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CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE

FINANCIAL STATEMENTS, SUPPLEMENTAL INFORMATION

AND INDEPENDENT AUDITORS' REPORTS

NINE MONTHS ENDED JUNE 30, 2016 AND YEAR ENDED SEPTEMBER 30, 2015


FINANCIAL STATEMENTS, SUPPLEMENTAL INFORMATION

AND INDEPENDENT AUDITORS' REPORTS


TABLE OF CONTENTS

INDEPENDENT AUDITORS' REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

FINANCIAL STATEMENTS:

Statements of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Notes to Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

Schedule of Changes in Net Pension Liability and Related Ratios

PAGE

1 -2

3-8

9 10

11 - 12 13- 34

Based on Participation in the Public Employee Pension Plan of TCRS 35 Schedule of Consolidated Utility District of Rutherford County's Contributions

Based on Participation in the Public Employee Pension Plan of TCRS 36 Schedule of Funding Progress - Post-employment Benefits 37

SUPPLEMENTAL INFORMATION:

Schedule of Net Position by Component Schedule of Changes in Net Position Schedule of Operating Revenues Schedule of Operating Expenses Schedule of Debt Service Requirements to Maturity Schedule of Historical Debt Service Coverage Customers and Rate Schedule Top Ten Customers by Revenue Operating Information Schedule of Unaccounted for Water District Officials and Management

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

Schedule of Prior Year Findings and Questioned Costs

38 39 40

41 - 46 47- 48

49 50 51 52

53-54 55

56- 57

58

•• • P,amond.son, <Betzfer d <Dame, <PLLC

( Certifiea Pu6(ic Jl_ccountants)

INDEPENDENT AUDITORS' REPORT

To the Board of Commissioners Consolidated Utility District of Rutherford County, Tennessee

Report on the Financial Statements

We have audited the accompanying financial statements of Consolidated Utility District of Rutherford County, Tennessee (the "District") as of and for the nine months ended June 30, 2016 and year ended September 30, 2015, and the related notes to the financial statements, which comprise the District's 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the approprjateness 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 financial position of the District as of June 30, 2016 and September 30, 2015, and the respective changes in financial position and cash flows for the nine months and year then ended in conformity with accounting principles generally accepted in the United States of America.

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Brenhvood Location: 12 Cadillac Drive • Suite 210 • Brenhvood, Tennessee 37027 • Phone: 615-916-3100 • Fax: 615-916-3161 Murfreesboro Location: 1535 Vl. Northfield Blvd., Suite 14 Lincoln Square • Murfreesboro, Tennessee 37129 •Phone: 615-916-3100 •Fax: 615-907-3393

INDEPENDENT AUDITORS' REPORT (CONTINUED)

Other Matters

Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 3 through 8 and the pension trend data and post-employment data on pages 35 through 37 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information Our audits were conducted for the purpose of forming opinions on the District's financial statements as a whole. The supplemental information section is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibif"lty of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information, except for the portion marked "unaudited", on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 1, 2016, on our consideration of the District'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 the District's internal control over financial reporting and compliance.

~, 6ltf- 1 JJ~) fLlL November 1, 2016

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Consolidated Utility District of Rutherford County

lvlanagernent' s Discussion and Analysis

Nine months ended June 30, 2016

The management of Consolidated Utility District of Rutherford County (CUDRC) offers the readers of CUD RC s financial statements this narrative overview and analysis of the financial activities for the nine months ended June 30, 2016. This short period report is necessary to accornmoda te a change in fiscal years going forward. We encourage readers to consider the information presented here in conjunction with the additional information furnished in this report.

Financial Highlights • The assets plus deferred outflows of CUD RC exceeded its liabilities plus deferred

inflows at the close of the most recent fiscal year by $263,895,950 (net position). This includes Unrestricted Net Position in the amount of $±6,280,829 which may be used to meet CUDRC s ongoing obligations to customers, employees and creditors.

o CUDRCs total net position increased by $13,867,759. This increase is substantially attributable to an infusion of resources from contributions and tap fees.

• Net operating income for the period was $3,687,491.

Financial Statement Overview

This discussion ar1d analysis is intended to serve as an introduction to CUD RC s financial statements. Comparative data for the years 2015 & 2014 (not restated for the effects of changes in pension reporting) are also avaflable in this year's rv!D&A. This report also contains other supplementary information in addition to the basic financial statements themselves.

The basic financial statements herein are comprised of the Statement of Net Position, Statement of Revenues, Expenses and Changes in Net Position, the Statement of Cash Flows, and the accompanying Notes. The Statement of Net Position presents information on all of CUD RC s assets and deferred outflows, liabilities and deferred inflows, with the difference being reported as net position.

CUDRC, one of the largest utility districts in the state, provides water and decentralized sewer services to residents within Rutherford County. Costs are allocated to the two services, but financial statements for each service are not independently presented.

3

Financial Analysis

Net Position may serve over time as a useful indicator of CUDRC's financial position. By far the largest portion of CUDRC' s net position (SO percent) reflects both assets contributed by developers and the agency's own investment in capital assets (e.g., infrastructure, land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. CUDRC uses these assets to provide services to customers; consequently, these assets are not available for future spending. It should be noted that the resources needed to repay the long-term debt must be provided from operating revenues, since the capital assets themselves cannot be used to liquidate these liabilities.

Consolidated Utility District of Rutherford County Comparative Statement of Net Position

As of June 30, 2016, and September 30, 2015 and 2014

(In Tiwusands)

2016 2015

Current and other assets $61,152 $57,638

Capital assets 253,505 243,973

Total Assets $314,6571 s301,611 I Deferred Outlaws $3,3661 $3,1551

Other liabilities $5,657 $4,738

Long-term liabilities 45,502 46,805

Total Liabilities $51,159 1 $51,5431

Deferred Inflows $2,9681 $3,195 I Net position:

Net Investment in capital assets $210,445 $199,078

Restricted for bond provisions 7,170 7,220

Unrestricted 46,281 43,730

Total net position $263,8961 $250,0281

2014

$49,113

239,841

$288,9541

$3,301 1

$-l,641

49,163

$53,8041

s2,n3 \

$193,165

6,902

35,662

$235,7291

For all of the periods presented, CUDRC is able to report positive balances in all categories of net assets.

4

Table 2 Condensed Statement of Revenues, Expenses,

And Changes in Net Position For the nine months ended June 30, 2016

And Prior years ended September 30 (In Tiwusnnds)

2016 2015 2014

Revenues:

Operating revenue $21,806 $28,572 $27,525 Non-operating revenue 463 716 374

Total Revenue $22,269 $29,288 $27,899

Expenses:

Depreciation $6,290 $8,065 $7,347

Other operating expense 10,741 13,783 13,322 Non-operating expense 1,550 2,143 1,793

Total expenses $18,581 $23,991 $22,462 Income before contributions $3,688 $5,297 $5,437 Other Contributions 10,180 9,002 8,632 Change in net position $13,868 $14,299 $14,069 Beginning net position 250,028 235,729 221,660 Ending net position $263,896 $250,028 $235,729

Operating revenues in 2016 (nine months) totaling nearly $22 million and as shown in Figure 1, were derived principally from retail sales of water to an average of more than 49,000 customers during the fiscal year. The number of total active customers at year end was 49,815, indicating continued growth in customers served.

Revenue from sewer sales increased each month over the same period in the previous year, as the number of customers in these sewer systems increased from 4,452 to 4,635. Additional systems are nearing completion by developers, and others are in some stage of planning or construction. The 50 existing systems are designed to accommodate 6,881 homes.

5

Figure 1 Operating Revenues

4°/o 3%

mWater Sales

•Sewer Sales

a Services

a Other

Depreciation and system repairs were the areas of operation that showed the largest increase in expenses of the same nine months from the previous year. Operating expenses totaled $17 million, but increased revenue and developer conh·ibutions resulted in an increase in net position of nearly $13.9 million, which was slightly less than the previous year. The table below presents each component of operating expenses as a percentage of the total.

4%

6%

3o/o

Changes in Capital Assets

Figure 2 Operating Expenses

El Depreciation

II Source of Supply

DPumping

a Treatment Plant

&Transmission & Distrib.

II Customer Accounting

Iii Customer Service

DA&G

Ill Wastewater

As shown in Table 3, CUD RC s inveshnent in capital assets net of depreciation as of June 30, 2016 was approximately $253.5 million, and increased by more than $9.5 million. Capital assets totaling $10 million were installed and paid for by developers, then conh·ibuted to CUDRC.

6

Table 3 Ca pi ta! Assets

Net of Accumulated Depreciation As of June 30, 2016 and

September 30 prior years (In 17wusands)

2016 2015 land and land rights $3,433 $3,124

Pumping stations 4,699 4,925

Reservoirs 6,221 6,440

Trans & Dist Mallis 174,115 165,369

Services & Meters 1,880 2,111

Buildings 9,848 8,439

land Improvements 0 1

Water plant structures 19,262 16,989

Water plant equipment 2,057 2,178

Decentralized sewer systems 22,807 22,482

Office Equipment 590 503

Transportation Equipment 515 597

Tools and Garage Equipment 114 83

Heavy Equipment 604 567

Work ir1 process, CUD RC 60 0

Work in precess, subcontract 7,298 10,165

Total $253,505 $243,973

2014

$2,786

5,686

6,405

162,627

2,421

8,803

4

11,913

399

22,409

532

215

65

473

40

15,051

5239,841

CUDRC has several major projects on-going and scheduled through 2022 that are projected to cost approximately $79 million. The District currently anticipates that additional funds may be borrowed at some point in the future to fund portions of these projects.

Long-term Debt CUDRC had $·±1,285,000 in long-term debt outstanding at year-end compared with $43,193,000 in the prior year. Annual principal and interest requirements will remain at approximately $3.5 million tlrrough fiscal 2027, and gradually decline thereafter.

Economic Factors

Rutherford County, a part of the Nashville Metropolitan Statistical Area, reports an average unemployment rate of 4.0% in June, 2016, compared with Tennessee's unemployment rate of 4.1 % and the U.S. rate of 4.9%. We continue to see a substantial increase in multi-family housing construction, and have seen a significant resumption of single-family residential development throughout our service territory.

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Request for Information

Thls financial report is designed to provide a general overview of CUDRC' s finances for all those >vi th an interest in the district's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Comptroller, CUDRC, 709 New Salem Hwy., P.O. Box 2±9, Murfreesboro, TN 37133-0249.

General information relating to CUDRC can be found at the utility's website, http:/ /www.cudrc.com.

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CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE STATEMENTS OF NET POSITION

JUNE 30, 2016 AND SEPTEMBER 30, 2015

2016

ASSETS AND DEFERRED OUTFLOWS OF RESOURCES

Assets Current assets:

Cash and cash equivafents Investments, at fair value Accounts receivable, net of allowance for doubtful accounts, $185,000 and $189,000 for 2016 and 2015, respectively Inventory Interest receivable Prepaid expenses

Total current assets

Restricted assets: Investments for debt ser1ice

Capital assets: Utility plant and equipment, net

Total assets

Deferred outflo'NS of resources: Deferred amount related to pensions Deferred amount from debt refunding

Tota! deferred outflows of resources

Total assets and deferred outflo1ivs of resources

s 14,801,169 34,438,921

3,578,024 962,586 121,645 79,927

53,982,272

7,170,071

253,504,711

314,657,054

733,362 2,632,710 3,366,072

s 318,023,126

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION

Current liabilities: Current portion of long-term debt Trade accounts payable Retainage payable Accrued interest payable Accrued wages and payroll taxes Accrued vacation Other accrued liabilities

Total current nabilities

Leng-term liabilities: Waterv1orks revenue bonds Accrued sick leave Net pension liability Post employment benefits

Total liabilities

Deferred inflows of resources: Deferred amount related to pensions Deferred amount from debt refunding

Total deferred inflows of resources

Net position: Net investment in capital assets Restricted to meet bond indenture provisions Unrestricted

Total net position

Total liabilities, deferred inflows of resources and net position

s 1,919,088 2,451,058

640,544 130,239 231,965 283,868

5,656,762

41,284,887 818,281 796,381

2,602,797

51,159,108

479,672 2,488,396 2,968,068

210,445,050 7,170,071

46,280,829

263,695,950

$ 318,023,126

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

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2015

$ 15,892,226 29,840,076

3,266,644 987,270

61,662 369,821

50,417,699

7,220,283

243,972,993

301,610,975

408,726 2,745,946 3,154,672

$ 304,765,647

$ 1,857,577 1,891,132

14,551 265,318 176,065 272,601 260,641

4,737,885

43, 194,546 742,572 726,962

2,140,917

51,542,882

605,843 2,588,731 3,194,574

199,078,085 7,220,283

43,729,823

250,028,191

$ 304,765,647

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITIONS


2016 2015

Operating revenues: Water and sewer revenues $ 20,242,937 $ 26,338,376 Connection and other fees 1,562,841 2,233,517

