CITY OF POTEAU, OKLAHOMA...Poteau, which include the City’s water, wastewater, and sanitation utility operations, include the Poteau Public Works Authority. The government-wide financial

CITY OF POTEAU, OKLAHOMA

AUDITED FINANCIAL STATEMENTS

JUNE 30, 2016

CITY OF POTEAU, OKLAHOMAJUNE 30, 2016

CONTENTS

PageIndependent Auditor's Report………………………………………………………………………………1-3

Management's Discussion and Analysis…………………………………………………………………4-11

Basic Financial Statements Statement of Net Position…………………………………………………………………………………12Statement of Activities……………………………………………………………………………………13Balance Sheet - Governmental Funds………………………………………………………………… 14Reconciliation of the Governmental Funds Balance Sheet

to the Statement of Net Position…………………………………………………………………… 15Statement of Revenues, Expenditures, and Changes in

Fund Balances - Governmental Funds………………………………………………………………16Reconciliation of the Governmental Funds Statement of

Revenues, Expenditures, and Changes in Fund Balancesto the Statement of Activities…………………………………………………………………………17

Statement of Net Position - Proprietary Funds…………………………………………………………18Statement of Revenues, Expenses, and Changes in

in Net Position - Proprietary Funds………………………………………………………………… 19Statement of Cash Flows - Proprietary Funds…………………………………………………………20Notes to the Financial Statements………………………………………………………………………21-58

Required Supplementary InformationBudgetary Comparison Schedules

General Fund………………………………………………………………………………………… 59Poteau Industrial Authority………………………………………………………………………… 60

Pension Plan Required SchedulesOklahoma Municipal Retirement Fund

Schedule of Changes in Net Pension Liability and Related Ratios………………………… 61Schedule of Employer Contributions……………………………………………………………62

Oklahoma Firefighters Pension and Retirement FundSchedule of the Proportionate Share of the Net Pension Liability……………………………63Schedule of Employer Contributions……………………………………………………………64

Oklahoma Police Pension and Retirement FundSchedule of the Proportionate Share of the Net Pension Liability……………………………65Schedule of Employer Contributions……………………………………………………………66

Other Post Employment BenefitsSchedule of Funding Progress………………………………………………………………………67

CITY OF POTEAU, OKLAHOMAJUNE 30, 2016

CONTENTS (continued)

PageAdditional Supplementary Information

Combining Financial StatementsGeneral Fund

Balance Sheet………………………………………………………………………………………68Statement of Revenues, Expenditures and Changes in Fund Balance………………………69

Nonmajor Governmental FundsBalance Sheet………………………………………………………………………………………70-71Statement of Revenues, Expenditures and Changes in Fund Balance………………………72-73

Enterprise Fund - Poteau Public Works AuthorityStatement of Net Position………………………………………………………………………..74Statement of Revenues, Expenses and Changes in Net Position………………………. 75Statement of Cash Flows…………………………………………………………………………76

Additional Required ReportIndependent Auditor's Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit of FinancialStatements Performed In Accordance with Government Auditing Standards …………………77-78

Schedule of Findings and Responses……………………………………………………………………79-80Schedule of Prior Year Findings and Responses……………………………………………………..81

4200 Jenny Lind Rd., Ste. B Fort Smith, Arkansas 72901

Ph: 479.649.0888 email: [email protected] www.selectcpa.com

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Independent Auditor’s Report To the City Council City of Poteau, Oklahoma Report on Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the remaining fund information of the City of Poteau, Oklahoma, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Poteau, Oklahoma, as of June 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 11 and the required supplemental information as listed in the table of contents on pages 60 through 67 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 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 audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise City of Poteau, Oklahoma’s basic financial statements. The schedules of combining and individual fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. These schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information 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 basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules of combining and individual fund financial statements are fairly stated in all material respects in relation to the basic financial statements taken as a whole.

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Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated April 14, 2017, on our consideration of City of Poteau, Oklahoma’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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City of Poteau, Oklahoma’s internal control over financial reporting and compliance.

Przybysz & Associates, CPAs, P.C. Fort Smith, Arkansas April 14, 2017

MANAGEMENT'S DISCUSSION AND ANALYSIS

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The following discussion and analysis of the City of Poteau’s (the City) financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2016. Please read it in conjunction with the City’s financial statements, which begin on page 12. Financial Highlights

The combined assets and deferred outflows of the City of Poteau exceeded its combined liabilities and deferred inflows at the close of the most recent fiscal year by $28,339,737 (net position). Of this amount, $7,145,006 (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors.

The government’s total net position increased by $427,461 for the year ended June 30, 2016. As of the close of the current fiscal year the City of Poteau’s governmental funds reported combined

ending fund balances of $6,264,476, an increase of $706,408 in comparison with the prior year. $4,830,961 of the ending fund balance is available for spending at the government’s discretion (unassigned fund balance).

At the end of the current fiscal year, unassigned fund balance for the general fund was $5,793,084 or

82% of total general fund expenditures and transfers out. The City of Poteau’s total liabilities increased by $117,408 to a total of $9,079,680 during the

current fiscal year. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Poteau’s basic financial statements. The City of Poteau’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad view of the City of Poteau’s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City of Poteau’s assets, deferred outflows and inflows, and liabilities with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Poteau is improving or deteriorating. The statement of activities presents information showing how the government’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the City of Poteau that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Poteau include general government, public safety, public works, culture and recreation, and economic development. The business-type activities of the City of Poteau, which include the City’s water, wastewater, and sanitation utility operations, include the Poteau Public Works Authority. The government-wide financial statements include not only the City of Poteau itself (known as the primary

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government), but also the legally separate authority (Poteau Public Works Authority). Financial information for this component unit is blended with the primary government itself. The Poteau Public Works Authority, although also legally separate, functions for all practical purposes as a department of the City of Poteau, and, therefore, has been included as an integral part of the primary government. The government-wide financial statements can be found on pages 12-13 of this report.

Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Poteau, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City of Poteau can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented forgovernmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains eleven (11) individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and the Poteau Industrial Authority, both of which are considered to be major funds. Data from the other nine governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The City adopts an annual appropriated budget for its general and other governmental funds. Budgetary comparison statements have been provided for the general fund and major special revenue fund the Poteau Industrial Authority, to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 14-17 of this report. Proprietary funds. The City maintains two proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses its enterprise fund to account for its utility operations. Internal service funds are used to report an activity that provides goods or services to other funds or departments on a cost-reimbursement basis. The City uses itsinternal service fund to account for its self funded health care plan. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Poteau Public Works Authority, which is considered to be a major fund of the City and the Poteau Insurance fund. The basic proprietary fund financial statements can be found on pages 18-20 of this report. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.

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The City does not report any fiduciary funds. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 21-58 of this report. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s actual revenues and expenditures on a budgetary basis compared with the original and final budgets for the general and major special revenue funds, required supplemental information on cost-sharing pension plans and a schedule of funding progress for other post-employment benefits. Required supplementary information can be found on pages 59-67 of this report. The combining statements referred to earlier, in connection with the general, nonmajor governmental funds and enterprise funds, are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 68-76 of this report. Government-Wide Financial Analysis As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, combined assets and deferred outflows exceeded combined liabilities and deferred inflows by $28,339,337 at the close of the most recent fiscal year. One portion of the City’s net position ($20,976,160 or 74 %) reflects its investment in capital assets (e.g., land, buildings, improvements, vehicles, and equipment) less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

City of Poteau Statement of Net Position June 30, 2016 and 2015

Governmental Business-Type Activities Activities Totals 2016 2015** 2016 2015** 2016 2015**

Current assets $ 7,495,988 $ 6,429,683 $ 3,097,751 $ 2,839,750 $ 10,593,739 $ 9,269,433 Noncurrent assets 24,642,826 25,677,137 2,014,192 2,248,637 26,657,018 27,925,774 Total assets 32,138,814 32,106,820 5,111,943 5,088,387 37,250,757 37,195,207 Deferred outflows 730,830 268,537 148,055 64,827 878,885 333,364 Current liabilities 872,130 6,113,760 730,727 595,559 1,602,857 6,709,319 Noncurrent liabilities 6,907,657 1,634,417 569,166 618,536 7,476,823 2,252,953 Total liabilities 7,779,787 7,748,177 1,299,893 1,214,095 9,079,680 8,962,272 Deferred inflows 614,151 740,129 95,774 137,254 710,225 877,383 Net position: Investment in capital assets 19,332,377 19,681,116 1,643,783 1,733,426 20,976,160 21,414,542 Restricted 218,571 157,635 - - 218,571 157,635 Unrestricted 4,924,458 4,048,300 2,220,548 2,068,439 7,145,006 6,116,739 Total net position $ 24,475,406 $ 23,887,051 $ 3,864,331 $ 3,801,865 $ 28,339,337 $ 27,688,916

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** - Prior year amounts not restated for MD&A purposes. An additional portion of the City’s net position ($218,571 or 1%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position ($7,145,006) may be used to meet the government’s ongoing obligations to citizens and creditors. The government’s net position increased by $427,461 during the current fiscal year.

City of Poteau

Statement of Activities Years Ended June 30, 2016 and 2015

Governmental Activities Business-Type Activities Totals 2016 2015** 2016 2015** 2016 2015**

Program revenues: Charges for services $ 638,431 $ 637,956 $ 2,544,538 $ 2,405,025 $ 3,182,969 $ 3,042,981 Grants/contributions 173,533 826,343 - - 173,533 826,343 General revenues 8,216,237 6,203,036 14,763 37,822 8,231,000 6,240,858

Total revenues 9,028,201 7,667,335 2,559,301 2,442,847 11,587,502 10,110,182

City of Poteau Statement of Activities

Years Ended June 30, 2016 and 2015 Governmental Activities Business-Type Activities Totals 2016 2015** 2016 2015** 2016 2015** Expenses: General government/administration 624,369 1,139,810 390,368 307,863 1,014,737 1,447,673 Public safety 2,920,661 2,368,642 - - 2,920,661 2,368,642 Public works 2,440,496 2,003,999 - - 2,440,496 2,003,999 Culture and recreation 1,869,951 1,784,952 - - 1,869,951 1,784,952 Economic development 263,093 255,084 - - 263,093 255,084 Interest expense on long-term debt 165,847 136,389 - - 165,847 136,389 Water - - 1,067,395 1,151,745 1,067,395 1,151,745 Wastewater - - 977,352 892,579 977,352 892,579 Sanitation - - 440,509 437,484 440,509 437,484 Total expenses 8,284,417 7,688,876 2,875,624 2,789,671 11,160,041 10,478,547 Increase in net position before transfers 743,784 (21,541) (316,323) (346,824) 427,461 (368,365) Transfers, net (378,789) (261,086) 378,789 261,086 - - Increase (decrease) in net position 364,995 (282,627) 62,466 (85,738) 427,461 (368,365) Net position, beginning, restated 24,110,411 24,169,678 3,801,865 3,887,603 27,912,276 28,057,281

Net position, ending $ 24,475,406 $ 23,887,051 $ 3,864,331 $ 3,801,865 $ 28,339,737 $ 27,688,916 ** - Prior year amounts not restated for MD&A purposes.

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Governmental activities. Governmental activities increased the City’s net position by $364,995. The key elements of this increase were:

A decrease in overall expenses for general government and administration.

City of Poteau

Governmental Activities Years Ended June 30, 2016 and 2015

Program Revenues Cost of Services 2016 2015** 2016 2015**

General government $ - $ 4,140 $ 624,369 $ 1,139,810 Public safety 259,695 360,659 2,920,661 2,368,642 Public works 317,463 724,463 2,440,496 2,003,999 Culture and recreation 213,206 375,037 1,869,951 1,784,952Economic development 21,600 - 263,093 255,084 Interest on long-term debt - - 165,847 136,389 Total governmental activities $ 811,964 $ 1,464,299 $ 8,284,417 $ 7,688,876

** - Prior year amounts not restated for MD&A purposes. Business-type activities. Business-type activities increased the City’s net position by $62,466. The key elements of this increase were:

Business-type activities experienced a rate increase for services. This increase was enforced to cover overall expenses that continue to rise to maintain

personnel and benefits.

