TOWN OF PORUM, OKLAHOMA ANNUAL FINANCIAL ......TOWN OF PORUM, OKLAHOMA ANNUAL FINANCIAL REPORT JUNE...

TOWN OF PORUM, OKLAHOMAANNUAL FINANCIAL REPORT

JUNE 30, 2016

RALPH OSBORNCERTIFIED PUBLIC ACCOUNTANT

500 SOUTH CHESTNUTP. O. BOX 1015

BRISTOW, OKLAHOMA 74010-1015(918)367-2208

FAX (918)367-1034

INDEPENDENT AUDITORS’ REPORT

The Honorable Mayor and Members of the Board of TrusteesTown of PorumPorum, Oklahoma

I have audited the accompanying financial statements of the governmentalactivities, the business-type activities, each major fund, and the aggregateremaining fund information of Town of Porum, Oklahoma, as of and for the yearended June 30, 2016, and the related notes to the financial statements, whichcollectively comprise Town of Porum’s basic financial statements.

Management’s Responsibility for the Financial Statements

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

Auditor’s Responsibility

My responsibility is to express an opinion on these financial statements basedon my audit. I conducted my audit in accordance with auditing standards generallyaccepted in the United States of America and the standards applicable to

financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Those standards require that I planand perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about theamounts and disclosures in the financial statements. The procedures selecteddepend on the auditor’s judgement, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevantto the entity’s preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. Accordingly, I express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonablenessof significant accounting estimates made by management, as well as evaluating theoverall presentation of the financial statements.

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

Opinion

In my opinion, the financial statements referred to above present fairly, in allmaterial respects, the respective financial position of the governmentalactivities, the business-type activities, each major fund, and the aggregateremaining fund information of Town of Porum as of June 30, 2016, and therespective changes in financial position and, where applicable, cash flowsthereof for the year then ended in conformity with accounting principlesgenerally accepted in the United States of America.

Other Information

My audit was conducted for the purpose of forming opinions on the financialstatements that collectively comprise the Town of Porum, Oklahoma’s basicfinancial statements. The combining and individual nonmajor fund financialstatements are presented for the purpose of additional analysis and are not arequired part of the basic financial statements.

The combining and individual nonmajor fund financial statements are theresponsibility of management and were derived from and related directly to theunderlying accounting and other records used to prepare the basic financialstatements. Such information has been subjected to the auditing proceduresapplied in the audit of the basic financial statements and certain additionalprocedures, including comparing and reconciling such information directly to theunderlying accounting and other records used to prepare the basic financialstatements or to the financial statements themselves, and other additionalprocedures in accordance with auditing standards generally accepted in the UnitedStates of America. In our opinion, the combining and individual nonmajor fundfinancial statements are fairly stated, in all material respects, in relation tothe basic financial statements as a whole.

Other Matters

In accordance with Government Auditing Standards, I have also issued my reportdated April 16, 2017 on my consideration of Town of Porum’s internal control overfinancial reporting and my tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. The purposeof that report is to describe the scope of our testing of internal control overfinancial reporting and compliance and the results of that testing and not toprovide an opinion on the internal control over financial reporting or oncompliance. That report is an integral part of an audit performed in accordance

with Government Auditing Standards and should be considered in assessing theresults of my audit.

Sincerely,

Ralph OsbornCertified Public AccountantBristow, OklahomaApril 16, 2017

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TOWN OF PORUM, OKLAHOMASTATEMENT OF NET POSITION

JUNE 30, 2016

Primary Government Business Governmental Type Activities Activities Total ASSETSCurrent assets: Cash and cash equivalents $ 284,417 $ 757,123 $ 1,041,540 Investments - 264,262 264,262 Taxes receivable 51,349 - 51,349 Accounts receivable - 97,372 97,372 Due from other funds 20,488 (20,488) - Prepaid expense 7,113 15,710 22,823 Insurance reserve - 23,690 23,690 Debt service cash and cash equivalents - 37,843 37,843 Total current assets 363,367 1,175,512 1,538,879Non-current assets:Capital assets Land - 11,050 11,050 Other capital assets net of accumulated depreciation 329,904 1,353,133 1,683,037Total non-current assets 329,904 1,364,183 1,694,087 Total assets 693,271 2,539,695 3,232,966

LIABILITIESCurrent liabilities: Accounts payable 12,726 23,539 36,265 Payroll Liabilities 4,843 4,115 8,958 Compensated absences 12,845 39,345 52,190 Accrued interest - 418 418 Utility deposits - 48,218 48,218 Notes payable, current - 17,700 17,700 Total current liabilities 30,414 133,335 163,749Non-current liabilities: Notes payable, non-current - 146,500 146,500 Total non-current liabilities - 146,500 146,500 Total liabilities 30,414 279,835 310,249

NET POSITION Capital assets, net of related debt 329,904 1,199,983 1,529,887 Designated for economic development - (32,853) (32,853) Reserved for Debt service - 37,843 37,843 Insurance reserve - 23,690 23,690 Unrestricted 332,953 1,031,197 1,364,150 Total net Position $ 662,857 $ 2,259,860 $ 2,922,717

The accompanying notes are an integral part of these financial statements.