Total operating revenues 21,805,778 28,571,893

Operating expenses: Source of supply 1,340 2,325 Pumping 390, 149 596,218 Water treatment 1,984,647 2,711,622 Transmission and distribution 3,289,521 4, 115,606 Customer accounting 462,584 613,674

Customer service 1,044,824 1,350,315 Wastewater (step sewer) 713,154 943,656 General and administrative 2,854,979 3,449,431 Depreciation and amortization 6,290,370 8,065,523

Total operating expenses 17,031,568 21,848,370

Net operating income 4,774,210 6,723,523

Non-operating revenues (expenses):

Interest earned 331, 155 464,968

Interest expense (1,251,540) (1,715,868)

Gain on sale of capital assets 123,583 231,202 Loss on abandonment of capital assets (297,11 O) (425, 169)

Other income 8,611 20,148

Other non-operating expenses (1,418) (1,835)

Total non-operating revenues (expenses) (1,086,719) (1,426,554)

Net income before contributions 3,687,491 5,296,969

Capital contributions: Contributions in aid of construction 10, 180,268 9,002,297

Change in net position 13,867,759 14,299,266

Net position, beginning 250,028, 191 235,728,925

Net position, end of year $ 263,895,950 $ 250,028, 191

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

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CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE STATEMENTS OF CASH FLOWS


2016 2015

Cash flows from operating activities: Receipts from customers $ 21,494,398 $ 28,253, 707 Payments to suppliers and others (6,294,905) (8,951,336) Payments to employees (3 ,950 ,445) (4,839,291)

Net cash provided by operating activities 11,249,048 14,463,080

Cash flows from noncapital financial activities: Other income 8,611 20, 148 Other non-operating expenses (1,418) (1,834)

Net cash provided by noncapital financing activities 7,193 18,314

Cash flows from capital and related financing activities: Contributions in aid of construction 3,791,900 3,843,853 Acquisition and construction of capital assets (9,383,741) (7,802,504)

Proceeds from sale of capital equipment 233,565 297,261

Principal paid on revenue bonds (1,848,148) (1,801, 192)

Interest paid on revenue bonds (863,413) (1,702,339)

Net cash used in capital and related financing activities (8,069,837) (7,164,921)

Cash flows from investing activities: Interest received on investments 271,172 470,835

Proceeds from maturity of investments 39,046,721 79,066,222

Purchases of investments and certificates of deposit (43,595,354) (77,466,582)

Net cash provided by (used in) investing activities (4,277,461) 2,070,475

Net increase (decrease) in cash and cash equivalents (1,091,057) 9,386,948

Cash and cash equivalents, beginning of period 15,892,226 6,505,278

Cash and cash equivalents, end of period $ 14,801,169 $ 15,892,226

Non-cash capital and related financing activities: Developer contributions of utility plant $ 6,388,368 $ 5,158,444

Capital additions included in accounts payable $ 814,944 $ 357,873


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CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE STATEMENTS OF CASH FLOWS (CONTINUED)


2016 2015

Reconciliation of operating income to net cash provided by operating activities:

Net income from operations $ 4,774,210 $ 6,723,523 Adjustments to reconcile net income from operations to net cash

provided by operating activities: Depreciation and amortization 6,290,370 8,065,523 Pension expense (473,420) (408,726) Bad debt expense 74,965 66,859 Increase in accounts receivable (386,345) (385,045) (Increase) decrease in inventories 24,684 (292,357) (Increase) decrease in prepaid expenses 289,894 (133,249) Increase in trade accounts payable 88,304 375,669 Decrease in accrued wages and payroll taxes (45,826) (15,870) Increase in accrued compensated absences 35,073 15,696 Increase (decrease) in net pension liability 69,419 (482,918) Increase in post employment benefits payable 461,880 330,054 Increase (decrease) in other accrued liabilities 23,227 (1,922) Increase in deferred amounts related to pensions 22,613 605,843

Net cash provided by operating activities $ 11,249,048 $ 14,463,080


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NOTE 1 -

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE NOTES TO FINANCIAL STATEMENTS


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidated Utility District of Rutherford County, Tennessee, was created in 1968 pursuant to the public laws of the State of Tennessee and under the order of the County Judge of Rutherford County, Tennessee. The District includes those districts originally known as Double Springs Utility District, Stones River Utility District, Florence Utility District, and Rockvale Utility District of Rutherford County. The District was established under Tennessee Code Annotated § 7-82, also known as the Utility District law of 1937, and received its charter from the State of Tennessee in April, 1970. The District was created to provide water to areas of Rutherford County; however the District amended its charter on December 31, 1997, to include limited sewer service. The District is not a component unit of any other governmental entity, and it has no component units. The operation of the District is overseen by a five (5) member board of commissioners, each of whom serves a four (4) year term of office.

A summary of the District's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows:

Basis of Accountina and Presentation

The District's financial statements are presented on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASS).

All activities of the District are accounted for within a single proprietary (enterprise) fund. Proprietary funds are used to account for operations that are (a) financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis are financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes.

The District makes a distinction between operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with its principal ongoing operations. The principal operating revenues of the District are water and wastewater charges to customers. Operating expenses consist of salaries, benefits, utilities, operating contracts for maintenance, insurance and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as non-operating revenues and expenses.

The accounting and financial reporting treatment applied to the District is determined by its measurement focus. The transactions of the District are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operations are included on the Statement of Net Position. Net position (i.e., total assets plus deferred outflows, net of total liabilities plus deferred inflows) are segmented into net investment in capital assets; restricted for capital assets activity and debt service; and unrestricted components. When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then unrestricted resources as they are needed.

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NOTE 1 -

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE NOTES TO FINANCIAL STATEMENTS {CONTINUED)


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES {CONTINUED)

Financial Instruments

Unless otherwise indicated, the fair values of all reported assets and liabilities which represent financial instruments approximate the carrying values of such amounts.

Cash, Cash Equivalents. Deoosits and Investments

Cash and cash equivalents, for purposes of the statement of cash flows, include restricted and unrestricted cash on hand or on deposit and debt security investments with a maturity at purchase of three months or less.

Investments are reported at their fair value. Fair value is based upon quoted market prices. Realized gains and losses from the sale of investments are calculated separately from the change in the fair value. Realized gains or losses in the current period include unrealized amounts from prior periods. All investment income, including changes in the fair value of investments, is to be recognized in the operating statement.

Receivables

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The District provides for estimated uncollectible receivables through bad debt expense and a credit to an allowance based on its assessment of the current status of individual accounts and historical write-off experience. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

lnventorv

Inventory consists primarily of materials used in the construction and maintenance of the distribution facilities and is valued at lower of cost {on the first-in, first-out basis) or market.

Caoital Assets

Capital assets are recorded at historical cost. Donated assets are valued at estimated fair value on the date received. Self-constructed assets are recorded based on the amount of direct labor, material, and certain indirect costs charged to the asset construction. Depreciation is calculated using the straight-line method over the following estimated useful lives:

Buildings and Structures Transmission and Distribution Mains Equipment STEP Sewer Systems

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Estimated Life 33 - 40 years 40- 50 years

4 -20 years 40 - 50 years

NOTE 1 •

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE NOTES TO FINANCIAL STATEMENTS (CONTINUED)


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Caoital Assets (Continued)

Depreciation expense aggregated $6,290,370 and $8,065,523 for the nine months ended June 30, 2016 and the year ended September 30, 2015, respectively, and is included with depreciation and amortization expense.

Maintenance and repairs are charged to operations when incurred. Costs of assets sold or retired (and the related amounts of accumulated depreciation) are eliminated from the Statement of Net Position in the year of sale or retirement, and the resulting gain or loss is recognized in operations.

Abandonment of Caoital Assets

In accordance with GASS Statement No. 42, "Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries," management evaluates prominent events or changes in circumstances affecting capital assets to determine whether impairment of a capital asset has occurred. A capital asset is generally considered impaired if both the decline in service utility of the capital asset is large in magnitude and the event or change in circumstance is outside the normal life cycle of the capital asset. Abandonment losses of $297,110 and $425,169 were recognized in the nine months ended June 30, 2016 and the year ended September 30, 2015, respectively.

Contributed Systems

Construction and acquisition of water systems and step sewer systems are financed in part by contributions in aid of construction from property owners and developers. Contributed capital represents the total value of donated water systems and tap fees in excess of cost collected for installed taps.

Deferred outflows/inflows of resources

Deferred outflows of resources represent a consumption of net position that applies to future periods and so will not be recognized as an outflow of resources until then. The District has deferred charges on refunding resulting from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the life of the refunding debt. The District also has contributions made to its pension plan subsequent to the measurement date of the plan which will be recognized as a reduction of the net pension liability in the subsequent fiscal year.

Deferred inflows of resources represent the acquisition of net position that applies to future periods and so will not be recognized as an inflow of resources until that time. The District has deferred premiums on bond issuances. This amount is deferred and amortized over the life of the bonds and recorded in interest expense. The District also has deferrals of pension expense that resulted from the implementation of GASB Statement No. 68. These amounts are deferred and recognized in pension expense in subsequent fiscal years.

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NOTE 1 -




Presentation of certain taxes

The District collects various taxes from customers and remits these amounts to applicable taxing authorities. The District's accounting policy is to exclude these taxes from revenues and cost of sales.

Net Position

Equity is classified as net position and displayed in the following three components:

Net investment in caoital assets - Consists of capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds that are attributable to the acquisition, construction, or improvement of those assets.

Restricted for debt service - Consists of restricted cash and investments.

Unrestricted - All other net position that do not meet the description of the above categories.

Revenues and Exoenses

As a proprietary fund, the District was organized to be _self-supporting through user charges. All proprietary funds are accounted for using the accrual basis of accounting. The District utilizes cycle billing and records revenue billed to its customers when the meters are read, and expenses are recorded as they are incurred. Recognition has been given to unbilled revenue in the financial statements.

Operating revenue consist of sales of water and other services related to water distribution. Non-operating revenues consist of investment income and special charges that can be used for either operating or capital purposes. Operating income reported in the financial statements includes revenues and expenses related to the primary continuing operations of the District. Principal operating expenses are the cost of providing goods or services and include administrative expenses and depreciation of capital assets.

Pensions

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

-16-

NOTE 1 -

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE NOTES TO FINANCIAL STATEMENTS (CONTINUED}


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED}

Comoensated Absences

Employees of the District are entitled to paid vacation and sick days depending on the length of service and other factors. District employees who meet certain eligibility criteria are compensated for accrued sick leave upon retirement. The vested and earned vacation leave is recognized as a current liability of the District at June 30, 2016 and September 30, 2015. The estimated liability for sick leave has been reflected in this report as a long-term liability, as it will not be paid to employees until termination.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recently Adooted Accountina Standards

In June 2012, the GASS approved Statement No. 68, Accounting and Financial Reporting for Pensions. This statement requires governments providing defined benefit pension plans to recognize their long-term obligation for pension benefits as a liability on the statement of net position and to more comprehensively and comparably measure the annual costs of pension benefits. This Statement also requires revised note disclosures and required supplementary information (RSI) to be reported by employers. The implementation of this GASB statement had a significant impact on the District's financial statements and was effective for the District's September 30, 2015 financial statements.

In November 2014, the GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - An Amendment of GASB Statement No. 68. This statement amends Statement No. 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. Statement No. 68, as amended, continues to require that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pension be reported at transition only if it is practical to determine all such amounts. The provisions of Statement No. 71 are required to be applied simultaneously with the provisions of Statement No. 68.

In February 2015, the GASB approved Statement No. 72, Fair Value Measurement and Application. This Statement addresses accounting and financial reporting issues related to fair value measurements and requires additional disclosures about assets and liabilities measured at fair value. This Statement is effective for periods beginning after June 15, 2015. The District has implemented effective for the June 30, 2016 financial statements.

-17-

NOTE 1 •

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE NOTES TO FINANCIAL STATEMENTS.(CONTINUED)



Recently Adooted Accounting Standards (Continued)

In June 2015, the GASS issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB), which supersedes the requirements of GASS Statement No. 45 and requires governments that are responsible only for OPES liabilities related to their own employees and that provide OPES through a defined benefit OPES plan administered through a trust that meets specified criteria to report a net OPES liability, which is the difference between the total OPES liability and assets accumulated in the trust and restricted to making benefit payments, on the face of the financial statements. Governments that participate in a cost-sharing OPES plan that is administered through a trust that meets the specified criteria will report a liability equal to their proportionate share of the collective OPES liability for all entities participating in the cost-sharing plan. Governments that do not provide OPES through a trust that meets specified criteria will report the total OPES liability related to their employees. This Statement also requires governments to present more extensive note disclosures and required supplementary information about their OPES liabilities. This Statement is effective for fiscal years beginning after June 15, 2017. The District will fully analyze the impact of this new Statement prior to the effective date above.