City of Poteau Business-Type Activities

Years Ended June 30, 2016 and 2015 Program Revenues Cost of Services 2016 2015 2016 2015

Water $ 1,094,910 $ 1,025,123 $ 1,067,395 $ 1,151,745 Wastewater 876,811 830,527 977,352 892,579 Sanitation 477,629 451,423 440,509 437,484 Administration 95,188 97,952 390,368 307,863 Total business-type activities $ 2,544,538 $ 2,405,025 $ 2,875,624 $ 2,789,671

Financial Analysis of the Government’s Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

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As of the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $6,264,476, an increase of $706,408 in comparison with the prior year. The key element to this increase was:

In an effort to be prepared for future needs, the City did not spend all revenues and increased general fund balances by saving funds for future expenses.

The general fund is the chief operating fund of the City. As of the end of the current fiscal year, unassigned fund balance of the general fund was $5,793,084. The fund balance of the City’s general fund decreased $296,346 during the current fiscal year. The key factors in this decrease were:

Overall revenues for the general fund were down due to economic factors affecting sales tax revenues.

Increasing costs of doing business.

Enterprise funds. The City’s enterprise funds provide the same type of information found in the government-wide financial statements, but in more detail. Unrestricted net position of the Poteau Public Works Authority as of the end of the year amounted to $2,305,423. The total increase in net position was $62,145. Operating revenues increased $139,513 over the previous year due to:

A rate increase was implemented July 1, 2015 to help offset the rising costs associated with Poteau Public Works Authority.

This rate increase also caused other charges for services/penalties to increase as well. Operating expenses decreased by $71,095, as a result of:

Fewer capital projects were completed in 2016 compared to 2015. Due to weather conditions, a decline in demand for water also decreased the expenses of

purchasing water since not as many gallons were needed in the year. Budgetary Highlights of General and Major Special Revenue Funds The budget was adjusted during the year to reflect unforeseen circumstances throughout the year. Capital Asset and Debt Administration Capital assets. The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2016, amounts to $26,657,018 (net of accumulated depreciation). This investment in capital assets includes land, construction in progress, buildings and improvements, machinery and equipment, and vehicles. Major capital asset events during the current fiscal year included the following:

Numerous tasers were purchased for the police department A pumper truck was purchased and outfitted for the Fire Department.

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A major upgrade project was completed on the sidewalks on Dewey Street. New Building at PARC. New Playground Equipment was purchased for Bill J. Barber Park. Electric Door was installed at the Patrick Lynch Library. Purchased a Side by Side for the Cemetery Purchased several mowers for PARC, PARK, Cemetery, Airport and Sewer Plant. Upgraded the Pirate Storage Tank for Water Department. Upgraded a pump at the Sewer Plant. Constructed a new road in the Industrial

City of Poteau Capital Assets

June 30, 2016 and 2015 (net of depreciation)

Governmental Activities Business-Type Activities Totals 2016 2015 2016 2015 2016 2015

Land $ 4,220,680 $ 4,220,680 $ 23,500 $ 23,500 $ 4,244,180 $ 4,244,180 Construction in progress 28,000 - - - 28,000 - Buildings 12,563,125 13,305,175 - - 12,563,125 13,305,175Machinery and equipment 934,617 1,104,383 126,828 151,626 1,061,445 1,256,009 Vehicles 1,213,768 1,010,636 17,025 24,998 1,230,793 1,035,634 Other improvements 5,656,385 5,905,137 - - 5,656,385 5,905,137 Infrastructure 26,251 26,251 - - 26,251 26,251 Utility systems - - 1,846,839 2,048,513 1,846,839 2,048,513

Capital assets, net $ 24,642,826 $ 25,572,262 $ 2,014,192 $ 2,248,637 $ 26,657,018 $ 27,820,899 Additional information of the City’s capital assets can be found in Note 7 on pages 31 through 33 of this report. Noncurrent liabilities. As of the end of the current fiscal year, the City had total long-term liabilities of $7,476,823. This represents debt secured solely by capital leases of $178,757; notes payable of $5,266,519; accrued compensated absences of $159,041; other post-employment benefits liability of $481,304, and net pension liability of $1,391,202. The City’s total debt decreased $ 666,685 during the current fiscal year. Key factors in this decrease were due to:

Note payables decreased due to continued efforts to pay down these balances.

City of Poteau Outstanding Debt

June 30, 2016 and 2015 Governmental Activities Business-Type Activities Totals 2016 2015** 2016 2015** 2016 2015**

Capital lease obligations $ 178,757 $ 347,925 $ - $ - $ 178,757 $ 347,925 Notes payable 5,042,827 5,543,221 223,692 515,211 5,266,519 6,058,432 Compensated absences 113,422 109,272 45,619 47,170 159,041 156,442 Other post-employment benefits 378,843 301,370 102,461 85,196 481,304 386,566 Net pension liability 1,193,808 960,721 197,394 115,760 1,391,202 1,076,481

Total outstanding debt $ 6,907,657 $ 7,262,509 $ 569,166 $ 763,337 $ 7,476,823 $ 6,956,855

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** - Prior year amounts not restated for MD&A purposes. Additional information on the City’s long-term liabilities can be found in Notes 8 through 11 on pages 33 through 54 of this report. Economic Factors and Next Year’s Budgets and Rates The City’s elected and appointed officials considered many factors when setting the fiscal-year 2016 and 2017 budgets, tax rates, and fees that will be charged for the proprietary fund type activities. One of these factors is the economy. The downturn of the national economy has affected the local economy. Unemployment is up and sales tax revenues have been flat for the last several years. These indicators were taken into account when adopting the City’s budget for 2017. Revenues have remained static or dropped in the recent years, so the City decided not to increase the budgeted revenue figures by much for 2017. The economic downturn has closed some key factories/businesses in recent years. The unemployment rate was taken into account when projecting future revenues for the City.

Requests for Information This financial report is designed to provide our citizens, taxpayers, customers, and investors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City of Poteau’s city treasurer, City of Poteau, 111 Peters Street, Poteau, Oklahoma 74953.