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TOWN OF PORUM, OKLAHOMASTATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2016

Program Revenue Charges Operating Capital For Grants and Grants and (Expenses) Expenses Services Contributions Contributions Revenue Function/Programs Governmental activities General government $ 23,763 $ 335 $ 2,865 $ - $ (20,563) Public safety 278,563 38,300 7,790 37,575 (194,898) Parks and recreation 2,409 - - - (2,409) Street 26,763 - 5,191 - (21,572) Total governmental activities 331,498 38,635 15,846 37,575 (239,442)

Business-type activities Utilities 1,019,641 1,091,310 - - 71,669 Economic development 1,237 - - - (1,237) Total business-type activities 1,020,878 1,091,310 - - 70,432

Total primary government $1,352,376 $1,129,945 $ 15,846 $ - $(169,010)

Primary Government Governmental Business-type Activities Activities Total

Changes in net Position:

Net (expense) revenue $ (239,442) $ 70,432 $ (169,010)

General revenues Taxes Sales tax 172,624 - 172,624 Use tax 15,191 - 15,191 Franchise 20,775 - 20,775 Cigarette tax 2,012 - 2,012 Gas tax 1,237 - 1,237 Miscellaneous 962 - 962 Interest 149 898 1,047 Transfers, net 57,500 (57,500) -

Total general revenue and transfer 270,450 (56,602) 213,848 Change in net Position 31,008 13,830 44,838 Net position - beginning 631,849 2,246,030 2,877,879

Net position - ending $ 662,857 $ 2,259,860 $ 2,922,717


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TOWN OF PORUM, OKLAHOMABALANCE SHEET - GOVERNMENTAL FUNDS

JUNE 30, 2016

Other Total General Grant Governmental Governmental Fund Funds Fund Fund ASSETS

Cash and cash equivalents $ 15,412 $ 41,873 $ 227,132 $ 284,417 Taxes receivable 35,602 - 15,747 51,349 Prepaid expense 7,113 - - 7,113 Due from other funds 30,000 - - 30,000

TOTAL ASSETS $ 88,127 $ 41,873 $ 242,879 $ 372,879

LIABILITIES AND FUND BALANCES

LIABILITIES Accounts payable $ 9,610 $ 1,770 $ 1,346 $ 12,726 Payroll Liabilities 4,843 - - 4,843 Due to other funds 9,028 - 484 9,512

TOTAL LIABILITIES 23,481 1,770 1,830 27,081

FUND BALANCES Unrestricted 64,646 40,103 241,049 345,798

TOTAL FUND BALANCES 64,646 40,103 241,049 345,798

TOTAL LIABILITIES AND FUND BALANCES $ 88,127 $ 41,873 $ 242,879 $ 372,879


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TOWN OF PORUM, OKLAHOMARECONCILIATION OF BALANCE SHEET - GOVERNMENTAL FUNDS

WITH THE STATEMENT OF NET POSITION JUNE 30, 2016

Total fund balance $ 345,798

Amounts reported in the statement of net positionare different because:

Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Capital assets 752,470 Accumulated depreciation (422,566) 329,904

Liabilities not due and payable in the current period are not reported in the funds. Amounts accrued for compensated absences are not included in the governmental funds (12,845)

Total net position $ 662,857


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TOWN OF PORUM, OKLAHOMASTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN

FUND BALANCES - GOVERNMENTAL FUNDSFOR THE YEAR ENDED JUNE 30, 2016

Other Total General Grant Governmental Governmental Fund Funds Funds Funds Revenue Sales tax $ 86,312 $ - $ 86,312 $ 172,624 Use tax 15,191 - - 15,191 Cigarette tax 2,012 - - 2,012 Franchise tax 20,775 - - 20,775 Gasoline tax - - 1,237 1,237 Motor vehicle tax - - 5,191 5,191 Alcoholic beverage tax 2,865 - - 2,865 Intergovernmental - 37,575 7,790 45,365 Licenses and permits 335 - - 335 Fines and Forfeitures - - 37,800 37,800 Fire Runs - - 500 500 Other 962 - - 962 Interest 131 18 - 149

Total revenue 128,583 37,593 138,830 305,006

Expenditures Current General government 20,417 - - 20,417 Police department 182,819 21,638 - 204,457 Parks and recreation 829 - - 829 Court 4,395 - 3,668 8,063 Fire department - - 68,645 68,645 Street - - 16,924 16,924 Animal control 7,949 - - 7,949 Total expenditures 216,409 21,638 89,237 327,284

Excess (deficiency) of revenue over (under) expenditures (87,826) 15,955 49,593 (22,278)

Other financing sources (uses) Transfer from other funds 94,750 - - 94,750 Transfer to other funds - - (37,250) (37,250) Net other financing sources (uses) 94,750 - (37,250) 57,500 Net changes in fund balances 6,924 15,955 12,343 35,222 Fund balances, beginning 57,722 24,148 128,706 310,576

Fund balances, ending $ 64,646 $ 40,103 $ 241,049 $ 345,798


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TOWN OF PORUM, OKLAHOMARECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGESIN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES


Net changes in fund balances - total governmental funds $ 35,222

Amounts reported for governmental activities in thestatement of activities are different because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. However, for governmental activities those cost are shown in the combined statement of net assets and allocated over their estimated useful lives as annual depreciation in the statement of activities. This is the amount by which capital outlay exceeds depreciation outlay in the period. Depreciation expense (38,938) Capital outlay 36,846 (2,092) Some expenses reported in the statement of activities do not require the use of current financial resources and are not reported as expenditures in governmental funds. These include the net (increase)/decrease in compensated absences. (2,122)

Change in net position $ 31,008


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TOWN OF PORUM, OKLAHOMASTATEMENT OF FUND NET POSITION - PROPRIETARY FUNDS

JUNE 30, 2016 Development Public Works Authority Total ASSETSCurrent assets: Cash and cash equivalents $ 716,081 $ 41,042 $ 757,123 Investments 264,262 - 264,262 Accounts receivable 97,372 - 97,372 Due from other funds 83,407 - 83,407 Prepaid expense 15,710 - 15,710 Insurance reserve 23,690 - 23,690 Debt service cash and cash equivalents 37,843 - 37,843 Total current assets 1,238,365 41,042 1,279,407

Non-current assets Capital assets: Land 11,050 - 11,050 Other capital assets, net of accumulated depreciation 1,291,683 61,450 1,353,133 Total non-current assets 1,302,733 61,450 1,364,183 Total assets 2,541,098 102,492 2,643,590

