore are not reported in the funds. 47,662,269

Other long-term assets are not available to pay for current-period

expenditures and therefore are reported as unavailable revenue in the funds 1,223,365

The net position of the internal service funds $ (690,670)

Less: Capital assets of the internal service funds included above (166,976)

Plus: Compensated absences and net OPEB obligations of the internal

service funds included below 322,665

Plus: Pension-related items included above and below 1,423,502

Plus: Long-term obligations of the internal service funds 10,253 898,774

Governmental activities report as deferred outflows of resources

contributions to the public employees retirements system for the year and

other adjustments 2,621,160

Proceeds from long-term obligations in excess of the face amount of the

bonds are amortized over the term of the bonds. (3,956)

Governmental activities report as deferred inflows the effect of differences

between projected and actual earnings and changes in proportionate share of

contributions to the public employess retirement system (3,682,522)

Some liabilities, including bonds payable, are not due and payable in the

current period and therefore not reported in the funds. (7,963,262)

NET POSITION OF GOVERNMENTAL ACTIVITIES $ 41,278,334

POLK COUNTY

RECONCILIATION OF THE BALANCE SHEET OF

GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION

June 30, 2016


Total Total

Public Behavioral Health Building Nonmajor GovernmentalGeneral Works Health Services Improvement Funds Funds

REVENUES

Property taxes $ 10,397,049 $ - $ - $ - $ - $ 3,080,041 $ 13,477,090

Licenses, fees and permits 760,592 - - - 52,250 812,842

Intergovernmental 4,529,920 4,981,859 13,728,657 1,266,226 - 2,908,665 27,415,327

Charges for services 1,354,162 392,700 456,367 828,054 548,104 3,579,387

Franchise fees 381,786 - - - 72,605 454,391

Fines and forfeitures 101,589 - - - 13,033 114,622

Donations 909 - 5,867 137,830 35,206 179,812

Interest 48,482 4,303 27,228 - - 2,861 82,874

Miscellaneous 146,181 11,847 29,473 - - 5,132 192,633

TOTAL REVENUES 17,720,670 5,390,709 14,247,592 2,232,110 - 6,717,897 46,308,978

EXPENDITURES

Current

General government 3,158,373 - - - - 988,120 4,146,493

Public safety 11,562,814 - - - - 1,605,748 13,168,562

Highways and streets - 4,733,537 - - - 99,179 4,832,716

Health and welfare 238,479 - 10,976,111 2,021,118 - 1,875,562 15,111,270

Education - - - - - 382,261 382,261

Debt service

Principal - 45,000 - - 130,000 2,555,000 2,730,000

Interest - 20,769 - - 72,680 202,375 295,824

Capital outlay 331,498 522,006 396,146 80,794 109,765 476,906 1,917,115

TOTAL EXPENDITURES 15,291,164 5,321,312 11,372,257 2,101,912 312,445 8,185,151 42,584,241

Excess (deficiency) of revenues over

expenditures 2,429,506 69,397 2,875,335 130,198 (312,445) (1,467,254) 3,724,737

OTHER FINANCING SOURCES (USES)

Transfers in - 63 - - 750,000 1,225,000 1,975,063

Sale of capital assets 6,861 12,119 - - - - 18,980

Transfers out (1,225,063) - - - - - (1,225,063)

TOTAL OTHER FINANCING SOURCES

(USES) (1,218,202) 12,182 - - 750,000 1,225,000 768,980

Net change in fund balances 1,211,304 81,579 2,875,335 130,198 437,555 (242,254) 4,493,717

Fund balance beginning of year 3,383,828 1,126,628 3,492,632 51,475 (1,075,162) 1,173,915 8,153,316

Fund balances at end of year $ 4,595,132 $ 1,208,207 $ 6,367,967 $ 181,673 $ (637,607) $ 931,661 $ 12,647,033

POLK COUNTY

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS



NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS 4,493,717$ Amounts reported for governmental activities in the statement of activities are different because of the following:

Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. The difference between these two amounts is:

Capitalized expenditures 1,665,185$

Depreciation (3,454,704) (1,789,519)

In the statement of activities, property taxes are reported as revenue when assessed. However, in the governmental funds, property taxes are reported as revenues when they are measurable and available. This revenue recognition results in differences in amounts reported for property tax revenue. 27,528

In the statement of activities, revenue is recognized when earned. However, in the governmental funds, revenues are reported when they are measurable and available. This results in differences in amounts reported for grants and contributions. (313,794)

In the statement of activities, only the gain on the sale of capital assets is reported, whereas in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost, less accumulated depreciation, of the capital assets sold. (34,202)

Repayment of long-term obligation principal is an expenditure in the governmental funds, but the repayment reduces long-term obligations in the statement of net position.

Governmental funds 2,730,000 Internal services funds 20,306 2,750,306

Amortization of premium on the issuance of long-term obligations reduces interest expense on the statement of activities. 27,458

Pension liability changes, including changes to deferred outflows and inflows increased the pension expense in the current year, but do not require the use of current resources.

Decrease in net pension asset (4,998,965) Increase in pension liability (12,124,527) Decrease in deferred inflows 6,340,336

Increase in deferred outflows 1,116,333 (9,666,823)

Internal service funds are used to account for all costs arising from the operations of the County's central services activities and insurance programs. The primary funding sources are charges to other

Changes in net position (1,213,642)

Depreciation expense included above 65,328

Debt service principal payments included above (20,306)

Increase in pension expense due to reporting change included below 1,229,172

Compensated absences included below 25,177

Other post employment benefits obligation included below 3,170 88,899

Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds: Compensated absences (51,473)

Net other post employment benefit obligation (29,363) (80,836)

CHANGES IN NET POSITION OF GOVERNMENTAL ACTIVITIES (4,497,266)$

POLK COUNTY

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES



Original Final Actual Variance

REVENUES

Property taxes ########## $10,175,000 $10,397,049 $ 222,049

Licenses, permits and fees 635,500 635,500 760,592 125,092

Intergovernmental 4,284,150 4,284,150 4,529,920 245,770

Charges for services 1,205,000 1,205,000 1,354,162 149,162

Franchise fees 121,000 121,000 381,786 260,786

Fines and forfeitures 77,500 77,500 101,589 24,089

Donations 3,000 3,000 909 (2,091)

Interest 25,000 25,000 48,482 23,482

Miscellaneous 52,000 52,000 146,181 94,181

TOTAL REVENUES 16,578,150 16,578,150 17,720,670 1,142,520

EXPENDITURES

County Clerk

Recording

Personnel Services 112,717 112,717 108,109 4,608

Materials and Services 5,275 5,275 5,698 (423)

Interdepartment Charges 55,974 55,974 55,974 -

Total Recording 173,966 173,966 169,781 4,185

Elections Personnel Services 154,509 $ 154,509 $ 147,907 $ 6,602

Materials and Services 106,250 106,250 93,605 12,645


Capital Outlay - 100,000 99,613 387

Total Elections 324,835 424,835 405,201 19,634

Total County Clerk 498,801 598,801 574,982 23,819

Budget


POLK COUNTY

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -

BUDGET AND ACTUAL

GENERAL FUND

Continued on next page7

EXPENDITURES (continued) Original Final Actual Variance

Treasurer


Materials and Services 4,250 4,250 4,207 43


Capital Outlay 20,000 20,000 17,902 2,098

Total Treasurer 93,234 93,234 89,259 3,975

Non-Departmental

Fund-wide


O & C TIMBER - Title III



Total O & C TIMBER - Title III 83,170 88,170 86,102 2,068

Total Non-departmental 86,920 96,920 90,728 6,192

Assessment

Personnel Services $ 823,120 $ 823,120 $ 776,290 $ 46,830

Materials and Services 23,300 23,300 26,670 (3,370)


Total Assessment 1,134,463 1,134,463 1,091,003 43,460

Tax Collector




Total Tax Collector 275,186 275,186 266,296 8,890

Budget

GENERAL FUND


BUDGET AND ACTUAL (Continued)



Community Development

Planning

Personnel Services 258,984 258,984 259,722 (738)



Total Planning 393,371 393,371 378,531 14,840

Building Inspection


Materials and Services 250,900 300,900 300,838 62


Total Building Inspection 500,153 550,153 516,307 33,846

Environmental Health




Total Environmental Health 252,413 252,413 238,479 13,934

Total Community Development 1,145,937 1,195,937 1,133,317 62,620

District Attorney

Prosecution

Personnel Services $ 1,039,805 $ 1,039,805 $ 939,030 $ 100,775



Total Prosecution 1,230,477 1,230,477 1,164,990 65,487

Support Enforcement




Total Support Enforcement 354,746 354,746 282,350 72,396



GENERAL FUND

Budget



District Attorney (continued)

Victim's Assistance




Total Victim's Assistance 171,444 181,444 167,048 14,396

Court Appointed Special Advisor (CASA)

Materials and Services 25,000 25,000 25,000 -

Medical Examiner

Personnel Services 33,592 33,592 32,944 648



Total Medical Examiner 41,095 41,095 39,323 1,772

Total District Attorney 1,822,762 1,832,762 1,678,711 154,051

Sheriff

Patrol

Personnel Services $ 2,951,860 $ 2,951,860 $ 2,523,002 $ 428,858



Capital Outlay 80,000 80,000 180,607 (100,607)

Total Patrol 3,887,296 3,887,296 3,662,916 224,380

Jail

Personnel Services 3,210,602 3,210,602 2,777,234 433,368



Capital Outlay - - 27,497 (27,497)

Total Jail 4,491,779 4,491,779 4,130,008 361,771

Budget



GENERAL FUND



Sheriff (continued)

Emergency Management



Capital Outlay - - - -

Total Emergency Management 363,541 563,541 487,024 76,517

Total Sheriff 8,742,616 8,942,616 8,279,948 662,668

Community Corrections




Capital Outlay 15,000 15,000 - 15,000

Total Community Corrections 1,899,097 1,899,097 1,812,259 86,838

Community Service-Diversion

Personnel Services $ 133,106 $ 158,106 $ 160,438 $ (2,332)


Capital Outlay - - - -

Total Community Service-Diversion 169,617 194,617 192,480 2,137

Parks Maintenance

Personnel Services 40,484 41,484 41,041 443



Capital Outlay - - 5,879 (5,879)

Total Parks Maintenance 60,541 85,541 82,181 3,360

Contingency 2,791,476 2,136,476 - 2,136,476

TOTAL EXPENDITURES 18,720,650 18,485,650 15,291,164 3,194,486


GENERAL FUND


Budget




expenditures

(2,142,500) (1,907,500) 2,429,506 4,337,006

Sale of capital assets 2,500 2,500 6,861 4,361

Transfers out (1,110,000) (1,345,000) (1,225,063) 119,937

TOTAL OTHER FINANCING SOURCES

(USES) (1,107,500) (1,342,500) (1,218,202) 124,298

Net change in fund balance (3,250,000) (3,250,000) 1,211,304 4,461,304

Fund balance at beginning of year 3,250,000 3,250,000 3,383,828 133,828

Fund balance at end of year $ - $ - $ 4,595,132 $ 4,595,132

GENERAL FUND

Budget





Original

and Final

Budget Actual Variance

REVENUES

Intergovernmental $4,640,000 $4,981,859 $ 341,859

Charges for services 408,500 392,700 (15,800)

Interest 1,000 4,303 3,303

Miscellaneous - 11,847 3,043

TOTAL REVENUES 5,049,500 5,390,709 332,405

EXPENDITURES

Administration

Personnel Services 305,156 295,481 9,675

Materials and Services 78,350 77,618 732

Interdepartment Charges 322,733 322,733 -

Capital Outlay 10,000 - 10,000

Total Administration 716,239 695,832 20,407

County Shops


Materials and Services 209,500 215,496 (5,996)

Capital outlay 5,000 - 5,000

Total County Shops 476,605 464,405 12,200

Road Maintenance

Personnel Services 1,142,937 1,136,126 6,811

Materials and Services 2,573,000 2,064,596 508,404

Capital Outlay 75,000 522,006 (447,006)

Total Road Maintenance 3,790,937 3,722,728 68,209

POLK COUNTY


BUDGET AND ACTUAL

PUBLIC WORKS FUND



Originaland Final


EXPENDITURES (continued)Road Construction

Materials and Services $ 50,500 $ 1,315 $ 49,185

Debt payments 65,000 66,219 (1,219)

Capital Outlay 85,000 - 85,000

Total Road Construction 200,500 67,534 132,966

Survey


Materials and Services 43,500 6,568 36,932

Total Survey 279,303 210,847 68,456

Engineering



Total Engineering 200,611 159,966 40,645

Contingency 415,305 - 415,305

TOTAL EXPENDITURES 6,079,500 5,321,312 758,188

Excess (deficiency) of revenues over expenditures (1,030,000) 69,397 1,099,397

OTHER FINANCING SOURCES (USES)Transfers in 30,000 63 (29,937)

Sale of capital assets - 12,119 12,119

TOTAL OTHER FINANCING SOURCES (USES) 30,000 12,182 (17,818)

Net change in fund balance (1,000,000) 81,579 1,081,579

Fund balance at beginning of year 1,000,000 1,126,628 126,628

Fund balance at end of year $ - $1,208,207 $ 1,208,207



PUBLIC WORKS FUND



REVENUES

Intergovernmental $ 10,320,500 $ 11,020,500 $ 13,728,657 $ 2,708,157

Charges for services 527,500 527,500 456,367 (71,133)

Interest - - 27,228 27,228

Donations - - 5,867 5,867

Miscellaneous 1,000 1,000 29,473 28,473

TOTAL REVENUES 10,849,000 11,549,000 14,247,592 2,698,592

EXPENDITURES

Administration



Interdepartment Charges 1,973,692 1,973,692 1,973,692 -

Capital Outlay - 500,000 324,626 175,374

Total Administration 3,581,044 4,081,044 3,638,771 442,273

Addiction Program



Total Addiction Program 765,814 765,814 707,592 58,222

Outpatient Mental Health Services


Materials and Services 1,840,000 1,840,000 1,874,239 (34,239)