BASIC FINANCIAL STATEMENTS


STATEMENT OF NET POSITION

AS OF JUNE 30, 2016

Governmental Business-TypeActivities Activities Total

AssetsCurrent AssetsCash and cash equivalents $ 544,371 $ 982,379 $ 1,526,750 Certificates of deposit 4,418,654 1,545,362 5,964,016 Receivables, net allowance for doubtful accounts 2,097,470 290,075 2,387,545 Due from other funds 366,673 - 366,673 Inventories 14,385 - 14,385 Other assets 54,435 - 54,435 Restricted assets - cash and certificates of deposit - 279,935 279,935 Total Current Assets 7,495,988 3,097,751 10,593,739

Non-current AssetsCapital assets

Land 4,220,680 23,500 4,244,180 Buildings 19,082,670 45,750 19,128,420 Infrastructure 5,755,751 - 5,755,751 Utility system improvements - 17,752,877 17,752,877 Other Improvements 15,695,502 - 15,695,502 Machinery and equipment 3,683,023 696,797 4,379,820 Vehicles 3,854,436 572,032 4,426,468 Construction in process 28,000 - 28,000 Accumulated depreciation (27,677,236) (17,076,764) (44,754,000)

Capital Assets-Net 24,642,826 2,014,192 26,657,018 Total Assets 32,138,814 5,111,943 37,250,757

Deferred OutflowsDeferred amounts related to pensions 730,830 148,055 878,885 Total Deferred Outflows 730,830 148,055 878,885

LiabilitiesCurrent LiabilitiesAccounts payable and accrued liabilities 327,817 262,175 589,992 Payroll and payroll withholdings 69,228 22,405 91,633 Due to other funds 347,507 19,166 366,673 Interest payable 38,713 1,362 40,075 Current maturity of long-term debt - 146,717 146,717 Current portion of capital lease obligations 88,865 - 88,865 Payable from restricted assets

Customer meter deposits - 278,902 278,902 Total Current Liabilities 872,130 730,727 1,602,857

Non-current liabilitiesLong-term debt 5,042,827 223,692 5,266,519 Capital lease obligations 178,757 - 178,757 Compensated absences 113,422 45,619 159,041 Other post employment benefits 378,843 102,461 481,304 Pension liability 1,193,808 197,394 1,391,202 Total Non-current Liabilities 6,907,657 569,166 7,476,823 Total Liabilities 7,779,787 1,299,893 9,079,680

Deferred InflowsDeferred amounts related to pensions 614,451 95,774 710,225 Total Deferred Inflows 614,451 95,774 710,225

Net PositionNet investment in capital assets 19,332,377 1,643,783 20,976,160 Restricted:

Expendable 149,751 - 149,751 Nonexpendable 68,820 - 68,820

Unrestricted 4,924,458 2,220,548 7,145,006 Total Net Position $ 24,475,406 $ 3,864,331 $ 28,339,737

See accompanying notes and independent auditor's report.

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STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2016

Business-Charges for Grants & Governmental Type

Functions/Programs Expenses Services Contributions Activities Activities TotalGovernmental ActivitiesGeneral government $ 624,369 $ - $ - $ (624,369) $ - $ (624,369) Public safety 2,920,661 249,772 9,923 (2,660,966) - (2,660,966) Public works 2,440,496 153,853 163,610 (2,123,033) - (2,123,033) Culture and recreation 1,869,951 213,206 - (1,656,745) - (1,656,745) Economic development 263,093 21,600 - (241,493) - (241,493) Interest on long-term debt 165,847 - - (165,847) - (165,847)

Total Governmental Activities 8,284,417 638,431 173,533 (7,472,453) - (7,472,453)

Business-Type ActivitiesAdministration 390,368 95,188 - - (295,180) (295,180) Water 1,067,395 1,094,910 - - 27,515 27,515 Wastewater 977,352 876,811 - - (100,541) (100,541) Sanitation 440,509 477,629 - - 37,120 37,120 Total Business-Type Activities 2,875,624 2,544,538 - - (331,086) (331,086) Total $ 11,160,041 $ 3,182,969 $ 173,533

General Revenues:Sales and use tax 5,475,939 - 5,475,939 Franchise taxes and fees 357,223 - 357,223 Other taxes 454,552 - 454,552 Investment earnings 19,408 9,067 28,475 Settlement proceeds 1,668,647 - 1,668,647 Miscellaneous 240,468 5,696 246,164

Transfers (378,789) 378,789 - Total General Revenues and Transfers 7,837,448 393,552 8,231,000 Change in Net Position 364,995 62,466 427,461

Net Position, Beginning of Year, as previously stated 23,887,051 3,801,865 27,688,916 Prior period adjustment 223,360 - 223,360 Net Position, Beginning of Year, restated 24,110,411 3,801,865 27,912,276 Net Position, End of Year $ 24,475,406 $ 3,864,331 $ 28,339,737

13

And Change In Net Position


Net (Expense) RevenueProgram Revenues


BALANCE SHEET - GOVERNMENTAL FUNDS

AS OF JUNE 30, 2016

Poteau Other TotalIndustrial Governmental Governmental

General Authority Funds FundsAssetsCash and cash equivalents $ 1,115,577 $ 277,446 $ (901,179) $ 491,844 Certificates of deposit 4,188,366 - 108,255 4,296,621 Receivables, net allowance for doubtful accounts 1,152,592 940,716 4,040 2,097,348 Due from other funds 1,500 - - 1,500 Inventories - - 14,385 14,385 Other assets 54,435 - - 54,435 Total Assets $ 6,512,470 $ 1,218,162 $ (774,499) $ 6,956,133

Liabilities & Fund BalancesLiabilitiesAccounts payable $ 250,542 $ 3,218 $ 21,162 $ 274,922 Payroll and payroll withholdings 68,402 - 826 69,228 Due to other funds 346,007 - 1,500 347,507 Total Liabilities 664,951 3,218 23,488 691,657

Fund BalancesNon-spendable 54,435 - 14,385 68,820 Restricted - - 149,751 149,751 Assigned - 1,214,944 - 1,214,944 Unassigned 5,793,084 - (962,123) 4,830,961 Total Fund Balances 5,847,519 1,214,944 (797,987) 6,264,476 Total Liabilities and Fund Balances $ 6,512,470 $ 1,218,162 $ (774,499) $ 6,956,133

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

AS OF JUNE 30, 2016

Total Fund Balances - Governmental Funds $ 6,264,476

Amounts reported for governmental activities in the Statement of NetPosition are different because of the following:

Capital assets used in governmental activities are not financialresources and therefore are not reported as assets in governmentalfunds. The cost of assets is $51,987,806 and the accumulated depreciation is $27,555,409. 24,642,826