LIABILITIESCurrent liabilities: Due to other funds 30,000 73,895 103,895 Accounts payable 23,539 - 23,539 Payroll liabilities 4,115 - 4,115 Compensated absences 39,345 - 39,345 Accrued interest 418 - 418 Utility deposits 48,218 - 48,218 Note payable, current 17,700 - 17,700 Total current liabilities 163,335 73,895 237,230

Non-current liabilities: Notes payable, non-current 146,500 - 146,500 Total non-current liabilities 146,500 - 146,500

Total liabilities 309,835 73,895 383,730 NET POSITIONCapital assets, net of related debt 1,138,533 61,450 1,199,983Designated for economic development - (32,853) (32,853)Reserved for debt service 37,843 - 37,843Reserved for insurance reserve 23,690 - 23,690Unrestricted 1,031,197 - 1,031,197 Net position of business-type activities $ 2,231,263 $ 28,597 $ 2,259,860


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TOWN OF PORUM, OKLAHOMASTATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

PROPRIETARY FUNDSFOR THE YEAR ENDED JUNE 30, 2016

Development Public Works Authority Total OPERATING REVENUESCharges for services: Water charges $ 839,878 $ - $ 839,878 Wastewater charges 47,025 - 47,025 Sanitation charges 127,658 - 127,658 Membership tie-in fees 43,828 - 43,828 Turn-on charges 17,877 - 17,877 Penalty 14,327 - 14,327 Other revenues 717 - 717 Total operating revenues 1,091,310 - 1,091,310

OPERATING EXPENSESPersonal services 306,988 - 306,988 Payroll tax and benefits 64,022 - 64,022 Retirement 19,510 - 19,510 Fuel 12,535 - 12,535 Repairs 68,837 - 68,837 Sanitation contractor 126,543 - 126,543 Professional fees 15,130 - 15,130 Insurance 37,492 - 37,492 Materials and supplies 87,937 - 87,937 Office 18,381 - 18,381 Bad Debts 2,687 - 2,687 License and permits 13,520 - 13,520 Other operating expense 22,091 - 22,091 Utilities and telephone 64,488 - 64,488 Depreciation 142,611 1,237 143,848 Total operating expenses 1,002,772 1,237 1,004,009

Operating income (loss) 88,538 (1,237) 87,301

NON-OPERATING REVENUE (EXPENSES)Interest revenue 857 41 898 Grant expense (13,870) - (13,870)Interest on notes payable and fees (2,999) - (2,999) Total non-operating revenue (expenses) (16,012) 41 (15,971)

Income (loss) before transfer 72,526 (1,196) 71,330

Transfer to other funds (57,500) - (57,500) Total Transfers (57,500) - (57,500) Change in net position 15,026 (1,196) 13,830

Total net position, beginning 2,216,237 29,793 2,246,030

Total net position, ending $ 2,231,263 $ 28,597 $ 2,259,860


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TOWN OF PORUM, OKLAHOMASTATEMENT OF CASH FLOWSPROPRIETARY FUND TYPE


Public Development Works Authority Total

Cash flows from operating activities Cash received from customers $ 1,082,779 $ - $ 1,082,779 Cash payments to employees (307,309) - (307,309) Cash payments to suppliers for goods and services (556,159) - (556,159)Net cash provided (used) by operating activities 219,311 - 219,311

Cash flows from non-capital financing activities Transfer from other funds (net) (28,325) - (28,325)Cash used by non-capital financing activities (28,325) - (28,325)Cash flows from capital and related financing activities Acquisition of fixed assets - - - Sale of Assets - - - Interest paid on notes payable and fiscal fees (3,074) - (3,074) Principal paid on notes payable (16,400) - (16,400) Grant expense (13,870) - (13,870)Net cash used for capital and related financing activities (33,344) - (33,344)

Cash flows from investing activities Interest revenue 857 41 898 Transfers to investments (843) - (843)

Transferred to debt service reserve (391) - (391)

Net cash provided by investing activities (377) 41 (336)

Net change in cash and cash equivalents 157,265 41 157,306

Cash and cash equivalents, beginning 558,816 41,001 599,817

Cash and cash equivalents, ending $ 716,081 $ 41,042 $ 757,123


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TOWN OF PORUM, OKLAHOMASTATEMENT OF CASH FLOWSPROPRIETARY FUND TYPE


Public Development Works Authority Total

Reconciliation of operating income (loss) to net cash provided by (used) by operating activities Operating income (loss) $ 88,538 $ (1,237) $ 87,301 Adjustments to reconcile operating income to net cash used by operating activities: Depreciation 142,611 1,237 143,848 Changes in assets and liabilities: (Increase)/decrease in: Accounts receivable (10,614) - (10,614) Prepaid expense 9,722 - 9,722 Insurance reserve 12,528 - 12,528 Increase/(decrease) in: Accounts payable (25,236) - (25,236) Payroll liabilities (12) - (12) Compensated absences (309) - (309) Utility deposits 2,083 - 2,083 Net cash provided by operating activities $ 219,311 $ - $ 219,311


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TOWN OF PORUM, OKLAHOMANOTES TO FINANCIAL STATEMENTS

JUNE 30, 2016

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Town of Porum, Oklahoma, was incorporated under the provisions of the lawsof the State of Oklahoma. The Town operates under a Board of Trustees form ofgovernment and provides the following services: general government, publicsafety, public works, parks and recreation. The basic financial statementsinclude the departments, agencies, and other organizational units over which theBoard of Trustees exercise oversight responsibility. In evaluating how to definethe government for financial reporting purposes, management has considered allpotential component units. The decision to include a component unit in thereporting entity was made by applying the criteria set forth in GASB StatementNo. 14 and No. 39. Based on the criteria Porum Public Works Authority and PorumDevelopment Authority are component units. The definition of the financialreporting entity is primarily based on the concept of financial accountability. The financial reporting entity consists of the primary government (the Town), andactivities for which the primary government is financially accountable, and theactivities of Porum Public Works Authority and Porum Development Authority. Financial accountability exists if a primary government appoints a votingmajority of an organizations governing body, and is either able to impose itswill on the organization or there is a potential for the organization to providea specific financial benefit to, or impose specific financial burdens on, theprimary government. Based upon the application of these criteria, there are noother entities to include in the Town’s financial statements.