Capital Outlay - - 71,520 (71,520)

Total Outpatient Mental Health Services 5,895,321 5,895,321 5,359,656 535,665

POLK COUNTY

BUDGET AND ACTUAL

BEHAVIORAL HEALTH FUND



Budget


BEHAVIORAL HEALTH

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL (continued)


EXPENDITURES (continued)

Developmental Disability

Personnel Services $ 1,006,965 $ 1,156,965 $ 1,104,245 $ 52,720



Total Developmental Disability 1,140,891 1,340,891 1,273,658 67,233

Sub-Grant Programs

Materials and Services 1,154,500 1,154,500 392,580 761,920

Contingency 1,511,430 1,511,430 - 1,511,430

TOTAL EXPENDITURES 14,049,000 14,749,000 11,372,257 3,376,743

Net change in fund balance (3,200,000) (3,200,000) 2,875,335 6,075,335

Fund balance at beginning of year 3,200,000 3,200,000 3,492,632 292,632

Fund balance at end of year $ - $ - $ 6,367,967 $ 6,367,967

Budget

See accompanying notes

16


REVENUES

Intergovernmental $ 1,021,000 $ 1,221,000 $ 1,266,226 $ 45,226

Charges for services 903,000 903,000 828,054 (74,946)

Donations 1,000 1,000 137,830 136,830

TOTAL REVENUES 1,925,000 2,125,000 2,232,110 107,110

EXPENDITURES

Administration

Personal services 536,981 536,981 391,189 145,792

Materials and services 34,600 34,600 13,156 21,444

Interdepartment charges 134,562 134,562 134,562 -

Total Administration 706,143 706,143 538,907 167,236

Family and Community Outreach

Personal services 1,228,947 1,228,947 1,171,295 57,652

Materials and services 96,695 296,695 267,701 28,994

Interdepartment charges 43,215 43,215 43,215 -

Capital outlay - - 80,794 (80,794)

Total Family and Community Outreach 1,368,857 1,568,857 1,563,005 5,852

TOTAL EXPENDITURES 2,075,000 2,275,000 2,101,912 173,088

Net change in fund balance (150,000) (150,000) 130,198 280,198

Fund balance at beginning of year 150,000 150,000 51,475 (98,525)

Fund balance at end of year $ - $ - $ 181,673 $ 181,673

Budget

POLK COUNTY


BUDGET AND ACTUAL

HEALTH SERVICES FUND



Governmental

Activities

Internal

Service Funds

ASSETS

Current assets

Cash and investments 980,396$

Receivables 40,057

Prepaid items 90,724

Total current assets 1,111,177

Capital assets, net 166,976



Pension related items 282,971

LIABILITIES

Current liabilites

Accounts payable and accrued liabilites 212,403


Due within one year 135,074

Due in more than one year 1,506,765

TOTAL LIABILITIES 1,854,242


Pension related items 397,552

NET POSITION

Investment in capital assets 166,976

Unrestricted (857,646)

TOTAL NET POSITION (690,670)$

POLK COUNTY


PROPRIETARY FUNDS

June 30, 2016


Governmental

Activities

Internal

Service

Funds

OPERATING REVENUES

Intergovernmental 74,680$

Charges for services 5,534,154

Miscellaneous 7,380

TOTAL OPERATING REVENUES 5,616,214

OPERATING EXPENSES

Personal services 3,913,416

Materials and services 2,101,728

Interest on long-term obligations 1,259

Depreciation 65,328

TOTAL OPERATING EXPENSES 6,081,731

Operating (loss) (465,517)

NONOPERATING REVENUE (EXPENSE)

Gain on sale of capital asset 1,875

(Loss) before transfers (463,642)

Transfers out (750,000)

Change in net position (1,213,642)

Net position - beginning 522,972

Net position - end (690,670)$

POLK COUNTY

STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

PROPRIETARY FUNDS



19

Governmental

Activities

Internal

Service

Funds

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 5,591,411$

Other receipts 7,380

Payments to employees for services (2,655,897)

Payments to suppliers of goods or services (2,061,768)

Net cash provided by operating activities 881,126

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Purchase of capital assets (96,143)

Sale of capital assets 1,875

Transfers out (750,000)

Principal payments on long-term obligations (20,306)

Net cash (used) in financing activities (864,574)

Net increase in cash and cash equivalents 16,552

Cash and cash equivalents, beginning of year 963,844

Cash and cash equivalents, end of year 980,396$

Reconciliation of operating (loss) to net cash

provided by operating activities

Operating (loss) (465,517)$

Adjustments to reconcile operating (loss) to net

cash provided by operating activities:

Depreciation 65,328

(Increase) decrease in assets:

Receivables (17,423)

Prepaid items (30,097)

Net pension asset 874,392

Deferred outflows of resources (138,582)

Increase (decrease) in liabilities:

Accounts payable and accrued liabilities 71,316

Compensated absences 25,177

Net pension liability 1,308,921

Net OPEB obligation 3,170

Deferred inflows of resources (815,559)

Net cash provided by operating activities 881,126$


PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS

POLK COUNTY


20

AgencyFund

ASSETS

Cash and investments 966,038$Receivables 4,336,417


LIABILITIESDue to other governments 5,302,455$

POLK COUNTY


FIDUCIARY FUND

June 30, 2016


21

POLK COUNTY

NOTES TO BASIC FINANCIAL STATEMENTSJune 30, 2016

1. Summary of Significant Accounting Policies

A. The reporting entity

Polk County was created by the Provincial Legislature from the original Yamhill district on December 22, 1845, and now operates under the provisions of Oregon Revised Statutes (ORS) title 20, Chapters 201 and 215 inclusive. The governing board is a Board of Commissioners, elected at-large from throughout the County. The Commissioners are full-time employees of the County. The Board votes on all ordinances and determines matters of County policy. The Administrative Officer acts as the Chief of Staff for the Commissioners and serves at the pleasure of the Board. Other elected officers of the county include the Assessor, Clerk, District Attorney, Sheriff, and Treasurer. Polk County provides a full range of services to the community which includes planning and zoning, sheriff services, incarceration, courts, tax collections and assessment, document recording, parks, and health and human services.

The accompanying basic financial statements present all activities, funds, and component units for which the County is considered to be financially accountable. The criteria used for making this determination includes appointment of a voting majority, imposition of will, financial benefit or burden on the primary government and fiscal dependency on the primary government. Based upon the evaluation of these criteria, the County is a primary government with one blended component unit—Polk County Extension Service District.

The Polk County Extension Service District was formed May 18, 2010, by a vote of the people, under ORS Chapter 451. The purpose of the District is to provide Oregon State University extension educational programs, training and information to Polk County residents. The County is not financially accountable for the District, but because the Board of County Commissioners acts as the governing board of the District, this entity has been included as a blended component in the basic financial statements of the County. Complete financial statements of the District can be obtained from the Treasurer at the courthouse.

B. Government-wide and fund financial statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the County. For the most part, the effect of interfund activity has been removed from these statements. Exceptions to this general rule are charges between the functions of the County, the eliminations of which would distort the direct cost and program revenues reported for the various functions concerned. Governmental activities are supported by taxes and intergovernmental revenues.

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NOTES TO BASIC FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies (continued)

B. Government-wide and fund financial statements (continued)

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter two are excluded from the government-wide financial statements. Major governmental funds and major proprietary funds are reported in separate columns in the respective fund financial statements.

C. Measurement focus, basis of accounting and financial statement presentation

The government-wide financial statements, proprietary fund and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting.Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as generalrevenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues are charges to customers for sales and services. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

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C. Measurement focus, basis of accounting and financial statement presentation (continued)

Governmental fund financial statements (balance sheet and statement of revenues, expenditures and changes in fund balances) are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Significant revenues, which are susceptible to accrual under the modified accrual basis of accounting, include property taxes and federal and state grants. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

The bases of accounting described above are in accordance with accounting principles generally accepted in the United States of America.

The County reports the following major governmental funds:

General - accounts for all financial resources of the general government, except those required to be accounted for in another fund.

Public Works - accounts for the receipt and expenditure of state gasoline taxes for road repair and construction.

Behavioral Health - accounts for the receipt and expenditure of patient funds, and state and federal grants for the County’s behavioral health programs including community treatment services, alcohol and drug rehabilitation, and developmental disability services.

Health Services – accounts for the receipt and expenditure of state grants and charges for services to operate the County’s health services administration.

Building Improvement - accounts for major capital improvements. The financing source is primarily transfers from other funds.

Additionally, the County reports the following fund types:

Special Revenue - accounts for revenue derived from specific taxes or other revenue sources, which are legally restricted to finance particular functions or activities. When a special revenue fund is not an operating fund, transfers are made from the special revenue fund to the operating funds authorized to make expenditures.

Debt Service - accounts for the resources accumulated and payments made for principal and interest on long-term debt of governmental funds.

Capital Projects - accounts for expenditures on major construction projects or equipment acquisition. The principal sources of revenues for capital expenditures are general obligation bond proceeds and grant funds.

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C. Measurement focus, basis of accounting and financial statement presentation (continued)

Internal Service - accounts for the cost of providing services to other funds which are charged a fee on a cost reimbursement basis for those services.

Agency - accounts for resources received and held in a fiduciary capacity. Disbursements from these funds are made in accordance with the trust agreement or applicable legislative enactment for each particular fund.

D. Equity classification

Government-wide statements

On the statement of net position, equity is classified as net position and displayed in three components:

Net investment in capital assets – Consists of capital assets including restricted capital assets, netof accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages,notes, or other borrowings that are attributable to the acquisition, construction, or improvementsof those assets.

Restricted net position – Consists of net position with constraints placed on the use either by (1)external groups such as creditors, grantors, contributors, or laws and regulations of othergovernments; or (2) law through constitutional provisions or enabling legislation.

Unrestricted net position – All other net position that does not meet the definition of “restricted”or “net investment in capital assets”.

In the government-wide and proprietary fund financial statements, when both restricted and unrestricted resources are available for use it is the County’s policy to use restricted resources first, and then unrestricted resources as they are needed.

Governmental fund type fund balance reporting

Governmental type fund balance amounts are reported within one of the five fund balance categories list below:

Non-spendable — Amounts that cannot be spent either because they are in non-spendable formor because they are legally or contractually required to be maintained intact.

Restricted — Amounts that can be spent only for specific purposes because of constitutionalprovisions or enabling legislation, or because of constraints that are externally imposed bycreditors, grantors, contributors, or the laws or regulations of other governments.

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D. Equity classification (continued)

Governmental fund type fund balance reporting (continued)

Committed — Amounts that can be used only for specific purposes determined by a formal actionof the Board of Commissioners, as the highest level of decision-making authority for the County.Commitments may be established, modified, or rescinded only through ordinances or resolutionsapproved by the Board of Commissioners.

Assigned — Amounts that do not meet the criteria to be classified as restricted or committed butthat are intended to be used for specific purposes. The Commissioners has granted authority tothe County Administrator to assign fund balance amounts.

Unassigned — The residual classification for the government’s general fund and any otherspendable amounts not contained in other classifications. Additionally, other funds may reportnegative unassigned fund balance in certain circumstances.

In the governmental fund financial statements, when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the County considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the County considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the Board of Commissioners has provided otherwise in its commitment or assignment actions.

E. Budget policies and budgetary control

Generally, Oregon Local Budget Law requires annual budgets be adopted for all funds of the County except agency funds. The County uses the modified accrual basis of accounting for all budgets. All annual appropriations lapse at fiscal year end.

The County begins its budgeting process by appointing Budget Committee members in the fall of each year. Budget recommendations are developed by management through early spring, with the Budget Committee meeting and approving the budget document in late spring. Public notices of the budget hearing are generally published in May or June and the hearing is held in June. The County Commissioners adopt the budget, make appropriations, and declare the tax levy no later than June 30. Expenditure appropriations may not be legally over-expended, except in the case of grant receipts and bond sale proceeds which could not be reasonably estimated at the time the budget was adopted.

The resolution authorizing appropriations for each fund sets the level at which expenditures cannot legally exceed appropriations. The County established the levels of budgetary control at the program or department level for all funds.

Budget amounts shown in the financial statements have been revised since the original budget amounts were adopted. The County Commissioners must authorize all appropriation transfers and supplementary budgetary appropriations.

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F. Risk management

The County is exposed to various risks of loss related to errors and omissions; automobile; damage to and destruction of assets; bodily injury; and worker’s compensation for which the County carries commercial insurance. There has been no significant reduction in insurance coverage from the prior year and settled claims have not reached the level of commercial coverage in any of the past three fiscal years.

G. Cash and cash equivalents

For purposes of reporting cash flows, cash and cash equivalents include cash on hand, checking, savings and money market accounts, and any highly-liquid debt instruments purchased with a maturity of three months or less.

H. Property taxes

Uncollected property taxes in governmental funds are reported in governmental funds balance sheet as receivables; the portion which is available to finance expenditures of the current period is recorded as revenue and the remaining balance is recorded as deferred revenue. Property taxes collected within 60 days of the end of the current period are considered measurable and available and are recognized as revenue. All property taxes receivable are due from property owners within the County.

Property taxes receivable in the agency funds are offset by amounts held in trust and, accordingly, have not been recorded as revenue.

Under state law, county governments are responsible for extending authorized property tax levies, computing tax rates, billing and collecting all property taxes, and making periodic remittances of collections to entities levying taxes. Real and personal property taxes are levied upon all taxable property within the County and become a lien against the property as of July 1 of each year and are payable in three installments which are due on November 15, February 15 and May 15 following the lien date.

I. Grants and entitlements

Receivables for federal and state grants and state shared revenue are recorded as revenue in all fund types as earned.