Deferred outflows of resources related to pensions are applicable to futurereporting periods and, therefore, are not reported in the funds. 730,830

Internal service funds are used by management to charge the costs ofhealth insurance to individual funds. The assets and liabilities ofinternal service funds are included in the statement of net position. 486,960

Long-term liabilities, including bonds payable, are not due and payablein the current period, and therefore are not reported as liabilities inthe funds. Long-term liabilities at year end consist of:

Notes payable $ (5,042,827)Capital lease obligations (267,622)Accrued interest payable (38,713)Compensated absences (113,422)Accrued OPEB liability (378,843)Net pension liability (1,193,808) (7,035,235)

Deferred inflows of resources related to pensions are applicable to futurereporting periods and, therefore, are not reported in the funds. (614,451)

Total Net Position - Governmental Activities $ 24,475,406


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


Poteau Other TotalIndustrial Governmental Governmental

General Authority Funds FundsRevenuesTaxes $ 5,814,128 $ - $ - $ 5,814,128 Licenses and permits 20,057 - - 20,057 Intergovernmental 473,586 - - 473,586 Fines and forfeitures 243,520 - 6,252 249,772 Charges for services 213,206 21,600 133,796 368,602 Grant income 9,923 79,044 84,566 173,533 Other 240,468 - - 240,468 Interest 17,554 505 473 18,532 Total Revenues 7,032,442 101,149 225,087 7,358,678

ExpendituresGeneral government 647,900 - - 647,900 Public safety 2,788,710 - 3,925 2,792,635 Public works 1,573,627 - 311,072 1,884,699 Culture and recreation 978,504 - 11 978,515 Economic development 27,844 207,106 - 234,950 Capital outlay 451,634 193,906 35,901 681,441 Debt service:

Principal 80,303 500,394 - 580,697 Interest 87,463 53,828 - 141,291

Total Expenditures 6,635,985 955,234 350,909 7,942,128 Excess of Revenues Over (Under) Expenditures 396,457 (854,085) (125,822) (583,450)

Other Financing Sources (Uses)Operating transfers (692,803) 313,680 334 (378,789) Settlement proceeds 1,668,647 1,668,647 Total Other Financing Sources (Uses) (692,803) 1,982,327 334 1,289,858 Net Change in Fund Balance (296,346) 1,128,242 (125,488) 706,408

Fund Balance, Beginning of Year as previously stated 6,087,311 86,702 (672,499) 5,501,514 Prior period adjustment 56,554 - - 56,554 Fund Balance, Beginning of Year as restated 6,143,865 86,702 (672,499) 5,558,068

Fund Balance, End of Year $ 5,847,519 $ 1,214,944 $ (797,987) $ 6,264,476


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


Total Net Change in Fund Balances - Governmental Funds $ 706,408

Amounts reported for governmental activities in the Statement ofActivities are different because of the following:

Capital outlays are reported in governmental funds as expenditures. However,in the Statement of Activities, the cost of those assets is allocated over theirestimated useful lives as depreciation expense. This is the amount by whichdepreciation expense of $1,821,306 exceeds capital outlays of $681,441 forthe period. (1,206,317)

Repayment of debt principal is an expenditure in the governmental funds, butthe repayment reduces long-term liabilities in the Statement of Net Position.This is the amount by which long-term liabilities were reduced for payments on:

Notes payable 500,394Capital lease obligations 80,303

In the statement of activities, total interest expense is adjusted for the changebetween current year and prior year accrued interest which is shown on the statement of net assets. The current year adjustment is an increase tointerest expense. (24,556)

Because more compensated absences were accrued during the year than werepaid, a net increase in other long-term liabilities occurred. This is the amountby which compensated absences earned were greater than compensated absences paid. (4,151)

Some expenses reported in the statement of activities and changes of netposition do not require the use of current financial resources, and, therefore,are not reported as expenditures in the governmental funds:

Change in estimated liability for OPEB obligation (77,473)

Governmental funds report agency pension contributions as expenditures. Someitems reported in the Statement of Activities represent a change in net positionthat applies to future periods and includes the difference between expectedand actual experience, changes in assumptions, expected earnings on planinvestment, and employer contributions that are not recognized as an outflowor inflow until a future period and, therefore, are not reported as expendituresin governmental funds.These activities consist of:

City pension contributions $ 517,967Cost of benefits earned net of employee contributions (267,956) 250,011

Internal service funds are used by management to charge the costs of healthinsurance to individual funds. The net income of the internal service fund isreported with governmental activities. 140,376

Change in Net Position of Governmental Activities $ 364,995


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STATEMENT OF NET POSITION - PROPRIETARY FUNDS

AS OF JUNE 30, 2016

Enterprise Fund Internal Service FundPoteau Public Poteau Insurance

Works Authority FundAssetsCurrent AssetsCash and cash equivalents $ 964,793 $ 70,113 Certificates of deposit 1,545,362 122,033 Receivables, net of allowance for doubtful accounts 290,075 122 Due from other funds 83,295 365,173 Restricted assets - cash and certificates of deposit 279,935 - Total Current Assets 3,163,460 557,441


Land 23,500 - Buildings 45,750 - Utility system improvements 17,752,877 - Machinery and equipment 696,797 - Vehicles 572,032 - Accumulated depreciation (17,076,764) -

Capital Assets-Net 2,014,192 - Total Assets 5,177,652 557,441

Deferred OutflowsDeferred amounts related to pensions 148,055 - Total Deferred Outflows 148,055 -

LiabilitiesCurrent LiabilitiesTrade accounts payable 262,175 - Payroll and payroll withholdings 22,405 - Claims and judgements - 52,895 Due to other funds - 102,461 Interest payable 1,362 - Current maturity of long-term debt 146,717 - Payable from restricted assets -

Customer meter deposits 278,902 - Total Current Liabilities 711,561 155,356

Non-current LiabilitiesLong-term debt 223,692 - Compensated absences 45,619 - Other post employment benefits 102,461 378,843 Pension liability 197,394 - Total Non-current Liabilities 569,166 378,843 Total Liabilities 1,280,727 534,199

Deferred InflowsDeferred amounts related to pensions 95,774 - Total Deferred Inflows 95,774 -

Net PositionNet investment in capital assets 1,643,783 - Unrestricted 2,305,423 23,242 Total Net Position $ 3,949,206 $ 23,242