Porum Public Works Authority was created October 29, 1962 under the provisionsof Title 60 Oklahoma Statutes Sections 176 to 180. The Authority is managed bya Board of Trustees made up of members of the Town Board of Trustees. TheAuthority operates water, sanitation, and sewer services for the Town of Porum.The Authority is reported as a proprietary fund.

Porum Development Authority was created June 15, 2004 under the provisions ofTitle 60, Oklahoma Statutes, Section 176 to 180. The Development Authority ismanaged by a Board of Trustees made up of the Town Board of Trustees. TheDevelopment Authority was created for the purpose of promoting economicdevelopment in the Porum area. The Development Authority is reported as aproprietary fund.

The accounting policies of the Town conform to accounting principles generallyaccepted in the United States of America applicable to government units.

Government-Wide and Fund Financial Statements

The government-wide financial statements include the statement of net positionand the statement of activities. These statements report financial informationfor the Town as a whole excluding fiduciary activities such as employee pensionplans. The primary government and component units are presented separatelywithin the financial statements with the focus on the primary government.Individual funds are not displayed but the statements distinguish governmentalactivities, generally supported by taxes and Town general revenues, frombusiness-type activities, generally financed in whole or in part with feescharged to external customers.

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JUNE 30, 2016

The statement of activities reports the expenses of a given function offset byprogram revenues directly connected with the functional program. A functionalprogram is an assembly of similar activities and may include portions of a fundor summarize more than one fund to capture the expenses and program revenuesassociated with a distinct functional activity. Program revenues include(1)charges for services which report fees, fines and forfeitures, and othercharges to users of the Town’s services;(2) operating grants and contributionswhich finance annual operating activities including restricted investment income;and (3) capital grants and contributions which fund the acquisition,construction, or rehabilitation of capital assets and include fees to developers. These revenues are subject to externally imposed restrictions to these programsuses. Taxes and other revenue sources not properly included with program revenuesare reported as general revenues.

Fund Financial Statements

Fund financial statements of the Town are provided for governmental, proprietary,and fiduciary funds. Major individual governmental and enterprise funds arereported in separate columns with composite columns for non-major funds.

Measurement Focus, Basis of Accounting and Financial Statement Presentation

The financial statements of the Town are prepared in accordance with generallyaccepted accounting principles (GAAP). The Town’s reporting entity applies allrelevant Governmental Accounting Standards Board (GASB) pronouncements andapplicable Financial Accounting Standards (FASB) pronouncements and AccountingPrinciples Board (APB) opinions issued on or before November 30, 1989, unlessthey conflict with GASB pronouncements. The Town’s reporting entity does notapply FASB pronouncements or APB opinions issued after November 30, 1989.

The government-wide statements report using the economic resources measurementfocus and the accrual basis of accounting generally including thereclassification or elimination of internal activity (between or within funds).However, internal eliminations do not include utility services provided to Towndepartments. Reimbursements are reported as reductions to expenses. Proprietaryand fiduciary fund financial statements and financial statements of Towncomponent units also report using this same focus and basis of accountingalthough internal activity is not eliminated in these statements. Revenues arerecorded when earned and expenses recorded when a liability is incurred,regardless of the timing of related cash flows. Property tax revenues arerecognized in the year for which they are levied while grants are recognized whengrantor eligibility requirements are met.

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JUNE 30, 2016

Governmental fund financial statements report using the current financialresources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they are both measurable and available. Availablemeans collectible within the current period or soon enough thereafter to paycurrent liabilities. The Town considers revenues to be available if they arecollected within 60 days of the end of the fiscal year. Expenditures arerecorded when the related fund liability is incurred, except for generalobligation bond principal and interest which are reported as expenditures in theyear due.

Major revenue sources susceptible to accrual include: sales and use taxes,property taxes, franchise taxes (fees), intergovernmental revenues, andinvestment income. In general, other revenues are recognized when cash isreceived.

Operating income reported in proprietary fund financial statements includerevenues and expenses related to the primary, continuing operations of the fund.Principal operating revenues for proprietary funds are charged to customers forsales or services. Principal operating expenses are the cost of providing goodsor services and include administrative expenses and depreciation of capitalassets. Other revenues and expenses are classified as non-operating in thefinancial statements.

When both restricted and unrestricted resources are available for use, it is theTown’s policy to use restricted resources first, then unrestricted resources asneeded.

FUND TYPES AND MAJOR FUNDS

The Town reports the following major governmental funds:

General Fund - The general fund reports as the primary fund of the Town. Thisfund is used to account for all financial resources not reported in other funds.

Proprietary Funds - The Town reports the following major enterprise funds:

Porum Public Works Authority - The Authority provides certain utility servicesfor the Town.

Budgetary Accounting and Control

The Mayor submits an annual budget to the Board of Trustees in accordance withthe Oklahoma Municipal Budget Act. The budget is presented to the Board ofTrustees for review, and public hearings are held to address priorities andallocation of resources. In June, the Board of Trustees adopts the annual fiscalyear budgets for the Town operating funds. Once approved, the Board of Trusteesmay amend the legally adopted budget when unexpected modifications are requiredin estimated revenues and appropriations. Public trusts submit budget and otherplanning documents to their respective governing bodies.