J. Other receivables

In governmental fund types, the portion of the receivable which is available to finance expenditures of the current period is recorded as revenue and the remaining balance is recorded as deferred revenue. Revenues are recorded when earned in proprietary fund types.

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K. Capital assets

Capital assets, which include property, equipment, infrastructure assets (e.g., roads, bridges, sidewalks, sewers, street lighting, and similar items), and their improvements, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the County as assets with an initial, individual cost of more than $5,000 and an estimated useful life of more than one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed.

Property, plant, and equipment of the County are depreciated using the straight-line method over estimated useful lives as follows:

• Vehicles 5 to10 years

• Equipment 5 to 30 years

• Buildings improvements 50 years

• Infrastructure 20 to 40 years

Upon disposal of such assets, the accounts are relieved of the related costs and accumulated depreciation and resulting gains or losses are reflected in the statement of activities.

L. Long-term obligations

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

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M. Compensated absences

Vacation Leave – is accrued as it is earned. County employees earn vacation leave at the rate of 96 to 192 hours year, depending on position and length of service. The maximum accumulation, depending on position and length of service, ranges from 200 to 250 hours. For governmental funds, the non-current portion (the amount estimated to be used in subsequent fiscal years) is maintained separately and represents a reconciling item between the fund-level and government-wide presentations. Only the current portion is reported in the governmental funds, and is calculated based on historical trends.

Sick Leave – is earned at a rate of eight hours per month of service, and is not limited as to accumulation. Sick leave, which does not vest, is recognized in all funds when leave is taken.

Holiday Leave – Sheriff’s office employees earn holiday leave as required by contract and may accumulate from eighty to ninety-six hours depending on their position.

N. Use of estimates

In preparing the County’s financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates.

O. Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Oregon Public Employee Retirement System (OPERS) and additions to/deductions from OPERS’ fiduciary net position have been determined on the same basis as they are reported by OPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

P. Deferred outflows / inflows of resources

In addition to assets, the statements of net position reports a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then. These include refunded debt charges and pension related items.

In addition to liabilities, the statement of net position will report a separate section for deferred inflows of resources. This separate financial statement element represents amounts that apply to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Pension related items which are amortized over specified periods are reported as deferred inflows of resources.

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P. Deferred outflows / inflows of resources (continued)

The balance sheet of governmental funds reports as deferred inflows, unavailable revenues from property taxes. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.

2. Deposits and Investments

The County maintains a pool of cash and investments that are available for use by all funds. Each fund’sportion of this pool is displayed on the financial statements as cash and investments. Interest earned onpooled cash and investments is allocated to participating funds based upon their combined cash andinvestment balances.

Investments, including amounts held in pooled cash and investments, are stated at amortized cost. Inaccordance with Governmental Accounting Standards Board (GASB) Statement No. 31, Accounting andFinancial Reporting for Certain Investments and for External Investment Pools, investments with aremaining maturity of more than one year, at the time of purchase are stated at fair value. Fair value isdetermined at the quoted market price, if available, otherwise the fair value is estimated based on theamount at which the investment could be exchanged in a current transaction between willing parties, otherthan in a forced liquidation sale. Investments in the State of Oregon Local Government Investment Pool(LGIP) are stated at fair value.

The Oregon State Treasury administers the LGIP. The LGIP is an open-ended, unrated, no-load,diversified portfolio offered to any agency, political subdivision or public corporation of the state who bylaw is made the custodian of, or has control of, any fund. The LGIP is commingled with the State’s short-term funds. To provide regulatory oversight, the Oregon Legislature established the Oregon Short-TermFund Board and LGIP investments are approved by the Oregon Investment Council. The fair value of theCounty’s position in the LGIP is the same as the value of the pool shares.

Credit Risk. Oregon statutes authorize the County to invest in obligations of the U. S. Treasury andagencies, bankers’ acceptances, repurchase agreements, commercial paper rated A-1 by Standard &

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2. Deposits and Investments (continued)

Poor’s Corporation or P-1 by Moody’s Commercial Paper Record, and the state treasurer’s investmentpool.

As of June 30, 2016, the County had the following investments:

Standard and Poor’s Ratings Maturities Fair Value

State Treasurer’s Investment Pool N/A N/A $ 12,188,529

Interest Rate Risk. The County’s formal policy limits investment maturities to one year as a means of managing its exposure to fair-value losses arising from increases in interest rates.

Concentration of Credit Risk. The County's formal policy places a limit on the amount that may be invested in any one issuer as follows:

U.S. Treasury Bills, Notes and Bonds 100%Federal Agency Bonds and Discount Notes 100%Local Government Investment Pool 100%Time Certificates of Deposit:

Commercial Banks 60%Savings and Loans 10%

Custodial Credit Risk – Investments. This is the risk that, in the event of the failure of a counterparty, the County will not be able to recover the value of its investments that are in the possession of an outside party. The County does not have a policy which limits the amount of investments that can be held by counterparties.

Custodial Credit Risk – Deposits. This is the risk that, in the event of a bank failure, the County’s deposits may not be returned. The Federal Depository Insurance Corporation (FDIC) provides insurance for the County’s deposits with financial institutions up to $250,000 each for the aggregate of all non-interest bearing accounts and the aggregate of all interest bearing accounts at each institution. Deposits in excess of FDIC coverage with institutions participating in the Oregon Public Funds Collateralization Program are collateralized with securities held by the Federal Home Loan Bank of Seattle in the name of the institution. As of June 30, 2016, $1,547,586 of the County’s bank balances were exposed to custodial credit risk as they were collateralized with securities held by the pledging financial institution’s agent but not in the County’s name.

A. The County’s deposits and investments at June 30, 2016 are as follows:

Total investments $ 12,188,529Cash on hand 6,232Deposits with financial institutions 1,122,360

Total deposits and investments $ 13,317,121

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2. Deposits and Investments (continued)

B. Cash and investments by fund:

Governmental activities/funds Governmental funds

General $ 3,720,156Public Works 1,065,997Behavioral Health 5,425,750Health Services 297,930Nonmajor funds 860,854

Total governmental funds 11,370,687

Internal Service funds 980,396

Total governmental activities 12,351,083

Fiduciary fund Agency 966,038

Total cash and investments $ 13,317,121

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3. Receivables

A. The County’s receivables at June 30, 2016 are as follows:

Property

Fund Taxes Accounts Grants Assessments Totals

General 596,960$ 91,780$ 370,273$ 33,676$ 1,092,689$

Public Works - 3,687 462,115 - 465,802

Behavioral Health - 65,337 1,506,609 - 1,571,946

Health Services - 626 84,282 - 84,908

Nonmajor funds 195,456 26,821 235,907 - 458,184

Total governmental funds 792,416 188,251 2,659,186 33,676 3,673,529

Internal service funds - 20,457 19,600 - 40,057

Total governmental activities 792,416 208,708 2,678,786 33,676 3,713,586

Fiduciary funds

Agency 4,336,417 - - - 4,336,417

Totals 5,128,833$ 208,708$ 2,678,786$ 33,676$ 8,050,003$

B. Property taxes - ensuing year’s levies

The permanent tax rates per $1,000 of assessed value for the various funds are as follows:

General $ 1.716Polk County Extension Service District .075

In May 2015, voters of the County approved a five-year operating levy for the Sheriff’s office and other public safety programs of a rate of $0.45 per $1,000 of assessed value. The County will levy$0.3196.

The tax rate limit of $10.00 per thousand of assessed value imposed by the Oregon Constitution is not expected to affect these levies.

In addition to the permanent tax rate, the County will levy $2,800,000 for the retirement of long-term debt principal and interest due in 2016-17.

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4. Capital Assets

A. Capital asset activity for the governmental activities for the year ended June 30, 2016 wasfollows:

Balances Balances

July 1, 2015 Additions Deletions June 30, 2016

Capital assets not being depreciated

Land 1,732,490$ 44,261$ -$ 1,776,751$

Construction in progress 85,627 462,014 - 547,641

Total capital assets not being depreciated 1,818,117 506,275 - 2,324,392

Capital assets being depreciated

Infrastructure 97,106,041 - - 97,106,041

Buildings 22,220,510 - - 22,220,510

Improvements 1,708,899 44,618 - 1,753,517

Bridges 22,609,312 - - 22,609,312

Equipment 10,352,325 1,210,435 259,321 11,303,439

Total capital assets being depreciated 153,997,087 1,255,053 259,321 154,992,819

Less accumulated depreciation for:

Infrastructure 81,169,929 1,702,857 - 82,872,786

Buildings 10,323,407 578,996 - 10,902,403

Improvements 787,454 74,926 - 862,380

Bridges 7,375,402 423,392 - 7,798,794

Equipment 6,769,165 674,533 225,119 7,218,579

Total accumulated depreciation 106,425,357 3,454,704 225,119 109,654,942

Total capital assets being depreciated, net 47,571,730 (2,199,651) 34,202 45,337,877

Governmental activities capital assets, net 49,389,847$ (1,693,376)$ 34,202$ 47,662,269$

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4. Capital Assets (continued)

B. Depreciation expense charged to functions/programs of the County was as follows:

Governmental Activities

General government 176,274$

Public safety 532,775

Highways and streets 2,447,713

Health and welfare 297,942

Total governmental activities 3,454,704$

C. Capital asset activity in internal service funds, which are included in the governmental activities, for the year ended June 30, 2016 was as follows:

Balances Balances

July 1, 2015 Additions Deletions June 30, 2016

Capital assets being depreciated

Improvements 19,532$ -$ -$ 19,532$

Equipment 705,410 96,143 9,000 792,553

Total capital assets being depreciated 724,942 96,143 9,000 812,085

Less accumulated depreciation for:

Improvements 19,532 - - 19,532

Equipment 569,249 65,328 9,000 625,577

Total accumulated depreciation 588,781 65,328 9,000 645,109

Total capital assets being depreciated, net 136,161$ 30,815$ -$ 166,976$

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5. Long-term Obligations

A. Changes in long-term obligations for the year ended June 30, 2016 were as follows:Outstanding Outstanding Balances

July 1, June 30, Due Within

2015 Additions Reductions 2016 One Year

Governmental Activites

Long-term debt

Bonded Debt

General Obligation Bonds- Series 2007 5,325,000$ -$ 2,555,000$ 2,770,000$ 2,770,000$

Full Faith and Credit Obligations, Series 2011 1,775,000 - 130,000 1,645,000 135,000

Full Faith and Credit Obligations, Series 2012 655,000 - 45,000 610,000 45,000

Capital Leases

U.S Bank Equipment Finance 30,559 - 20,306 10,253 8,154

Total long-term debt obligations 7,785,559 - 2,750,306 5,035,253 2,958,154

Other long-term obligations

Compensated absences 929,560 51,473 - 981,033 981,033

Net pension liability - 12,124,527 - 12,124,527 -

Net other post-employement benefits 1,917,613 29,363 - 1,946,976 -

10,632,732$ 12,205,363$ 2,750,306$ 20,087,789$ 3,939,187$

Internal service funds included in governmental activities

Long-term debt

Capital Leases

U.S Bank Equipment Finance 30,559$ -$ 20,306$ 10,253$ 8,154$

Other long-term obligations

Compensated absences 101,743 25,177 - 126,920 126,920

Net pension liability - 1,308,921 - 1,308,921 -

Net other post-employment benefits 192,575 3,170 - 195,745 -

324,877$ 1,337,268$ 20,306$ 1,641,839$ 135,074$

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5. Long-term Obligations (continued)

B. Government activities long-term debt obligations

General Obligation Bonds, series 2007 – The purpose of the bonds was to finance capital construction and capital improvements, including but not limited to, providing funds for improvements to the County road system and to pay costs of issuance. The indebtedness amount was not to exceed $20,000,000. Interest on the bonds ranges from 4.5 to 5 percent depending upon maturity dates.

Full Faith and Credit Obligations, series 2011 – The County issued bonds for $2,250,000 to pay off the Academy Building debt and provide funds for its remodel. Interest on the bonds range from 2 to 4 percent depending upon maturity dates.

Full Faith and Credit Obligations, series 2012 – The County issued bonds for $790,000 to refund the Bank of New York Loan dated July 3, 2002. Interest on the bonds range from 1.85 to 3.8 percent depending upon maturity dates.

C. Internal service funds long-term debt obligation

U.S. Bank Equipment Finance – This obligation includes 11 tax-exempt leases/purchase agreements for copiers from RicohTM. Annual payments and interest vary by lease agreement.

D. Future maturities of government activities long-term debt obligations

Fiscal

Year Principal Interest Principal Interest Principal Interest Principal Interest

2017 2,770,000$ 69,250$ 135,000$ 67,380$ 45,000$ 19,936$ 2,950,000$ 156,566$

2018 - - 140,000 61,880 50,000 18,758 190,000 80,638

2019 - - 145,000 56,180 50,000 17,233 195,000 73,413

2020 - - 155,000 50,180 50,000 15,708 205,000 65,888

2021 - - 160,000 43,560 55,000 14,106 215,000 57,666

2022-25 - - 710,000 99,440 230,000 37,414 940,000 136,854

2026-27 - - 200,000 4,400 130,000 4,940 330,000 9,340

2,770,000$ 69,250$ 1,645,000$ 383,020$ 610,000$ 128,095$ 5,025,000$ 580,365$

Series 2012Series 2011Series 2007 Totals

Full Faith and Credit Obligations, Full Faith and Credit Obligations,General Obligation Bonds,

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5. Long-term Obligations (continued)

E. Future maturities of internal service funds long-term debt obligations

Fiscal

Year Principal Interest

2017 8,154$ 315$

2018 2,099 57

10,253$ 372$

11 Leases

US Bank Equipment Finance

Capital Leases

6. Interfund Transfers

Interfund transfers used to reallocate financial resources to funds where they will be expended were asfollows:

Fund In Out

General -$ 1,225,063$

Public Works 63 -

Building Improvements 750,000 -

Nonmajor 1,225,000 -

Internal Service - 750,000

1,975,063$ 1,975,063$

Transfers

The purpose of the General Fund transfer to the Public Works Fund was to supplement the resources of the fund for maintaining forest roads of the County. The purpose of the General Fund transfers to the nonmajor governmental funds was to supplement the resources of the funds for their respective activities. The transfer from the Internal Service Fund to the Building Improvement fund was to provide for debt service payments and to reduce the fund deficit in the Building Improvement Fund.

