Financial Audit Presentation Year Ended June 30, 2015 Greene, Finney & Horton, CPAs Town of Kiawah Island Financial Audit Presentation Year Ended June 30, 2015

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs OPINION The Town’s responsibility: Effective internal controls Financial statements Prepare and manage the budget GF&H’s responsibility: Opinion – reasonable assurance that financial statements are materially correct Opinion does not address the financial condition of the Town The Town received an unmodified opinion

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs General Fund Total fund balance of $9.3M decreased $1.1M Non-spendable fund balance of $1k for prepaid items Restricted fund balance of $778k for tourism related capital improvements Unassigned fund balance of $8.5M

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs General Fund Unassigned fund balance is $8.5M, which is 97.0% of 2016 budgeted expenditures GFOA recommends a minimum of 16.7% (two months), but it should be higher for a coastal community

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs Major Reasons To Maintain An Adequate Fund Balance: Cash flow through second half of calendar year; business licenses are cyclical Significant emergencies and unanticipated expenditures Flexibility for discretionary funding needs Potential for better interest rates on debt issues (can save the Town money). To cover potential shortfalls from the state (a) due to budget cuts or (b) as a result of the change in legislation Unique requirements for a beach coastal municipality.

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs General Fund Revenues: $5.0 million for 2015: $2.0m in business licenses $1.1m in building permits $663k in franchise fee revenue $431k in local options sales tax $273k in environmental service fees $535k in all other revenues $638k (14.6%) increase from 2014 $246k increase in building permits due to increased permits issued $127k increase in business licenses due to increased growth in the island’s economy $128k increase in miscellaneous revenues due to a reimbursement from Charleston County related to the bike path and a refund from Berkeley Electric related to street lights GENERAL FUND REVENUES

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs General Fund Revenues: $636k or 14.5% higher than budget Business licenses were higher than budget by $298k Building permits were higher than budget by $165k Miscellaneous revenues were higher than budget by $102k GENERAL FUND REVENUES

GENERAL FUND EXPENDITURES 2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs General Fund Expenditures: GENERAL FUND EXPENDITURES $6.7M for 2015: $3.1m in general government $1k in judicial $192k in public safety $921k in environmental services $297k in tourism and recreation $2.2m in capital outlay $491k (6.9%) less than budget General government $318k over budget primarily due to salaries exceeding budget by $90k, professional consultant expenditures for building permits exceeding budget by $126k and repairs and maintenance related to software exceeding budget by $72k Environmental services $117k over budget due to an additional month of solid waste expenditures in 2015 Capital outlay $904k under budget

GENERAL FUND EXPENDITURES 2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs General Fund Expenditures: GENERAL FUND EXPENDITURES $3.1M (85.9%) increase from 2014: $566k increase in general government due to the increase related to the building permits contract restructuring, purchase of new software, and an increase in salaries $69k increase in public safety $158k increase in environmental services due to 13 months of expenditures in 2015 and only 11 months in 2014 $297k increase in tourism and recreation due to the arts council expenditure being reported in the General Fund in 2015 $2.0m increase in capital outlay due to the purchase of land for the new Town Hall

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs Totals for All Funds Includes General, State, County and Local Accommodations, Beverage Permits, Hospitality Tax and Victims’ Assistance Funds Revenues-$8.3 million Expenditures-$9.2 million The higher expenditures are primarily due to the purchase of the land for the new Town Hall in 2015

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs Change In Accounting: Implemented Statement No. 68 Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27 and GASB Statement No. 71 Pension Transition for Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68 in 2015: The Town participates in the State’s cost sharing multiple-employer plans – the South Carolina Retirement System (“SCRS”) and Police Officers Retirement System (“PORS”). The Town was required to record its pro-rata portion of the net pension liability and deferred outflows/inflows of resources associated with the SCRS and PORS in its Statement of Net Position which has significantly decreased its beginning net position by approximately $2.1M on the government wide statements. Net pension liability of $2.1M at June 30, 2015.

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs Other Items of Note: Total capital assets were $9.1M – an increase of $1.7M from 2014 due to the following: $2.1M in additions mainly due to $2.1M in land purchased for the new Town Hall $393k in depreciation expense No accrual was made related to litigation as the amount of any gain is not estimable at the time of issuance of the report.

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs Compliance Material Weakness related to Inadequate Financial Procedures and Processes: Segregation of Duties Bank Reconciliations Non-Payroll Cash Disbursements Payroll Cash Receipts Wire Transfers Financial Projections and Financial Reporting to Town Council Credit Cards Journal Entries

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs Compliance, continued No Single Audit was required for fiscal year 2015 as the federal expenditures were less than $500k Management Letter Required communications to management and those charged with governance: Accounting Policies and Procedures Manual Fraud Risk Management Program

2015 FINANCIAL AUDIT TOWN OF KIAWAH ISLAND ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Greene, Finney & Horton, CPAs Summary Unmodified opinion on the Financial Statements from GF&H Good financial condition as of June 30, 2015 Continue to work on improving internal controls, processes, and policies