In March 2016, the GASS issued Statement No. 82, Pension Issues - An Amendment of GASB Statements No. 67, 68 and 73. This statement addresses certain issues that have been raised with respect to Statements No. 67, 68 and 73. Specifically, this statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. This statement is effective for reporting periods beginning after June 15, 2016 except for the requirements of this Statement for the selection of assumptions in a circumstance in which an employer's pension liability is measured as of a date other than the employer's most recent fiscal year end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. The District will fully analyze the impact of this new Statement prior to the effective date above.

Risk Management

The District is subject to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District purchases commercial insurance for these claims and for all other risks of loss. Settled claims have not exceeded the commercial coverage for the nine months ended June 30, 2016 and the year ended September 30, 2015.

-18-

NOTE 2 -



CASH AND INVESTMENTS

Cash and investments as of June 30, 2016 and September 30, 2015 are classified in the Statements of Net Position as follows:

Cash and cash equivalents Investments Restricted for debt service

2016 s 14,801,169

34,438,921 7,170,071

$ 56,410,161

2015 $ 15,892,226

29,840,076 7,220,283

$ 52,952,585

Cash and investments as of June 30, 2016 and September 30, 2015 consist of the following:

2016 2015 Cash on hand $ 1,350 $ 1,350 Deposits with financial institutions 14,799,819 15,890,876 Certificates of deposit 12,000,000 6,000,000 Investments - marketable securities 27,266,894 27,773,582 Local governmental investment pool 2,342,098 3,286,777

$ 56,410,161 $ 52,952,585

Authorized Investments

The District is authorized by law to invest idle funds in various U.S. government or agency obligations as well as secured certificates of deposits at state and federal chartered banks and savings and loan associations. The District also may invest in repurchase agreements for U.S. Government or agency obligations and money market funds whose portfolio consist of any of the investments discussed above if those investments are approved by the state director of local finance. Finally, the District may invest in the local government investment pool established by Title 9, Chapter 4, Part 7, Tennessee Code Annotated. Authorized investments may not have a maturity of greater than four (4) years unless authorized by the state director of local finance. District regulations do not provide any further restrictions on investments.

Disclosures Relating to Interest Rate Risk and Credit Risk

Interest rate risk is the risk that changes in interest rates will adversely affect the fair market value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in interest rates is. One of the ways the District manages its exposure to interest rate risk is by purchasing a combination of shorter and longer term investments. By timing cash fiows from maturities so that a portion of the portfolio is maturing evenly over time, this provides the cash flow and liquidity needed for operations and capital expenditures.

-19-

NOTE 2 ·



CASH AND INVESTMENTS (CONTINUED)

Disclosures Relating to Interest Rate Risk and Credit Risk (Continued)

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.

As of June 30, 2016, the District had the following investments in marketable securities.

!V1arket Maturity Call Rating as of Value Date Date Year End

Fannie ~lae s 755,670 10/15/2018 Quarterly AAA Federal Farm Credit Bank 585,006 1/16/2018 Quarterly AAA Federal Home Loan Bank 1,001,940 2/13/2017 Quarterly AAA Federal Home Loan Bank 1,000,460 5/30/2017 Quarterly AAA Federal Home Loan Bank 504,780 11/15/2017 Quarterly AAA Federal Home Loan Bank 1,000,210 112912018 Quarterly AAA Federal Home Loan Bank 1,000,640 312312018 Quarterly AAA Federal Home Loan Mortgage 1,000,420 1112512016 Quarterly AAA Federal Home Loan Mortgage 1,004,070 6/2912017 Quarterly AAA Federal Home Loan Mortgage 903,663 712512017 Quarterly AAA Federal Home Loan Mortgage 1,000,390 8/2512017 Quarterly AAA Federal Home Loan Mortgage 1,000,170 10/27/2017 Quarterly AAA Federal Home Loan Mortgage 1,000,770 5/25/2018 Quarterly AAA Federal Home Loan Mortgage 1,000,570 5125/2018 Quarterly AAA Federal Home Loan Mortgage 1,000,330 612212018 Quarterly AAA Federal Home Loan Mortgage 1,001,050 812412018 Quarterly AAA Federal Home Loan Mortgage 500,315 11/26/2018 Quarterly AAA Federal Home Loan Mortgage 1,003,960 1212812018 Quarterly AAA Federal Home Loan Mortgage 1,000,260 412912019 Quarterly AAA Federal Home Loan Mortgage 1,000,400 1012912019 Quarterly AAA Federal Home Loan Mortgage 1,000,180 212612020 Quarterly AAA Federal Home Loan Mortgage 1,000,590 512612020 Quarterly AAA Federal National Mortgage Assn. 1,000,900 6128/2019 Quarterly AAA Federal National Mortgage Assn. 1,000,280 512512018 Quarterly AAA Federal National Mortgage Assn. 1,000,120 1012912018 Quarterly AAA Federal National Mortgage Assn. 1,000,150 1111612018 Quarterly AAA Federal National Mortgage Assn. 1,000,790 612812019 Quarterly AAA Federal National Mortgage Assn. 1,000.300 1012912019 Quarterly AAA Federal National Mortgage Assn. 998,510 1012912019 Quarterly AAA

$ 27,266,894

-20-

NOTE 2-



CASH AND INVESTMENTS (CONTINUED)

Concentration of Credit Risk

The investment policy of the District contains no limitations on the amount that can be invested in any one issuer. Investments in any one issuer that represents 5% or more of the total District investments are as follows:

Federal Home Loan Bank Federal Home Loan Mtg. Corp. Federal National Mortgage Assn.

Custodial Credit Risk

Federal Agency Securities Federal Agency Securities Federal Agency Securities

$ 4,508,030 $ 14,417,138 $ 7,001,050

Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a depositor will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, an investor will not be able to recover the value of its investment or collateral securities that regain the possession of another party. Tennessee Code Annotated requires that a financial institution secure deposits made by a state or local government unit by pledging securities in a collateral pool maintained by the State Treasurer, or by placing securities in an amount of 105% of the uninsured amount of the deposits in an escrow account in a second bank for the benefit of the government agency. Rules adopted by the Tennessee State Funding Board also require that investments must be held by a separate custodian (not the broker-dealer) in an account in the name of the government agency. At June 30, 2016 and September 30, 2015, and throughout the periods then ended, the District was in compliance with these requirements.

-21-

NOTE 3 -



CAPITAL ASSETS

Components of utility plant and equipment for the nine months ended June 30, 2016 are as follows:

Balance Balance September 30, June 30,

2015 Additions Retires Transfers 2016 Capital assets not being

depreciated Land ar.d improvements $ 3,123,503 s 311,663 s s s 3,435, 166 Ccnstructlcn in progress 10,1€4,674 8,997,351 (11,804,193) 7,357,832

13,288,177 9,309,014 (11,804,193) 10.792,998 Capital assets being

depreciated Structures and

improvements 60,783,597 10,474 4,383,516 65, 177,587 Transmission ar:d

d"1strit:ution mains 229,282,979 5,5C6,222 7,332,682 242, 121,883 STEP sewer systems 25,654,653 978,275 (330,000) 26,302,928 Equipment 8,981,050 323,839 (158,159) 87,995 9,234,725

324, 702,279 6,818,810 (488,159) 11,804,193 342,837, 123 Total plant in serAce 337,9S0,456 16,127,824 (488,159) 353,630,121 Less accumulateC

Cepreciaticn (94,017,463) (6.2S0,370) 182,423 (100,125,410)

Net capital assets $ 243,972.993 s 9,837,454 s (305,736) s s 253,504,711

-22-

NOTE 4-



LONG-TERM DEBT

The long-term debt at June 30, 2016 and September 30, 2015 consisted of the following:

2016 2015 Series 2000 revenue bonds; interest payable monthly at 4.75%, maturing in monthly installments through 2040. $ 810,011 $ 823,712

Series 2009 revenue bonds; interest payable monthly at 4. 125%, maturing in monthly installments through 2047. 1,228,964 1,243,411

Series 2009 revenue bonds; interest payable semi-annually at 2.5% to 4.5%, maturing in annual installments through 2030. 11,510,000 12, 130,000

Series 2013 revenue refuncing bonds; interest payable semi-annually at 2% to 4%, maturing in annual installments through 2036. 29,655,000 30,855,000

Total cebt 43,203,975 45,052, 123

Less current portion 1,919,088 1,857,577

Long-term portion, net $ 41,284,887 $ 43,194,546

Future debt service requirements of long-term debt are as follows:

Year Ending September 30, Principal Interest Total

2017 $ 1,919,088 $ 1,625,694 $ 3,544,782 2018 1,985,854 1,567,528 3,553,382 2019 2,077,701 1,492,906 3,570,607 2020 2, 134,402 1,409,805 3,544,207 2021 2,181,639 1,327,468 3,509,107

2022-2026 12,396,599 5,236,036 17,632,635 2027-2031 11,807,706 2,669,279 14,476,985 2032-2036 7,890,206 923,853 8,814,059 2037-2041 443,897 120,873 564,770 2042-2046 306,716 45,664 352,380

2047 60,167 1, 191 61,358

$ 43,203,975 s 16,420,297 $ 59,624,272

As of June 30, 2016, the District was in compliance with all bond covenants.

-23-



NOTE 4 -

NOTE 5 -

LONG-TERM DEBT (CONTINUED)

Long-term transactions for the nine months ended June 30, 2016 are as follows:

Revenue bonds

Refunding bonds Total Jong-term debt

Advance Refunding

Balance September 30,

2015

$ 14,197,123 30,855,000

$ 45,052,123

Proceeds $

s

Balance

June 30, Payments 2016

s 648,148 $ 13,548,975 1,200,000 29,655,000

s 1,848,148 $ 43,203,975

On April 11, 2013, the District issued $33, 140,000 in Revenue Refunding Bonds at interest rates ranging from 2.0% to 4.0% to advance refund $37,235,000 of outstanding Series 2004, 2005, and 2006 Revenue Bonds with interest rates ranging from 3.4% to 5.5%. The net proceeds of $35, 147,546 (including a premium of $2,384,985 and after payment of $377,439 in underwriting fees and other issue costs), along with $3,332,356 of prior issue debt service reserve funds, $550,085 of prior issue sinking funds, and $1,955,440 of issuer funds was deposited in an irrevocable trust with an escrow agent and invested in Treasury Securities - State and Local Government Series in an amount sufficient to provide funds for the future debt service payments on the refunded bonds until the respective redemption dates. As a result, the Series 2004, 2005, and 2006 Revenue Bonds are considered defeased and the liability for those bonds has been removed from the statement of net position.

The reacquisition price exceeded the net carrying amount of the old debt by $2,802,068. This amount is being amortized over the remaining life of the refunding debt. The District refunded the Series 2004, 2005, and 2006 revenue bonds to reduce its total net debt service payments over 23 years by $5,429,206 and to obtain an economic gain (difference between the present values of the net debt service payments on the old and new debt, adjusted for issuer contributions) of $4,602,731.

FAIR VALUE OF FINANCIAL INSTRUMENTS

GASB Statement No. 72, Fair Value Measurements and Application, defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.

-24-

NOTE 5 -



FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

GASB Statement No. 72 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with GASS Statement No. 72, the following summarizes the fair value hierarchy:

Level 1 Inputs - Unadjusted quoted market prices for identical asset and liabilities in an active market the District has the ability to access.

Level 2 Inputs - Inputs other than quoted prices in active markets that are observable either directly or indirectly.

Level 3 Inputs - Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.

The following table presents the District's fair value hierarchy for those assets and liabilities measured at fair value on a recurr'rng basis as of June 30, 2016 and September 30, 2015.

Certificates of deposit

Mortgage-backed securities

Local government investment pool

Total assets at fair value

Total liabilities at fair value

Certificates of deposit

Mortgage-backed securities

Local government investment pool

Total assets at fair value

Total liabilities at fair value

s

s s

$

$

$

Total

Value

12,000,0CO s 27,266,894

2,342,098

41,608,992 $

s

Total

Value

6,000,000 s 27,773,582

3,286,777

37,060,359 s $

June 30, 2016

Value Value Value Level 1 Level2 Level 3

12,000,000 s $ 27,266,894

2,342,098

14,342,098 s 27,266,894 s s s

September 30, 2015

Value Value Value Level 1 Level 2 Level 3

6,000,000 $ s 27,773,582

3,286,777

9,286,777 s 27,773,582 $

s s

Carrying values of non-derivative financial statement balances, including cash and cash equivalents, accounts payable, and accrued expenses, approximate fair values due to the short term nature of these financial statements. The carrying value of long-term debt, based on borrowing rates currently available to the District, approximates fair value. There are no changes in methods or assumptions during the periods ended June 30, 2016 and September 30, 2015.

-25-

NOTE 6 •



PENSION PLAN

Plan descriotion

Employees of Consolidated Utility District of Rutherford County are provided a defined benefit pension plan through the Public Employee Retirement Plan, an agent multipleemployer pension plan administered by the TCRS. The TCRS was created by state statute under Tennessee Code Annotated Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publically available financial report that can be obtained at WWN.treasury.tn.gov/tcrs.

