Granite Shoals, Texas Audit Presentation September 30, 2016 Presented By: Louis Breedlove, Audit Manager April 11, 2017 4.11.2017

OVERVIEW OF THE AUDIT PROCESS Audit Planning and Risk Assessment The audit was performed in accordance with Generally Accepted Auditing Standards (GAAS) and Generally Accepted Government Auditing Standards (GAGAS) The audit process was a risk-based approach in which we identified potential areas of risk that could lead to material misstatement of the financial statements. We tailored our audit programs and resources to specifically address the following areas of risk: Revenue recognition and related receivables Capital projects, purchasing and compliance with bidding procedures Payables, accrued liabilities, and expenditures

OVERVIEW OF THE AUDIT PROCESS Audit Planning and Risk Assessment Performing preliminary analytical procedures, covering all accounts and identify any significant new accounts or programs and any significant changes from the prior year. Obtaining an understanding of the City and internal controls and evaluating the design and implementation of internal controls for each significant audit area. Assessing various organizational, financial & fraud risks through discussion with management, results of our planning procedures. Designing our audit procedures with a focus on areas containing the greatest risk of material misstatement, error, and fraud.

OVERVIEW OF THE AUDIT PROCESS Audit Fieldwork & Completion and Reporting Typical audit procedures as part of our audit fieldwork include:   Agreeing the financial statement elements to the underlying accounting records including year-end account balances and transaction activity occurring throughout the year. Inspection of documents, recalculation of various amounts, inquiry of appropriate personnel as well as other means to verify account balances. Confirming cash held in bank and investment accounts, accounts receivable, inventory held by others, and material grants. Perform specific analytical procedures - considering historical trends and events within the City. Audit Completion and Reporting Procedures Include: Evaluate the sufficiency and appropriateness of audit evidence obtained. Perform an overall analytical review. Evaluate and conclude on the results of audit procedures. Assist in the preparation of the City’s Annual Financial Report. Issue the Auditor’s Opinion (report).

ANNUAL FINANCIAL REPORT COMPONENTS OF THE ANNUAL FINANCIAL REPORT Auditor’s Opinion Management’s Discussion and Analysis Basic Financial Statements Government-Wide Statements Fund Level Statements Notes to the Financial Statements Required Supplementary Information Budget to Actual – General Fund TMRS Pension Disclosures

-Unmodified -Modified -Disclaimed -Adverse INDEPENDENT AUDITOR’S REPORT REFERENCE CAFR – PAGE 1 Four possible outcomes -Unmodified -Modified -Disclaimed -Adverse The City received an unmodified opinion Highest level of assurance

FINANCIAL HIGHLIGHTS REFERENCE AFR – PAGE 7 Total assets exceeded total liabilities by $7,411,607. City's governmental funds reported combined ending fund balances of $1,194,194, an increase of $32,772. Unassigned fund balance in the general fund was $554,168 or 18% of annual general fund expenditures. The City’s net funded pension liability totaled $161,660 as of year end.

STATEMENT REVENUES, EXPENDITURES & CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS – YEAR ENDING 9/30/16 - REFERENCE AFR PAGE 24 *Unassigned fund balance for the general fund was $554,168 or 18% of total general fund expenditures.

City Revenues – Governmental Activities GOVERNMENTAL FUNDS – YEAR ENDING 9/30/16 - REFERENCE AFR PAGE 12 Total governmental revenues were $3,655,819. The largest sources of revenue were: Property taxes in the amount of $2,240,557. Charges for services totaling $559,906.

City Expenditures – Governmental Activities GOVERNMENTAL FUNDS – YEAR ENDING 9/30/15 - REFERENCE AFR PAGE 12 Total governmental expenses were $3,376,458. The largest expenses were: Public safety at $1,345,093 General government at $925,887 Streets and parks $696,127

SCHEDULE OF REVENUES, EXPENDITURES & CHANGES IN FUND BALANCE (Budget & Actual) GENERAL FUND – YEAR ENDING 9/30/16 - REFERENCE AFR PAGE 63

STATEMENT REVENUES, EXPENDITURES & CHANGES IN NET POSITION PROPRIETARY FUNDS – YEAR ENDING 9/30/16 - REFERENCE AFR PAGE 27

SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS YEAR ENDING 9/30/2016 - REFERENCE AFR PAGE 64 The actuary has reduced the estimated long-term earnings rate from 7% to 6.75% to account for inflation. The City’s current funded ratio is 87%, 80%-90% is considered above avg. by Standard and Poor’s.

CONCLUSION Other Reports and Questions Presented By: Louis Breedlove, Audit Manager April 11, 2017