city of sun valley, idaho...city of sun valley, idaho sun valley, idaho report on the financial...

CITY OF SUN VALLEY, IDAHO

FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

Year Ended September 30, 2015

TABLE OF CONTENTS Page INDEPENDENT AUDITORS’ REPORT ........................................................................................................ 3

MANAGEMENT’S DISCUSSION AND ANALYSIS .................................................................................... 5

BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS Statement of Net Position ..................................................................................................................................... 18 Statement of Activities ........................................................................................................................................... 19 FUND FINANCIAL STATEMENTS

Balance Sheet – Governmental Funds ................................................................................................................ 20 Reconciliation of the Government Funds Balance Sheet to the Statement of Net Position ........................................................................................................................ 22 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds ............................................................................................................. 23 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities ............................................... 25 Notes to the Financial Statements ........................................................................................................................ 26

REQUIRED SUPPLEMENTARY INFORMATION

Statement of Revenues, Expenditures and Changes in Fund Balances – Budget to Actual: General Fund .................................................................................................................................................... 45 Debt Service Fund ........................................................................................................................................... 46 Fixed Asset Fund ............................................................................................................................................. 47 Land Acquisition Fund ................................................................................................................................... 48 Capital Improvement Fund ............................................................................................................................ 49 Workforce Housing Fund .............................................................................................................................. 50 Street and Path Fund ....................................................................................................................................... 51 Schedule of Employers’ Share of Net Pension Liability and Employer Contributions ................................ 52

GOVERNMENTAL REPORTS

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 ................................................................................................................................... 54

Schedule of Findings and Responses .................................................................................................................... 56

INDEPENDENT AUDITORS’ REPORT To the City Council City of Sun Valley, Idaho Sun Valley, Idaho Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Sun Valley, Idaho as of and for the year ended September 30, 2015, and the related notes to the financial statements, which collectively comprise the City’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 form 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 misstatements 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. Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the City of Sun Valley, Idaho as of September 30, 2015 and the respective changes in financial position thereof 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 and budgetary comparison and net pension liability information on pages 45 through 52 be presented to supplement the basic financial statements. Such information, although not a party 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 The management’s discussion and analysis and budgetary comparison information have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 1, 2016, on our consideration of City of Sun Valley, Idaho’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 the 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 City’s internal control over financial reporting and compliance. Meridian, Idaho September 1, 2016

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Josh PLLC Signature

MANAGEMENT’S DISCUSSION AND ANALYSIS



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The City of Sun Valley (City) offers the readers of the City’s financial statements this narrative overview and analysis of the financial activities for the fiscal year ended September 30, 2015. The discussion and analysis presents the highlights of financial activities and financial position for the City. Since the analysis focuses on significant financial issues, major financial activities and resulting changes in financial position, budget changes and variances from the budget, and specific issues related to funds and the economic factors currently affecting the City, please read it in conjunction with the City’s financial statements following this section. Financial Highlights

The assets of the City exceeded its liabilities at the close of the fiscal year ended September 30, 2015 by $8,201,122.

The City’s net position decreased by $1,729,054 primarily due to pension-related obligations

which are now required to be included in the City’s financial statements.

As of September 30, 2015, the City’s governmental funds reported combined ending fund balances of $3,625,223, a decrease of $56,375 from the prior fiscal year. Of this amount, 100% is fund balance that is committed or assigned for use in a particular fund; or unassigned and therefore available for spending at the government’s discretion.

As of September 30, 2015, the total unassigned fund balance for the General Fund was

$2,989,774 or 59% of total General Fund expenditures of $5,062,459. Using the Financial Section of This Report This discussion and analysis serves as an introduction to the City’s basic financial statements. The basic financial statements are comprised of: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the financial statements. This report also contains other supplemental information in addition to the basic financial statements themselves. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business. The government-wide financial statements include a statement of net position and a statement of activities. These statements provide both long-term and short-term information about the City’s overall financial status. The statement of net position presents information on all of the City’s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.



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The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods such as revenues pertaining to uncollected taxes and earned, but unused, vacation leave. These government-wide financial statements distinguish governmental activities of the City that are principally supported by taxes and intergovernmental revenues, such as grants. Governmental activities include general government, community development, police, fire, culture and recreation, building safety, and streets. FUND FINANCIAL STATEMENTS The fund financial statements report information about groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to insure and demonstrate compliance with finance-related legal requirements. All of the City of Sun Valley’s funds are Governmental funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements, however, the governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as, on balances of spendable resources available at the end of the fiscal year. This information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains seven individual governmental funds: General Fund, Debt Service Fund, Fixed Asset Fund, Land Acquisition Fund, Capital Improvement Fund, Workforce Housing Fund, and Street and Path Fund. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for these funds. The City approves a one-year budget for all funds. Budgetary comparison statements have been provided for all of the funds to show compliance with the FY15 budget.



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Notes to the Financial Statements Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements, however, the governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as, on balances of spendable resources available at the end of the fiscal year. This information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains seven individual governmental funds: General Fund, Debt Service Fund, Fixed Asset Fund, Land Acquisition Fund, Capital Improvement Fund, Workforce Housing Fund, and Street and Path Fund. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for these funds. The City approves a one-year budget for all funds. Budgetary comparison statements have been provided for all of the funds to show compliance with the FY15 budget. Other Information In addition to the basic financial statements and accompanying notes, certain required supplementary information including the major governmental fund budgetary schedule is also included. GOVERNMENT-WIDE STATEMENTS Over time, net assets may serve as a useful indicator of a government's financial position. The following table reflects the condensed Statement of Net Position. In the case of the City of Sun Valley, assets exceeded liabilities and deferred inflows by $8,201,122. The City’s total net position was $8,201,122 on September 30, 2015. This amount represents a decrease of $1,729,054 primarily due to pension-related obligations which are now required to be included in the City’s financial statements. These balances are not shown in the 2014 column in the following table.

None of City of Sun Valley's net assets are subject to external restrictions on how they may be used. The City’s unrestricted net assets for governmental activities, the part of the net position that can be used to finance day-to-day operations if needed, was $2,798,723. Table 1 reflects the Statement of Net Position.



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Table 1 Statements of Net Position

September 30, 2015 and 2014 2015 2014 Current assets $ 6,806,405 $ 6,932,850 Deferred outflows - pension 395,004 0 Capital assets 6,363,462 7,147,085 Total assets and deferred outflows $ 13,564,871 $ 14,079,935 Current Liabilities $ 506,820 $ 708,039 Net pension liabilities 823,201 0 Noncurrent Liabilities 759,929 769,914 Deferred tax revenue 2,742,823 2,671,806 Pensions 530,976 0 Total liabilities and deferred inflows 5,363,749 4,149,759 Net Position Invested in capital assets, net of related debt 5,402,399 6,295,324 Unrestricted 2,798,723 3,634,852 Total liabilities, deferred inflows and net position $ 13,564,871 $ 14,079,935 Normal Impacts There are three normal transactions that can affect the comparability of the City’s Statement of Net Position summary presentation. These include: Net Results of Activities – which will impact (increase/decrease) current assets and unrestricted net assets.