Benefits provided

Tennessee Code Annotated Title 8, Chapters 34-37 establishes the benefit terms and can be amended only by the Tennessee General Assembly. The chief legislative body may adoot the benefit terms permitted by statute. Members are eligible to retire with an unr~duced benefit at age 60 with 5 years of service credit or after 30 years of service credit regardless of age. Benefits are determined by a formula using the member's highest five consecutive year average compensation and the member's years of service credit. Reduced benefits for early retirement are available at age 55 and vested. Members vest with five years of service credit. Service related disability benefits are provided regardless of length of service. Five years of service is required for non-service related disability eligibility. The service related and non-service related disability benefits are determined in the same manner as a service retirement benefit but are reduced 10 percent and include projected service credits. A variety of death benefits are available under various eligibility criteria.

Member and beneficiary annuitants are entitled to automatic cost of living adjustments (COLAs) after retirement. A COLA is granted each July for annuitants retired prior to the 2r.d of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at 3 percent, and applied to the current benefit. No COLA is granted if the change in the CPI is less than one-half percent. A one percent COLA is granted if the CPI change is between one-half percent and one percent. A member who leaves employment may withdraw their employee contributions, plus any accumulated interest.

Ernoloyees covered by benefit terms

At the measurement date of June 30, 2015 the following employees were covered by the benefit terms:

Inactive employees or beneficiaries currently receiving benefits 7 Inactive employees entitled to but not yet receiving benefits 21 Active employees 66

94

-26-

NOTE 6 -



PENSION PLAN (CONTINUED)

Contributions

Contributions for employees are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Employees contribute 5 percent of salary. The District makes employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. For the year ended June 30, 2015, the Actuarially Determined Contribution (ADC) for the District was $408,725 based on a rate of 11.83 percent of covered payroll. By law, employer contributions are required to be paid. The TCRS may intercept the District's state shared taxes if required employer contributions are not remitted. The employer's actuarially determined contribution (ADC) and member contributions are expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability.

Net Pension Liability

The District's net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate net pension liability was determined by an actuarial valuation as of that date.

Actuarial assumptions. The total pension liability as of June 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3.0 percent

Salary increases Graded salary ranges from 8.97 to 3.71 percent based on age, including inflation, averaging 4.25 percent.

Investment rate of return 7.5 percent, net of pension plan investment expenses, ·rncluding inflation.

Cost-of-Living Adjustment 2.5 percent

Mortality rates were based on actual experience from the June 30, 2012 actuarial experience study adjusted for some of the expected future improvement in life expectancy.

The actuarial assumptions used in the June 30, 2015 actuarial valuation were based on the results of an actuarial experience study performed for the period July 1, 2008 through June 30, 2012. The demographic assumptions were adjusted to more closely reflect actual and expected future experience.

-27-

NOTE 6 •




The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2012 actuarial experience study by considering the following three techniques: (1) the 25-year historical return of the TCRS at June 30, 2012, (2) the historical market returns of asset classes from 1926 to 2012 using the TCRS investment policy asset allocation, and (3) capital market projections that were utilized as a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. Four sources of capital market projections were blended and utilized in the third technique. The blended capital market projection established the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding inflation of 3 percent. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class U.S. equity Developed market international equity Emerging market international equity Private equity and strategic lending U.S. fixed income Real estate Short-term securities

Long-Term Expected Real Rate of Return

6.46% 6.26% 6.40% 4.61% 0.98% 4.73% 0.00%

Target ~!location 33% 17% 5% 8% 29% 7% 1%

100%

The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees as 7.5 percent based on a blending of the three factors described above.

Discount rate

The discount rate used to measure the total pension liability was 7.5 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current rate and that contributions from the District will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive 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.

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NOTE 6 -




Changes in Net Pension Liability

Increase (Decrease) Total Pension Plan Fiduciary Net Pension

Liability Net Position Liability (Asset)

(a) (b) (a) - (b)

Balance at 6/30/14 $ 7,399,728 $ 6,672,766 $ 726,962 Changes for the year: Service cost 271,048 271,048 Interest 570,337 570,337 Difference between expected and actual experience 18,413 18,413 Contributions-employer 408,725 (408,725) Contributions-employees 172,750 (172,750) Net investment income 212,375 (212,375) Benefit payments, including refunds of employee contributions (132,562) (132,562) Administrative expense (3,471) 3,471 Net changes 727,236 657,817 69,419

Balance at 6/30/15 $ 8,126,964 $ 7,330,583 $ 796,381

Sensitivity of the net oension liability to cha noes in the discount rate

The following presents the net pension liability of the District calculated using the. discount rate of 7.5 percent, as well as what the net pension liability (asset) would be if it were calculated using a discount rate that is 1-percentage-point lower (6.5 percent) or 1-percentage-point higher (8.5 percent) than the current rate:

Consolidated Utility District of Rutherford County's

1 % Decrease (6.5%)

Current Discount Rate

(7.5%) 1% Increase

(8.5%)

net pension liability (asset) $ 2,082,155 $ 796,381 $ (240,550)

-29-

NOTE 6 -




Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions

Pension expense

For the year ended June 30, 2016, the District recognized pension expense of $92,032.

Deferred outflows of resources and deferred inflows of resources

For the year ended June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Deferred Outflows of Inflows of Resources Resources

Differences between expected and actual experience $ 16, 111 $ 177,027 Net difference between projected and actual earnings on pension plan investments 243,830 302,645 Contributions subsequent to the measurement date of June 30, 2015 473,421

Total $ 733,362 $ 479,672

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended June 30:

2017 2018 2019 2020 2021 Thereafter

Payable to the Pension Plan

$ (62,912) (62,912) (62,912) 37,970

(22,987) (45,974)

At June 30, 2016, the District reported no outstanding amount of contributions to the pension plan required as of June 30, 2016.

-30-



NOTE 7 -

NOTE 8 -

RETIREMENT PLANS

Deferred Compensation Plan

The District offers its employees a deferred compensation plan created in accordance with the Internal Revenue Service Code Section 457. The Plan, available to all District employees, permits employees to defer a portion of their salary until future years. Compensation deferred under this plan is not available to employees or their beneficiaries until termination, retirement, death, or unforeseeable emergency. Prior to the adoption of the TCRS plan, the District provided a matching contribution of up to 4% of total wages to all participating employees. Subsequent to July 1, 2007 no employer match is available to employees participating in TCRS. For those employees who elected not to participate in TCRS the District provides a contribution of 11.5% for all employees who elect to contribute at least 5% to this program. Effective May 2, 2015, the District's contribution of 11. 5% is being made to the defined contribution plan as described below. Employer contributions under this program for the year ended September 30, 2015 were $56,014. There were no employer contribution under this program for the nine months ended June 30, 2016.

Defined Contribution Plan

Beginning May 2, 2015, the District began offering its employees a deferred contribution retirement plan created in accordance with the Internal Revenue Service Code Section 401(a). This plan covers employees that were employed on July 1, 2007 and before who elected not to participate in the TCRS plan. Under the terms of the plan, the employee must contribute at least 5% to the deferred compensation plan. The District contributes 11. 5% of employee-eligible plan compensation subject to annual limitations imposed by the Internal Revenue Code. Employees are immediately vested in employer contributions. For the nine months ended June 30, 2016 and year ended September 30, 2015, employer contributions to the 401(a) retirement plan totaled $80,832 and $39,768, respectively.

POST EMPLOYMENT HEAL TH BENEFITS

Plan Description

The District administers a single-employer defined benefit healthcare plan (the "Retiree Health Plan"). The plan provides healthcare insurance for eligible retirees and their spouses until a retiree reaches age 65 through the District's group health insurance plan, which covers both active and retired members. Benefit provisions are established through the District's current healthcare insurance provider, United Healthcare. The Retiree Health Plan does not issue a publicly available financial report.

Fundina Policy

The District pays 96% of the cost of current-year premiums for eligible retired plan members and their spouses. The District's contributions for retirees for the year ended September 30, 2015 were $2, 752. The District made no contributions for retirees for the nine months ended June 30, 2016.

-31-

NOTE 8-



POST EMPLOYMENT HEAL TH BENEFITS {CONTINUED)

Annual OPES Cost and Net OPES Obligation

The District's annual other postemployment benefit (OPES) cost (expense) is calculated based on the annual required contribution of the employer (ARC). The District has elected to calculate the ARC and related information using the alternative measurement method permitted by GASB Statement 45 for employers in plans with fewer than 100 total plan members. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the D'istrict's annual OPEB costs for the year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation to the Retiree Health Plan:

Annual required contribution Interest on net OPEB obligation Adjustment to annual required contribution Annual OPEB cost (expense) Contributions made Increase in net OPES obligation Net OPES obligation, beginning of period Net OPES obligation, end of period

s 459,700 48,789

(46,609) 461,880

461,880 2,140,978

s 2,602,858

The District's annual OPES cost, the percentage of annual OPES cost contributed to the plan, and the net OPEB obligation for periods ended 2016, 2015 and 2014 is as follows:

Ended 6/30/2016 9/30/2015 9/30/2014

Cost $ 461,880 $ 332,806 $ 326,357

Funded Status and Funding Prooress

Cost Contributed $0

$2,752 $15,092

Obligation $ 2,602,858 s 2,140,917 $1,810,863

As of June 30, 2016 and September 30, 2015, the actuarial accrued liability for benefits was $2,001,601 and $2,335, 121, respectively, all of which was unfunded. The covered payroll (annual payroll of active employees covered by the plan) was $3,950,445 and $4,822,592, respectively, and the ratio of the unfunded actuarial accrued liability to the covered payroll was 50.7 and 48.4 percent, respectively.

-32-

NOTE 8 -



POST EMPLOYMENT HEAL TH BENEFITS (CONTINUED)

The projection of future benefit payments for an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing benefit costs between the employer and plan members to that point. The methods and assumptions used include techniques that are designed to reduce the effects of short-tenm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

The following simplifying assumptions were made:

Retirement age for active employees - Based on the District's permitted retirement age, which is age 59 1/2, or at the first subsequent year in which the member would qualify for benefits.

Marital status - Marital status of members at the calculation date was assumed to continue throughout retirement.

Mortality- Not assumed to be a factor since member benefits end at age 65.

Turnover - Non-group-specific age-based turnover data from GASS 45 were used as the basis for assigning active members a probability of remaining employed until the assumed retirement age and for developing an expected future working lifetime assumption for purposes of allocating to periods the present value of total benefits to be paid.

Healthcare cost trend rate - The expected rate of increase in healthcare insurance premiums was based on projections of the Office of the Actuary at the Centers for Medicare & Medicaid Services. A rate of 7.1 percent initially, reduced to an ultimate rate of 6.1 percent after five years, was used.

Health insurance premiums - 2016 health insurance premiums for retirees were used as the basis for calculation of the present value of total benefits to be paid.

-33-



NOTE 8 -

NOTE 9 -

POST EMPLOYMENT HEAL TH BENEFITS (CONTINUED)

Inflation rate - The expected long-term inflation assumption of 3.0 percent was based on projected changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPl-W) in the 2010 Annual Report of the Board of Trustees of the Federal OldAge and Survivors Insurance and Disability Insurance Trust Funds for an intermediate growth scenario.

Payroll growth rate - "The expected long-term payroll growth rate was assumed to equal the rate of inflation.

Based on the historical and expected returns of the District's short-term investment portfolio, a discount rate of 5.5 percent was used. In addition, a simplified version of the entry age actuarial cost method was used. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at June 30, 2016, was thirty years.

CONTINGENCIES

The District is involved in various lawsuits in the normal course of business operations. The District's management believes the outcome of these lawsuits will not have a material adverse effect on the District's financial statements.

NOTE 10 - SUBSEQUENT EVENT

Subsequent to June 30, 2016, the District issued $9,519,000 in Series 2016 Waterworks Revenue Refunding Bond. Issuance proceeds of $9,464,215 derived from the sale of the Series 2016 WaterNorks Revenue Refunding Bond and $3,239,736 of District funds were put into escrow to retire t'ie $11,510 ,000 Series 2009 Revenue Bond described in Note 4. Interest on the Series 2016 WaterNorks Revenue Refunding Bond shall be payable each February 1st and August 1", commencing February 1, 2017 at an interest rate of 1.81% per annum. Principal of the Series 2016 Waterworks Revenue Refunding Bond shall be payable in annual installments on each February 151

•

-34-

SUPPLEMENTAL INFORMATION


SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS

BASED ON PARTICIPATION IN THE PUBLIC EMPLOYEE PENSION PLAN OF TCRS

FOR NINE MONTHS ENDED JUNE 30, 2016 AND FISCAL YEAR ENDED SEPTEMBER 30, 2015

Total pension liability: SeNice cost Interest Changes in benefit terms Differences between actual & expected experience Change of assumptions Benefit payments, including refunds of employee contributions Net change in total pension liability Total pension liability- beginning Total pension liability- ending (a)

Plan fiduciary net position: Contributions - employer Contributions - employee Net investment income Benefit payments, including refunds of employee contributions Administrative expense Net change in plan fiduciary net position Plan fiduciary net position - beginning Plan ficuciary net position - ending (b)

Net Pension Liability- ending (a) - (b)

Plan fiduciary net position as a percentage of total pension liability

Covered-employee payroll

Net pension liability as a percentage of covered-employee payroll

-35-

2016

s 271,048 570,337

18,413

(132,562) 727,236

7,399,728 $ 8,126,964

$ 408,725 172,750 212,375

(132,562) (3,4 71)

657,817 6,672,766

$ 7,330,583

$ 796,381

90.20%

$ 3,454,991

23.05%

2015

$ 288,991 538,160

(227,605)

(172,602) 426,944

6,972,784 $ 7,399,728

$ 401,527 163,889 921,146

(172,602) (2,571)

1,311,389 5,361,377

$ 6,672,766

$ 726,962

90.18%

$ 3,277,774

22.18%

' ..