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7. Unavailable Revenue

Resources owned by the County, which are measurable but not available, and are deferred in thegovernmental funds, consist of the following:

Public Behavioral Health Nonmajor

General Works Health Services Funds Totals

Property taxes 514,582$ -$ -$ -$ 169,308$ 683,890$

Assessments 32,625 - - - - 32,625

Accounts - 48,240 403,556 48,912 6,142 506,850

547,207$ 48,240$ 403,556$ 48,912$ 175,450$ 1,223,365$

8. Contingency – Sick Leave

Portions of amounts accumulated at any point in time can be expected to be redeemed before terminationof employment; however, such redemptions cannot be reasonably estimated. As of June 30, 2016,employees of the County had accumulated 8,293 days of sick leave.

9. Litigation

The County, in the regular course of business, is named as a defendant in various lawsuits. The likelyoutcome of these suits is not determinable at this time and the County does not believe that the ultimateresolution of these lawsuits will have a material adverse effect on the County’s General Fund.

10. Operating Leases

The County leases buildings/office space under non-cancelable operating leases. Total lease costs paid forthe year ended June 30, 2016 were $299,060.

Future minimum lease payments for the non-cancelable leases are as follows:

Fiscal Year Ending June 30, Amount2017 $302,5942018 180,7912019 154,0002020 157,1002021 13,113

Total $807,598

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11. Defined Benefit Pension Plan

A. Plan description

Employees of the County are provided with pensions through OPERS. All the benefits of OPERS are established by the Oregon legislature pursuant to Oregon Revised Statute (ORS) Chapters 238 and 238A.

The OPERS consists of a single cost-sharing multiple employer defined benefit pension plan.

OPERS produces an independently audited Comprehensive Annual Financial Report which can be found at: www.oregon.gov/pers/Pages/section/financial_reports/financials.aspx

Detailed information about the pension plan’s fiduciary net position is available in the separately issued OPERS financial report.

B. Description of benefit terms

Plan benefits

All benefits of the System are established by the legislature pursuant to ORS Chapters 238 and 238A.

1. Tier One/Tier Two Retirement Benefit (Chapter 238). Tier One/Tier Two RetirementBenefit plan is closed to new members hired on or after August 29, 2003.

Pension benefits

The OPERS retirement allowance is payable monthly for life. It may be selected from 13retirement benefit options. These options include survivorship benefits and lump-sum refunds.The basic benefit is based on years of service and final average salary. A percentage (2.0 percentfor police and fire employees, 1.67 percent for general service employees) is multiplied by thenumber of years of service and the final average salary. Benefits may also be calculated undereither a formula plus annuity (for members who were contributing before August 21, 1981) or amoney match computation if a greater benefit results.

A member is considered vested and will be eligible at minimum retirement age for a serviceretirement allowance if he or she has had a contribution in each of five calendar years or hasreached at least 50 years of age before ceasing employment with a participating employer (age45 for police and fire members). General service employees may retire after reaching age 55.Police and fire members are eligible after reaching age 50. Tier One general service employeebenefits are reduced if retirement occurs prior to age 58 with fewer than 30 years of service.Police and fire member benefits are reduced if retirement occurs prior to age 55 with fewer than25 years of service. Tier Two members are eligible for full benefits at age 60.

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11. Defined Benefit Pension Plan (continued)

B. Description of benefit terms (continued)

1. Tier One/Tier Two Retirement Benefit (continued)

Death benefits

Upon the death of a non-retired member, the beneficiary receives a lump-sum refund of themember’s account balance (accumulated contributions and interest). In addition, the beneficiarywill receive a lump-sum payment from employer funds equal to the account balance, providedone or more of the following conditions are met:

the member was employed by a OPERS employer at the time of death, the member died within 120 days after termination of OPERS-covered employment, the member died as a result of injury sustained while employed in a OPERS-covered job,

or the member was on an official leave of absence from a OPERS-covered job at the time of

death.

Disability benefits

A member with 10 or more years of creditable service who becomes disabled from other than duty-connected causes may receive a non-duty disability benefit. A disability resulting from a job-incurred injury or illness qualifies a member (including OPERS judge members) for disability benefits regardless of the length of OPERS-covered service. Upon qualifying for either a non-duty or duty disability, service time is computed to age 58 (55 for police and fire members) when determining the monthly benefit.

Benefit changes after retirement

Members may choose to continue participation in a variable equities investment account after retiring and may experience annual benefit fluctuations due to changes in the market value of equity investments.

Under ORS 238.360 monthly benefits are adjusted annually through cost-of-living changes. The cost-of-living increase for fiscal year 2015 was capped at 1.5 percent for all benefit recipients. As a result of the Moro Decision (Everice Moro et al v. State of Oregon et al), the cap on the cost-of-living increases are 2.0 percent for fiscal years 2016 and beyond.

2. Oregon Public Service Retirement Plan (Chapter 238A) (OPSRP DB)

Pension benefits

The OPSRP pension program provides benefits to members hired on or after August 29, 2003.

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B. Description of benefit terms (continued)

2. Oregon Public Service Retirement Plan (continued)

Pension benefits (continued)

This portion of OPSRP provides a life pension funded by employer contributions. Benefits arecalculated with the following formula for members who attain normal retirement age:

Police and fire: 1.8 percent is multiplied by the number of years of service and the final average salary. Normal retirement age for police and fire members is age 60 or age 53 with 25 years of retirement credit. To be classified as a police and fire member, the individual must have been employed continuously as a police and fire member for at least five years immediately preceding retirement.

General service: 1.5 percent is multiplied by the number of years of service and the final average salary. Normal retirement age for general service members is age 65, or age 58 with 30 years of retirement credit.

A member of the OPSRP pension program becomes vested on the earliest of the following dates: the date the member completes 600 hours of service in each of five calendar years, the date the member reaches normal retirement age, and, if the pension program is terminated, the date on which termination becomes effective.

Death benefits

Upon the death of a non-retired member, the spouse or other person who is constitutionally required to be treated in the same manner as the spouse, receives for life 50 percent of the pension that would otherwise have been paid to the deceased member.

Disability benefits

A member who has accrued 10 or more years of retirement credits before the member becomes disabled or a member who becomes disabled due to job-related injury shall receive a disability benefit of 45 percent of the member’s salary determined as of the last full month of employment before the disability occurred.

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C. Contributions

OPERS funding policy provides for monthly employer contributions at actuarially determined rates. These contributions, expressed as a percentage of covered payroll, are intended to accumulate sufficient assets to pay benefits when due.

Employer contribution rates during the period were based on the December 31, 2013 actuarial valuation. The rates based on a percentage of payroll, first became effective July 1, 2015.

Tier 1/tier 2 employer contribution rates are 17.13 percent and the OPSRP employer contribution rates are 10.12 percent for general service employees and 14.23 percent for public safety employees. Employer contributions for the year ended June 30, 2016 were $1,967,444 excluding amounts to fund employer specific liabilities.

D. Pension asset or liability, pension expense and deferred outflows of resources and deferred inflows of resources related to pensions

At June 30, 2016, the County reported a liability of $12,124,527 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The County’s proportion of the net pension liability was based on a projection of the County’s long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined.

Employers' long-term contribution efforts are based on projected rates that have two major components:

1. Normal Cost Rate: The economic value, stated as a percent of payroll, for the portion of eachactive member’s total projected retirement benefit that is allocated to the upcoming year ofservice. The rate is in effect for as long as each member continues in OPERS-coveredemployment. The current value of all projected future Normal Cost Rate contributions is thePresent Value of Future Normal Costs (PVFNC). The PVFNC represents the portion of theprojected long-term contribution effort related to future service.

An employer’s PVFNC depends on both the normal cost rates charged on the employer’spayrolls, and on the underlying demographics of the respective payrolls. For OPERS funding,employers have up to three different payrolls, each with a different normal cost rate: (1) Tier1/Tier 2 payroll, (2) OPSRP general service payroll, and (3) OPSRP police and fire payroll.

The employer’s Normal Cost Rates for each payroll are combined with system-wide presentvalue factors for each payroll to develop an estimated PVFNC. The present value factors areactuarially determined at a system level for simplicity and to allow for the PVFNC calculationsto be audited in a timely, cost-effective manner.

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D. Pension asset or liability, pension expense and deferred outflows of resources anddeferred inflows of resources related to pensions (continued)

2. UAL Rate: If system assets are less than the actuarial liability, an Unfunded Actuarial Liability(UAL) exists. UAL can arise when an event such as experience differing from the assumptionsused in the actuarial valuation occurs. An amortization schedule is established to eliminate theUAL that arises over a fixed period of time if future experience follows assumption. The UALRate is the upcoming year’s component of the cumulative amortization schedules, stated as apercent of payroll. The present value of all projected UAL Rate contributions is equal to theUnfunded Actuarial Liability (UAL). The UAL represents the portion of the projected long-termcontribution effort related to past service.

The UAL has Tier 1/Tier 2 and OPSRP pieces. The Tier 1/Tier 2 piece is based on the employer’sTier 1/Tier 2 pooling arrangement. If an employer participates in one of the two large Tier 1/Tier2 rate pools [State & Local Government Rate Pool (SLGRP) or School Districts Rate Pool], thenthe employer’s Tier 1/Tier 2 UAL is their pro-rata share of their pool’s UAL. The pro-ratacalculation is based on the employer’s payroll in proportion to the pool’s total payroll. TheOPSRP piece of the UAL follows a parallel pro-rata approach, as OPSRP experience ismandatorily pooled at a state-wide level. Employers that do not participate in a Tier 1/Tier 2pooling arrangement, who are referred to as “Independent Employers”, have their Tier 1/Tier 2UAL tracked separately in the actuarial valuation.

The projected long-term contribution effort is the sum of the PVFNC and the UAL. The PVFNC part of the contribution effort pays for the value of future service while the UAL part of the contribution effort pays for the value of past service not already funded by accumulated contributions and investment earnings. Each of the two contribution effort components are calculated at the employer-specific level. The sum of these components across all employers is the total projected long-term contribution effort.

At June 30, 2015, the County’s proportion was 0.2112 percent, which is an increase of 0.0093 percent from its proportion measured as of June 30, 2014.

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D. Pension asset or liability, pension expense and deferred outflows of resources anddeferred inflows of resources related to pensions (continued)

For the year ended June 30, 2016, the County recognized pension expense of $12,677,946. At June 30, 2016, the County reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred DeferredOutflows of Inflows of Resources Resources

Difference between expected and actual experience $ 653,816 $ --Net difference between projected and actual earnings on pension plan investments -- 2,541,576Changes in proportion share -- 160,754Difference between County’s contributions and proportionate share of contributions -- 980,192County’s contributions subsequent to the measurement date 1,967,444 --

$ 2,621,260 $ 3,682,522

$1,967,444 reported as deferred outflows of resources related to pensions resulting from the County’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense (income) as follows:

Year ends June 30,

2017 $ (1,338,281)2018 (1,338,281)2019 (1,338,281)2020 1,003,6072021 (17,470)

$ 3,028,706

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E. Actuarial valuations

The December 31, 2013 actuarial valuation used the following actuarial methods and valuation procedures in determining the Tier One/Tier Two contribution rates.

Actuarial cost method

The employer contribution rates effective July 1, 2015, through June 30, 2017, were set using the entry age normal actuarial cost method. Under this actuarial cost method, each active member’s entry age present value of projected benefits is allocated over the member’s service from the member’s date of entry until their assumed date of exit, taking into consideration expected future compensation increases.

Tier One/Tier Two unfunded actuarial accrued liability amortization

The Tier 1/Tier 2 UAL amortization period is reset to 20 years as of December 31, 2013. Gains and losses between subsequent odd-year valuations will be amortized as a level percentage of combined valuation payroll (Tier 1/ Tier 2 plus OPSRP payroll) over a closed 20 year period from the valuation in which they are first recognized.

Retiree healthcare unfunded actuarial accrued liability amortization

The UAL for Retiree Health Care as of December 31, 2007 is amortized as a level percentage of combined valuation payroll (Tier 1/ Tier 2 plus OPSRP payroll) over a closed 10 year period. Gains and losses between subsequent odd-year valuations are amortized as a level percentage of combined valuation payroll over a closed 10 year period from the valuation in which they are first recognized.

Asset valuation method

The actuarial value of assets equals the market value of assets, excluding the Contingency and Capital Preservation Reserves, and the Rate Guarantee Reserve when it is in positive surplus status. Market values are reported to the actuary by PERS.

Contribution rate stabilization method

Contribution rates for a rate pool (e.g. Tier 1/Tier 2 SLGRP, Tier 1/Tier 2 School Districts, OPSRP) are confined to a collared range based on the prior contribution rate (prior to application of side accounts, pre-SLGRP liabilities, and 6 percent Independent Employer minimum). The new contribution rate will generally not increase or decrease from the prior contribution rate by more than the greater of 3 percentage points or 20 percent of the prior contribution rate. If the funded percentage excluding side accounts drops below 60% or increases above 140%, the size of the collar doubles. If the funded percentage excluding side accounts is between 60% and 70% or between 130% and 140%, the size of the rate collar is increased on a graded scale

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E. Actuarial valuations (continued)

Allocation of liability for service segments

For active Tier 1/Tier 2 members who have worked for multiple PERS employers over their career, the calculated actuarial accrued liability is allocated among the employers based on a weighted average of the Money Match methodology, which uses account balance, and the Full Formula methodology, which uses service. The allocation is 30% (5% for police & fire) based on account balance with each employer and 70% (95% for police & fire) based on service with each employer. The entire normal cost is allocated to the current employer.