Spending of Non-borrowed Current Assets on New Capital – which will (a) reduce current assets and increase capital assets and (b) will reduce unrestricted net assets and increase investments in capital assets, net of debt.

Reduction of Capital Assets through Depreciation – which will reduce capital assets and investments in capital assets, net of debt.

Table 2, which is located on the next page, focuses on the changes in net position of the governmental activities.



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Table 2 Changes in Net Position

For the Fiscal Years Ended September 30, 2015 and 2014

2015 2014 Revenues Program Revenues Charges for services $ 251,902 $ 565,956 General Revenue Property taxes levied for general purposes 2,694,027 2,742,605 Property taxes levied for debt service 0 0 Franchise fees 111,654 132,103 Local option tax 1,644,794 1,599,215 State shared revenue 685,824 659,427 Investment earnings 5,309 3,305 Miscellaneous 108,437 45,305 Total Revenues 5,501,947 5,747,916 Expenses General government 1,509,071 1,338,821 Community development 372,752 478,050 Police 1,202,742 1,101,199 Fire 1,083,125 875,566 Culture and recreation 302,291 227,583 Transportation 318,250 250,000 Streets 861,279 991,401 Contingency 0 12,309 Interest and fees on long-term debt 30,578 33,415 Unallocated depreciation expense 564,878 569,661 Total Expenses 6,244,966 5,878,005 Change in Net Position $ (743,019) $ (130,089)



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Governmental Activities Governmental activities decreased the City of Sun Valley's net assets by $743,019. Key elements of this change in net position are as follows: Revenues Revenue in 2015 decreased over 2014 levels primarily due to the return of building inspection fees to more normal levels. Building inspection revenue was higher than normal in 2014 due to permit revenue for one-time projects at the Sun Valley Lodge and Community School. Expenditures Expenditures in 2015 increased over 2014 levels by $366,961. Increased funding to external agencies, the addition of a patrol officer and two firefighter/EMT positions, and the undertaking of a chip sealing project were the primary contributors to this increase.

This graph shows the total governmental activities cost of $6,236,966 for this year. Of the total amount, general government accounts for $1,509,071 or 24% of the cost and public safety (police



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and fire) accounts for $2,285,867 or 37% of the cost. Additional activities expenditures in 2015 include streets and transportation at $1,179,529 or 19%, unallocated depreciation expense at $564,878 or 9%, community development at $372,752 or 6%, and culture and recreation at $302,291 or 5%. Interest and long-term debt accounted for $30,578 or 1% of total governmental activity expenses. The graph also shows how much of the governmental activities cost is covered by general revenues. Only 5% of the governmental activities cost is covered by program revenues (charges for services). The costs that are not covered by program revenue must be covered by taxes and other general revenue.

$2,694,027

$111,654

$1,644,794

$685,824

$5,309

$108,437

$0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000

Property Taxes

Franchise Fees

Local Option Tax

State shared revenues

Interest earnings

Miscellaneous Revenue

General Revenue by Source ‐ Governmental Activities

As graphically portrayed above, the City received a significant amount of its revenue in 2015 – 49% - from property taxes. The City is also heavily reliant on the local option tax as a prime revenue source: in 2015, local option tax revenue comprised 30% of the City’s revenue. State shared revenues, franchise fees, and miscellaneous revenue provided 12%, 2%, and 2% respectively to support the City’s governmental operations.



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FINANCIAL ANALYSIS OF THE CITY'S FUNDS As noted earlier, the City of Sun Valley uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds in FY 15 The focus of the City of Sun Valley's governmental funds is to provide information on short-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unrestricted fund balance may serve as a useful measure of a government's net resources available for spending at the end of a fiscal year. Fund balance is currently reported in five categories: nonspendable, restricted, committed, assigned, and unassigned. Nonspendable fund balance represents resources that are not in a spendable form (such as inventory or endowment funds). Restricted fund balance are funds that are legally segregated by their providers (bondholders, grantors, or higher levels of government) for a purpose more specific than the overall purpose of the fund. Committed fund balance are funds that set aside for a specific purpose by the City itself using its highest decision-making authority and cannot be used for another purpose without the City using its highest decision-making authority to release them. Assigned fund balance are funds that the City intends to use for a specific purpose and which are assigned by either the City or an individual or other body which has been delegated the authority by the governing body. Unrestricted fund balance can be used for any purpose of the fund. As of September 30, 2015, the City of Sun Valley's governmental funds – General Fund, Debt Service Fund, Fixed Asset Fund, Land Acquisition Fund, Capital Improvement Fund, Workforce Housing Fund, and Street and Path Fund – reported a combined ending fund balance of $3,625,223. This fund balance is available for spending at the government’s discretion (committed, assigned, and unassigned fund balance). Of this amount, $40,000 is committed to indicate that the funds are not available for spending because they have been committed for workforce housing purposes. The fund balance also includes assigned funds of $9,601 in the Debt Service Fund, $371,763 in the Land Acquisition Fund, $106,904 in the Workforce Housing Fund, and $107,181 in the Street and Path Fund. In the General Fund, $2,989,774 remains unassigned. This unassigned fund balance represents 48% of the governmental fund expenditures. The total fund balance represents approximately 58% of the governmental fund expenditures in comparison. The General Fund is the chief operating fund of the City of Sun Valley. At the end of the 2015 fiscal year, unassigned fund balance of the General Fund was $2,989,774. Of the unassigned fund balance, $1,401,342 is available for subsequent year's expenditures. The remaining unassigned fund balance of $1,588,432 has been designated by the City Council in compliance with the City's "Fiscal Policy Reserve". The policy states that no less than the equivalent of 16 weeks ($1,588,432) and no more than the equivalent of 32 ($3,176,864) weeks of regular General Fund operating expenditures, based on its annual General Fund budget are set aside to mitigate current and future risks and to ensure stable tax rates.



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During the 2015 fiscal year, the fund balance of the City of Sun Valley's General Fund decreased by $108,034 due to transfers to the Fixed Asset Fund to assist in the funding of equipment. The Debt Service Fund is used for the payment of principal and interest for the City’s long-term debt. The City does not currently have any long-term debt so the City can leave the $9,601 fund balance in the Debt Service Fund for use toward any future long-term debt incurred or transfer to the General Fund for general City purposes The Fixed Asset Fund accounts for the revenue and expenditures to finance assets that are tangible, have a useful life exceeding two years, and are of significant value. Transfers into the Fund in 2015 helped fund the acquisition of a patrol car and the annual lease payment for the aerial ladder truck. The fund balance at year-end was $0. The Land Acquisition Fund is used to account for revenue and expenditures related to the acquisition of land by the City. There was no change in the fund balance of the Land Acquisition Fund - $371,763 – during the 2015 fiscal year as there was no acquisition of land by the City. The City’s Capital Improvement Fund is used to account for revenue and expenditures associated with improving capital assets. Transfers into the Fund in 2015 provided funding to undertake exterior improvements to the City Hall building and Street Department facility. The ending fund balance was $0. The Workforce Housing Fund accounts for revenue and expenditures associated with the City’s workforce housing units, workforce housing assistance provided to City employees, and community workforce housing support. In 2015, the fund balance was utilized to fund these items resulting in a fund balance decrease of $52,185. The year-end fund balance totaled $146,904. The Street and Path Fund is used to account for revenue and expenditures associated with the maintenance of the City’s streets and pathways. Although a chip sealing project was undertaken in 2015, sufficient revenue was realized to result in a year-end fund balance of $107,181. General Fund Budgetary Highlights in FY 15 Actual budget comparisons for the various funds are found following the Notes to Financial Statements. Information regarding the General Fund budget final budget follows.