SCHEDULE OF CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY'S CONTRIBUTIONS BASED ON PARTICIPATION IN THE PUBLIC

EMPLOYEE PENSION PLAN OF TCRS

FOR PERIOD ENDED JUNE 30, 2016 AND YEARS ENDED SEPTEMBER 30, 2015 AND 2014

2016 2015 2014

Actuarially determined contribution $ 473,421 $ 408,725 $ 401,527 Contributions in relation to the actuarially

determined contribution

Contribution deficiency (excess)

Covered-employee payroll Contributions as a percentage of

covered payroll

Valuation date

473,421

$

$ 4,001,868 11.83%

408,725

$

$ 3,454,991 11.83%

401,527

$

$ 3,277,774 12.25%

Actuarially determined contribution rates for 2016 were calculated based on the July 1, 2013 actuarial valuation.

Methods and assumotions used to determine contribution rates:

Actuarial cost method

Amortization method

Remaining amortization period

Asset valuation

Inflation

Salary increases

Investment Rate of Return

Retirement age

Mortality

Cost of Uving Adjustments

Frozen initial liability

Level dollar, closed (not to exceed 20 years)

7 years

10-year smoothed within a 20 percent corridor to market value

3.0 percent

Graded salary ranges from 8.97 to 3. 71 percent based on age, including inflation, averaging 4.25 percent

7.5 percent, net of investment expense, including inflation

Pattern of retirement determined by experience study

Customized table based on actual experience including an adjustment for some anticipated improvement

2.5 percent

-36-

Actuarial Valuation

Date 6/30/2016 9/30/2015 9/30/2014

1 ••


REQUIRED SUPPLEMENTARY INFORMATION POST-EMPLOYMENT BENEFITS

SCHEDULE OF FUNDING PROGRESS

JUNE 30, 2016

Actuarial Accrued UMLas a

Actuarial Liability Unfunded Percentage of Value of (ML)· ML Funded Covered Covered

Plan Assets Entr; Age (UML) Ratio Payroll Payroll (a) (b) (b - a) (alb) (c) ((b - a)/c)

s $ 2,001,601 $ 2,001,601 0% $ 3,722,983 53.76% $ s 2,335, 121 $ 2,335,121 0% $ 4,822,592 48.42% s $ 2,748,434 $ 2,748,434 0% $ 4,485, 119 61.28%

-37-

Invested in Capital Assets, net of related debt Restricted to Meet Bond Indenture Provisions Restricted for Capital Investments Unrestricted Total Net Position

.~-·-


SCHEDULE OF NET POSITION BY COMPONENT

2016 $ 210,445

7,170

7015 $ 1 QQ,078

7,220

LAST TEN FISCAL YEARS

(amounts exrressed In thousands)

2014 $ 103,165

6,Q02

2013 $ 185,000

G,538

Fiscal Year 2012 2011

$ 173,233 $ 1G3,8Q4 10,015 0,700

2010 $ 161,807

8,036

200!:! $ 174,056

7,310

200A $ 165,173

6,Q1Q

ZOO? $ 132,515

6,140 5,413

46,280 43,730 35,662 31,634 30,843 32,Q22 30,173 14,610 1Q,167 28,506 _u~.~Qt? _ _li--2liQ,Q?8 __ ~_2}:5/_2-!L $ 2~"211 $ 214,001 $ 206.606 $ 2_QQJ_Q6__$ rn:J,Q.85 _ _ji_J_9_1_,_259 _ _ji 112.613

-38-

.·~·-,


SCHEDULE OF CHANGES IN NET POSITION

LAST TEN FISCAL YEARS

(amounts expressed in lhousands)

* Fiscal Year 2016 201.S 2014 2013 2012 2011 2010 2009 20QU 2007

Operating Revenue: Water Sales $ 18,800 $ 24,635 $ 23,794 $ 22,793 $ 22,895 $ 20,873 $ 19,248 $ 18,542 $ 19,001 $ 17,925 Sewer (Step) Sales 1,487 1,851 1,676 1,513 1,463 1,358 1, 114 873 791 639 Late Payment Fees 415 557 677 622 608 583 563 546 566 555 Service Charges 997 1,447 1,344 1, 147 1,003 1,010 1, 105 926 947 1,000 Other 150 220 211 197 166 180 354 158 176 86 Less: Adjustments and Allowances (109) (147) (177) (139) ( 181) (228) (259) (322) (336) (238)

Total Operating Revenue 21 806 28,572 27,525 26,133 ~014 23,782 22, 125 20,723 21,145 19,976

Operating Expenses: Pumping 390 506 547 527 525 540 524 539 514 450 Water Plant & Treatment 1,986 2,714 2,780 2,534 2,673 2,373 2,233 2,488 2,525 2,330 Transmission & Distribution 3,290 4, 116 3,798 3,945 3,557 3,719 3,430 3,665 3,448 3,230 Customer Accounting 403 014 630 587 595 589 588 731 966 882 Customer Service 1,045 1,350 1,252 1,344 1,515 1,516 1,528 1,701 1,711 1,439 Wastewater (Step Systems) 712 944 032 905 877 936 925 830 724 518 Administrative & General 2,856 3,449 3,366 3,204 3,330 3,105 3,006 3,422 2,715 2,687 Depreciation & Amortization 0,290 8,065 7,347 7,214 7,087 6,954 6,766 6,512 6,004 5,001

Total Operating Expenses 17,032 21,848 20,670 20,260 20,168 10,822 19,000 19,888 18,607 16,546

Net Operating Revenue 4,774 6,724 6,855 5,873 5,840 3,960 3, 125 835 2,538 3,430

Non-operating Revenue (Expenses) (1,087) (1,427) (1.418) (2,255) (2,379) (2,003) (2,360) (1,533) (885) (195)

Net Income before Contributions 3,687 5,297 5,437 3,618 3,467 1,957 765 (698) 1,653 3,235

Contributions: Growth Fees - 709 1,454

Tap Fees - Net of Costs 3,792 3,844 2,744 1,850 1,582 808 1, 197 830 708 1, 145

Developer Contributions 6,388 5,158 5,888 3,129 1,551 3.470 2, 112 3,991 9,713 13,141

Contributions - Others - - 578 885 266 46 594 5,803 1, 125

Total Contributions 10 180 9,002 8,632 5,563 4,018 4,544 3,355 5,424 16,933 16,865

Change in Accounting Methods n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Change in Net Position $ 13,867 $ 14,299 $ 14,069 $ 9, 181 $ 7,485 $ 6,501 $ 4, 120 $ 4,726 $ 18,586 $ 20, 100

* - Changes in net position for 2016 are for the nine months ended June 30.

-39-

--------- -----

( \

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE SCHEDULE OF OPERATING REVENUES

FOR THE NINE MONTHS ENDED JUNE 30, 2016

Variance (Unaudited) Favorable

Actual Budget (Unfavorable) Operating Revenues

Water Sales $ 18,865,447 $ 18,528,000 $ 337,447 Sewer (Step) Sales 1,486,809 1,400,000 86,809 Late Payment Fees 415,406 420,000 (4,594) Service Charges 997,386 1,071,500 (74,114) Fire Protection 128,768 115,000 13,768 Miscellaneous Income 21,281 19,500 1,781

21,915,097 21,554,000 361,097 Less: Adjustments and Allowances (109,319) (150,000) 40,681

Total Operating Re•;enues $ 21,805,778 $ 21,404,000 $ 401,778

-40-


SCHEDULE OF OPERATING EXPENSES


(Unaudited) Budget %of Actual Budaet Remaininq Budcet Used

Source of Supply Purchased water s 1,340 $ 750,000 748,660 0.18%

Pumping Building and grounds 17,841 25,000 7,159 71.36% Chemicals 12,000 12,000 0.00% Contract services, ma·1ntenance 20,334 23,145 2,761 88.07% Electrici~; 196,775 355,000 158,225 55.43% Employee regular wages 60,859 84,564 23,705 71.97% Employee overtime pay 11,150 13,500 2,350 82.59% Employee bonus pay 4,924 10,010 5,086 49.19% Employee vacation pay 1,633 7,785 6,152 20.98% Employee sick pay 2,383 4,505 2,122 52.90% Employee benefits, allocated 13,449 31,000 17,551 43.38% Employee section 401 (a)/457 6,946 6,895 (51) 100.74% Retirement contribution 6,225 6,225 0.00% Employer payroll taxes 6,195 9,208 3,013 67.28% EquipmenUvehicle repair 6,214 5,000 (1,214) 124.28% Insurance, v1orkers comp 1,714 2,175 461 78.80% Materials and supplies 961 2,100 1,139 45.76% Miscellaneous 400 400 0.00% Office furniture and fixtures 500 500 0.00% Outside services employed 138 9,000 8,862 1.53% Postage/freight 220 1,300 1,080 16.92% Rental expense 120 2,000 1,880 6.00% Repair and maintenance 33,434 50,000 16,566 66.87% School and education 150 3,060 2,910 4.90% Telephone, data & fax 681 1,000 319 68.10% Tools and equipment 404 11,000 10,596 3.67% Transportation 3,574 11,000 7,426 32.49% Travel 3,000 3,000 0.00% Uniforms 800 800 0.00%

Total Pumping 390,149 691,172 301,023 56.45%

Water Treatment Plant Building and grounds 24,724 12,600 (12,124) 196.22% Chemicals 471,008 540,450 69,442 87.15% Computers and software 1,090 6,075 4,985 17.94% Contract services, administrative 332,166 360,225 28,059 92.21% Contract services.direct projects 4,856 5,175 319 93.84% Contract services, maintenance 6,791 7,200 409 94.32% Contract services, management 24,598 48, 150 23,552 51.09% Contract services, operations 584, 198 600,750 16,552 97.24% Dues and subscriptions 450 450 0.00% Electricity 447,378 564,525 117,147 79.25%

-41-


SCHEDULE OF OPERATING EXPENSES (CONTINUED)


(Unaudited) Budget % of Actual Budcet Remaininq Budqet Used

EquipmenUvehicle repair 146 3,600 3,454 4.06% Lab supplies 24,239 22,275 (1,964) 100.00% Licenses and permits 1,000 1, 125 125 100.00% Materials and supplies 11,441 8,100 (3,341) 141.25% Office furniture and fixtures 450 450 0.00% Outside services employed 1,436 1,125 (311) 127.64% Pos:age/freight 12,052 13,500 1,448 89.27% Promotion & entertainment 1,523 1,800 277 84.61% Professional fees 127 (127) 0.00% Rental expense 430 450 20 95.56% Repair and maintenance 18,201 31,725 13,524 57.37% School and education 2,505 2,475 (30) 101.21% Telephone, data & fax 743 675 (68) 110.07% Tools and equipment 10,354 5,850 (4,504) 176.99% Transportation 1,599 3,600 2,001 44.42% Travel 450 450 0.00% Uniforms 2,042 900 (1,142) 226.89%

Total Water Treatment Plant 1,984,647 2.243,700 259,053 83.45%

Transmission and Distribution Chemicals 150 150 0.00% Computers and software 1,439 9,500 8,061 15.15% Contract services, maintenance 853 1,485 627 57.78% Dues and subscriptions 4,799 968 (3,831) 495.76% Employee regular wages 1,615,070 1,649,194 34, 124 97.93% Employee overtime pay 89,617 113,450 23,833 78.99% Employee supplemental pay 98,296 94,422 (3,874) 104.10% Employee vacation pay 119,888 155,826 35,938 76.94% Employee sick pay 73,872 85,679 11,807 86.22% Employee - temporary 69,900 69,900 0.00% Employee benefits, alloca!ed 483,100 541,000 57,900 •· 89.30% Employee section 401 (a)/457 23,454 24,968 1,514 93.94% Retirement contribution 211,406 211,406 0.00% Em player payroll taxes 149,853 171,235 21,382 87.51% EquipmenUvehicle repair 43,766 58,425 14,659 74.91% Insurance, workers comp 31,158 30,520 (638) 102.09% Lab supplies 2,927 5,307 2,380 55.15% Licenses & perm its 1,400 3,000 1,600 46.67% Materials and supplies 19,366 35,988 16,622 53.81% Miscellaneous expenses 2,587 2,031 (556) 127.38% Office furniture/fixtures 15,465 11,500 (3,965) 134.48% Outside services employed 13,201 31,163 17,962 42.36% Postage/freight 825 3,768 2,943 21.89% Promotion & entertainment 1,531 1,531 0.00% Rental expense 5,812 10,406 4,594 55.85% Repair and maintenance 317,891 401,850 83,959 79.11 % School and education 14,693 13,489 (1,204) 108.93%