Allocation of benefits-in-force reserve

The reserve is allocated to each rate pool in proportion to the retiree liability attributable to the rate pool.

Economic assumptions

Investment return 7.75% compounded annuallyPre-2014 interest crediting 8.00% compounded annually on regular account balances

8.25% compounded annually on variable account balancesPost 2013 interest crediting 7.75% compounded annuallyInflation 2.75% compounded annuallyPayroll growth 3.75% compounded annuallyHealthcare cost trends Ranges from 6.1% in 2014 to 4.7% in 2083

Demographic assumptions

Mortality tablesHealthy retirees RP 2000, Generational (Scale AA) Combined Active/Healthy

Annuitant, Sex DistinctDisabled retirees RP 2000, Static, Combined Disabled, No Collar, Sex Distinct

Male 65% and Female 90% of disabled tableNon-annuitants Ranges from 55% to 70% of healthy retired mortality tables

depending upon sex and employment typeRetirement assumptions

Probability tables based on age of member, years of service and employment type with all police and fire retired by age 65 and all others retired by age 70, election to receive a lump sum option at retirement, disability assumptions, termination assumptions and Oregon post-retirement residency assumptions.

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E. Actuarial valuations (continued)

Salary increase assumptions

Salary increase assumptions, in addition to general payroll growth, include merit increase, unused sick leave and vacation pay.

The December 31, 2013 actuarial valuation for OPSRP generally used the same actuarial methods and valuation procedures as Tier One/Tier Two contribution rates except as follows.

OPSRP unfunded actuarial accrued liability amortization

The UAL as of December 31, 2007 is amortized as a level percentage of combined valuation payroll (Tier 1/ Tier 2 plus OPSRP payroll) over a closed period 16 year period. Gains and losses between subsequent odd-year valuations are amortized as a level percentage of combined valuation payroll over 16 years from the valuation in which they are first recognized.

Economic assumptions

An additional amount for administrative expenses is added to the normal cost.

Retirement assumptions

Probability tables are different but still based on age of member, years of service and employment type with all police and fire retired by age 65 and all others retired by age 70, election to receive a lump sum option at retirement, disability assumptions, termination assumptions and Oregon post-retirement residency assumptions.

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F. Actuarial methods and assumptions used in developing total pension liability

Valuation Date December 31, 2013Measurement Date June 30, 2015Experience Study Report 2014, published September 2015 Actuarial Cost Method Entry Age Normal Actuarial Assumptions: Inflation Rate 2.75 percent Long-term expected rate of return 7.75 percent Discount rate 7.75 percent Projected Salary Increases 3.75 percent

Cost of living adjustments (COLA) Blend of 2.00 percent COLA and graded COLA (1.25%/.015) in accordance with Moro decision; blend based on service

Mortality Healthy retirees and beneficiaries: RP-2000 Sex-distinct, generational per Scale AA, with collar adjustments and set-backs as described in the valuation. Active members: Mortality rates are a percentage of healthy retiree rates that vary by group, as described in the valuation. Disabled retirees: Mortality rates are a percentage (65% for males, 90% for females) of the RP-2000 static combined disabled mortality sex-distinct table.

Actuarial valuations of an ongoing plan involve estimates of the value of projected benefits and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Experience studies are performed as of December 31 of even numbered years. The methods and assumptions shown above are based on the 2014 Experience Study which reviewed experience for the four-year period ending on December 31, 2014.

Discount rate

The discount rate used to measure the total pension liability was 7.75 percent for the Defined Benefit Pension Plan. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and those of the contributing employers are made at the contractually required rates, as actuarially determined. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments for the Defined Benefit Pension Plan was applied to all periods of projected benefit payments to determine the total pension liability.

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F. Actuarial methods and assumptions used in developing total pension liability (continued)

Long-term expected rate of return

To develop an analytical basis for the selection of the long-term expected rate of return assumption, in July 2013 the PERS Board reviewed long-term assumptions developed by both the actuaries capital market assumptions team and the Oregon Investment Council's (OIC) investment advisors. Each asset class assumption is based on a consistent set of underlying assumptions, and includes adjustment for the inflation assumption. These assumptions are not based on historical returns, but instead are based on forward-looking capital market economic model. For more information on the Plan's portfolio, assumed asset allocation and the long-term expected reate of return for each major asset class, calculated using both arithmetic and geometric means, see PERS audited financial statements.

The table below presents the assumptions for each of the asset classes in which the Plan was invested at the time based on the OIC's long-term target asset allocation.

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F. Actuarial methods and assumptions used in developing total pension liability (continued)

Depletion date projection

GASB 68 generally requires that a blended discount rate be used to measure the Total Pension Liability (the Actuarial Accrued Liability calculated using the Individual Entry Age Normal Cost Method). The long-term expected return on plan investments may be used to discount liabilities to the extent that the plan’s Fiduciary Net Position (fair market value of assets) is projected to cover benefit payments and administrative expenses. A 20-year high quality (AA/Aa or higher) municipal bond rate must be used for periods where the Fiduciary Net Position is not projected to cover benefit payments and administrative expenses. Determining the discount rate under GASB 67 will often require that the actuary perform complex projections of future benefit payments and asset values. GASB 67 (paragraph 43) does allow for alternative evaluations of projected solvency, if such evaluation can reliably be made. GASB does not contemplate a specific method for making an alternative evaluation of sufficiency; it is left to professional judgment.

The following circumstances justify an alternative evaluation of sufficiency for OPERS:

OPERS has a formal written policy to calculate an Actuarially Determined Contribution (ADC),which is articulated in the actuarial valuation report.

The ADC is based on a closed, layered amortization period, which means that payment of thefull ADC each year will bring the plan to a 100% funded position by the end of the amortizationperiod if future experience follows assumption.

GASB 68 specifies that the projections regarding future solvency assume that plan assets earnthe assumed rate of return and there are no future changes in the plan provisions or actuarialmethods and assumptions, which means that the projections would not reflect any adverse futureexperience which might impact the plan’s funded position.

Based on these circumstances, it is OPERS independent actuary’s opinion that the detailed depletion date projections outlined in GASB 67 would clearly indicate that the Fiduciary Net Position is always projected to be sufficient to cover benefit payments and administrative expenses.

G. Sensitivity of the County’s proportionate share of the net pension liability to changes in the discount rate.

The following presents the County’s proportionate share of the net pension liability calculated using the discount rate of 7.75 percent, as well as what the County’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.75 percent) or 1-percentage-point higher (8.75 percent) than the current rate:

1 Percentage Current 1 Percentage Point Discount Point Lower Rate Higher

The County’s proportionate share of net pension liability or (asset) $ 29,262,095 $ 12,124,527 $ (2,317,940)

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12. Defined Contribution Retirement Plan

OPSRP Individual Account Program (OPSRP IAP)

Pension Benefits

An IAP member becomes vested on the date the employee account is established or on the date the rolloveraccount was established. If the employer makes optional employer contributions for a member, themember becomes vested on the earliest of the following dates: the date the member completes 600 hoursof service in each of five calendar years, the date the member reaches normal retirement age, the date theIAP is terminated, the date the active member becomes disabled, or the date the active member dies.

Upon retirement, a member of the OPSRP Individual Account Program (IAP) may receive the amountsin his or her employee account, rollover account, and vested employer account as a lump-sum paymentor in equal installments over a 5-, 10-, 15-, 20-year period or an anticipated life span option. Eachdistribution option has a $200 minimum distribution limit.

Death Benefits

Upon the death of a non-retired member, the beneficiary receives in a lump sum the member’s accountbalance, rollover account balance, and vested employer optional contribution account balance. If a retiredmember dies before the installment payments are completed, the beneficiary may receive the remaininginstallment payments or choose a lump-sum payment.

Recordkeeping

OPERS contracts with VOYA Financial to maintain IAP participant records.

13. Other Post-Employment Benefits

The County provides post-retirement health care benefits in accordance with Oregon Revised Statutes(ORS) 243.303. This ORS requires that Oregon governments offer pre-Medicare health care insurancecoverage to retirees at the same premium rates charged to active employees. Health care premiums, pricedonly for retirees who on average incur higher health care claims costs than younger active employees,would be more expensive than health care premiums that are priced to cover the average costs of bothactives and retirees combined. GASB 45, a new accounting and financial reporting pronouncement,requires that this implicit subsidy be included in the liabilities and costs reported on the County’s financialstatements.

County retirees and their dependents under age 65 are allowed to receive the same health care coverageat the same premium rates as offered to active employees. The retiree is responsible for all premiums;none of the premiums are paid by the County. All employees of the County who retire from active servicewith a PERS pension benefit payable immediately are eligible for this benefit. The implicit employersubsidy is measured as the expected health care cost per retiree and dependent, less the gross premiumscharged by the insurance carrier for that coverage. The subsidy is only measured for retirees and spousesyounger than age 65, at which point such retirees and spouses typically become eligible for Medicare.

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13. Other Post-Employment Benefits (continued)

At the August 1, 2014 actuarial valuation date, there were 243 active employees and 12 retirees andspouses of retirees receiving benefits.

The County funds the other post-employment benefits only to the extent of current year insurancepremium requirements on a pay-as-you-go basis. The premium requirements for the County are asfollows:

Retirees SpousesExpected monthly cost –Medical, vision Male Female Male Female

Age 50 $ 900 $ 1,021 $ 641 $ 759Age 55 959 1,007 764 847Age 60 1,175 1,145 940 980Age 64 1,473 1,327 1,175 1,131

Retirees SpousesExpected monthly cost - Dental Male Female Male Female

Age 50 $ 62 $ 69 $ 62 $ 69Age 55 69 74 69 74Age 60 77 78 77 78Age 64 81 80 81 80

The County has not established an irrevocable trust to accumulate assets to fund the cost of the net OPEB obligation that arises from the implicit subsidy.

Polk County’s annual OPEB (other post-employment benefit) is calculated based on the annual required contributions of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB 45. The ARC represent a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period of 15 years. The County’s annual liability is the total of the current year’s cost plus the current year amortization of the prior unfunded liability. In the year of implementation of the new standard, it is required that the employer ARC be recognized as a current year cost and liability. The Standard does not require accrual of the unamortized unfunded liability.

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The following table shows components of the County’s annual OPEB cost for the fiscal year ending June30, 2016, the amount actually contributed to the plan, and changes in the County’s net OPEB liability:

Annual Required Contribution 295,816

Interest earned on net OPEB obligation 67,116

Adjustment to the ARC (230,576)

Annual OPEB cost (expense) 132,356

Implicit benefit payments (102,993)

Increase in Net OPEB Obligation 29,363

Net OPEB Obligation – beginning of year 1,917,613

Net OPEB Obligation – end of year $ 1,946,976

As of August 1, 2014, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $1,518,053, and the actuarial value of assets was zero, resulting in an unfunded accrued liability of $1,518,053.

The County’s schedule of funding progress as of the dates of actuarial valuation is as follows:

Actuarial Actuarial UAAL as a

Valuation Value of AAL Unit Funded Covered Percent of

Date Assets Credit UAAL Ratio Payroll Covered Payroll

8/1/2014 $ - 1,518,053$ $ 1,518,053 0% 14,864,117 10%

8/1/2012 - 1,943,672 1,943,672 0% 15,664,907 12%

8/1/2010 - 1,953,122 1,953,122 0% 13,928,664 14%

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The County’s annual OPEB cost, percentage of annual OPEB cost contributed to the plan, and the netOPEB obligation as of June 30, 2009 to 2016 is as follows:

Percentage Fiscal Annual Annual OPEB Net OPEBYear Ended OPEB Cost Cost Contributed Obligation

June 30, 2009 $ 404,332 18% $ 332,858June 30, 2010 414,011 20% 662,113June 30, 2011 438,523 24% 993,795June 30, 2012 303,054 24% 1,222,609June 30, 2013 321,429 29% 1,450,107June 30, 2014 300,930 23% 1,682,851June 30, 2015 316,135 26% 1,917,613June 30, 2106 132,356 78% 1,946,976

14. Net Position Restricted Through Enabling Legislation

The government-wide statement of net position reports $9,576,690 of restricted net position, of which$9,402,663 is restricted by enabling legislation.

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15. Governmental Fund Balances

Fund balance amounts for governmental funds have been reported in the categories of nonspendable,restricted, committed, assigned and unassigned. The specific purposes for these amounts are as follows:

General

Public

Works

Behavioral

Health

Health

Services

Building

Improvement

Nonmajor

Funds Totals

Nonspendable:

Inventory -$ 235,054$ -$ -$ -$ 235,054$

Prepaids 44,755 - 17,470 825 37,694 100,744

Restricted for: -

Roads and street maintenance - 762,696 - - - 762,696

Bicycle path

construction/maintenance - 210,457 - - - 210,457

Bridge construction - - - - - -

Law enforcement - - - 298,170 298,170

Health and welfare - - 6,350,497 180,848 86,387 6,617,732

Economic development - - - 346,027 346,027

Education - - - 18,077 18,077

Debt service - - - 24,574 24,574

Other purposes 181,711 - - 159,069 340,780

Committed for:

Dog control - - - 13,152 13,152

Fair and fairgrounds facility support - - - 17,905 17,905

Unassigned 4,368,666 - - - (637,607) (69,394) 3,661,665

Total Fund Balances 4,595,132$ 1,208,207$ 6,367,967$ 181,673$ (637,607)$ 931,661$ 12,647,033$

16. Deficit Fund Balance

As of June 30, 2016, the Building Improvement Fund has a deficit fund balance in the amount of $637,607.This deficit will be eliminated through increased transfers from other funds.

As of June 30, 2016, the Doaks Ferry Interchange Fund has a deficit fund balance in the amount of$67,841. It is expected that grant revenue will be received from Oregon Department of Transportation inthe subsequent year to eliminate this deficit.