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Table 3 Budget to Actual Comparison – General Fund

September 30, 2015 and 2014 2015 2014 Original Budget $ 5,065,052 $ 4,757,310 Final Budget 5,162,408 5,209,530 Actual Expenditures 5,054,259 4,440,090 Variance $ 108,149 $ 769,440 Capital Assets The City of Sun Valley's investment in capital assets for its governmental activities as of September 30, 2015 amounted to $6,363,462 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, equipment and vehicles, and infrastructure such as roads and pathways. The net decrease in the City’s capital asset investment for fiscal year 2015 is $783,623 and is shown in greater detail in the financial statements. The following table provides a summary of the City's capital assets.

Table 4 Capital Assets for the year ended

September 30, 2015 and 2014

2014 2013 Land $ 191,149 $ 191,149 Building and improvements 3,030,084 3,030,084 Infrastructure 16,454,746 16,454,746 Equipment and vehicles 4,654,359 4,628,102 Accumulated depreciation (17,966,876) (17,156,996) Total capital assets, net of accumulated depreciation $ 6,363,462 $ 7,147,085

Police Department equipment in the amount of $26,257 was added in fiscal year 2015. There were no other significant additions to capital assets.



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Long-term debt Idaho state statutes limit the amount of general obligation debt a city may issue to 2 percent of its market valuation. City management believes it is well below this threshold. At the end of the 2015 fiscal year, the City of Sun Valley had $685,128 in outstanding long-term debt. Economic Factors The City is primarily residentially with a major destination resort located within its boundaries. The property tax revenue derived from the current housing stock is stable. The commercial component includes lodging, retail, and restaurant sales. Since the majority of the revenue collected by the City is based on property taxes, the City experiences relative stability in its revenue stream. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the City of Sun Valley's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or request for additional information should be addressed to the City Administrator, P.O. Box 416, 81 Elkhorn Road, Sun Valley, Idaho 83353.

BASIC FINANCIAL STATEMENTS


Governmental Activities

CURRENT ASSETSCash and Investments $ 3,764,001 Receivables

Property tax 2,764,211 Local option taxes 72,085 Intergovernmental 185,297 Other receivables 20,811

Total Current Assets 6,806,405

NONCURRENT ASSETSCapital Assets

Land and other assets not depreciated 191,149 Buildings, property and equipment, infrastructure,

net of depreciation 6,172,313

Total Noncurrent Assets 6,363,462

Total Assets 13,169,867

DEFERRED OUTFLOWSPension obligations 395,004

Total Assets and Deferred Outflows $ 13,564,871

CURRENT LIABILITIESAccounts payable $ 263,781 Other accrued expenses 158,253 Current portion of capital lease payable 84,786

Total Current Liabilities 506,820

NONCURRENT LIABILITIESNet pension liability 823,201 Compensated absences 74,801 Capital lease payable, net of current portion 685,128

Total Liabilities 2,089,950

DEFERRED INFLOWSDeferred tax revenue 2,742,823Pensions 530,976

Total Deferred Inflows 3,273,799

Net Investment in Capital Assets 5,402,399 Unrestricted 2,798,723

Total Net Position 8,201,122 Total Liabilities, Deferred Inflows and Net Position $ 13,564,871

STATEMENT OF NET POSITION

September 30, 2015

ASSETS AND DEFERRED OUTFLOWS

LIABILITIES AND DEFERRED INFLOWS

NET POSITION

See accompanying notes to basic financial statements.

18


Net (Expense)Revenue and

Changes in Net Position

Charges for Operating Capital GovernmentalFunctions/Programs Expenses Services Grants Contributions Activities

Governmental ActivitiesGeneral government 1,509,071$ 40,919$ 0$ 0$ (1,468,152)$ Community development 372,752 3,639 (369,113) Police 1,202,742 (1,202,742) Fire 1,083,125 (1,083,125) Culture and recreation 302,291 4,346 (297,945) Transportation 318,250 16,035 (302,215) Streets 861,279 (861,279) Building safety 186,963 186,963 *Unallocated deprecation expense 564,878 (564,878)

Interest on long-term debt 30,578 (30,578) Total Governmental Activities 6,244,966 251,902 0 0 (5,993,064)

General RevenuesTaxes

Property taxes, levied for general purposes 2,694,027 Franchise fees 111,654 Local option tax 1,644,794

State shared revenue 685,824 Interest earnings 5,309 Miscellaneous 108,437

Total General Revenues 5,250,045

Change in Net Position (743,019)

NET POSITION, Beginning of Year (Previously stated) 9,930,176 Prior period adjustment (986,035)

NET POSITION, Beginning of Year (Restated) 8,944,141

NET POSITION, End of Year 8,201,122$

*Unallocated depreciation that excludes depreciation which is included in the direct expenses of various programs.

STATEMENT OF ACTIVITIES

For the Year Ended September 30, 2015

Program Revenues


19


Land General Debt Service Fixed Asset Acquisition

Fund Fund Fund FundASSETS

Cash and Investments 3,128,631$ 9,522$ 0$ 371,763$ Receivables Property taxes 2,747,491 395 Local option taxes receivable 72,085 Intergovernmental 185,297 Due from other funds 0 Other receivables 20,811 0

Total Assets 6,154,315$ 9,917$ 0$ 371,763$

LIABILITIES AND FUND BALANCES

LIABILITIES Accounts payable 263,781$ 0$ 0$ 0$ Accrued expense 158,253 Due to general fund 0 Advanced revenue 16,009 316

Total Liabilities 438,043 316 0 0

DEFERRED INFLOWS 2,726,498 0 0 0

FUND BALANCESNonspendableRestrictedCommittedAssigned 9,601 0 371,763 Unassigned 2,989,774

Total Fund Balances 2,989,774 9,601 0 371,763

Total Liabilities, Defered Inflows and Fund Balances 6,154,315$ 9,917$ 0$ 371,763$

BALANCE SHEET - GOVERNMENTAL FUNDS

September 30, 2015

See accompanying notes to basic financial statements. 20

Capital Workforce Street TotalImprovement Housing and Path Governmental

Fund Fund Fund Funds

0$ 146,904$ 107,181$ 3,764,001$

2,747,886 72,085

185,297 0

20,811

0$ 146,904$ 107,181$ 6,790,080$

0$ 0$ 0$ 263,781$ 158,253

0 0 0 16,325

0 0 0 438,359

0 0 0 2,726,498

0 0

40,000 40,000 0 106,904 107,181 595,449

2,989,774

0 146,904 107,181 3,625,223

0$ 146,904$ 107,181$ 6,790,080$


Total fund balance - total governmental funds 3,625,223$

Amounts reported for governmental activities in theStatement of Net Position are different because:

Capital assets used in governmental activities are not financialresources and therefore are not reported in the funds. Theseassets, net of accumulated depreciation, consist of:

Land 191,149$ Buildings 3,030,084 Infrastructure 16,454,746 Equipment 4,654,359 Accumulated depreciation (17,966,876)

Total capital assets, net of accumulated depreciation 6,363,462

Some of the City's taxes will be collected after year-end, but are notavailable soon enough to pay the current period's expenditures, andtherefore are reported as deferred revenue in the funds. 16,325

Long-term liabilities are not due and payable in the current periodand therefore are not reported as fund liabilities. These liabilities consist of:

Long-term capital lease payable (769,914) Net pension liability (823,201) Pension related deferred inflows (530,976) Pension related deferred outflows 395,004 Compensated absences payable (74,801)

Total net position of governmental activities 8,201,122$

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET POSITION

September 30, 2015


22


Land General Debt Service Fixed Asset Acquisitoin

Fund Fund Fund Fund

REVENUES Property taxes 2,425,226$ 0$ 0$ 0$ Local option tax 1,644,794 Franchise fees 111,654 Licenses, permits, and fees 196,100 Intergovernmental 638,180 Charges for services 10,164 Fines and forfeitures 1,080 Earnings on investments 5,309 Earnings on leases 0 Refunds and reimbursements 40,919 Miscellaneous 81,575 Total Revenue 5,155,001 0 0 0

EXPENDITURES

General government 1,922,440 18,775 Community development 370,575 Police 1,202,742 Fire 919,785 112,426 Streets 591,218 Unanticipated 55,699 Capital outlay 26,257 Total Expenditures 5,062,459 0 157,458 0

Excess (Deficiency) of Revenues Over Expenditures 92,542 0 (157,458) 0

OTHER FINANCING SOURCES (USES) Transfers in 157,458 Transfers out (200,576) (3,337) Issuance of debt Net Other Financing Sources (Uses) (200,576) (3,337) 157,458 0

Net Change in Fund Balance (108,034) (3,337) 0 0

FUND BALANCE, Beginning of Year 3,097,808 12,938 0 371,763

FUND BALANCE, End of Year 2,989,774$ 9,601$ 0$ 371,763$

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -GOVERNMENTAL FUNDS


See accompanying notes to basic financial statements. 23

Capital Workforce Street and TotalImprovement Housing Path Governmental

Fund Fund Fund Funds

0$ 0$ 268,801$ 2,694,027$ 1,644,794

111,654 196,100

47,644 685,824 3,639 13,803

1,080 5,309

0 40,919

81,575 0 3,639 316,445 5,475,085

46,455 55,824 2,043,494 370,575

1,202,742 1,032,211

209,264 800,482 55,699

26,257 46,455 55,824 209,264 5,531,460

(46,455) (52,185) 107,181 (56,375)

46,455 203,913 (203,913)

46,455 0 0 0

0 (52,185) 107,181 (56,375)

0 199,089 0 3,681,598

0$ 146,904$ 107,181$ 3,625,223$


Net change in fund balances - total governmental funds (56,375)$

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets are allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital outlay 26,257 Depreciation expense (809,880) Excess of depreciation expense over capital outlay (783,623)

Issuing debt increases long-term liabilities in the statement of net position.Repoyment of principal is an expenditure in the governmental funds, butthe repayment reduces long-term liabilities in the statement of net position.This is the amount by which proceeds exceeded repayments:

Principal payments 81,847

Under the modified accrual basis of accounting used in the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable financial resources. In the statement of activities, which is presented on the accrual basis, expenses and liabilities are reported regardless of financial resource availability.

Pension revenue 26,862 Decrease in deferred property tax revenue (244) Increase in compensated absences payable (11,486)

15,132

Change in Net Position of Governmental Activities (743,019)$

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


TO THE STATEMENT OF ACTIVITIES


25


NOTES TO FINANCIAL STATEMENTS

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NOTE A - SIGNIFICANT ACCOUNTING POLICIES General Statement City of Sun Valley, Idaho (the City) was chartered in 1947 under the laws of the State of Idaho. The City operates under a mayor and council form of government and provides the following services: public safety (police and fire), community development, building safety, streets, planning and zoning, and general administrative services to its citizens. The financial statements of the City are prepared in accordance with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASB) pronouncements. Financial Reporting Entity The accompanying financial statements present the activities of the City of Sun Valley, Idaho (the City). In evaluating how to define the City, for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying criteria set forth in generally accepted accounting principles as applicable to governments. All funds, account groups, and activities of the City are included in these financial statements. No component units have been excluded. Basis of Presentation Government-wide 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 non-fiduciary activities of the governmental entity. For most part, the effect of interfund activity has been removed from these statements. Governmental activities (government funds) which normally are supported by taxes and intergovernmental revenues are reported separately from business-type activities (proprietary funds) which rely to a significant extent on fees and charges for support. The City has no business-type activities and, therefore, this column has been eliminated. The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include (1) fees, fines, and charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Basis of Presentation (Continued) Fund Financial Statements: The City segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental activities. These statements present each major fund as a separate column on the fund financial statements.


NOTES TO FINANCIAL STATEMENTS (Continued)

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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The City has presented the following major governmental funds:

The General Fund is the City’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund.

The Fixed Asset Fund accounts for all revenues and expenditures to finance assets that are tangible, have a useful life exceeding two years and have a cost of more than $5,000.

The Land Acquisition Fund is used to account for financial resources for the acquisition of land by the City. The Capital Improvement Fund accounts for the construction or acquisition of capital improvements or facilities. The Debt Service Fund is used for the accumulation of resources for, and the payment of, general long-term debt principle, interest and related costs. The Workforce Housing Fund is used to provide affordable housing for low to moderate income households whose income is derived from employment within Sun Valley or, when found appropriate by the City, employed within Blaine County in the area commonly known as the North Valley, including the City of Ketchum and the area commonly known as River Run. The Street and Path Fund is used to account for the repairs, maintenance, and projects related to roads and streets within the City.

Measurement Focus/Basis of Accounting Measurement focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included on the statement of net assets and the operating statements present increases (revenues) and decreases (expenses) in net total assets. Under the accrual basis of accounting, revenues are recognized 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.



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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized as soon as they are both measurable and available. “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days after year end. Expenditures generally are recorded when the liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences, are recorded only when payment is due. Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. Sales taxes collected and held by the state at year end on behalf of the government also are recognized as revenue. All other revenue items are considered to be measurable and available only when cash is received by the government. Budgetary Control Annual budgets are adopted on a basis consistent with state code and generally accepted accounting principles for all governmental funds. All annual appropriations lapse at fiscal year end. Project-length financial plans are adopted for all capital projects funds. Annual operating budgets are adopted for proprietary funds. The City Council follows these procedures in establishing the budgetary data reflected in the financial statements:

1. Prior to August, the Mayor submits to the City Council a proposed operating budget outlined for the fiscal year commencing the following October 1. The tentative budget is balanced and includes expenditures and the means of financing them.