-42-


SCH!::DULE OF OPERATING EXPENSES (CONTINUED)


(Unaudited) Budget % of Actual Budaet Remaining Budaet Used

Telephone, data & fax 18,910 17,923 (987) 105.51% Tools and equipment 62,645 73,413 10,768 85.33% Transportation 64,518 151,575 87,057 42.57% Travel 3,390 12, 101 8,711 28.01% Uniforms 10,721 19,390 8,669 55.29%

Total Transmission and Distribution 3,289,521 4,012.563 723,042 81.98%

Customer Accounting Computers and software 9,960 4,000 (5,960) 249.00% Contract services, maintenance 6,950 (6,950) 0.00% Employee regular wages 207,013 211,670 4,657 97.80% Employee overtime pay 14,644 9,000 (5,644) 162.71% Employee supplemental pay 15,027 11,654 (3,373) 128.94% Employee vacation pay 16,052 20,715 4,663 77.49% Employee sick pay 15, 117 11,100 ( t.!,017) 136.19% Employee benefits, allocated 71,416 77,000 5,584 92.75% Employee section 401(a)/457 4,530 4,517 (13) 100.29% Retirement contribution 22,664 22,664 0.00% Em player payroll taxes 19,996 20,207 211 98.96% Equipment/vehicle repair 500 500 0.00% Insurance, \vorkers comp 4,358 5,530 1, 172 78.81% Materials and supplies 1,554 2,500 946 62.16% tvliscellaneous expenses 250 250 0.00% Office furniture/fixtures 150 750 600 20.00% Outside services employed 44,525 52,000 7,475 85.63% Postage/freight 364 500 136 72.80% Promotion & entertainment 900 900 0.00% Rental expense 200 200 0.00% Repair and maintenance 900 900 0.00% School and education 3,585 4,000 415 89.63% Telephone, data & fax 3,964 4,000 36 99.10% Tools and equipment 1,371 2,000 629 68.55% Transportation 18,091 35,000 16,909 51.69% Travel 3,006 4,000 994 75.15% Uniforms 911 3,500 2.589 26.03%

Total Customer Accounting 462,584 509,057 46,473 90.87%

Customer Service Contract services, maintenance 357 750 393 100.00% Employee regular wages 477,911 490,590 12,679 97.42% Employee overtime pay 1,199 4,000 2,801 29.98% Employee supplemental pay 30,768 38,350 7,582 80.23% Employee vacation pay 32,291 27,935 (4,356) 115.59% Employee sick pay 29,360 25,605 (3, 755) 114.67% Employee benefits, allocated 164,346 213,000 48,654 77.16% Employee section 401 (a)/457 7,691 7,605 (86) 101.13% Retirement contribution 58,253 58,253 0.00%

-43-

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE SCHEDULE OF OPERATING EXPENSES (CONTINUED)


(Unaudited) Budget % of Actual Budcet Remaining Budcet Used

Employer payroll taxes 41,623 44,865 3,242 92.77% Insurance, workers comp 733 930 197 78.82% Materials and supplies 5,812 4,125 (1,687) 140.90% Miscellaneous expenses 8,000 (8,000) 0.00% Office furniture/fixtures 288 600 312 48.00% Outside services employed 71,656 95,600 23,944 74.95~'0 Postage/freight 160,031 160,880 849 99.47% Promotion & entertainment 1,233 650 (583) 189.69% School and education 1,050 4,550 3,500 23.08% Telephone, data & fax 306 350 44 87.43% Tools and equipment 75 1,500 1,425 5.00% Transportation 300 300 0.00% Travel 3,714 5,000 1,286 74.28% Uniforms 6,380 6.375 (5) 100.08%

Total Customer Service 1,0<14,824 1.191,813 146.989 87.67%

\f/asterwater (Step Systems) Building and grounds 60,337 61,098 761 98.75% Computers and soft,vare 827 (827) 0.00% Contract services, maintenance 7,500 7,500 0.00% Dues and subscriptions 375 375 0.00% Electrici~; 98,887 101,250 2,363 97.67% Employee ragular wages 213,810 213,636 (124) 100.06% Employee overtime pay 24,023 25,500 1,477 94.21% Employee supplemental pay 13,583 16,430 2,847 82.67% Employee vacation pay 12,722 9,620 (3, 102) 132.25% Employee sick pay 16,369 10,989 (5,380) 148.96% Employee benefits, allocated 76,160 94,000 17,840 81.02% Employee section 401 (a)/457 12,875 13,550 675 95.02% Retirement contribution 17,601 17,601 0.00% Em player payroll taxes 20,232 21, 131 899 95.75% Equipmentlvehicle repair 262 1,875 1,613 13.97% Insurance, workers comp 4,305 5,460 1,155 78.85% Lab supplies 1,082 3,000 1,918 36.07% Licenses & permits 30, 190 45,052 14,862 67.01% Materials and supplies 3,104 18,750 15,646 16.55% Miscellaneous expenses 750 750 0.00% Office furniture/fixtures 750 750 0.00% Outside services employed 800 1,875 1,075 42.67% Postage/freight 137 600 463 22.83% Promotion & entertainment 750 750 0.00% Professional fees: sewer 5,850 11,250 5,400 52.00% Rental expense 140 ·750 610 18.67% Repair and maintenance 57,043 71,250 14,207 80.06% School and education 2,500 1,875 (625) 133.33% Telephone, data & fax 31,575 33,750 2,175 93.56% Tools and equipment 2,746 9,000 6,254 30.51%

-44-




(Unaudited) Budget % of Actual Budoet Remainina Budcet Used

Transportation 9,369 22,500 13, 131 41.64% Travel 402 1,500 1,098 26.80% Uniforms 955 3,375 2,420 28.30% Utilities 12,869 (12,869) 0.00%

Total Wastewater (Step Systems) 713,154 826,842 113,688 86.25%

General and administrative Bad Debts, net of recoveries 74,452 115,000 40,548 64.74% Banking services, retail 34,943 42,000 7,057 83.20% Banking services, investment 5,479 6,000 521 91.32% Building and grounds 86,641 100,000 13,359 86.64% Computers and soft.vare 105,640 100,500 (5,140) 105.11% Contract services, maintenance 194,641 245,000 50,359 79.45% Dues and subscriptions 86,430 80,250 (6,180) 107.70% Employee regular wages 544, 177 668, 130 123,953 81.45% Employee regular wages: Board 18,000 19,000 1,000 94.74% Employee overtime pay 10, 167 12,300 2,133 82.66% Employee supplemental pay 17,302 16,078 (1,224) 107.61 % Employee vacation pay 35,437 49,502 14,065 71.59% Employee sick pay 19,547 32, 145 12,598 60.81% Employee - temporary 21,200 21,200 0.00% Employe benefits, allocated 135,427 170,000 34,573 79.66% Employee benefits, allocated: Board 47,099 54,000 6,901 87.22% Employee section 401 (a)/457 25,336 24,863 (468) 101.88% Retirement contribution 59,787 59,787 0.00% Employer payroll taxes 46, 150 62,772 16,622 73.52% Employer payroll taxes: Board 2,149 5,590 3,441 38.44% Post-employment health care - ARC 461,880 375,000 (86,880) 123.17% Equipment/vehicle repair 1,271 2,500 1,229 50.84°/a Insurance, general 119,441 125,000 5,559 95.55% Insurance, workers comp 1,095 1,400 305 78.21% Licenses & permits 375 2,000 1,625 18.75% Materials and supplies 57,918 51,750 (6,168) 111.92% Miscellaneous expenses 10,287 7,000 (3,287) 146.96% Office furniture/fixtures 21,518 3,500 (18,018) 614.80% Outside ser1ices employed 93,913 218,000 124,087 43.08% Postage/freight 2,421 3,100 679 78.10% Promotion & entertainment 17,577 20,250 2,673 86.80% Promotion & entertainment: Board 319 400 81 79.75% Professional fees, accounting 28,126 36,000 7,874 78.13% Professional fees, engineering 75,272 90,000 14,728 83.64% Professional fees, legal 164,019 160,000 (4,019) 102.51% Rental expense 2,927 2,000 (927) 146.35% Repair and maintenance 694 11,000 10,306 6.31% School and education 8,388 8,500 112 98.68% School and education: Board 2,818 4,000 1,182 70.45%

-45-




(Unaudited) Budget Actual Budget Remaininq

Telephone, data & fax 40,338 47,000 6,662 Telephone, data & fax: Board 2,142 2,000 (142) Tools and equipment 18,542 15,500 (3,042)

Transportation 13,406 5,000 (8,406)

Travel 12,401 9,500 (2,901)

Travel: Board 4,062 6,000 1,938

Tuition assistance 20,185 24,000 3,815

Unemployment tax 1,137 6,000 4,863

Uniforms 9,356 7,000 (2,356)

Utilities 63,772 90,000 21,228

Vehicles - non-capital 105.362 175,000 69,638 Total Administration and General 2,854,979 3,392.522 537,543

Depreciation and amortization 6,290.370 6,261,100 (29,270)

Total Operating Expense $ 17,031,568 s 19,878,769 s 2,847,201

-46-

% of Budaet Used

85.83% 107.10% 119.63% 268.12% 130.54%

67.70% 84.10% 18.95%

133.66% 76.41% 60.21% 84.16%

100.47%

85.68%


SCHEDULE OF DEBT SERVICE REQUIREMENTS TO MATURITY

AS OF JUNE 30, 2016

2013 Refunding Revenue 2009 VVater Revenue All Bond Issues 2%-4o/o 2.50°/o-4.SOo/o

Fis ca! Year Total Prindoal Interest Princioal Interest Princioal Interest 2017 s 3,544,782 $ 1,919,088 s 1,625,694 s 1,230,000 $ 1,063,731 s 650,000 s 473,575 2018 3,553,382 1,985,854 1,567,528 1,275,000 1,026,831 670,000 454,075 2019 3,570,607 2,077,701 1,492,906 1,335,000 975,831 700,000 432,300 2020 3,544,207 2,134,402 1,409,805 1,390,000 922,431 700,000 404,300 2021 3,509, 107 2,181,639 1,327,468 1,405,000 866,831 730,000 379,800 2022 3,518,707 2,278,743 1,239,959 1,470,000 810,631 760,000 350,600 2023 3,529,507 2,380,954 1,148,553 1,530,000 751,831 800,000 320,200 2024 3,524,307 2,473,055 1,051,252 1,600,000 690,631 820,000 286,200 2025 3,525,457 2,575,661 949,796 1,670,000 626,631 850,000 251,350 2026 3,534,657 2,638, 181 846,476 1,730,000 559,831 900,000 217,350 2027 3,529,957 2,795,816 734,141 1,805,000 490,631 930,000 176,850 2028 2,995,907 2,378,394 617,513 1,365,000 418,431 950,000 135,000 2029 3,007,207 2,476,442 530,765 1,410,000 377,481 1,000,000 92,250 2030 3,014,907 2,574,453 440,454 1,455,000 335, 131 1,050,000 47,250 2031 1,929,007 1,582,601 346,406 1,510,000 291,531 2032 1,936,820 1,640,750 296,070 1,565,000 244,344 2033 1,932,914 1,689,326 243,588 1,610,000 195,438 2034 1,962,597 1,772,924 189,673 1,690,000 145,121

2035 1,975,564 1,846,686 128,878 1,760,000 88,088 2036 1,006, 164 940,520 65,644 850,000 28,688 2037 127,476 94,727 32,749

2038 127,476 99,027 28,449

2039 127,476 103,523 23,953

2040 111,8c6 92,493 19,373

2041 70,476 54, 127 16,349

2042 70,476 56,403 - 14,073

2043 70,476 58,774 11,702

2044 70,476 61,220 9,256

2045 70,476 63,818 6,658

2046 70,476 66,501 3,975

2047 61.358 60.167 1,191

Totals $ 59,624,272 s 43.203.975 $16,420.297 $ 29,655,000 s 10,910,144 $11,510,000 $ 4.021,100

-47-


SCHEDULE OF DEST SERVICE REQUIREMENTS TO MATURITY (CONTINUED)