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REQUIRED SUPPLEMENTARY INFORMATION

2016 2015 2014

Proporation of the collective net pension liability (asset) 0.21117493% 0.22053790% 0.22053790%

Proporationate share of the collective net pension liability

(asset) 12,124,527$ (4,998,965)$ 11,254,372$

Covered payroll 15,389,727$ 13,843,399$ 14,470,863$

Proporationate share of the collective net pension liability

(asset) as a percentage of the covered payroll 78.783% -36.111% 77.773%

Pension plan's fiduciary net position as a percentage of the

total pension liability 108.843% 103.590% 91.974%

SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

OREGON PUBLIC EMPLOYEES RETIREMENT SYSTEM

Last 10 Years Ended June 30, *

POLK COUNTY

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2016 2015 2014

Contractually required contributions 1,967,344$ 1,504,827$ 1,577,230$

Contractually required contributions recognized by the pension plan 1,967,344 1,504,827 1,577,230

Difference - - -

Covered payroll 15,389,727 13,843,399 14,470,863

Contractually required contributions as a percentage of covered payroll 12.78349% 10.87036% 10.89935%

* Information will be accumlated until 10 years are presented.

SCHEDULE OF CONTRIBUTIONSOREGON PUBLIC EMPLOYEES RETIREMENT SYSTEM

Last 10 Years Ended June 30, *

POLK COUNTY

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COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES


EXPENDITURES

Academy Building Improvement

Materials and services 7,500 3,804 3,696

Debt service 210,000 202,680 7,320


Total Academy Building Improvement 617,500 206,484 411,016

Courthouse Building Improvement


Capital outlay 70,000 54,765 15,235

Total Courthouse Building Improvement 132,500 105,961 26,539

TOTAL EXPENDITURES 750,000 312,445 437,555

Excess (deficiency) of revenues over expenditures (750,000) (312,445) 437,555


Transfers in 750,000 750,000 -

Net change in fund balance - 437,555 437,555

Fund balance at beginning of year - (1,075,162) (1,075,162)

Fund balance at end of year $ - $ (637,607) $ (637,607)


POLK COUNTY

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL

BUILDING IMPROVEMENT - CAPITAL PROJECTS FUND(A MAJOR FUND)


NON-MAJOR GOVERNMENTAL FUNDS

Special Revenue Funds

Special revenue funds account for revenues derived from specific taxes or other earmarked sources, including federal and state grant awards, which are restricted to particular functions or activities. Funds included in this category are:

Polk Interagency Narcotics Team – accounts for the receipt and expenditures of grants, forfeitures and other moneys belonging to the interagency group, the POINT team, to support drug enforcement and education activities.

Multi-Disciplinary Intervention – accounts for the receipt and expenditures of a grant received each year from the Children’s Services Division, the CAMI grant, disbursements are made as requested by the District Attorney.

Domestic Mediation – accounts for the receipt and expenditures of funds received from the Court and the state which are used to provide mediation services in child custody and visitation disputes.

Court Security – accounts for the receipts and expenditures of funds received from County assessments on fines and from the state for the purpose of providing security in buildings that contain state court facilities located within the County.

Public Land Corner – accounts for the receipt of recording fees and expenditures for surveying landmarks.

Dog Control – accounts for the receipt of permits and license fees for animal control.

Marine Patrol – accounts for the receipt and expenditure of funds received from the state for marine patrol activities.

Law Library – accounts for the receipt and expenditure of certain court fees, state funding and charges for maintaining a law library.

Public Health – accounts for the receipt and expenditures of state and federal grants, patient fees and a transfer from the General Fund for use in promoting public health including family planning, general health and Women’s Infants’ and Children’s programs.

Juvenile – accounts for the receipt and expenditures of state grants and a transfer from the General Fund for juvenile corrections programs.

NON-MAJOR GOVERNMENTAL FUNDS (continued)

Special Revenue Funds (continued)

Youth Programs – accounts for the receipt and expenditures of state and federal grants for the operations of mentor, monitor and shelter home programs for youth.

Fair – accounts for the receipt and expenditures of state funding, Fair admission, rentals andconcessions for operation of the annual County Fair and operations of the Fair buildings and grounds.

County School – accounts for receipt and expenditures of various state allocations for distribution to County school districts.

Economic Development – accounts for the receipt and expenditures of state grants and to promote economic development in the County.

Household Hazardous Waste – accounts for the receipt and expenditures of charges for services to operate the County’s household hazardous waste program.

Extension – accounts for Oregon State University extension services educational programs, training and information for Polk County residents.

Debt Service Fund

The Debt Service Fund accounts for payment of general obligation bond principal and interest. The principal source of revenue is property taxes.

Capital Projects Funds

The capital projects funds account for resources used in the acquisition and construction of capitalfacilities and equipment. Funds included in this category are:

OTIA III Bridge Replacement – accounts for the receipt and expenditure of funds provided by Oregon State bonds for repairs and improvements to public infrastructure.

Doaks Ferry Road/Hwy 22 and 51 – accounts for the receipt and expenditure of funds provided by Oregon Department of Transportation for improvements on Doaks Ferry Road, Highway 22 and Highway 51.

Special

Revenue

Debt

Service

Doaks Ferry

Road Hwy 22

& 51 Totals

ASSETS

Cash and investments $ 859,199 $ 1,655 $ - $ 860,854

Receivables 260,895 172,372 24,917 458,184

Prepaid items 37,694 - - 37,694

TOTAL ASSETS $1,157,788 $ 174,027 $ 24,917 $1,356,732

LIABILITIES

Accounts payable and accrued liabilities 156,202$ $ - 1,010$ 157,212$

Due to General Fund 661 - 91,748 92,409

TOTAL LIABILITIES 156,863 - 92,758 249,621

DEFERRED INFLOWS OF RESOURCES Unavailable revenue 25,997 149,453 - 175,450

FUND BALANCES

Nonspendable 37,694 - - 37,694

Restricted 907,730 24,574 - 932,304

Committed 31,057 - - 31,057

Unassigned (1,553) - (67,841) (69,394)

TOTAL FUND BALANCES 974,928 24,574 (67,841) 931,661

$1,157,788 $ 174,027 $ 24,917 $1,356,732

POLK COUNTY

COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS

June 30, 2016

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

60

Special Debt CapitalRevenue Service Projects Totals

REVENUES

Property taxes $ 383,446 $ 2,696,595 $ - $ 3,080,041

Licenses, fees and permits 52,250 - - 52,250

Intergovernmental 2,528,351 - 380,314 2,908,665

Charges for services 548,104 - - 548,104

Franchise fees 72,605 - - 72,605

Fines and forfeitures 13,033 - - 13,033

Donations 35,206 - - 35,206

Interest 1,994 237 630 2,861

Miscellaneous 5,132 - - 5,132

TOTAL REVENUES 3,640,121 2,696,832 380,944 6,717,897

EXPENDITURES

Current

General government 988,120 - - 988,120

Public safety 1,605,748 - - 1,605,748

Highways and streets 99,179 - - 99,179

Health and welfare 1,875,562 - - 1,875,562

Education 382,261 - - 382,261

Debt service - principal - 2,555,000 - 2,555,000

Debt service - interest - 202,375 - 202,375

Capital outlay - - 476,906 476,906

TOTAL EXPENDITURES 4,950,870 2,757,375 476,906 8,185,151

Excess (deficiency) of revenues over expenditures (1,310,749) (60,543) (95,962) (1,467,254)


Transfers in 1,225,000 - - 1,225,000

Net change in fund balances (85,749) (60,543) (95,962) (242,254)

Fund balances at beginning of year 1,060,677 85,117 28,121 1,173,915

Fund balances at end of year $ 974,928 $ 24,574 $ (67,841) $ 931,661


POLK COUNTY

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

NONMAJOR GOVERNMENTAL FUNDS

61

Polk

Interagency

Narcotics

Team

Multi-

Disciplinary

Intervention

Domestic

Mediation

Court

Security

Public Land

Corner

Dog

Control

Marine

Patrol

Law

Library

ASSETS

Cash and investments $ 113,726 $ 934 $ 4,749 $ 106,023 $ 40,540 $ 14,805 $ - $ 6,409

Receivables - 28,711 - 2,070 - - 21,281 -

Prepaid items 2,017 - - - - - - -

TOTAL ASSETS $ 115,743 $ 29,645 $ 4,749 $ 108,093 $ 40,540 $ 14,805 $ 21,281 $ 6,409

LIABILITIES

Accounts payable and accrued liabilities $ 484 $ 13,474 $ 6,302 -$ $ - $ 1,653 $ 4,782 $ 2,406

Due to General Fund - - - - - - 661 -

TOTAL LIABILITIES 484 13,474 6,302 - - 1,653 5,443 2,406


Unavailable revenue - - - - - - - -

FUND BALANCES

Nonspendable 2,017 - - - - - - -

Restricted 113,242 16,171 - 108,093 40,540 - 15,838 4,003

Committed - - - - - 13,152 - -

Unassigned - - (1,553) - - - - -

TOTAL FUND BALANCES 115,259 16,171 (1,553) 108,093 40,540 13,152 15,838 4,003

TOTAL LIABILITIES, DEFERRED INFLOWS OF

RESOURCES AND FUND BALANCES $ 115,743 29,645$ 4,749$ 108,093$ 40,540$ 14,805$ 21,281$ 6,409$

POLK COUNTY

COMBINING BALANCE SHEETSPECIAL REVENUE FUNDS

June 30, 2016

62

Public

Health Juvenile Fair

Economic

Development

Household

Hazardous

Waste Extension Totals

$ 54,953 $ 22,888 $ 30,143 $ 365,032 $ 86,903 $ 12,094 $ 859,199

104,360 60,479 101 5,000 15,809 23,084 260,895

650 2,067 9,024 20,000 - 3,936 37,694

$ 159,963 $ 85,434 $ 39,268 $ 390,032 $ 102,712 $ 39,114 $ 1,157,788

$ 66,784 $ 22,370 $ 12,339 $ 24,005 $ 354 $ 1,249 $ 156,202

- - - - - - 661

66,784 22,370 12,339 24,005 354 1,249 156,863

6,142 - - - - 19,855 25,997

650 2,067 9,024 20,000 - 3,936 37,694

86,387 60,997 - 346,027 102,358 14,074 907,730

- - 17,905 - - - 31,057

- - - - - - (1,553)

87,037 63,064 26,929 366,027 102,358 18,010 974,928

159,963$ 85,434$ 39,268$ 390,032$ 102,712$ 39,114$ 1,157,788$

63

Polk

Interagency

Narcotics

Team

Multi-

Disciplinary

Intervention

Domestic

Mediation

Court

Security

Public Land

Corner

Dog

Control

Marine

Patrol

Law

Library

REVENUES

Property taxes $ - $ - $ - $ - $ - $ - $ - $ -

Licenses, fees and permits - - - - - 52,250 - -

Intergovernmental 25,000 113,445 29,520 15,564 - - 60,698 55,280

Charges for services - - - - 124,612 432 - -

Franchise fees - - - - - - - -

Fines and forfeitures 300 - - 12,423 - 310 - -

Donations - - - - - - - -

Interest - - - 616 - - - -

Miscellaneous 1,733 - - - - - - -

TOTAL REVENUES 27,033 113,445 29,520 28,603 124,612 52,992 60,698 55,280

EXPENDITURES

Current

General government - - 50,079 - - - - 60,611

Public safety 16,556 107,892 - 24,394 - 167,172 59,708 -

Highways and streets - - - - 99,179 - - -

Health and welfare - - - - - - - -

Education - - - - - - - -

TOTAL EXPENDITURES 16,556 107,892 50,079 24,394 99,179 167,172 59,708 60,611

Excess (deficiency) of revenues over expenditures 10,477 5,553 (20,559) 4,209 25,433 (114,180) 990 (5,331)


Transfers in - - 10,000 - - 115,000 5,000 5,000

Net change in fund balances 10,477 5,553 (10,559) 4,209 25,433 820 5,990 (331)

Fund balances at beginning of year 104,782 10,618 9,006 103,884 15,107 12,332 9,848 4,334

Fund balances at end of year $ 115,259 $ 16,171 $ (1,553) $ 108,093 $ 40,540 $ 13,152 $ 15,838 $ 4,003


POLK COUNTY

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

SPECIAL REVENUE FUNDS

64

Public

Health Juvenile

Youth

Programs Fair

County

School

Economic

Development

Household

Hazardous

Waste Extension Totals

$ - $ - $ - $ - $ - $ - $ - $ 383,446 $ 383,446

- - - - - - - - 52,250

1,496,007 261,713 - 113,667 143,059 214,398 - - 2,528,351

130,740 33,470 - 258,850 - - - - 548,104

- - - - 1,138 - 71,467 - 72,605

- - - - - - - - 13,033

1,514 - - 24,192 - - - 9,500 35,206

- - 706 - - - - 672 1,994

- - - 3,385 - - 14 - 5,132

1,628,261 295,183 706 400,094 144,197 214,398 71,481 393,618 3,640,121

- 8,233 - 424,576 144,197 237,546 62,878 - 988,120

- 1,040,712 189,314 - - - - - 1,605,748

- - - - - - - - 99,179

1,875,562 - - - - - - - 1,875,562

- - - - - - - 382,261 382,261

1,875,562 1,048,945 189,314 424,576 144,197 237,546 62,878 382,261 4,950,870

(247,301) (753,762) (188,608) (24,482) - (23,148) 8,603 11,357 (1,310,749)

215,000 800,000 - 75,000 - - - - 1,225,000

(32,301) 46,238 (188,608) 50,518 - (23,148) 8,603 11,357 (85,749)

119,338 16,826 188,608 (23,589) - 389,175 93,755 6,653 1,060,677

$ 87,037 $ 63,064 $ - $ 26,929 -$ $ 366,027 $ 102,358 $ 18,010 $ 974,928

65


REVENUES

Intergovernmental $ 30,000 $ 25,000 (5,000)$

Fines and forfeitures - 300 300


TOTAL REVENUES 30,000 27,033 (2,967)