2. Public hearings are conducted at the City Hall, to obtain taxpayer comments. 3. Prior to September 1, the budget is legally enacted through passage of an ordinance. 4. Formal budgetary integration is employed as a management control device during the year. 5. Revisions that alter the total expenditures of any fund must be approved by the City Council. However,

state law does allow fund expenditures to exceed fund appropriations. 6. Annual appropriated budgets are adopted for all the funds of the City. The budget is prepared in

accordance with the basis of accounting utilized by that fund. Budgeted amounts shown are as originally adopted and as amended by the City Council. Budgeted amendments are passed on an as-needed basis. All annual appropriations lapse at fiscal year-end. A balanced budget is required.



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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and Investments The government’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. State statute authorizes the government to invest in obligations of the U.S. Treasury, commercial paper, corporate bonds, repurchase agreements, and the State Treasurer’s Investment Pool. Investments for the government are reported at fair value. Receivables and Payables Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to/from other funds”. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements. Quasi-external transactions are accounted for as revenues, expenditures or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as reductions of expenditures/expenses in the fund that is reimbursed. Receivables and Payables (Continued) All other interfund transactions, except quasi-external transactions and reimbursements, are reported as transfers. Nonrecurring or non-routine permanent transfers of resources are reported as fund balance transfers. All other interfund transfers are reported as operating transfers. These transfers offset each other and are not a part of the government-wide financial statements unless between business-type (enterprise) funds and governmental funds. Non-tax receivables are recognized as revenues received from the State and Federal governments if designated for the current fiscal period. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and in the fund financial statements for proprietary funds. Capital assets are defined by the City as assets with an initial, individual cost of more than $10,000 and an estimated useful life in excess of three years. 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 cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.



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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued) Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities is included as part of the capitalized value of the assets construction. Property, plant and equipment of the City are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings 20-25

Building improvements 20-25 Infrastructure 20-50 Equipment and vehicles 7-15

In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital Lease Obligations Assets and liabilities resulting from capital leases are recorded at lease inception. The principal portion of lease payments reduces the liability; the interest portion is expensed. Other financing sources and expenditures are recorded at lease inception. Lease payments are recorded as debt service expenditures. For budgetary purposes, lease payments are only reported as expenditures when paid. Compensated Absences Employees of the City are entitled to paid vacation and paid sick leave depending on job classification, length of service and other factors. All vacation and personal days off are accrued when incurred in the government-wide financial statements. Governmental funds do not report a liability for these amounts unless payment will be made early in the following year. Interfund Transactions During the course of normal operations, the City has some transactions between funds, including expenditures and transfers of resources to provide services, construct assets, among other activity. The accompanying financial statements generally reflect such transactions as transfers. Operating subsidies are also recorded as transfers.



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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued) Net Position Classifications

Government-Wide Statements: Net assets are displayed in three components as follows:

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

Restricted net assets – Consist of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments, or (2) law through constitutional provisions or enabling legislation. Unrestricted Net Assets – All other net assets that do not meet the definition of “invested in capital assets, net of related debt” or “restricted”

Fund statements: Governmental fund equity is classified as fund balance. Fund balance is further classified as nonspendable, restricted, committed, assigned or unassigned. Proprietary fund equity is classified the same as in the government-wide statements. Use of Restricted/Unrestricted Net Assets When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the City’s policy is to apply restricted net assets first. Property Tax Calendar

The City’s property tax is levied each October on the value listed as of the prior January 1 for all real property located in the City. The lien date is effective January 1 of the year the property tax is levied. A revaluation of all property is required to be completed no less than every five years. Under Idaho Code Section 50-235, the City cannot levy taxes over nine-tenths percent (.9%) of the total City adjusted market value for real property located within the City. Taxes are due in two installments on December 20 and June 20 following the levy date. Property taxes levied are recorded as receivables if uncollected and a deferred revenue amount is recorded, in the fund financial statements, to the extent of taxes not estimated to be collected within 60 days of the end of the accounting period.



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NOTE A - SIGNIFICANT ACCOUNTING POLICIES (Continued) Deferred Outflows and Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows and inflows of resources. Deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future periods and thus, will not be recognized as an outflow of resources (expense/expenditure) until then. Deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. Use of Estimates The City uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Pensions For purposes of measuring the net pension liability and pension expense, information about the fiduciary net position of the Public Employee Retirement System of Idaho Base Plan (Base Plan) and additions to/deductions from Base Plan’s fiduciary net position have been determined on the same basis as they are reported by the Base Plan. 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.



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NOTE B - CASH AND INVESTMENTS At September 30, 2015, the City’s cash and investments consisted of the following: Bank Balance Carrying Amount Cash Bank Deposits $ 665,718 $ 405,839 Cash on Hand 1,084 Total Cash $ 665,718 Investments, at Fair Value State Treasurer’s Local Government Pool, no rating 3,357,078 Total Cash and Investments $ 3,764,001 Reconciliation of the City’s deposit and investment balances as of September 30, 2015: City’s Deposits Average and Investments Total Maturities Cash in bank – Deposits $ 405,839 NA State Treasurer’s Local Government Pool 3,357,078 <12 Mo Cash on Hand 1,084 NA Total $ 3,764,001 Custodial Credit Risk – Deposits Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. The City does not have a deposit policy for custodial credit risk. As of September 30, 2015, $415,718 of the City’s bank balance was uninsured and uncollateralized. Credit Risk Credit risk is the risk that the counterparty to an investment will not fulfill its obligation. It is commonly expressed in terms of the credit quality rating issued by a nationally recognized statistical rating organization such as Moody’s, Standard & Poor’s and Fitch’s. The rating of the Local Government Investment Pool (LGIP) as of September 30, 2009 was AAAf. The LGIP terminated its rating service in December 2009 as the cost of the rating outweighed the benefit to the pool as a whole. The funds objectives and overall strategy and structure have not changed.



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NOTE B - CASH AND INVESTMENTS (Continued) Interest Rate Risk Interest rate risk is the risk of loss in fair value should market interest rates change in the future. Investments with long-term, fixed interest rates are the most volatile. The investments within the Idaho State Treasurer’s Local Government Investment Pool and the Federal Home Loan Note have an average maturity of one year or less and the government money market fund has an average maturity of less than 30 days, thereby minimizing interest rate risk. NOTE C - INVESTMENT IN MOUNTAIN RIDES TRANSPORTATION AUTHORITY The Mountain Rides Transportation Authority is an Authority Board authorized pursuant to Idaho Code, Section 76-2328 to procure, establish, operate, maintain and plan for a multimodal public transportation system in and between the corporate limits of Sun Valley, Ketchum, Hailey, Bellevue and Carey and within Blaine County. The Authority receives its funding through federal and state grants, fares, and contributions from the cities in Blaine County as well as from Blaine County. The City’s share of operating costs for the year ended September 30, 2015 was $318,250. The Authority is governed by an independent Board comprised of representatives appointed by the Mayors of each city, except for the City of Carey, and the Board of the County Commissioners, and one “Member-At-Large” appointed by the Board of the Authority.