AS OF JUNE 30, 2016

2008 Rural Oeve!opment 2COO Rural Development 4,125°/o 4.75%

Fiscal Year Princioal Interest Princioal Interest 2017 s 20, 162 s 50,314 s 18,926 s 38,074 2018 21,009 49,467 19,845 37,155 2019 21,893 48,583 20,808 36,192 2020 22,681 47,795 21,721 35,279 2021 23,766 46,710 22,873 34, 127 2022 2.\, 765 45,711 23,983 33,017 2023 25,807 44,669 25, 147 31,853 2024 26, 771 43,705 26,284 30,716 2025 28,017 42,459 27,644 29,356 2026 29, 195 41,281 28,986 28,014 2027 30,422 40,054 30,394 26,606 2028 31,594 38,882 31,800 25,200 2029 33,029 37,447 33,413 23,587 2030 34,418 36,058 35,035 21,965 2031 35,865 34,611 36,736 20,264 2032 37,281 33,195 38,469 18,531 2033 38,939 31,537 40,387 16,613 2034 40,576 29,900 42,348 14,652

,. 2035 42,282 28,194 44,404 12,596 l 2036 43,988 26,438 46,532 10,468

2037 45,909 24,567 48,818 8,182 2038 47,839 22,637 51, 188 5,812 2039 49,850 20,626 53,673 3,327 2040 51,896 18,580 40,597 793 2041 54, 127 16,349 2042 56,403 14,073

2043 58,774 11,702 2044 61,220 9,256 2045 63,818 6,658 2046 66,501 3,975 2047 60, 167 1. 191

Totals s 1,228,964 s 946.674 s 810,011 s 542,379

-48-

Operating Revenues Operating Expenses


SCHEDULE OF HISTORICAL DEl3T SERVICE COVERAGE

* 2016

$ 21,806 17,032

(U rm uclitccl)

(dollar amounts expressed in thousands)

2015 $ 28,572

21,848

2014 $ 27,525

20,670

2013 $26,133

20.260

2012 $ 26,014

20.168

Fiscal Year

2Q11 $23,782

19,822

2010 $ 22.125

19,000

2009 $ 20,723

19,888

2008 $ 21,145

18,607

2007 $ 19,976

16,546

Net Operating lncome 4,774 6,724 G,855 5,873 5,846 3,960 3,125 835 2,538 3,430 Non-Operating lncome(Expense) (1,087) (1,427) (1.418) (2.255) (2,379) (2,003) (2.360) (1,533) (885) (195)

Net Income Before Contributions 3,687 5,297 5,437 3,618 3,467 1,957 765 (698) 1,653 3,235 Add: Contributed Capital - Cash - 3,844 2,744 1,863 1,632 1,074 1,243 1,434 1.417 3,724

Depreciation 6,290 8,065 7,347 7,214 7,087 G,954 6,766 G,512 6,004 5,001 Interest Expense 1,252 1. 716 1,773 2,089 2,465 2,529 2,544 2,295 2, 143 2, 189

NetAvailableforDebtService $11,229 $18,922 $17,301 $14,784 $14,651 $12,514 $11,318 $ 9,543 $11,217 $14,149

Annual Debt Requirements $ 3,455 $ 3,512 $ 3,512 $ 3,513 $ 4,545 $ 4,011 $ 3,437 $ 3,525 ·$ 3,445 $ 3,385

Debt Service Coverage (times) 3.25 5.39 4.93 4.21 3.22 3.12 3.29 2.71 3.26 4.18

• Operating results for 2016 are for the nine mont11s ended June 30. Prior years are for twelve months ended September 30.

-49-

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE CUSTOMERS AND RATE SCHEDULE

NINE MONTHS ENDED JUNE 30, 2016 (Unaudited)

As of June 30, 2016, Consolidated Utility District served approximately 49,815 water customers and had approved the following rate structure for the coming year:

Water Rates First 500 gallons Each additional 1,000 gallons

from 501 - 5,000 Each additional 1,000 gallons

from 5,001 - 10,000 Each additional 1,000 gallons



in excess of 100,000 gallons

$12.78

$6.29

$6.79

$7.29

$7.79

$6.79

As of June 30, 2016, Consolidated Utility District served approximately 4,635 customers on STEP sewer systems and had approved the following rate structure for the coming year:

Se1t1er Rates Customer Charge All consumption, per 1,000 gallons

-50-

$28.00 $2.00


TOP TEN CUSTOMERS BY REVENUE

(Unaudited) For the Nine Months Ended June 30, 2016 and Year Ended September 30, 2005

2016 2005 Percentage

Water of Total Annual

Customer Salss Rank Water Sales Water Sales Rank

Republic Services $ 91, 195 1 0.48% Hawthorne Park South Apartments 84, 133 2 0.45%

Embassy Suites Hotel 83, 142 3 0.44%

Rutherford County Board of Education 82, 131 4 0.44%

Bell Murfreesboro, LLC 67,902 5 0.36%

Arium Parkside, LLC 65,235 6 0.35%

Woodgate Farms, LL C 64,103 7 0.34%

Student Quarters on Rutherford 57,634 8 0.31%

Cross Creek Murfreesboro 55,792 9 0.30%

The Paddock Club 53,302 10 0.28%

Uni'lersity Gables College Par!<: 79,704 1

Al'lin C. Yori<: Medical Center 41,764 2

National Car Wash 39,964 3

Town of Smyrna 33,700 4

South Park Corporation 32,016 5

Blackman High School 29,543 6

Holly Par!<: Apartments 18,307 7

Prestige Car Wash 15,078 8 Community Care of Rutherford County 14,370 9

Applebee's Restaurant 9,967 10

Percentage of Total

Water Sales

0.55% 0.29% 0.27% 0.23% 0.22% 0.20% 0.13% 0.10% 0.10% 0.07%

Note: Customer water sales for 2016 are fer the nine months ended June 30. Customer water sales for

June 30, 2006 were not a'lailable.

-51-


OPERATING INFORMATION

FOR THE NINE MONTHS ENDED JUNE 30, 2016 AND YEARS ENDED SEPTEMBER 30, 2007 • 2015 (Unaudited)

Fiscal Year 2016 2015 2014 2013 W1

Average Daily Demand 9.89 9.98 10.17 9.79 10.10

Maximum Daily Demand 13.92 13.88 14.16 12.72 16.76

Average Active Customers 49,085 47,533 45,944 44,639 43,527

Fiscal Year 2011 2010 2009 2008 ~

Average Daily Demand 10.11 9.69 10.12 10.68 9.96

Max!mum Daily Demand 15.47 13.21 14.07 15.25 15.51

Average Active Customers 43, 110 42,602 41,889 40,992 33,976

NOTE: Demand numbers are in million gal!ons per Cay

AVERAGE MONTHLY Fiscal Year WATER USAGc (gals) 2016 2015 2014 2013 2012

Sold to Customers 250,795,268 240,849,913 233,355,934 221,244,772 234,406,261 percent scld 81% 79% 77% 74~<> 76%

Nor.-iv!etered Consumption {Fire, flushing, 9,781,460 10,870,141 11,348,818 15,428,754 9,175,919 percent non-metered 3% 4% 4% 5% 3%

Ur.accounted for 47,639,498 51,987,287 58,686,626 60,615,378 64,499,487 percent unacccunted for 15% 17% 19% 20~~ 21%

Average 1\-!onthly \..Yater Pumped. 308,216,226 303.707,341 303,391,378 297.288,904 308,081,667

AVERAGE MONTHLY Fiscal Year

WATER USAGE (gals) 2011 2010 2009 2008 ~ Sold to Customers 223,270,3.\ 1 228,417,585 224,684, 150 233,962,207 224,530,620

percent sold 74% 74% 73% 74% 74%

Non-ililetered Consumption (Fire, flushing, etc.) 8,755,512 26,705,003 18,133,181 24,882,254 22,274,060

percent non-metered 3% 9% 6% 8% 7%

Unaccounted for 70,762,480 52,647,987 64,953,244 59,076,083 56,181,624 percent unaccounted for 23% 17% 21% 19% 19%

Average Monthly Water Pumped 307,788,333 307,770,575 307,770,575 317,920,544 302,986,304

-52-

~~.·:(~'.;t;t·J:f;1:":~t"'ff'.f~f:);;~i;~.;-;,["-j'F?'.~,~~;}ii~;~f~If.~~!.:;fi'.t~t'.:±tfi~"i--,~l"~';:~~·,,~~'·?:;~z~::;2 ..... t~.·•.·~~.~~.~.·i,~~:5>~~~, • ' ·-'. ·-~ ~ .c-._ --·;- ·''

hfci C;c<. '.O lCC2l5 c'ertn,Jien

~ co~~ '.JJ ~dd ~ ccrr.rr.er.t \'Jater Audit Report for:jConsolldated Utlllty_ District _ _ _' .- ._:: RepcC'.n_g Year:L_- .21J15 ~Qn1l1s. 6/W16 l__.

{June 2016) {791)

Pleas·a e~ter dala :;n ~,_e-..... ~i:~ Ce::s cei;;w_ 11\'here a:.a,i_atle, nletereit-va 1~es ~~culd be uSed; if mete~ed va·:~es are Un3~a1!~cia "piea;e esFffiaie"a \/Jf\;~: lr:Cic.lte y~ur ~ni:c~n_ca-irl :he ~~rac:1 ;, ~e lni::i.t ~a!a ~y ~rat::r:g ~ac.'1. cc_mpcr.e~t {r/~ er _1-1~) us~r.g '.he d!9P~CV.n :isl to_'.he :e,r1of11"._'.l' :11p~!_c_e1~. H_o_ver !Jle rni:use. over U;_e ce'I (o ot:ta:_n a_desciip~cn cf :tl!l grac'o:_s . ,- : -~ :;~ ..

·Ail •1olumeS io b~ en-tered as;" r.i1l.LioN'GALLCNS luS}'PER YE0

AR - ,·_ =---

WA.TE.R SUPPLIED .

WATER SUPPL!ED: - 3,67 4.773 l_i._:~ff/.

-_·.·: .8-ii1~d ~e~erkd:-IDI Ei~I 2,9es.5a4 --11.GiYr o-'smed ur.rr.etered: ~ ~:;i!Mlll o.cco::il.GiYr _ <-Uiibmed Cr,-e!eri:c: fil iEij; 10 f 10.841 '.-MGNr -

(Jnb.ii_iE;d ~r.me:!ir~d: ~ ];if_[G1 48.B24f--~1GYr~-----Unbi!led Unm~tefe'd:~cT~rTie_·~nt;~-~~fS Q(e8.ter lh3n_ tr.-e_ reccmnier:ded diifault value

.' .. -,

lMGNr_.; ril.-Gffr MG/Yr

.-~ En_t_er n_~gati~_e %_ o~_~a'.ueJc!:~n~_e_r-r~is!~tJo';i:: -_:En_ter po~ifr~_e :~ o(valu_e __ f~:,OVef-r~~S~~\fo_~.

,'----";::-'---__ ._._..

,_- ··~ ~- -

•. L c-c~~c:··'.~:-:-,_,.~l~o;-,-"'®'-!"'"'"'·"'""'~~_cf}.~~.Y'r -~t~ '_Us;~-~~~~;t~~~:ect-c