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JUNE 30, 2016

Each fund’s appropriated budget is prepared on a detailed line item basis.Revenues are budgeted by sources. Expenditures are budgeted by department andclass as follows: Personal services, Other services and charges, supplies,capital outlay, transfers, and debt service. Budget revisions at this level aresubject to final review by the Board of Trustees. The legal level of control isby department within a fund. Expenditures may not exceed appropriations at thislevel. Within these control levels, management may transfer appropriationswithout Board approval. Revisions to the budget were made during the year.

The budgets for the operating funds and proprietary fund operations are preparedon the cash and expenditures/encumbrances basis. Revenues are budgeted in theyear receipt is expected; and expenditures, which include encumbrances, arebudgeted in the year that the applicable purchase orders are expected to beissued. Unencumbered appropriations for annually budgeted funds lapse at fiscalyear-end.

Investments

The Town follows Governmental Accounting Standards Board (GASB) Statement No. 31,“Accounting and Financial Reporting for Certain Investments and for ExternalInvestment Pools,” which requires marketable securities to be carried at fairvalue. The Town considers highly liquid investments with a maturity of threemonths or less when purchased to be cash equivalents. The investments reportedin the financial statements consist of Certificates of Deposits.

Encumbrances

Encumbrance accounting, under which purchase orders, contracts and othercommitments for the expenditure of funds are recorded in order to reserve thatportion of the applicable appropriations, is employed in the governmental funds.Encumbrances outstanding at year end are reported as reservations of fundbalances.

Inventories and Prepaids

Inventories in governmental funds consist of expendable supplies held forconsumption stated on a first-in, first-out basis. They are reported at costwhich is recorded as an expenditure at the time individual inventory items areused. Proprietary funds and similar component unit inventories are recorded atthe lower of cost or market on a first-in, first-out basis. The Town has notmaintained inventory records, however, the value of inventory on hand at June 30,2016 is not believed to be material.

Prepaids record payments to vendors that benefit future reporting periods and arealso reported on the consumption basis. Both inventories and prepaids aresimilarly reported in government-wide and fund financial statements.

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JUNE 30, 2016

Capital Assets, Depreciation, and Amortization

The Town’s property, plant, equipment, and infrastructure with useful lives ofmore than one year are stated at historical cost and comprehensively reported inthe government-wide financial statements. The Town maintains infrastructureassets records consistent with all other capital assets. Proprietary andcomponent unit capital assets are also reported in their respective fund andcombining component units financial statements. Donated assets are stated atfair value on the date donated. The Town generally capitalizes assets with costof $2,500 or more as purchase and construction outlay occur. The cost of normalmaintenance and repairs that do not add to the assets value or materially extenduseful lives are not capitalized. Capital assets, including those of componentunits, are depreciated using the straight-line method. When capital assets aredisposed, the cost and applicable accumulated depreciation are moved from therespective accounts, and the resulting gain or loss is recorded in operations.

Estimated useful lives, in years, for depreciable assets are as follow:

Buildings 5-60 Improvements, other than buildings 2-50 Mobile equipment 3-40 Furniture , machinery, and equipment 3-30 Utility system 5-50

Compensated Absences

Full-time, permanent employees are granted personal leave in varying amounts tospecified maximums depending on tenure with the Town. The estimated liabilitiesinclude required salary-related payments. Compensated absences are reported asaccrued in the government-wide, proprietary, fiduciary, and component unitfinancial statements. Governmental funds report only matured absences payableto currently terminating employees and are included in wages and benefitspayable.

Reserves and Designations

Reserves represent those portions of fund balance not available for expenditureor legally segregated for a specific future use. Designated fund balancesrepresent tentative plans for future use of financial resources.

Use of Estimates

The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities, disclosure of contingent assets and liabilities at the date of thefinancial statements, and the reported amounts of revenue and expenses during thereporting period. Actual results could differ from those estimates.

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JUNE 30, 2016

NOTE B - DEPOSITS WITH FINANCIAL INSTITUTIONS AND INVESTMENTS

Custodial Credit Risk

Custodial credit risk is the risk that in the event of failure of counterparty,the Town will not be able to recover the value of its deposits or investments. Deposits are exposed to custodial credit risk if they are uninsured anduncollateralized. Investment securities are exposed to custodial credit risk ifthey are uninsured, are not registered in the name of the Town, and are held bycounterparty or the counterparty’s trust department but not in the name of theTown. The Town’s policy requires that all deposits and investments in excess ofamounts covered by federal deposit insurance be fully collateralized by theentity holding the deposits or investments. As of June 30, 2016, all of theTowns deposits and investments were either covered by federal deposit insuranceor were fully collateralized.

DepositsThe Town had deposits at financial institutions with a carrying amount ofapproximately $1,343,645 at June 30, 2016. The bank balance of the deposits atJune 30, 2016 was approximately $1,342,312.

Credit RiskFixed-income securities are subject to credit risk. However, the Town did nothave fixed income securities at June 30, 2016.

Interest Rate RiskInterest rate risk is the risk that changes in interest rates will adverselyaffect the fair value of an investment. The Board of Trustees monitor’s theinvestment performance on an ongoing basis to limit the Town’s interest raterisk. As of June 30, 2016, the Town’s deposits consisted of demand deposits andcertificates of deposit with a maturity of 12 months or less.

NOTE C - ACCOUNTS RECEIVABLE

The Town records the total due on utility accounts owed the proprietary fund forservices unpaid at June 30. Any uncollectible amounts are written-off as theybecome collectible.

The governmental funds have accrued sales tax, alcoholic beverage tax, gasolineexcise tax, and motor vehicle tax to be received in July and August.