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NOTE D - CAPITAL ASSETS Capital asset activity for the year ended September 30, 2015 is as follows: Governmental Activities Balance Balance 10/01/14 Increases Decreases 9/30/15 Capital assets, not being depreciated: Land $ 191,149 $ 0 $ 0 $ 191,149 Capital assets, being depreciated: Buildings and Improvements 3,030,084 3,030,084 Equipment and Vehicles 4,628,102 26,257 4,654,359 Infrastructure 16,454,746 16,454,746 Total capital assets, being depreciated 24,304,081 26,257 0 24,330,338 Less accumulated depreciation for: Buildings and Improvements 1,627,414 76,754 1,704,168 Equipment and Vehicles 2,699,892 230,524 2,930,416 Infrastructure 12,829,690 502,602 13,332,292

Total accumulated depreciation 17,156,996 809,880 0 17,966,876 Governmental activities capital assets, net $ 7,147,085 $ (783,623) $ 0 $ 6,363,462

Depreciation expense was charged to functions/programs as follows: Governmental Activities

General Government $ 7,336 Public Protection 163,339 Workforce Housing 11,353 Community development and building 2,177 Street 60,797 Unallocated 564,878

Total Depreciation Expense $ 809,880



September 30, 2015

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NOTE E - GOVERNMENT FUND BALANCES

As of September 30, 2015, fund balances of the governmental funds are classified as follows:

Nonspendable – Amounts that are not in a spendable form or are required to maintained intact. Such amounts are inventory, prepaid accounts, and assets held for sale. There were no nonspendable amounts at September 30, 2015.

Restricted – Amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. There were no restricted amounts at September 30, 2015.

Committed — Amounts that can be used only for specific purposes determined by a formal action of the City Council. The Council is the highest level of decision-making authority for the City. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by the Council. As of September 30, 2015, there was $40,000 in committed funds in the workforce development fund.

Assigned — Amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the City’s adopted policy, only City Council, Finance Director or the Council’s finance committee may assign amounts for specific purposes. The City believes all fund balances in the remaining funds outside the general fund are assigned for that particular fund’s purpose. The total amount of $595,449 has been shown as assigned.

Unassigned — All other spendable amounts. As of September 30, 2015, the fund balance in the general fund is considered unassigned.

NOTE F - INTERFUND TRANSFERS The composition of interfund transfers as of September 30, 2015 is as follows: From the General Fund to: The Fixed Asset Fund to cover costs $ 154,121 The Capital Improvement Fund to cover costs 46,455 $ 200,576 From the Debt Service Fund to: The Fixed Asset Fund to cover costs $ 3,337



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NOTE G - LEASES Capital Lease: The City has entered into lease agreement as lessee for financing the acquisition of equipment. This lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of inception. The amount of assets acquired through an active capital lease is as follows:

General Fund Assets $ 930,772 Less accumulated depreciation (124,103)

Total assets net of accumulated depreciation $ 806,669

The City has a capital lease with Oshkosh Capital at an annual interest rate of 3.59%. Future minimum lease payments are as follows:

Year Ended September 30 Amount

2016 $ 112,426 2017 112,426 2018 112,426 2019 112,426

2020 - 2023 449,700 Total minimum lease payments 899,404 Less: Amount representing interest (129,490) Present value of minimum lease payments $ 769,914 Amount due within one year $ 84,786 Amount due in more than one year 685,128 $ 769,914 Operating Leases: The City leases office equipment under non-cancelable operating leases which will expire in December, 2018. Lease expense for this equipment was $1,608 for the year ended September 30, 2015. The future minimum lease payments for these leases are as follows:

Year Ended September 30 Amount 2016 $ 1,260 2017 1,260 2018 315

$ 2,835



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NOTE H - COMPENSATED ABSENCES It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. No liability is reported for unpaid accumulated sick leave. Vacation pay that is expected to be liquidated with expendable available financial resources is reported as an expenditure and a fund liability of the governmental fund that will pay for it. Compensated absences activity for the year ended September 30, 2015 is as follows: Due Within Beginning Additions Reductions Ending One Year

Compensated absences $ 63,315 $ 99,137 $ 87,651 $ 74,801 $ 74,801 NOTE I - PENSION LIABILITY Plan Description City of Sun Valley, Idaho contributes to the Base Plan which is a cost-sharing multiple-employer defined benefit pension plan administered by Public Employee Retirement System of Idaho (PERSI or System) that covers substantially all employees of the State of Idaho, its agencies and various participating political subdivisions. The cost to administer the plan is financed through the contributions and investment earnings of the plan. PERSI issues a publicly available financial report that includes financial statements and the required supplementary information for PERSI. That report may be obtained on the PERSI website at www.persi.idaho.gov. Responsibility for administration of the Base Plan is assigned to the Board comprised of five members appointed by the Governor and confirmed by the Idaho Senate. State law requires that two members of the Board be active Base Plan members with at least ten years of service and three members who are Idaho citizens not members of the Base Plan except by reason of having served on the Board. Employee membership data related to the PERSI Base Plan, as of September 30, 2015 was as follows: Retirees and beneficiaries currently receiving benefits 67,008 Terminated employees entitles to but not yet receiving benefits 11,859 Active plan members 42,657 121,524



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NOTE I - PENSION LIABILITY (Continued) Pension Benefits The Base Plan provides retirement, disability, death and survivor benefits of eligible members or beneficiaries. Benefits are based on members’ years of service, age, and highest average salary. Members become fully vested in their retirement benefits with five years of credited service (5 months for elected or appointed officials). Members are eligible for retirement benefits upon attainment of the ages specified for their employment classification. The annual service retirement allowance for each month of credited service is 2.0% (2.3% for police/firefighters) of the average monthly salary for the highest consecutive 42 months. Amounts in parenthesis represent police/firefighters. The benefit payments for the Base Plan are calculated using a benefit formula adopted by the Idaho Legislature. The Base Plan is required to provide a 1% minimum cost of living increase per year provided the Consumer Price Index increases 1% or more. The PERSI Board has the authority to provide higher cost of living increases to a maximum of the Consumer Price Index movement or 6%, whichever is less; however, any amount above the 1% minimum is subject to review by the Idaho Legislature. Member and Employer Contributions Member and employer contributions paid to the Base Plan are set by statute and are established as a percent of covered compensation and earnings from investments. Contribution rates are determined by the PERSI Board within limitations, as defined by state law. The Board may make periodic changes to employer and employee contribution rates (expressed as percentages of annual covered payroll) if current rates are actuarially determined to be inadequate or in excess to accumulate sufficient assets to pay benefits when due. The contribution rates for employees are set by stature at 60% of the employer rate for general employees and 72% for police and firefighters. As of June 30, 2015 it was 6.79% for general employees and 8.36% for police and firefighters. The employer contribution rate as a percent of covered payroll is set by the Retirement Board and was 11.32% general employees and 11.66% for police and firefighters. The City contributions were $210,226 for the year ended September 30, 2015. Pension Liabilities, Pension Expense (Revenue), and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At September 30, 2015, City of Sun Valley, Idaho reported a liability for its proportionate share of the net pension liability. The net pension liability was measured as of July 1, 2014, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Association’s proportion of the net pension liability was based on the Association’s share of contributions in the Base Plan pension plan relative to the total contributions of all participating PERSI Base Plan employers. At July 1, 2015, the Association’s proportion was 0.000625135 percent.