Adjustment to reflect the consolidation of internal service funds activities related to enterprise funds (84,875)

Net Position of Business-Type Activities $ 3,864,331


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STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - PROPRIETARY FUNDS



Works Authority FundOperating RevenuesCharges for services

Water $ 1,094,910 $ - Wastewater 876,811 - Sanitation 477,629 - Penalties 93,155 - Other 2,033 1,110,299

Total Operating Revenues 2,544,538 1,110,299

Operating ExpensesWater 910,049 - Wastewater 724,479 - Sanitation 440,509 - Administration 374,880 30,480 Contractual services - 922,733 Employee benefits - 94,738 Depreciation 420,017 -

Total Operating Expenses 2,869,934 1,047,951

Net Income (Loss) from Operations (325,396) 62,348

Non-Operating Revenue (Expenses) Interest income 9,067 876 Interest expense (6,011) - Miscellaneous 5,696 - Total Non-Operating Revenue (Expenses) 8,752 876

Net Income (Loss) Before Operating Transfers (316,644) 63,224 Operating transfers in / (out) 378,789 - Change in Net Position 62,145 63,224 Net Position, Beginning of Year 346,584 Prior period adjustment (386,566) Net Position, Beginning of Year, restated (39,982) Net Position, End of Year $ 23,242

Adjustment to reflect the consolidation of internal service funds activities related to enterprise funds 321

Change in Net Position of Business-TypeActivities $ 62,466


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STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS



Works Authority Fund

Cash Flows from Operating ActivitiesCash received from customers $ 2,526,982 $ - Cash received from city and employee contributions - 1,037,718 Cash received from service users - 72,581 Cash payments to suppliers for goods and services (1,742,868) 77,473 Cash payments to employees (629,333) - Cash payments for premiums and other operating expenses - (177,290) Cash payments for claims paid - (817,766) Net Cash Provided By Operating Activities 154,781 192,716

Cash Flows from Noncapital and Related Financing ActivitiesCash transfers 378,789 - Net borrowings (repayment) of advances from primary government 48,366 (347,908) Miscellaneous revenues/(expenses) 5,696 - Net Cash Provided (Used) For Noncapital and Related Financing Activities 432,851 (347,908)

Cash Flows from Capital and Related Financing ActivitiesCash used to acquire fixed assets (185,572) - Principal paid on debt (144,802) - Interest paid on debt (6,286) - Net Cash Used For Capital and Related Financing Activities (336,660) -

Cash Flows from Investing ActivitiesReinvestment of certificate of deposit earnings (6,401) (488) Net activity of restricted accounts (9,439) - Interest income 9,087 877 Net Cash Provided (Used) By Investing Activities (6,753) 389 Net Increase (Decrease) In Cash and Cash Equivalents 244,219 (154,803) Cash and Cash Equivalents, Beginning of Year 720,574 224,916 Cash and Cash Equivalents, End of Year $ 964,793 $ 70,113

Reconciliation of Operating Income to Net Cash Provided By Operating ActivitiesOperating gain (loss) $ (325,396) $ 62,348 Adjustments:

Depreciation 420,017 - Net change in assets and liabilities:

Trade accounts receivable (26,841) - Due from other funds - Accounts payable 101,603 - Payroll and payroll withholdings 3,473 - Customer meter deposits 9,285 - Compensated absences (1,551) - Claims and judgements - 52,895 Other post employment benefits 17,265 77,473 Net pension liability 81,634 - Deferred charges relating to pension (124,708) -

Net Cash Provided By Operating Activities $ 154,781 $ 192,716


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NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2016

Organization

The City of Poteau, Oklahoma, (the City) operates under an aldermanic form of government underTitle 11of the Oklahoma Statutes. The City provides the following services to its citizens: public safety(police and fire), streets and highways, sanitation, social services, culture and recreation, publicimprovements, utilities, planning and zoning, and general administrative services.

1. Summary of Significant Accounting Policies

a. Reporting Entity

The accompanying financial statements present the City and its component units, entities for whichthe government is considered financially accountable. A blended component unit, although a legallyseparate entity, is in substance, part of the government's operations and so data from this unit isincluded as part of the reporting entity. The City's financial statements do not include any discretelypresented component units, which would be reported in a separate column in the government-widefinancial statements to emphasize that they are legally separate from the City. In determining thefinancial reporting entity, the City follows the provisions of Governmental Accounting StandardsBoard (GASB) Statement No. 61, "The Financial Reporting Entity: Omnibus", and includes allcomponent units for which the City is financially accountable.

Blended Component Unit - the Poteau Public Works Authority (PPWA) was created as a publictrust pursuant to Title 60 of the Oklahoma Statutes to finance, develop and operate the electric,water, wastewater, and solid waste activities of the City. The current City Council serves as the governing body of the PPWA. Debt issued by the PPWA requires approval of the City Council. TheCity is the beneficiary of the trust. The City owns the utility systems operated by the PPWA and leased such assets to the trust. PPWA is reported as an enterprise fund and does not issueseparate financial statements.

Poteau Industrial Authority (PIA) promotes industrial and economic development and expansionand secures industrial development within the City.

The Poteau Library Building Project, Inc. (PLBP) was established as a non-profit entity under Section501(c (3) of the Internal Revenue Code by the City of Poteau with its purpose to develop and construct a public library for the City of Poteau. Its board of directors is comprised of the mayorand two to four council members of the City. The City is the sole member of the corporation. Thebalances and activity of PLBP are included in the accompanying governmental fund financialstatements as the library building fund.

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JUNE 30, 2016

1. Summary of Significant Accounting Policies (continued)

b. Basic Financial Statements

Basic financial statements are presented at both the government-wide and fund financial level. Bothlevels of statements categorize primary activities as either governmental or business-type. Governmental activities, which are normally supported by taxes and intergovernmental revenues, arereported separately from business-type activities, which rely to a significant extent on fees and charges for services.

Government-wide financial statements report information about the reporting government as a whole.For the most part, the effect of interfund activity has been removed from these statements. Thesestatements focus on the sustainability of the City as an entity and the change in aggregate financialposition resulting from the activities of the year. These aggregated statements consist of the Statement of Net Position and the Statement of Activities.