NOTE D - INTERFUND RECEIVABLES AND PAYABLES

Interfund receivables and payables at June 30, 2016 are as follows: Amount Due To Other Funds Due From Other Funds $ 73,895 Public Works Development Authority 9,028 Public Works General 313 Public Works Street and Alley 171 Public Works Fire Department $ 83,407

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JUNE 30, 2016 NOTE E - INSURANCE RESERVE

The Proprietary Fund reserved net position for insurance reserve relate to riskmanagement activities. Town of Porum, Oklahoma’s risk management activitiesconsist of purchasing policies from commercial insurance carriers. As part of itsrisk management activity, the Town has purchased workers’ compensation insurancefrom Oklahoma Municipal Assurance Group (the Group). The premium paid for theworkers’ compensation insurance includes an amount which is placed in a loss fundfor the Town of Porum, Oklahoma. The balance of the premium is used foradministration of the insurance and obtaining insurance coverage. The loss fundis an actuarially determined estimate of the Town’s expected workers’compensation claims during the policy period. At June 30, 2016, the balance inthe fund was $20,121.

If the actual losses are less than the amount of the loss fund, the differencemay be refunded to the Town or placed in an escrow account for the Town of Porum,Oklahoma. Refunds may begin as early as two years after the end of the planyear. The reinsurance purchased by the Group covers claims in excess of the lossfund. The Town of Porum, Oklahoma is not obligated to pay any amount in excessof its annual premium. The amount in the escrow account at June 30, 2016 was$3,569. This money may be refunded on written request.

NOTE F - DEBT SERVICE CASH AND CASH EQUIVALENTS

The trustee bank for notes payable listed in Note H maintains reserve and sinkingfund accounts to accumulate resources for the retirement of the debt. At June30, 2016, the trustee bank was holding $37,843 for use in retiring the debt.

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JUNE 30, 2016

NOTE G - CAPITAL ASSETS

Changes in capital assets.

The following table provides a summary of changes in capital assets: CAPITAL ASSETS, DEPRECIATED Infrastructure & Furniture, Capital Improvements Machinery, Assets Not Other Than And Depreciated Buildings Buildings Equipment Totals Land PRIMARY GOVERNMENTGovernmental activities Balance, June 30, 2015 $ 105,850 $ 232,942 $ 376,832 $ 715,624 $ - Increases - - 36,846 36,846 - Decreases - - - - - Balance, June 30, 2016 105,850 232,942 413,678 752,470 - Accum. Deprec. Balance, June 30, 2015 50,671 61,879 271,078 383,628 Increase 2,672 11,467 24,799 38,938 Decreases - - - - Balance, June 30, 2016 53,343 73,346 295,877 422,566

Governmental activities Capital Assets, Net $ 52,507 $ 159,596 $ 117,801 $ 329,904 $ -

Business-type activities Balance, June 30, 2015 $ 74,219 $ 4,224,057 $ 684,197 $ 4,982,473 $ 11,050 Increases - - - - - Decreases - - - - - Balance, June 30, 2016 74,219 4,224,057 684,197 4,982,473 11,050Accum. Deprec. Balance, June 30, 2015 11,532 2,951,666 522,294 3,485,492 Increase 1,237 120,323 22,288 143,848 Decreases - - - - Balance, June 30, 2016 12,769 3,071,989 544,582 3,629,340

Business-type Activities Capital Assets, Net $ 61,450 $ 1,152,068 $ 139,615 $ 1,353,133 $ 11,050

PRIMARY GOVERNMENT Capital Assets, Net $ 113,957 $ 1,311,664 $ 257,416 $ 1,683,037 $ 11,050

DEPRECIATION EXPENSE

Depreciation expense was charged to functions of the primary government as follows:

GOVERNMENT ACTIVITIES BUSINESS-TYPE ACTIVITIES

General government $ 3,346 Utilities $ 142,611 Public Safety 24,173 Economic development 1,237 Street 9,839 Park 1,580

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JUNE 30, 2016

NOTE H - NOTES PAYABLE PROPRIETARY FUND

The Authority has incurred indebtedness for the expansion of system facilities.The following is a summary of note payable transactions for the year ended June30, 2016. Payable at Addition/ Balance at July 1, 2015 Retirements June 30, 2016

Water Resources Board $ 180,600 $ (16,400) $ 164,200

$ 180,600 $ (16,400) $ 164,200

A brief description of the outstanding notes payable at June 30, 2016 is setforth below:

Outstanding Amount

Oklahoma Water Resource Board loan dated December 27, 1994,original loan amount of $350,000, interest rate variable,interest rate at June 30, 2016 was 1.51%, principal andinterest determined by trustee bank every six months,matures in August 2023 164,200

Total $ 164,200

The annual principal payments due over the next five years and thereafter are asfollows. Actual debt service requirements will vary depending on the variableinterest rate in effect at the time of payment.

Year ending June 30 Principal 2017 $ 17,700 2018 19,200 2019 20,800 2020 22,400 2021 24,300 2022-2023 59,800

Total $ 164,200

The Authority incurred interest and fees of $2,999 on long-term debt during theyear. Future year interest payments will depend on the interest rate at the timeof payment.

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JUNE 30, 2016

NOTE I - DEBT SERVICE COVERAGE

The revenue bond indenture requires the Public Works Authority maintain aschedule of charges, fees, and rates sufficient to produce annual net revenuesnot less than 1.25 times average annual debt service requirements after paymentof all operating and maintenance expense. The appropriation of sales tax by theTown of Porum to the Authority is included for the purpose of calculating netrevenue.

Ratio of net revenue to debt service follows:

Operating revenue $ 1,091,310 Operating expenses 860,161 Revenue Available For Debt Service $ 231,149 Average Annual Debt Service $ 18,071 Coverage Ratio 12.79 to 1

NOTE J - PENSION OBLIGATIONS

The Town participates in two pension plans.