~ P.ei;centa_.;;e ~ofWatSr __ - ---."-~~:·-~ ·

~~~)~:-~~~~:~~~:_>f_~,•oc T __

AUTHCRJZ!:D CONSUMPTION: _ -- ~_j_ -· -·- -J ·

.-~-- -

! ·:::·;'.__· ·---

_-v.,AT~R. L6~si:S-r.'iat·e-~ su'pfii'rel: +AU~o-rlZe(c9n_SUiTiptf~n) ,_ ·--~--- 628.224: MGNr--•_--0-_l -~- -_ :.:: _.-

-,- __ · :_ :_; ._-AQcar~~rit LOSseS --- -- -:---~< · · Pent:_--,:- -,- , ,.. .-:vaiue·

-.- L:nauthf.'.ri<:!?_d c~nsur.;i;t1on: ~~ -- j 9.187i~M~;:~ '. -~--~b-6.25~;-! @ O ·:· _J·~;-~.~;_~:--Cefat:_ft opt!on _s_e:eCted ror_ unauth,cr1z_ed ~on_sumptlcn-:-a gra.d!ng-Qf __ s !s appJled~:~-t _not _dlsp!a_yed_ - .

, ;-~~~~~~~~~~:r~~i~~i~ti~r:J~~~-~-~~I . --~ .~;-.!~;1,-~~gz~·i~-:-~----, :~:-~~~r! '~"'"~""'c;:c,~,".,",".z-...~-~':;l~f:;j ~ D~-radt oP-ti'on-~~lecteCf fc~ Sys~t_ema-t!C da~ handnng errors·:· a -gr.ldlr1g ~Of 5 rs0 ~p-p'iied ·bu:t-iiOt-dlSPia;ied -

--:-:--· - -- ·App~'.·e~"(l~~~·es; ·-=-:__-;-~ -:-~--~~: 29.553 ,-1.1GIYr-- · ~/--=-.-.·~-: __:; --~.

--:.:-. ; ·-_ -~ ~-~- ~

__ -.' .- -. :::: __ - .,_:___-_.

R~~1 LOSs-eS-1C;;r;ent Alln-~~1-Rea! i...OSSes or ·cft.RL1 - --.-::, -

: R.i:~!_ L.o~se:; _= _yi.tater_ l_oss~s_ -_ Appa_rent _L_osSes:_ -_ ~- ~--~! 598.671' ~IGJ"Y_r· ~-- ,=,""- ~~-:~~:· -~-.'-:---"' -·-WATER.LOSSES: \:-'l 623.224°~/.GNr --'-· -,-.~-~<:-;_,:.-~ ---~~:;_--:;~ __ F-_·~-----

.::::==:===================-================;='-4=;==========~--':-~~--=.;-~$-·:c..::_· ~· ~ : 'e>, NOIJ.F!::VC~HJEV-IATE~ -·-·· _ ·-;;~_·-'---~0

__ :.,-:- _,_ "'-·c_: ~,-~~~~<--- · ,_. ·..- · ~ ---:._NON·R=VENu_E W_ATER: _ - ~ · _-I 6a1.aag:-~~G1Yi, c- - ~ -: ' _.-_:.-- --- -~

""'Wa'.er Lesses + C-r_h,1e-C M~!erBd + Unb:;~d"Urrre'.9r<1d " - - • · ··- - i~:.> ·-::"'==~~'=':''7"'"'-C'~=o.7c:c-""~~~:--:--cc::-:-:-:-~c::-:::c-:=:--:---~,..,,..~"""':-c-'-~..,-..-=.:c.......c....:_~.::::... -_> . ·SYSTE~.t DATA

:.·. - -

. ;;: ___ _

·: .- _::. ·Toi:a_r ~ii.~ual-~-st-~f ~perating y;a;e'r ;y~ie~: ~EGQ]! Cus_tc_f11_er retai_J ~_it coSt (aPPned to App_.irii_t_COSs~si_?:& ~l 10 \l - -=v.aria-bie_Prcduc!ic~ ~cst _{appli!_'.d l9_R_eal Lo~_eS)_:_~~GQ]!

• ' • "' - - -, • - 0: ' .-=ce, -- . -- - -" • - -" - ·- '- ~ . "'-. ,, - - - . ·-. ~ ~·

. :.:;_, ~ - . - .-:·-· .• ''-'i-'-c_". -. ,:__:

WATER AUDIT DATA VAUDJTYSCORE: :- ---~-- : ... -,

';-_

_. ,, ::..:·--~;. -____:,' . _. ,, : --:::..~

S23,239,9021·'SN;,a;~_;·=: - ·-·~> "----'---- ''-----~< --~~-~. c~~'.:~~~::.;~t-~~:~: __ " c

sa.S7i!s11cco gallcns US ,?:,(--:;\,:~~ -- ~~J::-,··~::O--- -

-'-'--e-

· .. ·.·. - s;sa 7.'~'J'f'~?'{''.~~.~SJ.t','.tr'r~'.:'rcc'£~°:"ro. ~~~~~~~d~~l~\}:--fr _.__:,__:~-'-'-- ----,,--~ ,-- :.'-- -·-~,: ,-~--- ··~: .;;,•_-ei~-';-~-~-,-T::; '•"-c--'•.-

-- -· ,-----,_ _ _ ~. -'Et::~"""~~ l - .. _.,.> ,. c •• ,., YOUR, SCORE IS•!8 oufOflUO 7-; ·i· • -- "· . ~ ;._:;,,. ' ';;-cy ;:•::c•;Jo~'.·:q <"-

P,,CRITT:::S~F~r~:?~~~te<l derci ~e ic~ctce~1s;1 ccniu~,t<ii ";ct'•a!e<1issfsfn~i~-n~eca'iuraoin ome 'llaterf_'f I OataV"1c~::;'fJ' \ :'":f ·'~i:'='.;;'~ ·s,;sed-·c~ ~ti-.i.ilii_rcirnatiCii~p-~icec(audit aCcuracycan te iflwrovect.by

0

3cctress1ng the-fc:!owingtcmpor.e~: -. :-~~ c;:----~,~'- -~~-· : :.;.· _:,, . I 1: Volume fro-m ~wn. so~rces - · --,,_ ,_-_ --·. ~ · " :__ · -:, -,~·-I .-/-:. - ~~-- ~ 7 _-.~ ~ -_., _ ,~·:::::>-- ~ i.-.;;:_. ;:~7

-·,-

2: Billed metered ~o:. -.---' I 3: Customer metering lriaccuracies

.SJ.

; . ' i·,,. '

• .• I ·: ' .. , ·, '.: : .• :;: .. ·_ ·:.':::. ·.;· ·.,;:;:

System Attributes:.

''1·:

/1 ''

final1ci~I:

','I ,.,,

·;,_.·:·

'~: ; '~ .'.)1::1" ' ' Operational Efficiency::.';

Water Audit Report f?n Consolidated Utility District i · . (June 2016) (791), . R~rorti~g v~aH , c1·201G\ .. k 11201s.- 612016 Ii< 1 1 .. _1. .· .. ·_ .. ,.·,· '· · ··.·.·:

1',, ''

.:1.

: ,'' -:,:.':: :::.'°,' :::';!':: ".:; ::I'::: I,;·-.·!.::: . .' .i!,·. 1 './_I I:·'.! 1<-1"·:: ~' !.·.;-. ·.:· :'· :I ·1.i-1, .:.• r",":.' :· 11' :·,_1 ··.'.'::,i [: ·::·. , .: ·.I·,- : > :" . :·,: .. I-: "1' ,1·:.·._ •

... votiR.,~~,r~~ AUb1r 16i\ r Av ~u~i+.v;~.C,?~E 1~; 7s c;,,1o11 oo .a 1

•}1

'·:11

. .;:_,, :,,,, ·~~·

., .... . : .. ,1'

.· r\r]parentL~sses;'.1 '·· 29.s53 ]MG1Yr. .. 1 ;1 1 R~al,Lbs~es':; I 598.671 l~'Gl'(r . . .. . < . ; Water Losses: [ 628.224 IMGNr

,. ''.1.:·,:.:':·.- ::1:.1 ... ,. __ . '1 . .'I:'.: .... ·.I' , ', '' 1· ··.1· '· .; ·,' -,·.: ·1.':" , ... (':I,'· ..

Unavoidable Annual Real Losses (UARL):_1 I 45Z.-14]MG/Yr./ ',.! _1,'',. :: .. ~: · ,1 <: ,>:;.:~: ·!·.:,I; .', \<': ·:'':'°.',.''1'.:,,/1 : ~·:·>:I I; 1 .. :.1_1'.1'.: :,;.; '":·:_ · ·. · ...... : .. " . ' , ",_ ' ,'

•

1

; •• ~n~.u~,! cost.?f Apparent ~os~es: I $Z53-;27D] •.. . ... > • . , , , r , : : " , · ' · · ; • i ! 1 , · ' . , -, . , : · ' . , I . I " , 1 I · I -~ • · ' . ! . I .' . , : I ,r " I · . ~ . .' . , 1 · , , , , . I · . , , . : . I .. .- . . , . . _ .. _ • .. • . _ : . . , •

' ' · Anrnlal cost ofReal L~sses: . .. $~ • .valueda(Variabte Production Cost ·· .... ;

"·I''

··-.:·,.:

.'.: ,'

,',I. ,' ~ '

• • ~ 1,: _ i., . .i: ·:. :_: ;::: 1

- ,1·' ·· .'.11 ' .. ··!. Returri tci RePOiiina Worksheet to'.charlge· this-aSsu-rTiption .:

I ... ••• .•• <1 1,! ' I •• I .} ,<• .' '' .... · .• ' /" . ··:·"'' ' ';. : : 1::1·: ·····__£.·.···· NoMev~nue ;vater,as perce~t byyolurne ofWaler Suppli~d: ii 1s]fil , .• . '--iJ No~-;~J~ri~~ ~~t~r ~'i p~~c~~i'by ~iist of cSp~;~uri~ ~'ysiem( I 2.5% I Real L~s~~s \l~Jued at Variable Production Casi ·· .

. '1

11•11 ',.>I, .·,,1:11{·>11,il,: 11/1:····'···<,,.····· >I<·'·.'. ,•.·.· .· .

Apparent Losses peiser'iic~ cori~ection per, day:' [ 1.57lgallons/connecticiri/day : :~ , ', ·,.• • , , _· .' • · •"u: " ·"' , 1- :- I · I' '·' ''. , ·:. :· :'; ';. · , .. .. 1.• .. , · I, '-: • , ·- ·. , , . t .' > - • • ,' ... ~ ,. I.' •. :I , .. ,, .- , ',_ . , _ ,

. ·' ·, ·. Real'tosse~ perseivice conn~ction perd~y( I 31.84lgall~n;/co~nectioniday -1:··-~· .. '.,'."::,·I :_'1 ... :,-,, ,.1,; 1,,1 · 1·, <, 1 .. 1, "I::·.,-,.·· ·I - .. 11,: _. , · . ,.,., ,,,• ' I '.· '.•. ·.· •...•. · .......•. · ... _ ....... · .. · .. ··... < peailosses per.lengt11,,of mairper.~ay': I NIAi ? ·' . . . . . . . . ..... .

···-'~e~! Lo~~~ip~r;~rii~~'6cirinbctio~ p~rday Mrp~ip~e;sure:\I • 0:38[ga!lonslconnecticiniday/psi .. ·,._,_•···.····I 'II'/,'::> • •• ,.{ ;t:1.I'. II ,,i':l>1l:?:':'·1,,,:, ,·.I··:' ··',······ ,1

I .·. From1Ab~~~.R~al c~~s~~\~ 8.iire~t ;~~d~I R~al L()s~es 1(CARL): I . 598.67lmililon gallons/year - ,/ ' " t I 'i .,.. ' 1J" <' "" J' 'I ., -· ' .,., ",,, I 1 I · , ' , , I

• ' ' I I . ' ' . :,' m ·, IC1f;astructure L~~k~~~ index, (It!) [C~RUUA,RLJ:I I 1.32[' .. · · ..••....•• ·· .•. ··.·: . ' ' I ,·,,~.'l'IJl~l,llt,111 "1:>11i11,!i~l,l1r1';11,1\1\ll:~r,1',l,~/11\Jl11'l llllllllll1'lt1,'I 11 \l,J ;11,l•'l1".'J,,. ,:,:·,' .. ·· .. '_.·,-._1,,.,.

•This performance tnd1calor applies for systems' with a low service conneclton density of les_ll than 32 servtce connecltons/rn1Je o( p1pel1ne . •. · · ' 1

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CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE DISTRICT OFFICIALS AND MANAGEMENT

NINE MONTHS ENDED JUNE 30, 2016

John L. Batey, Jr. William A. Waite Craig Lynch Rosemary Owens Carter Woodruff Lynnisse Patrick Hassel B. Smith, Ill

William Dunnill, P.E. Mark Elgin Kevin Hickerson E. Paul Long, CPA Judy Bowling Cindy Judkins David Jones Bryant Bradley

James C. Cope James C. Hailey, Jr., PE

(Unaudited)

Commissioner, President Commissioner, Vice President Commissioner, Secretary-Treasurer Commissioner Commissioner Advisor Advisor

General Manager Assistant Manager Maintenance Assistant Manager Customer Accounting Comptroller Office Manager Administrative Assistant Wastewater Manager Project Manager

Attorney Consultant Engineer

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•• P.cfmomfson, <Betzfer a <Dame, P££C ( Certijiea Pu6Bc }lccountants) • INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL

REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS

To the Board of Commissioners Consolidated Utility District of Rutherford County, Tennessee

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 Consolidated Utility District of Rutherford County, Tennessee as of and for the nine months ended June 30, 2016, and the related notes to the financial statements and have issued our report thereon dated November 1, 2016.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District'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 opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, 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 the 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 that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the District'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.

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Brenhvood Location: 12 Cadillac Drive • Suite 210 • Brenhvood, Tennessee 37027 • Phone: 615-916-3100 • Fax: 615-916-3161 Murfreesboro Location: 1535 W. Northfield Blvd., Suite 14 Lincoln Square• Murfreesboro, Tennessee 37129 • Phone: 615-916-3100 •Fax: 615-907-3393

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT

OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (CONTINUED)

Puroose of this Reoort

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 opin·1on on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in Government Auditing Standards in considering the District's internal control and compliance. Accordingly, this commun·1cation is not suitable for any other purpose.

&G~,~ November 1, 2016

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( \

CONSOLIDATED UTILITY DISTRICT OF RUTHERFORD COUNTY, TENNESSEE SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

NINE MONTHS ENDED JUNE 30, 2016

Financial statement findinas

No prior year findings reported.

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