Presentation to

Town of FairviewCouncil Meeting | April 3, 2018

Overview

• Introduction• Audit Process• Required Communications• Audit Results• Financial Highlights• New Accounting Pronouncements• Questions

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Introductions

The Firm of Texas

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Weaver is the largest independent accounting firm based in Texas and the Southwest. We’ve served Texas public sector entities for 66 years.

DallasFort Worth

Midland

HoustonAustin

San Antonio

Conroe

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Engagement Leadership

John DeBurro, CPAPartner, Assurance Services

Claire Wootton, CPAManager, Assurance Services

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Engagement Team

Town of Fairview

Claire Wootton, CPAAudit Manager

Kayce StillingsAudit Associate I

Elisa Gilbertson, CPAAdvisory Services -ACL Data Specialist

Consulting

John DeBurro, CPAEngagement Partner

Audit

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Audit Process

Engagement Timeline

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Initial Audit Planning

Interim FieldworkJul 17 – Jul 21

Final FieldworkJan 15 – Jan 26

Release Audit Opinion

March 16

Council Meeting April 3

Discuss Developments/

Issues

Continuous Communication

Audit Process• 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

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Audit Process

• Walkthrough of accounting controls over significant transaction cycles:

• Budget• Purchasing and Accounts Payable• Payroll• Cash Receipts – taxes, municipal court, utility billing

• Test of internal controls:• Cash disbursements• Payroll

• Test of compliance• Public Funds Investment Act• Bidding procedures

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Interim fieldwork and risk assessment were performed in July 2017. Procedures included:

Audit Process

• Testing of significant account balances using a combination of vouching of material transactions, sampling transactions and applying analytical procedures.

• Assisting with the preparation of the financial statements.

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Final fieldwork- performed in January 2018Procedures included:

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Auditor Communicationsfor the year ended September 30, 2017

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Required Communications to Those in Charge of Governance

Communication ResultsAuditor’s responsibility under generally accepted auditing standards (GAAS)

The financial statements are the responsibility of the Town. Our audit was designed in accordance with GAAS in the U.S. and provides for reasonable rather than absolute assurance that the financial statements are free of material misstatement. Our responsibility is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented , in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities.

The audit of the fiscal year 2017 financial statements has been completed and wehave issued an unmodified opinion.

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Required Communications to Those in Charge of Governance

Communication ResultsAuditor’s Responsibility under Government Auditing Standards

In addition to the GAAS responsibilities, we are required to issue a written report on our consideration of internal controls and identify significant deficiencies, including material weaknesses, if any. Our report does not provide assurance on internal controls. We design our audit to provide reasonable assurance of detecting material misstatements resulting from noncompliance with provisions of contracts or grant agreements that have a direct or material effect on the financial statements. We issued a written report on the results of these procedures; however, our report does not express an opinion on compliance.

No material weaknesses identified, no significant deficiencies identified.

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Required Communications to Those in Charge of GovernanceCommunication ResultsUnusual transactions and the adoption of new accounting principles

The significant accounting policies used by theTown are described in Note 1 to the financial statements.

New GASB pronouncements implemented in 2017 include GASB Statement No. 77. The effect of the implementation of GASB Statement No. 77 is an additional disclosure (Note 10).

Other pronouncements implemented in 2017 include GASB Statement No. 78, 80, and 82. The implementation had no significant effects on the financial statements.

We noted no transactions entered into by the Town during the year for which there is a lack of authoritative guidance or consensus.

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Required Communications to Those in Charge of Governance

Communication ResultsFraud and illegal acts No fraud, irregularities, or illegal acts were

noted.

Material weakness in internal control

No material weaknesses noted.

Other information contained in documents containing audited financial statements

We performed limited procedures on the Management’s Discussion and Analysis(MD&A) and Required Supplementary Information (RSI). We did not provide any assurance on this information.

Management judgments and accounting estimates

Management’s estimates of uncollectible receivables, net pension liability and useful lives of capital assets were evaluated and determined to be reasonable in relation to the financial statements as a whole.

Management representations We requested certain representations from management that were included in the management representation letter.

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Required Communications to Those in Charge of Governance

Communication ResultsDifficulties encountered No significant difficulties were encountered during

our audit.

Management consultations We are not aware of management consulting with other accountants for a second opinion.

Auditor independence No independence issues noted.

Disagreements with Management

No disagreements arose over the course of our audit.

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Required Communications to Those in Charge of Governance

Communication ResultsAudit adjustments Professional standards require us to accumulate all

known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management.