Oklahoma Firefighter’s Pension and Retirement System

The Town participates in this statewide, cost-sharing, multiple-employer benefitplan on behalf of firefighters. The system is administered by an agency of theState of Oklahoma and funded by contributions from participants, employers,insurance premium taxes, and state appropriations, as necessary. The followingis a summary of eligibility factors, contribution methods, and benefitprovisions. Oklahoma Firefighter’s Pension And Retirement System

Eligibility to Participate All full-time or voluntary Firefighters of a participating Municipality hired before age 45 Authority establishing contribution State Statute obligation and benefit provisions

Plan members’ contribution rate 8% of covered payroll

Town’s contribution rate 13% of covered payroll/$60 per volunteer Period required to vest 10 years

Benefits and eligibility 20 years credited service, 2 ½% of final for distribution (full time) average salary multiplied by the years of credited service with a maximum of 30 years considered; If vested, at or after age 50, or after 10 but before 20 years of Credited service,with reduced benefits Benefits and eligibility 20 years credited service equal to for distribution (Volunteer) $5.46 per month per year of service With a maximum of 30 Years considered

Deferred retirement option Yes, 20 years credited service with Continued service for 30 or more years

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JUNE 30, 2016 Provisions for: Cost of living adjustments (normal retirement) Yes, if vested by 5/83 Death (duty, non-duty, post-retirement) Yes Disability Yes Cost of living allowances Yes

Contributions required by State Statue: Fiscal Required Percentage Year Contribution Contributed 2016 $ 1,080 100% 2015 1,140 100% 2014 1,080 100%

Oklahoma Municipal Retirement Fund (OMRF)

Plan Description - The City maintains a defined benefit retirement planwhich covers employees not covered by other plans. The plan operates asa trust maintained by the Oklahoma Municipal Retirement Fund (OMRF). Allregular, full-time City employees not covered by other plans are requiredto participate in OMRF. Benefits vest after ten years of service. Effective July 1, 1993, employees who retire at age 65 or completion often years of service, if later, are entitled to annual retirementbenefits, payable monthly in an amount equal to 1.875% of final averagecompensation multiplied by the number of years credited service. Finalaverage compensation is defined as the average of the five highestconsecutive annual salaries out of the last ten calender years of service.

An employee is eligible for an early retirement benefit once he hasattained age 55 and has completed ten years of service. The amount ofbenefit is determined based on the final average salary and creditedservice as of the date of termination. If benefit payments are to beginbefore age 65 the amount of benefit will be actuarially reduced. A lateretirement benefit is computed in the same manner as a normal retirementbased on average salary and credited service as of the termination ofemployment.

A participant who becomes totally and permanently disabled aftercompletion of ten years of service will be entitled to a disabilitybenefit computed based on average salary and service as of the date ofdisability but without actuarial reduction for payments beginning prior tonormal retirement age.

Employee contributions are returned with accrued interest if theiremployment is terminated prior to completion of ten years of service. Adeath benefit is payable after ten years of service based on 50% of theemployee’s accrued benefit. This benefit is payable for life or untilremarriage of the surviving spouse.

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JUNE 30, 2016

Funding policy - The amount shown below as the actuarial accruedliability is a standardized disclosure measure of the present value ofpension benefits, adjusted for the effect of projected salary increasesand step-rate benefits, estimated to be payable in the future as aresult of employee service to date. The measure is intended to helpusers assess the funding status of the Plan on a going concern basis,assess progress made in accumulating sufficient assets to pay benefitswhen due, and make comparisons among employers. The measure is theactuarial present value of credited project benefits, and is independentof the funding method used to determine contributions to the Plan.

The actuarial accrued liability was computed as part of an actuarialvaluation performed as of March, 2014. Significant actuarialassumptions used in the valuation include 1) a rate of return on theinvestment of present and future assets of 7.5% compounded annually, 2)future salary increases based on the age of the employee.

Actuarially Determined Contribution Requirements and Contributions Made

The Plan’s funding policy provides for actuarially determined periodiccontributions at rates that, for individual employees, increase gradually overtime so sufficient assets will be available to pay benefits when due. Requiredcontributions are determined using the aggregate entry age normal cost method.

The unfunded actuarial liability (UAL) is the excess of the total actuarialliability for active and non-active participants, over the actuarial value planassets. This amount (redetermined each year) is amortized as a level dollarsamount over 30 years from the amortization base date. The amortization base dateis initially set as the 2016 valuation date. Experience gains (decrease in costdue to favorable experience), or experience losses (increase in cost due toadverse experience), attributable to deviations between the assumed and actualexperience of the Plan, are amortized as part of the UAL.

The market value of plan assets is compared to the expected value based on theprior year market value to determine the investment gain or loss for the year. The gain or loss is then recognized ratably over a 5-year period beginning on thevaluation date.

For the fiscal year ended June 30, 2016, employees were required to contribute10% of annual compensation. The City is required to contribute the remainingamounts necessary to fund the pension plan, using an actuarial basis. The City’scontribution rate, for the fiscal year ended June 30, 2016 was 7%. During theyear ended June 30, 2016, the City and the employees contributed $39,913 and$27,370, respectively, to the OMRF.

Significant actuarial assumptions used to compute the actuarially determinedcontribution requirements are the same as those used to compute the pensionbenefit obligation as described above.

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JUNE 30, 2016

Historical trend information for the OMRF Employee Retirement System of Porum,Oklahoma for the past ten years is as follows:

Actuarial Actuarial Value Accrued Unfunded Annual UAAL as a Valuation Of Liability Funded AAL Covered % Covered Date Assets (AAL) Ratio (UAAL) Payroll Payroll

1/1/2009 - 127,641 0.0% 127,641 237,140 53.8% 1/1/2010 27,059 149,476 18.1% 122,417 321,260 38.1% 1/1/2011 58,462 163,978 35.7% 105,516 336,720 31.3% 1/1/2012 90,604 212,811 42.6% 122,207 367,345 33.3% 1/1/2013 125,826 239,885 52.5% 114,059 327,369 34.8% 1/1/2014 164,535 264,673 62.2% 100,138 318,869 31.4% 1/1/2015 182,395 271,141 67.3% 88,746 329,297 27.0%

NOTE K - RISK MANAGEMENT

The Town is exposed to various risks of loss related to torts; theft of, damage to,and destruction of assets; errors and omissions; injuries to employees; and naturaldisasters. The Town carries commercial insurance for risk of loss, includingworkers’ compensation. Settled claims resulting from these risks have not exceededcommercial insurance coverage in any of the past three fiscal years.