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NOTE I - PENSION LIABILITY (Continued) For the year ended September 30, 2015, City of Sun Valley, Idaho recognized pension revenue of $26,862. At September 30, 2015 City of Sun Valley, Idaho reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of resources of resources _ Differences between expected and actual expense $ 0 $ 98,684 Changes in assumptions or other inputs 29,980 0 Net difference between projected and actual Earnings on pension plan investments 302,961 432,292 Changes in the employer’s proportion and differences between the employer’s contributions and the employer’s proportionate contributions 0 0 City of Sun Valley, Idaho’s contributions subsequent to the measurement date 62,063 0 Total $ 395,004 $ 530,976 $62,063 reported as deferred outflows of resources related to pensions resulting from Employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending September 30, 2015. The average of the expected remaining service lives of all employees that are provided with pensions through the System (active and inactive employees) determined at July 1, 2013 the beginning of the measurement period ended June 30, 2015 is 5.6 years. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense (revenue) as follows: Year Ending June 30, Amount 2015 $ (84,443) 2016 (84,443) 2017 (84,443) 2018 61,291 2019 (5,997)



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NOTE I - PENSION LIABILITY (Continued) Actuarial Assumptions Valuations are based on actuarial assumptions, the benefit formulas, and employee groups. Level percentages of payroll normal costs are determined using the Entry Age Normal Cost Method. Under the Entry Age Normal Cost Method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated as a level percentage of each year’s earnings of the individual between entry age and assumed exit age. The Base Plan amortizes any unfunded actuarial accrued liability based on a level percentage of payroll. The maximum amortization period for the Base Plan permitted under Section 59-1322, Idaho Code, is 25 years. The total pension liability in the July 1, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 3.25% Salary increases 4.5 – 10.25% Salary inflation 3.75% Investment rate of return, net of investment expenses 7.10% Cost-of-living adjustments 1.00% Mortality rates were based on the RP – 2000 combined table for healthy males or females as appropriate with the following offsets: • Set back 3 years for teachers • No offset for male fire and police • Forward one year for female fire and police • Set back one year for all general employees and all beneficiaries An experience study was performed in 2012 for the period July 1, 2007 through June 30, 2011 which reviewed all economic and demographic assumptions other than mortality. Mortality and all economic assumptions were studied in 2014 for the period from July 1, 2009 through June 30, 2013. The Total Pension Liability as of June 30, 2015 is based on the results of an actuarial valuation date of July 1, 2015. The long-term expected rate of return on pension plan investments was determined using the building block approach and a forward-looking model in which best estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.



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NOTE I - PENSION LIABILITY (Continued) Even though history provides a valuable perspective for setting the investment return assumption, the System relies primarily on an approach which builds upon the latest capital market assumptions. Specifically, the System uses consultants, investment managers and trustees to develop capital market assumptions in analyzing the System’s asset allocation. The assumptions and the System’s formal policy for asset allocation are shown below. The formal asset allocation policy is somewhat more conservative than the current allocation of System’s assets. The best-estimate range for the long-term expected rate of return is determined by adding expected inflation to expected long-term real returns and reflecting expected volatility and correlation. The capital market assumptions are as of January 1, 2015. Long-term Target Expected Real Asset Class Index Allocation Rate of Return Core Fixed Income Barclays Aggregate 30% 0.80% Broad US Equities Wilshire 5000/Russell 3000 55% 6.90% Developed Foreign Equities MSCI EAFE 15% 7.55% Assumed Inflation – Mean 3.25% Assumed Inflation – Standard Deviation 2.00% Portfolio Arithmetic Mean Return 8.42% Portfolio Long-Term Expected Rate of Return 7.50% Less Assumed Investment Expense 0.40% Long-term Expected Rate of Return, Net of Investment Expense 7.10% Discount Rate The discount rate used to measure the total pension liability was 7.10%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current contribution rate. Based on these assumptions, the pension plans’ 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 was applied to all periods of projected benefit payments to determine the total pension liability. The long-term expected rate of return was determined net of pension plan investment expense but without reduction for pension plan administrative expense.



September 30, 2015

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NOTE I - PENSION LIABILITY (Continued) Sensitivity of the Employer's proportionate share of the net pension liability to changes in the discount rate. The following presents the Employer's proportionate share of the net pension liability calculated using the discount rate of 7.10 percent, as well as what the Employer's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.10 percent) or 1-percentage-point higher (8.10 percent) than the current rate: 1% Decrease Current Discount Rate 1% Increase (6.10%) (7.10%) (8.10%) Employer’s proportionate share Of the net pension liability (asset) $ 2,005,019 $ 823,201 $ (159,324) Pension plan fiduciary net position Detailed information about the pension plan's fiduciary net position is available in the separately issued PERSI financial report. PERSI issues a publicly available financial report that includes financial statements and the required supplementary information for PERSI. That report may be obtained on the PERSI website at www.persi.idaho.gov. NOTE J - RISK MANAGEMENT The government is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the government carries commercial insurance. NOTE K - EXCESS OF EXPENDITURES OVER APPROPRIATIONS For the year ended September 30, 2015, expenditures exceeded appropriations in the Capital Improvement, Workforce Housing and Street and Path Funds by $4,720, $4,639 and $7,634, respectively. The expenditures were funded by transfers from the general fund and carry forward fund balances. NOTE L - UNANTICIPATED EXPENSE In August of 2016, the former Finance Manager/Treasurer was arrested and charged with misappropriating over $130,000 of City funds. The total of the unauthorized transactions during the year ended September 30, 2015 was $55,699 with the remaining coming in the fiscal year ending September 30, 2016. Any amounts recovered will be recorded in the period received. This is shown in the General Fund as Unanticipated Expense.

REQUIRED SUPPLEMENTARY INFORMATION


BudgetOriginal Final Actual Variance

REVENUES Property taxes 2,429,280$ 2,426,280$ 2,425,226$ (1,054)$ Local option tax 1,304,500 1,636,500 1,644,794 8,294 Franchise fees 130,000 117,000 111,654 (5,346) Licenses, permits, and fees 194,300 179,600 196,100 16,500 Intergovernmental 718,711 692,028 638,180 (53,848) Charges for services 23,000 17,000 10,164 (6,836) Fines and forfeitures 6,500 6,900 1,080 (5,820) Earnings on investments 4,000 4,600 5,309 709 Refunds and reimbursements 36,000 45,500 40,919 (4,581) Miscellaneous 25,000 37,000 81,575 44,575

Total Revenue 4,871,291 5,162,408 5,155,001 (7,407)

EXPENDITURES

General government 1,859,289 1,918,283 1,922,440 (4,157) Community development 483,099 369,539 370,575 (1,036) Police 1,202,650 1,216,495 1,202,742 13,753 Fire 815,634 858,465 919,785 (61,320) Streets 604,380 612,140 591,218 20,922 Unanticipanted 0 0 55,699 (55,699) Contingency 100,000 187,486 187,486

Total Expenditures 5,065,052 5,162,408 5,062,459 99,949

Excess (Deficiency) of Revenues Over Expenditures (193,761) 0 92,542 92,542

OTHER FINANCING SOURCES (USES) Transfers in (out) 193,761 0 (200,576) (200,576)