The Statement of Activities demonstrates the degree to which the direct expenses of a given functionor business-type activity are offset by program revenues. Direct expenses are those that are clearlyidentifiable with a specific function or business-type activity. Program revenues include 1) charges tocustomers or applicants who purchase, use, or directly benefit from goods, services, or privilegesprovided by a given function or business-type activity and 2) grants and contributions that are restrictedto meeting the operational or capital requirements of a particular function or business type activity. Taxes and other items not included among program revenues are reported instead as general revenues.

Fund financial statements report information at the individual fund level. Each fund is considered to be a separate accounting entity. Funds are classified as governmental, proprietary, and fiduciary. Currently, the City has only governmental and proprietary type funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Non-major funds are consolidated into a single column in the financial section of the basicfinancial statements.

c. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurementfocus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenuesare recorded when earned and expenses are recorded when a liability is incurred, regardless of thetiming of the related cash flows.

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JUNE 30, 2016


Governmental fund financial statements are reported using the current financial resources measurementfocus and the modified accrual basis of accounting. Revenues are recognized as soon as they areboth measurable and available. Revenues are considered to be available when they are collectiblewithin the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days after year end.Expenditures are recorded when the related fund liability is incurred.

Franchise taxes, sales taxes, other taxes, and charges for services associated with the current fiscalperiod are all considered to be susceptible to accrual and so have been recognized as revenues of thecurrent fiscal period. All other revenue items are considered to be measurable and available onlywhen cash is received by the City.

Proprietary fund operating revenues, such as charges for services, result from exchange transactionsassociated with the principal activity of the fund. Exchange transactions are those in which each partyreceives and gives up essentially equal values. Non-operating revenues, such as investment earnings,result from non-exchange transactions.

The City reports the following major governmental funds:

The general fund is the City's primary operating fund. It accounts for all financial resources ofgeneral government, except those required to be accounted for in another fund.

The Poteau Industrial Authority fund promotes and secures industrial and economic developmentand expansion within the City

The City reports the following non-major governmental funds:

The special revenue funds account for revenue sources that are legally restricted to expenditures.Special revenue funds consist of the Robert S. Kerr Airport fund, Law Enforcement Grant fund, Juvenile Court fund, Police Drug fund, Police Court fund, Library Building fund and the PoteauNutrition fund.

The capital projects funds account for capital improvements to the City. The capital projectsfunds consist of the cemetery care fund.

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JUNE 30, 2016


The City reports the following major proprietary funds:

The Poteau Public Works Authority (PPWA) is used to account for operations (a) that are financedand operated in a manner similar to private business enterprises where the intent of the Council isthat the costs (expenses, including depreciation) of providing goods or services to the general publicon a continuing basis be financed or recovered primarily through user charges; or (b) where theCouncil 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 PPWA City of Poteau, Oklahoma, consists of three funds - the PPWA fund, the PPWA reservefund, and the meter deposit fund.

The Poteau Insurance fund is a internal service fund that is used to account for the City'sself-funded employee health care plan.

d. New Accounting Pronouncements

The Governmental Accounting Standards Board (GASB) has issued several new accounting pronouncements that took effect during the fiscal year. The following is a description of the newpronouncements applicable to the City:

GASB Statement No. 72, Fair Value Measurement and Application. The purpose of GASB 72is to improve financial reporting by clarifying the definition of fair value for financial reporting purposes, establishing general principles for measuring fair value, providing additional fair valueapplication guidance and enhancing disclosures about fair value measurement. The City adoptedthis statement during the year and resulted in revised footnote disclosures in the financial statements.

GASB Statement No. 76, The Hierarchy of generally Accepted Accounting Principles for Stateand Local Governments. The objective of GASB 76 is to identify - in the context of the currentgovernmental financial reporting environment - the hierarchy of generally accepted accountingprinciples. The City adopted this statement during the year and it had no significant impact on theCity's financial statements.

GASB Statement No. 80, Blending Requirements for Certain Component Units - An Amendmentof GASB Statement No. 14. This statement amends the blending requirements for the financialstatement presentation of component units of all state and local governments. The additionalcriterion requires blending of a component unit incorporated as a not-for-profit corporation in whichthe primary government is the sole corporate member. The City adopted this statement during2015 and it had no significant impact on the City's financial statements

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JUNE 30, 2016


GASB Statement No. 82, Pension Issues - an amendment of GASB Statements No. 67, No. 68and No. 73. This statement addresses issues that arose for pension plans and participatingemployers when implementing GASB No. 67 and No. 68. Specifically, the statement addressesissues regarding 1) the presentation of payroll-related measures in required supplementary information, 2) the selection of assumptions and the treatment of deviations from the guidancein an Actuarial Standard of Practice for financial reporting purposes, and 3) the classification ofpayments made by employers on behalf of employees. The City adopted this statement duringthe year and it had no significant impact on the financial statements.

e. Assets, Liabilities, and Net Position/Fund Balance

Fair Value of Financial Instruments

The City's financial instruments include cash and cash equivalents, certificates of deposit, accountsreceivable and accounts payable. The City's estimate of the fair value of all financial instruments does not differ materially from the aggregate carrying value of its financial instruments recorded in theaccompanying statement of net position. The carrying amount of these financial instrumentsapproximate fair value because of the short maturity of these investments.

Cash and Cash Equivalents

Cash balances from all funds are pooled and invested to the extent available in certificates of deposit.For purposes of the Statement of Cash Flows, the proprietary fund considers all highly liquid debtinstruments with a maturity of three months or less when purchased to be cash equivalents.

Accounts Receivable

Receivables in governmental funds and governmental activities include tax accruals and intergovernmental revenues such as grant requests, since they are both measurable and available.

Proprietary fund and business-type activities receivables include revenues earned at year end butnot yet received. Utility accounts receivable, both billed and unbilled, comprise the majority of thereceivables.

All trade and tax receivables are shown net of an allowance for uncollectibles. Managementestablishes an allowance for uncollectible accounts receivable based on historical collectionexperience and management's evaluation of the collectability of outstanding accounts receivable.

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JUNE 30, 2016


Inventories

Inventory is valued at average cost. The cost of governmental fund type inventories are recorded asexpenditures when consumed rather than when purchased.

Restricted assets

Funds received from utility customers for water meter deposits are maintained in separate accountsand held for refund to the customer upon their discontinuance of service, provided all outstandingbalances are paid.