NOTE L - FEDERAL AND STATE GRANTS

In the normal course of operations, the Town receives grant funds from variousfederal and state agencies. The grant programs are subject to audit by agents ofthe granting authorities the purpose of which is to ensure compliance withconditions precedent to the granting of the funds. Any liability for reimbursementwhich may arise as the result of these audits is not believed to be material.

NOTE I - SUBSEQUENT EVENTS

The Town evaluated subsequent events through April 16, 2017 the date which financialstatements were available, to determine if any items need to be disclosed. The Townis not aware of any items which need disclosure.

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TOWN OF PORUM, OKLAHOMACOMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS

JUNE 30,2016

Street Total And Fire Nonmajor Alley Department Court Funds ASSETS

Cash and cash equivalents $ 169,698 $ 56,381 $ 1,053 $ 227,132 Taxes receivable 8,190 7,557 - 15,747 Prepaid expense - - - -

TOTAL ASSETS $ 177,888 $ 63,938 $ 1,053 $ 242,879

LIABILITIES AND FUND BALANCES LIABILITIES

Accounts payable $ 771 $ 147 $ 428 $ 1,346 Due to other funds 313 171 - 484

TOTAL LIABILITIES 1,084 318 428 1,830

FUND BALANCES Designated 176,804 63,620 625 241,049 TOTAL FUND BALANCES 176,804 63,620 625 241,049 TOTAL LIABILITIES AND FUND BALANCES $ 177,888 $ 63,938 $ 1,053 $ 242,879


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TOWN OF PORUM, OKLAHOMACOMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016

Street Total And Fire Nonmajor Alley Department Court Funds REVENUES

Sales tax $ 43,156 $ 43,156 $ - $ 86,312Vehicle tax 5,191 - - 5,191Gasoline tax 1,237 - - 1,237Intergovernmental - 7,790 - 7,790Fire Runs - 500 - 500Fines and forfeits - - 37,800 37,800 TOTAL REVENUES 49,584 51,446 37,800 138,830

EXPENDITURESCurrent Street 16,924 - - 16,924 Court - - 3,668 3,668 Fire department - 68,645 - 68,645

TOTAL EXPENDITURES 16,924 68,645 3,688 89,237

Excess of revenues over (under) expenditures 32,660 (17,199) 34,132 49,593

Other financing sources (uses) Transfer to other funds - - (37,250) (37,250)

Net changes in fund balances 32,660 (17,199) (3,118) 12,343 Fund balances, beginning 144,144 80,819 3,743 228,706

Fund balances, ending $ 176,804 $ 63,620 $ 625 $ 241,049


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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 Honorable Mayor and Members of the Board of TrusteesTown of PorumPorum, Oklahoma

I have audited, in accordance with the auditing standards generally accepted in theUnited States of America and the standards applicable to financial audits containedin Government Auditing Standards issued by the Comptroller General of the UnitedStates, the financial statements of the governmental activities, the business-typeactivities, the aggregate discretely presented component units, each major fund,and the aggregate remaining fund information of Town of Porum, Oklahoma, as of andfor the year ended June 30, 2016, and the related notes to the financial statements,

which collectively comprise Town of Porum’s basic financial statements and haveissued my report thereon dated April 16, 2017 which did not include Management’sDiscussion and Analysis.

Internal Control Over Financial Reporting

In planning and performing my audit of the financial statements, I considered Townof Porum's internal control over financial reporting (internal control) to determinethe audit procedures that are appropriate in the circumstances for the purpose ofexpressing my opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of Town of Porum’s internal control. Accordingly, I do not express an opinion of the effectiveness of Town of Porum'sinternal control.

A deficiency in internal control exists when the design or operation of a controldoes not allow management or employees, in the normal course of performing theirassigned functions, to prevent, or detect and correct misstatements on a timelybasis. A material weakness is a deficiency, or a combination of deficiencies, ininternal control such that there is a reasonable possibility that a materialmisstatement of the entity’s financial statements will not be prevented, or detectedand corrected on a timely basis. A significant deficiency is a deficiency, or acombination of deficiencies, in internal control that is less severe than a materialweakness, yet important enough to merit attention by those charged with governance.

My consideration of internal control over financial reporting was for the limitedpurpose described in the first paragraph of this section and was not designed toidentify all deficiencies in internal control that might be material weaknesses or,significant deficiencies. Given these limitations, during our audit we did notidentify any deficiencies in internal control that we consider to be materialweaknesses. However, material weaknesses may exist that have not been identified.

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Compliance and Other Matters

As part of obtaining reasonable assurance about whether Town of Porum, Oklahoma’sfinancial statements are free of material misstatement, I performed tests of itscompliance with certain provisions of laws, regulations, contracts, and grantagreements, noncompliance with which could have a direct and material effect on thedetermination of financial statement amounts. However, providing an opinion oncompliance with those provisions was not an objective of my audit, and accordingly,I do not express such an opinion. The results of my tests disclosed no instancesof noncompliance or other matters that are required to be reported under GovernmentAuditing Standards.

Purpose of the Report

The purpose of this report is solely to describe the scope of our testing ofinternal control and compliance and the results of that testing, and not to providean 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 withGovernmental Auditing Standards in considering the entity’s internal control andcompliance. Accordingly, this communication is not suitable for any other purpose.

Sincerely,

Ralph OsbornCertified Public AccountantBristow, OklahomaApril 16, 2017

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TOWN OF PORUM, OKLAHOMA ANNUAL FINANCIAL ......TOWN OF PORUM, OKLAHOMA ANNUAL FINANCIAL REPORT JUNE...

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