EXPENDITURES


Interdepartment charges 8,821 8,821 -


Net change in fund balance (120,000) 10,477 130,477

Fund balance at beginning of year 120,000 104,782 (15,218)

Fund balance at end of year $ - $ 115,259 $ 115,259


POLK COUNTY

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -

BUDGET AND ACTUAL

POLK INTERAGENCY NARCOTICS TEAM - SPECIAL REVENUE FUND

66


REVENUES

Intergovernmental $ 115,000 $ 113,445 $ (1,555)

EXPENDITURES

Personal services 33,937 33,382 555








POLK COUNTY


BUDGET AND ACTUAL

MULTI-DISCIPLINARY INTERVENTION - SPECIAL REVENUE FUND

67


REVENUES


EXPENDITURES

Materials and services 49,441 48,520 921


TOTAL EXPENDITURES 51,000 50,079 921


expenditures (11,000) (20,559) (9,559)


Transfers in 10,000 10,000 -

Net change in fund balance (1,000) (10,559) (9,559)

Fund balance at beginning of year 1,000 9,006 8,006



POLK COUNTY


BUDGET AND ACTUAL

DOMESTIC MEDIATION - SPECIAL REVENUE FUND

68


REVENUES

Intergovernmental $ 15,000 $ 15,564 $ 564

Fines and forfeitures 10,000 12,423 2,423

Interest 1,000 616 (384)

TOTAL REVENUES 26,000 28,603 2,603

EXPENDITURES









POLK COUNTY


BUDGET AND ACTUAL

COURT SECURITY - SPECIAL REVENUE FUND

69


REVENUES

Charges for services $ 100,000 $ 124,612 $ 24,612

EXPENDITURES








POLK COUNTY


BUDGET AND ACTUAL

PUBLIC LAND CORNER - SPECIAL REVENUE FUND

70


REVENUES

Licenses, fees and permits $ 75,000 $ 52,250 $ (22,750)

Charges for services - 432 432

Fines and forfeitures 1,000 310 (690)

TOTAL REVENUES 76,000 52,992 (23,008)

EXPENDITURES

Personal services 128,862 124,384 4,478






Transfers in 115,000 115,000 -

Net change in fund balance (22,500) 820 23,320




POLK COUNTY


BUDGET AND ACTUAL

DOG CONTROL - SPECIAL REVENUE FUND

71


REVENUES


EXPENDITURES





Excess (deficiency) of revenues over expenditures (10,251) 990 11,241


Transfers in 5,000 5,000 -





POLK COUNTY


BUDGET AND ACTUAL

MARINE PATROL - SPECIAL REVENUE FUND

72


REVENUES

Intergovernmental $ 50,000 $ 55,280 $ 5,280

EXPENDITURES






Transfers in 10,000 5,000 (5,000)

Net change in fund balance (5,000) (331) 4,669

Fund balance at beginning of year 5,000 4,334 (666)



POLK COUNTY


BUDGET AND ACTUAL

LAW LIBRARY - SPECIAL REVENUE FUND

73


REVENUES

Intergovernmental $ 1,391,000 $ 1,496,007 $ 105,007


Donations 3,000 1,514 (1,486)

TOTAL REVENUES 1,564,000 1,628,261 64,261

EXPENDITURES

Family Planning


Materials and services 61,300 64,126 (2,826)


Total Family Planning 248,303 248,216 87

General Health




Total General Health 1,329,791 1,323,200 6,591

Women, Infants and Children




Total Women, Infants and Children 305,906 304,146 1,760



expenditures (320,000) (247,301) 72,699


Transfers in 295,000 215,000 (80,000)




POLK COUNTY


BUDGET AND ACTUAL

PUBLIC HEALTH - SPECIAL REVENUE FUND


74


REVENUES


Charges for services 19,500 33,470 13,970

TOTAL REVENUES 332,500 295,183 (37,317)

EXPENDITURES

Juvenile Probations




Total Juvenile Probations 751,718 701,725 49,993

Juvenile Sanctions



Total Juvenile Sanctions 394,615 338,987 55,628

Juvenile Community Service

Personal services 35,445 - 35,445


Interdepartment charges 722 722 -

Total Juvenile Community Service 48,167 8,233 39,934




Transfers in 800,000 800,000 -




POLK COUNTY


BUDGET AND ACTUAL

JUVENILE - SPECIAL REVENUE FUND


75


REVENUES

Intergovernmental $ 660,000 $ - $ (660,000)

Interest - 706 706

TOTAL REVENUES 660,000 706 (659,294)

EXPENDITURES


Interdepartment charges 15,000 74,314 (59,314)

Contingency 40,000 - 40,000




Fund balance at end of year $ - $ - $ -

POLK COUNTY


BUDGET AND ACTUAL

YOUTH PROGRAMS - SPECIAL REVENUE FUND


76


REVENUES



Donations 30,000 24,192 (5,808)

Miscellaneous 2,000 3,385 1,385

TOTAL REVENUES 418,000 400,094 (17,906)

EXPENDITURES

Annual Fair




Total Annual Fair 186,000 161,026 24,974

Year Around Operation




Total Year Around Operation 332,000 263,550 68,450




Transfers in 80,000 75,000 (5,000)


Fund balance at beginning of year 20,000 (23,589) (43,589)


POLK COUNTY


BUDGET AND ACTUAL

FAIR - SPECIAL REVENUE FUND


77


REVENUES


Franchise fees 122,500 1,138 (121,362)

TOTAL REVENUES 145,000 144,197 (803)

EXPENDITURES

Materials and services 145,000 144,197 803

Net change in fund balance - - -

Fund balance at beginning of year - - -


POLK COUNTY


BUDGET AND ACTUAL

COUNTY SCHOOL - SPECIAL REVENUE FUND


78


REVENUES


EXPENDITURES





TOTAL EXPENDITURES 1,267,500 237,546 1,029,954

Net change in fund balance (387,500) (23,148) 364,352 Fund balance at beginning of year 387,500 389,175 1,675


POLK COUNTY


BUDGET AND ACTUAL

ECONOMIC DEVELOPMENT - SPECIAL REVENUE FUND


79


REVENUES

Franchise fees $ 68,000 $ 71,467 3,467$

Miscellaneous - 14 14

TOTAL REVENUES 68,000 71,481 3,481

EXPENDITURES

Personal services 24,520 33,876 (9,356)




Net change in fund balance (97,000) 8,603 105,603 Fund balance at beginning of year 97,000 93,755 (3,245)


POLK COUNTY


BUDGET AND ACTUAL

HOUSEHOLD HAZARDOUS WASTE - SPECIAL REVENUE FUND


80


REVENUES

Property tax $ 380,500 $ 383,446 2,946$

Donations - 9,500 9,500

Interest 350 672 322

TOTAL REVENUES 380,850 393,618 12,768

EXPENDITURES

Education 382,850 382,261 589

Contingency 5,000 - 5,000


Net change in fund balance (7,000) 11,357 18,357 Fund balance at beginning of year 7,000 6,653 (347)



POLK COUNTY

EXTENSION - SPECIAL REVENUE FUND


BUDGET AND ACTUAL

81


REVENUES

Property taxes $ 2,706,875 $ 2,696,595 $ (10,280)

Interest 500 237 (263)

TOTAL REVENUES 2,707,375 2,696,832 (10,543)

EXPENDITURES

Debt service 2,757,375 2,757,375 -




POLK COUNTY


BUDGET AND ACTUAL

DEBT SERVICE FUND


82

OTIA III Bridge Doaks Ferry Road

Replacement Hwy 22 & 51 Totals

REVENUES

Intergovernmental -$ 380,314$ 380,314$

Interest 630 - 630

TOTAL REVENUES 630 380,314 380,944

EXPENDITURES

Capital outlay 345,389 131,517 476,906

Net change in fund balances (344,759) 248,797 (95,962)

Fund balances at beginning of year 344,759 (316,638) 28,121

Fund balances at end of year -$ (67,841)$ (67,841)$


POLK COUNTY

COMBINING STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCES

CAPITAL PROJECTS FUNDS

83


REVENUES

Interest $ 2,000 $ 630 $ (1,370)

EXPENDITURES

Personal services 8,177 8,180 (3)




Net change in fund balance (360,000) (344,759) 15,241




POLK COUNTY


BUDGET AND ACTUAL

OTIA III BRIDGE REPLACEMENT - CAPITAL PROJECTS FUND

84


REVENUES


EXPENDITURES

Personal services 27,327 27,621 (294)





Net change in fund balance - 248,797 248,797

Fund balance at beginning of year - (316,638) (316,638)



POLK COUNTY


BUDGET AND ACTUAL

DOAKS FERRY ROAD/HWY 22 & 51 - CAPITAL PROJECTS FUND

85

INTERNAL SERVICE FUNDS

Management Services

The Management Services Fund accounts for building maintenance, fiscal and personnel services, legal counsel and general services. Charges are made to other funds to recover the costs of providing these services.

Insurance

The Insurance Fund accounts for all costs incurred by the County under its insurance programs, up to policy deductible limits. Funding sources are revenues from investment income, proceeds from insurance recoveries, and charges to other funds.

Management

Services Insurance Totals

ASSETS

Current assets

Cash and investments 661,869$ 318,527$ 980,396$

Receivables 40,057 - 40,057

Prepaid items 90,724 - 90,724

Total current assets 792,650 318,527 1,111,177

Capital assets, net 166,976 - 166,976

TOTAL ASSETS 959,626 318,527 1,278,153


Pension related items 282,971 - 282,971

LIABILITIES

Accounts payable and accrued liabilities 66,746 145,657 212,403


Due within one year 135,074 - 135,074

Due in more than one year 1,506,765 - 1,506,765

TOTAL LIABILITIES 1,708,585 145,657 1,854,242


Pension related items 397,552 - 397,552

NET POSITION

Investment in capital assets 166,976 - 166,976

Unrestricted (1,030,516) 172,870 (857,646)

TOTAL NET POSITION (863,540)$ 172,870$ (690,670)$

POLK COUNTY

COMBINING STATEMENT OF NET POSITION


June 30, 2016

86

Management

Services Insurance Totals

OPERATING REVENUES

Intergovernmental 74,680$ -$ 74,680$

Charges for services 4,775,639 758,515 5,534,154

Miscellaneous 6,149 1,231 7,380

TOTAL OPERATING REVENUES 4,856,468 759,746 5,616,214

OPERATING EXPENSES

Personal services 3,853,898 59,518 3,913,416

Materials and services 1,231,223 870,505 2,101,728

Interest on long-term obligations 1,259 - 1,259

Depreciation 65,328 - 65,328

TOTAL OPERATING EXPENSES 5,151,708 930,023 6,081,731

Operating (loss) (295,240) (170,277) (465,517)

NONOPERATING REVENUE (EXPENSE)

Gain on sale of capital assets 1,875 - 1,875

(Loss) before transfers (293,365) (170,277) (463,642)

Transfers out (750,000) - (750,000)

Change in net position (1,043,365) (170,277) (1,213,642)

Net position - beginning 179,825 343,147 522,972

Net position - end (863,540)$ 172,870$ (690,670)$

POLK COUNTY

COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN


Year Ended June 30, 2016

NET POSITION

87

ManagementServices Insurance Totals

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 4,832,896$ 758,515$ 5,591,411$

Other receipts 6,149 1,231 7,380

Payments to employees for services (2,596,379) (59,518) (2,655,897)

Payments to suppliers of goods or services (1,243,060) (818,708) (2,061,768)

Net cash provided by operating activities 999,606 (118,480) 881,126

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Purchase of capital assets (96,143) - (96,143)

Sale of capital assets 1,875 - 1,875

Transfers out (750,000) - (750,000)

Principal payments on long-term obligations (20,306) - (20,306)

Net cash (used) in financing activities (864,574) - (864,574)

Net increase in cash and cash equivalents 135,032 (118,480) 16,552

Cash and cash equivalents, beginning of year 526,837 437,007 963,844

Cash and cash equivalents, end of year 661,869$ 318,527$ 980,396$

Reconciliation of operating (loss) to net cash

provided by operating activities

Operating (loss) (295,240)$ (170,277)$ (465,517)$

Adjustments to reconcile operating (loss) to net

cash provided by operating activities:

Depreciation 65,328 - 65,328

(Increase) decrease in assets:

Receivables (17,423) - (17,423)

Prepaid items (30,097) - (30,097)

Net pension asset 874,392 - 874,392

Deferred outflows of resources (138,582) - (138,582)

Increase (decrease) in liabilities:

Accounts payable and accrued liabilities 19,519 51,797 71,316

Compensated absences 25,177 - 25,177

Net pension liability 1,308,921 - 1,308,921

Net OPEB obligation 3,170 - 3,170

Deferred inflows of resources (815,559) - (815,559)

Net cash provided by operating activities 999,606$ (118,480)$ 881,126$

POLK COUNTY

COMBINING STATEMENT OF CASH FLOWS



88


REVENUES

Intergovernmental $ 50,000 74,680$ 24,680$

Charges for services 4,714,000 4,775,639 61,639Miscellaneous - 6,149 6,149

TOTAL REVENUES 4,764,000 4,856,468 92,468

EXPENDITURES

Board of Commissioners



Total Board of Commissioners 304,661 304,552 109

GIS-Computer Mapping



Total GIS-Computer Mapping 259,496 205,841 53,655

Equipment Replacement Reserve


Central Services



Capital outlay 25,000 54,800 (29,800)

Total Central Services 493,234 492,591 643

Academy Building Maintenance



Total Academy Building Maintenance 425,224 310,320 114,904

Jail Maintenance



Total Jail Maintenance 303,661 268,053 35,608

POLK COUNTY


BUDGET AND ACTUAL

MANAGEMENT SERVICES - INTERNAL SERVICE FUND




EXPENDITURES (continued)Courthouse Building Maintenance Personnel Services $ 359,195 $ 367,112 $ (7,917) Materials and Services 208,200 188,414 19,786