We had one audit adjustment to reclass the portion of cash received that was received in advance of completing the work on various road projects from Revenue to Unearned Revenue (Capital Projects Fund).

In addition, there were no uncorrected misstatements discovered as a result of our audit procedures.

Other material written communications between Weaver and Tidwell, L.L.P., and the Town

Nothing to note.

Auditor Results

Auditor Results

• We have issued the Independent Auditor’s Report on the financial statements

Unmodified opinion or “clean” opinion

• We have issued the Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

No material weaknesses noted No significant deficiencies noted

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Financial Highlights

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Financial Highlights

Comparison of Governmental Funds Expenditures by Fund(in millions of dollars)

57%30%

13%

0%

FY 2017General Fund

Debt Service Fund

Capital ProjectsFunds

NonmajorGovernmental Funds

Governmental Funds Expenditures for FY 2017 totaled $15 million, a $2.6 million or 21% increase• Principal retirement increased $2.5 million from FY16 due to the payoff of the 2012 CO’s. These

bonds were paid off with the proceeds from the Noah’s building sale.

57%15%

27%

1%FY 2016

General Fund

Debt Service Fund

Capital ProjectsFunds

NonmajorGovernmental Funds

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Financial HighlightsComparison of Governmental Funds Expenditures

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

Generalgovernment

Public safety Public works Inspections Municipalcourt

Parks andrecreation

Debt service Capital outlay

201720162015

(3-year comparison – current year and two prior years – in millions)

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Financial HighlightsComparison of Governmental Revenues by SourceGovernmental Revenues for FY 2017 totaled $10.4 million, a $0.2 million or 2% increase. Increase is primarily attributable to Property Tax increase (attributable to increase in property values as well as new TIF zone), along with decreases in Street Impact Fees and Miscellaneous Revenue.

54.9%

15.1%

6.3%

4.3%4.6%

3.9%0.2% 10.6%

FY 2017 Revenues

Property taxes

Sales taxes

Franchise taxes

Fines and forfeitures

Charges for service

Permits

Intergovernmental

Other

52.3%

16.0%

6.4%

4.2%5.2%

4.3% 0.2%

11.6%

FY 2016 Revenues

Property taxes

Sales taxes

Franchise taxes

Fines and forfeitures

Charges for service

Permits

Intergovernmental

Other

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Financial HighlightsComparison of Governmental Revenues by Source

(3-year comparison – current year and prior year – in millions)

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

201720162015

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Financial HighlightsFund BalancesGovernmental Funds’ Fund BalancesAs of September 30, 2017, the Town’s governmental funds reported a combined ending fund balance of $10.3 million as follows:

• General Fund $5,006,322• Debt Service 247,290• Capital Projects 4,805,146• Other Funds 278,495

$10,337,253

Overall, fund balance of the Governmental Funds decreased by $1.2 million. Fund balance in the Capital Projects Fund decreased by $1.3 million during fiscal

year 2017. This decrease was due to the capital outlay in FY17 for continuation of the Fairview Pkwy/Frisco Rd design, East Stacy Rd construction, and road construction and equipment purchased in FY17.

48.4%

2.4%

46.5%

2.8%

General Fund

Debt Service

Capital Projects

Other Funds

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Financial HighlightsBudgetary Highlights – General FundThe Town had a favorable budget variance of $614K (net change in fund balance):

• Actual revenues were $193K more than budgeted.• Charges for Services were $94K more than budgeted.• Miscellaneous Revenue was $117K more than budgeted.

• Actual expenditures were $429K less than budgeted.

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Financial HighlightsComparison of Proprietary Funds Operating Revenues and Expenses – FY 2017 and the two prior years (in millions)

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Operating Revenues Operating Expenses

201720162015

Proprietary funds’ net position increased by $376K during fiscal year 2017. Operating revenues increased $562K primarily due to increased water

rates and # of customers in FY17. Operating expenses increased $235K due to higher water purchase costs.

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Standards Required to be Implemented in FY2018Effective for the year ended September 30, 2018• Statement No. 85, “Omnibus 2017” - This statement addresses a variety of topics

including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits). The requirements of this Statement will enhance consistency in the application of accounting and financial reporting requirements.

• Statement No. 86, “Certain Debt Extinguishment Issues” - The objective of this Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources – resources other than the proceeds of refunding debt – are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance.

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We appreciate the opportunity to work with

Town of Fairviewand look forward to our continued relationship.

Questions?

John DeBurro, CPA | Engagement Partner972.448.6970| john.deburro@weaver.com

Claire Wootton, CPA | Manager972.448.6934 | claire.wootton@weaver.com