Net Other Financing Sources (Uses) 193,761 0 (200,576) (200,576)

Net Change in Fund Balance 0$ 0$ (108,034) (108,034)$

FUND BALANCE, Beginning of Year 3,097,808

FUND BALANCE, End of Year 2,989,774$

GENERAL FUND


BUDGET AND ACTUALSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

45



REVENUES 0$ 0$ 0$ 0$

EXPENDITURES 0 0 0 0

Excess (Deficiency) of Revenues Over Expenditures 0 0 0 0

OTHER FINANCING SOURCES (USES) Transfers out 0 0 (3,337) (3,337)


FUND BALANCE, Beginning of Year 12,938

FUND BALANCE, End of Year 9,601$

DEBT SERVICE FUNDSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


46




EXPENDITURES Repairs and maintenance 0 0 0 0 Miscellaneous 0 0 18,775 (18,775) Debt service 0 0 112,426 (112,426) Capital outlay 175,426 183,664 26,257 157,407

Total Expenditures 175,426 183,664 157,458 26,206

Excess (Deficiency) of Revenues Over Expenditures (175,426) (183,664) (157,458) 26,206

OTHER FINANCING SOURCES Issuance of debt 0 0 0 0 Transfers in (out) 175,426 183,664 157,458 (26,206)

Total other financing sources 175,426 183,664 157,458 (26,206)

Net Change in Fund Balance 0$ 0$ 0$

FUND BALANCE, Beginning of Year 0

FUND BALANCE, End of Year 0$

FIXED ASSET FUNDSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


47




EXPENDITURES 0 0 0 0

Excess (Deficiency) of Revenues Over

Expenditures 0 0 0 0

OTHER FINANCING SOURCES (USES) 0 0 0 0

Net Change in Fund Balance 0$ 0$ 0 0$



LAND AQUISITION FUNDSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


48



REVENUES Grant revenue 0$ 0$ 0$ 0$

EXPENDITURESRepairs and maintenance 51,000 41,735 46,455 (4,720)

Excess (Deficiency) of Revenues Over (51,000) (41,735) (46,455) (4,720) Expenditures

OTHER FINANCING SOURCES (USES) Transfers in 51,000 41,735 46,455 4,720

Net Change in Fund Balance 0$ 0$ 0$


FUND BALANCE, End of Year 0$

CAPITAL IMPROVEMENT FUNDSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


49



REVENUES Charges for services 7,000$ 7,000$ 3,639$ (3,361)$

EXPENDITURESMiscellaneous 45,200 54,546 55,824 (1,278)

Excess (Deficiency) of Revenues Over Expenditures (38,200) (47,546) (52,185) (4,639)

OTHER FINANCING SOURCES (USES) Transfers in 38,200 47,546 0 47,546




WORKFORCE HOUSING FUNDSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


50



REVENUES Property tax 265,555$ 265,555$ 268,801$ 3,246$ Intergovernmental 46,382 46,381 47,644 1,263

Total Revenue 311,937 311,936 316,445 4,509

EXPENDITURESRoad and path maintenance program 187,000 201,630 209,264 (7,634)

Excess (Deficiency) of Revenues Over Expenditures 124,937 110,306 107,181 (3,125)

OTHER FINANCING SOURCES (USES) Transfers out (124,937) (110,306) 0 (110,306)

Net Change in Fund Balance 0$ 0$ 107,181 107,181$



STREET AND PATH FUNDSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL


51


SCHEDULE OF EMPLOYER’S SHARE OF NET PENSION LIABILITY AND EMPLOYER CONTRIBUTIONS

September 30, 2015

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Schedule of Employer’s Share of Net Pension Liability PERSI – Base Plan Last 10 – Fiscal Years * 2015 Employer’s portion of net the pension liability 0.000625135% Employer’s proportionate share of the net pension liability $823,201 Employer’s covered-employee payroll $1,744,820 Employer’s proportional share of the net pension liability as a percentage of its covered-employee payroll 47.18% Plan fiduciary net position as a percentage of the total pension liability 94.35% * GASB Statement No. 68 requires ten years of information to be presented in this table. However, until a full 10-year trend is compiled, City of Sun Valley, Idaho will present information for those years for which information is available. Data reported is measured as of July 1, 2015 (measurement date) Schedule of Employer Contributions PERSI – Base Plan Last 10 – Fiscal Years * 2015 Statutorily required contribution $ 204,483 Contributions in relation to the statutorily required contribution $ 210,226 (deficiency) excess $ 5,743 Employer’s covered-employee payroll $ 1,744,820 Contributions as a percentage of covered-employee payroll 12.04% * GASB Statement No. 68 requires ten years of information to be presented in this table. However, until a full 10-year trend is compiled, City of Sun Valley, Idaho will present information for those years for which information is available. Data is reported is measured as of September 30, 2015.

GOVERNMENTAL REPORTS

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 City Council City of Sun Valley, Idaho Sun Valley, Idaho 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 and each major fund of the City of Sun Valley, Idaho, as of and for the year ended September 30, 2015 and the related notes to the financial statements, which collectively comprise City of Sun Valley, Idaho’s basic financial statements, and have issued our report thereon dated September 1, 2016.

Internal Control Over Financial Reporting In planning and performing our audit of the basic financial statements, we considered City of Sun Valley, Idaho’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 City of Sun Valley, Idaho’s internal control. Accordingly, we do not express an opinion on the effectiveness of City’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 over financial reporting 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 financial reporting that might be material weaknesses or significant deficiencies and therefore material weaknesses or significant deficiencies may exist that were not identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings that we consider to be material weaknesses (2015-001).

Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Sun Valley, Idaho’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.

City of Sun Valley, Idaho’s Response to Findings City of Sun Valley, Idaho’s response to findings identified in our audit is described in the accompanying schedule of findings and responses. The City of Sun Valley, Idaho’s response was not subject to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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.

Meridian, Idaho September 1, 2016

jtyree_HARRCO

Josh PLLC Signature


SCHEDULE OF FINDINGS AND RESPONSES

September 30, 2015

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2015-001 Criteria: Sufficient levels of review are an important part of internal control system, especially when segregation of duties is limited due to size of the accounting staff. Condition: The City’s financial statements were not being reconciled and closed in a timely manner. In addition, the appropriate level of review of financial results and transactions was not being completed in accordance with the City’s financial processes. Effect: During the year, the Finance Manager/Treasurer was arrested and charged with misappropriating over $130,000 of City Funds. Cause: Management assigned to review and approve financial information did not obtain this information in a timely manner, often times months behind schedule, or in some instances, never. The Finance Manager/Treasurer did this intently in order to cover up the fraudulent activity. Recommendation: Timely financial reporting allows for these reviews of the financial information to occur. The City should establish monthly dates for all financial information to be closed and distributed to management to review. Each department manager should review in detail the expenditures. The City should establish an approval process that is documented, ensuring that all management is appropriate reviewing their respective information. City of Sun Valley, Idaho Response: The City is currently in the process of prosecuting the Finance Manager/Treasurer. In addition, the City Management has taken steps to increase its review process to ensure this does not occur again. Additional procedures are being evaluated and expect to be implemented. The City agrees with the issue.

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