Total Courthouse Building Maintenance 567,395 555,526 11,869

Information Services Personnel Services 547,178 536,433 10,745 Materials and Services 357,200 322,956 34,244 Capital outlay - 24,165 (24,165)

Total Information Services 904,378 883,554 20,824

Finance Personnel Services 406,127 399,007 7,120 Materials and Services 106,650 102,902 3,748

Total Finance 512,777 501,909 10,868

Personnel Personnel Services 255,424 265,669 (10,245) Materials and Services 52,750 34,118 18,632

Total Personnel 308,174 299,787 8,387

County Legal Counsel Personnel Services 122,375 119,012 3,363 Materials and Services 8,850 4,186 4,664

Total County Legal Counsel 131,225 123,198 8,027


SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL (Continued)




Excess (deficiency) of revenues over expenditures 524,000 911,137 387,137


Sale of capital assets $ 1,000 $ 1,875 $ (875)

Transfers out (750,000) (750,000) -

TOTAL OTHER FINANCING SOURCES (USES) (749,000) (748,125) 875



Fund balance at end of year $ - 725,911 $ 725,911

Reconciliation to generally accepted accounting principles:

Capital assets, net 166,976

Deferred outflows of resources 282,971

Compensated absences (126,920)

Net pension liability (1,308,921)

Net other post-employment benefit obligation (195,745)

Deferred inflows of resources (397,552)

Accrued interest on long-term obligtions (7)

Long-term obligation (10,253)

Net position at end of year $ (863,540)




91


REVENUES

Charges for services $ 675,000 $ 758,515 $ 83,515

Settlements 10,000 - (10,000)


TOTAL REVENUES 685,000 759,746 74,746

EXPENDITURES

Personnel services 40,618 59,518 (18,900)


Appropriation subtotal 850,000 930,023 (80,023)

Contingency 235,000 - 235,000

TOTAL EXPENDITURES 1,085,000 930,023 154,977

Net change in fund balance (400,000) (170,277) 229,723



POLK COUNTY


BUDGET AND ACTUAL

INSURANCE - INTERNAL SERVICE FUND


92

AGENCY FUND

This fund accounts for resources received and held by the County in a fiduciary capacity. The fund accounts for various monies and other assets held by the County Treasurer for other taxing districts and other departments.

Balances BalancesJuly 1, 2015 Additions Deductions June 30, 2016

ASSETS

Cash and investments 1,345,387$ 85,583,307$ 85,962,656$ 966,038$ Taxes receivable 4,506,768 82,339,046 82,509,397 4,336,417

TOTAL ASSETS 5,852,155$ 167,922,353$ 168,472,053$ 5,302,455$

LIABILITIESDue to other governments 5,852,155$ 167,922,353$ 168,472,053$ 5,302,455$

POLK COUNTY

STATEMENT OF CHANGES IN ASSETS AND LIABILITIES


AGENCY FUND

93

Cash

Turnovers and

Cash and Disbursements Cash and

Investment to County Investment

Balances Cash Treasurer BalancesElected Offical July 1, 2015 Receipts and Others June 30, 2016

Assessor 10$ 14,559$ 14,559$ 10$

Clerk 150 465,705 465,705 150

District Attorney 25 307,850 307,850 25

Sheriff 147,554 1,380,030 1,353,680 173,904 Treasurer 9,548,375 83,415,163 79,820,506 13,143,032

TOTALS 9,696,114$ 85,583,307$ 81,962,300$ 13,317,121$

POLK COUNTY

As of and for the Year Ended June 30, 2016

SCHEDULE OF ACCOUNTABILITY FOR INDEPENDENTLY ELECTED OFFICIALS

94

INDEPENDENT AUDITOR’S REPORT REQUIRED BY OREGON STATE REGULATIONS

INDEPENDENT AUDITOR’S REPORT REQUIRED BY OREGON STATE REGULATIONS

To the Board of County CommissionersPOLK COUNTYDallas, Oregon

We have audited in accordance with auditing standards generally accepted in the United States of America the basic financial statements of POLK COUNTY as of and for the year ended June 30, 2016, and have issued our report thereon dated February 1, 2017.

Compliance

As part of obtaining reasonable assurance about whether the County's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules 162-10-000 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations, noncompliance with which could have a direct and material effect on the determination of financial statements amounts. However, our audit was not directed primarily toward obtaining knowledge of such noncompliance. As such, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.

We performed procedures to the extent we considered necessary to address the required comments and disclosures which included, but were not limited to the following:

Deposit of public funds with financial institutions (ORS Chapter 295).

Indebtedness limitations, restrictions and repayment.

Budgets legally required (ORS Chapter 294).

Insurance and fidelity bonds in force or required by law.

Programs funded from outside sources.

Authorized investment of surplus funds (ORS Chapter 294).

Highway revenues used for public highways, roads and streets.

Public contracts and purchasing (ORS Chapters 279A, 279B, 279C).

95

INDEPENDENT AUDITOR’S REPORT REQUIRED BYOREGON STATE REGULATIONS (Continued)

In connection with our testing nothing came to our attention, except as noted below, that caused us to believe the County was not in substantial compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules 162-10-000 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations.

Expenditures in excess of appropriations (which is prohibited by ORS 294.435) occurred as follows:

Fund/Category Appropriation Actual Variance

Insurance Fund $ 850,000 $ 930,023 $ (80,023)

The 2016-17 budget was prepared and adopted in compliance with legal requirements, except asfollows:

o The County did not reasonably estimate the July 1, 2016 beginning fund balances asrequired by ORS 294.361(1) as shown below:

Fund Estimated Actual Variance

Behavioral Health $ 5,500,000 $ 6,367,967 $ 867,967Management Services 300,000 725,911 425,911

o In the detail budget document for the General Fund the excess of actual revenues overactual expenditures in the second preceding year did not equal the beginning balance in the first preceding year.

OAR 162-10-0230 Internal Control

In planning and performing our audit of the financial statements, we considered the County's internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County's internal control. Accordingly, we do not express an opinion on the effectiveness of the County's internal control. Deficiencies in internal control, if any, were communicated separately.

Restriction on Use

This report is intended solely for the information and use of the Board of Commissioners and management of Polk County and the Oregon Secretary of State and is not intended to be and should not be used by anyone other than these parties.

Boldt Carlisle + Smith Certified Public Accountants Salem, OregonFebruary 1, 2017

By:

Bradley G. Bingenheimer, Member

96

GRANT COMPLIANCE – SINGLE AUDIT

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS

PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

To the Board of Commissioners Polk CountyDallas, Oregon

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, each major fund, the aggregate remaining fund information and the budgetary comparison information of Polk County as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the County’s basic financial statements, and have issued our report thereon dated February 1, 2017.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the County’s 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 financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County’s internal control. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

97

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (Continued)

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the County’s 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the 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.

Boldt Carlisle & SmithBoldt Carlisle + Smith Certified Public Accountants Salem, OregonFebruary 1, 2017

98

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE

REQUIRED BY THE UNIFORM GUIDANCE

To the Board of CommissionersPolk CountyDallas, Oregon

Report on Compliance for Each Major Federal Program

We have audited the County’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of theCounty’s major federal programs for the year ended June 30, 2016. The County’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of the County’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the County’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the County’s compliance.

Opinion on Each Major Federal Program

In our opinion, Polk County, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016.

99

INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE (Continued)

Other Matters

The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with the Uniform Guidance and which is described in the accompanying schedule of findings and questioned costs as item 2016-001. Our opinion on each major program is not modified with respect to this matters.

The County’s response to the noncompliance findings identified in our audit is described in the accompanying schedule of findings and questioned costs. The County’s response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

Report on Internal Control over Compliance

Management of Polk County, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the County’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Boldt Carlisle & SmithBoldt Carlisle + Smith Certified Public Accountants Salem, Oregon February 1, 2017

100

POLK COUNTY

SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the Year Ended June 30, 2016

Section I - Summary of Auditors' Results

Financial Statements

Type of auditor's report issued: Unmodified

Internal controls over financial reporting: • Material weakness(es) identified? No

• Significant deficiency(ies) identified? None reported

Noncompliance material to financial statements noted? No

Federal awards

Internal control over major federal programs: • Material weakness(es) identified? No

• Significant deficiency(ies) identified? None reported

Type of auditor's report issued on compliance for major federal programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes

Identification of major federal programs:

CFDA Number(s) Name of Federal Program or Cluster

15.227 Distribution of Receipts to State and Local Governments 93.563 Child Support Enforcement

Dollar threshold used to distinguish between type A and type B programs: $750,000

Auditee qualified as a low-risk auditee? No

101

SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)

Section II - Financial Statement Findings

None reported.

Section III - Federal Award Findings and Questioned Costs

2016-001

U.S. Department of the Interior Bureau of Land Management 15.227 Distribution of Receipts to State and Local Governments

Criteria: Title III funds shall be expended solely on projects approved by the County that meet the requirements in PL 106-393. A description of proposed projects shall be published and allow for a 45 day comment period before approval.

Condition: The County did not publish a description of the proposed projects as required.

Questioned Costs: $86,102

Prevalence and Consequences: The descriptions of proposed projects need to be published.

Effect: The County did not comply with publication requirements under the grant.

Auditor’s Recommendation: The County should comply with the publication requirements.

Grantee Response: The County agrees with the auditor’s recommendation and has developed procedures to ensure the description of proposed projects is published.

102

Federal

CFDA

Number

Pass Through

Entity Identifying

Number Expenditures

DEPARTMENT OF AGRICULTURE

Food and Nutrition ServicePassed through Oregon State Health Division

Special Supplemental Nutrition Program for Women, Infants and Children 10.557 2702 212,208$ Forest ServicePassed through Oregon Department of Administrative Services Schools and Roads - Grants to States 10.665 13,124

Total Department of Agriculture 225,332

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Community Planning & Development

Passed through Oregon Infrastructure Finance Authority

Community Development Block Grant 14.228 5,000

Total Department of Housing and Urban Development 5,000

DEPARTMENT OF THE INTERIOR

Bureau of Land Management Payment in Lieu of Taxes 15.226 113,658 Distribution of Receipts to State and Local Governments 15.227 804,773

Scotch Broom Removal and Dump Stoppers 15.999 31,495

Total Department of the Interior 949,926

DEPARTMENT OF JUSTICE

Bureau of Justice AssistanceBullet Proof Vest Partnership Program 16.607 1,126 State Criminal Alien Assistance Program 16.606 4,322

Office of Victims of CrimePassed through Oregon State Criminal Justice Division Crime Victim Assistance (VOCA) 16.575 VOCA 03-2099 62,550

Total Department of Justice 67,998

DEPARTMENT OF GENERAL SERVICES ADMINISTRATION

General Services AdministractionPassed through Oregon Department of Administrative Services

Disposal of Federal Surplus Real Property 39.002 8,301 Donation of Federal Surplus Personal Property 39.003

Passed through Oregon Department of Administrative Services 2,150 Direct 2,365

Total Department of General Services Administration 12,816

ENVIRONMENTAL PROTECTION AGENCY

Office of WaterPassed through Oregon Health Authority

State Public Water System Supervision 66.432 27-02 3,208 Capitalization Grants for Drinking Water State Revolving Funds 66.468 27-02 2,143

Total Environmental Protection Agency 5,351

POLK COUNTY

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFor the Year Ended June 30, 2016


Federal

CFDA

Number

Pass Through

Entity Identifying

Number Expenditures

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of Population AffairsPassed through Oregon Health Authority

Family Planning Services 93.217 21,682 Administration for Children and FamiliesPassed through Oregon Department of Justice

Child Support Enforcement 93.563 461 203,995 Health Resources and Services AdministrationPassed through Chemeketa Community College

Maternal and Child Health Block Grant 93.994 27 02 33,089 Substance Abuse and Mental Health Services AdministrationPassed through Oregon Department of Human Services

Block Grants for Comm Mental Health 93.958 MHS-37 62,381 Block Grants for Prevention and Treatment of Substance Abuse 93.959 A&D 70 158,289

Passed through Oregon Department of JusticeProject Grants and Cooperative Agreements for Tuberculosis Control Programs 93.116 947

Centers for Disease Control and PreventionPassed through Oregon Health Authority

CP&HP Sodium Reduction in Oregon 93.082 4,241 Bioterrorism Preparedness & Response 93.069 27 02 82,038 CP&HP-HPCDP-Tobacco 93.283 25,631 CP&HP-HIV Part B 93.917 34,704 CH&HP Chronic Disease Control & Prevention 93.757 3,719 PHEP - Ebola 93.074 10,085 Administration for Children and FamiliesAssistance Programs for Chronic Disease Prevention and Control 93.945 39,534

Total Department of Health and Human Services 680,335

DEPARTMENT OF HOMELAND SECURITY

Passed through Oregon State Police

FEMA - Hazard Mitigation 97.036 67,057

Emergency Management Performance 97.042 110,303 State Homeland Security Program 97.067 91,813

Total Department of Homeland Security 269,173

TOTAL FEDERAL FINANCIAL ASSISTANCE 2,215,931$

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)

104

1. Basis of Presentation

The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal

award activity of Polk County under programs of the federal government for the year ended

June 30, 2016. The information in this Schedule is presented in accordance with the requirements

of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements,

Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Because the

Schedule presents only a selected portion of the operations of Polk County, it is not intended

to and does not present the financial position, changes in net position, or cash flows of Polk

County.

2. Summary of Significant Accounting Policies

Expenditures reported on the Schedule are presented on the modified accrual basis of accounting.

Such expenditures are recognized following the cost principles contained in the Uniform Guidance,

wherein certain types of expenditures are not allowable or are limited as to reimbursement.

The County has elected to not use the 10 percent deminimis indirect cost rate as allowed under

the Uniform Guidance. Indirect costs are charged as allowed by each individual grant.

POLK COUNTY

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

June 30, 2016

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