Capital Assets

Capital assets, which include buildings and improvements, water distribution system, machinery and equipment, and vehicles are reported in the applicable governmental or business-type activitiescolumns in the government-wide financial statements. Capital assets are defined by the City asassets with an initial cost of more than $2,500 and an estimated useful life in excess of one year.Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed.Donated assets are recorded at estimated fair market value as of the date of the donation.

The costs of normal maintenance and repairs that do not add to the value or capacity of the asset ormaterially extend the life of the asset are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed.

Capital assets are being depreciated using the straight-line method over the following estimateduseful lives:

YearsBuilding and improvements 40Improvements other than buildings 15 - 40Machinery and equipment 3 - 15Vehicles 5 - 10Utility improvements and infrastructure 30 - 40

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JUNE 30, 2016


Interfund Receivables and Payables

During the course of operations, numerous transactions occur between individual funds for goodsprovided or services rendered. Short-term interfund loans are classified as "due to/from other funds."All short-term interfund receivables and payables at year end are planned to be eliminated in thesubsequent year. Long-term interfund loans are classified as "advances to/from other funds." Anyresidual balances outstanding between governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances" or "internal advances".

Compensated Absences

All full-time City employees earn vacation at varying rates depending upon years of eligible service.All vacation pay (and sick pay for certain employee classifications) is accrued when incurred in thegovernment-wide and proprietary fund financial statements. Vacation leave, which is unused and vested to the employee in good standing, is payable upon termination. In governmental funds, amounts accrued are expected to be liquidated with available financial resources and are reportedas an expenditures when incurred. For governmental activities, compensated absences are generallyliquidated by the general fund.

Full time employees with at least one year of service earn vacation of five to fifteen days per year.Employees may carryforward unused vacation up to a maximum of one year's accrual. Sick leave maybe accumulated up to a maximum of 240 hours. Unused sick leave benefits will not be paid to employees while they are employed or upon termination of employment.

Accrued compensated absences at June 30, 2016 for governmental activities was $113,422, andfor business-type activities was $45,619.

Long-term obligations

In the government-wide financial statements and proprietary fund types in the fund financial statements,long-term debt, and other long-term obligations are reported as liabilities in the applicable governmentalactivities, business-type activities, or proprietary fund type statement of net assets. Bond premiumsand discounts are deferred and amortized over the life of the bonds. Bonds payable are reportednet of the applicable bond premium or discount.

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JUNE 30, 2016


Pensions

For the 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 netposition of the Oklahoma Municipal Retirement Fund, the Oklahoma Police Pension and RetirementFund, and the Oklahoma Firefighters Pension and Retirement Fund (together, the Plans) and additionsto / deductions from the Plans' fiduciary net position have been determined on the same basis asthey are reported by the Plans. For this purpose, benefit payments (including refunds of employeecontributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

Net Position

The government-wide and proprietary fund financial statements utilize a net position presentation. Netposition is categorized as net investment in capital assets, restricted net position and unrestricted net position.

Net Investment in Capital Assets - This component of net position consists of capital assets, net ofaccumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes,or other borrowings that are attributable to the acquisition, construction, or improvement of thoseassets.

Restricted Net Position - Net position is reported as restricted when constraints placed on net positionuse are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. It is the City's policy to use restricted net position prior to the use of unrestrictednet position when both restricted and unrestricted net position are available for an expense which hasbeen incurred.

Unrestricted Net Position - Unrestricted net position represents net position that is not restricted because of constraints imposed by external parties or imposed by laws of other governments orrelated to the acquisition and construction of capital assets. Unrestricted net position consists of net position that does not meet the definition of "restricted" or "net investment in capital assets".

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally acceptedin the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements and notes to the financial statements. Actual resultscould differ from those estimates.

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JUNE 30, 2016


Risk Management

The City maintains a medical self-insurance plan funded by the City and administered by a third party.The plan provides certain healthcare benefits to active and retired City employees. Substantially allregular, full-time City employees are eligible for these benefits. The City's costs of providing these benefits, including premiums, totaled $829,942, and are included in operating expenses of the PoteauInsurance fund. The City contributes fully for each employee and shares in the contribution for anydependents. Retired employees may continue coverage under the City's policy, but must bear theentire cost of the contributions.

Advertising

It is the policy of the City to expense advertising expenditures as they are incurred.

2. Stewardship, Compliance and Accountability

Annual budgets are adopted for all governmental funds and proprietary funds. All unencumbered annualappropriations lapse at fiscal year-end. Actual expenditures within a fund may not legally exceed 90%of the adopted budget until actual revenues equal to the estimated amount have been received. Noexpenditure can exceed the actual amount on hand.

Prior to June of each year, all department heads of the City submit requests for appropriations to theMayor so that a budget may be prepared. The city council meets with the Mayor and department headsto review the needs, estimates and requests of the departments. The city council holds a public hearingprior to June 15, and a final budget is formally approved and adopted by the city council no later than June 23.

The appropriated budget is prepared by fund, function, and department. Transfers of appropriationsbetween classification categories within a department or between departments within a fund require theapproval of the council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the object classification level within a department. Object classifications include personnel services, materials and supplies, other services and charges, capitaloutlay, and debt service.

Encumbrance accounting is employed in governmental funds. Encumbrances (e.g., purchase orders,contracts) outstanding at year-end are reported as reservations of fund balances and do not constituteexpenditures or liabilities because the commitments will be re-appropriated and honored during thesubsequent year.

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JUNE 30, 2016

3. Bank Deposits

The City maintains its operating bank accounts in two local financial institutions. The Federal DepositInsurance Corporation (FDIC) insures accounts at each institution up to $250,000. In addition, somedeposits are collateralized by the bank through the pledging of securities. The City's cash balances may,at times, exceed these insured limits. At June 30, 2016, the City had uninsured deposits of $375,066.The City does not believe that there is any significant risk associated with the concentrations of creditnor has the City experienced any losses in such accounts.

4. Restricted Assets - Cash and Cash Equivalents

Restricted cash and cash equivalents consist of the following:

As of June 30, 2016Amounts held in payment of customer meter deposits

Cash $ 129,140 Certificates of deposit 150,795

Total $ 279,935

5. Receivables

Receivables as of June 30, 2016 for the City's individual major funds and nonmajor funds in the aggregateare as follows:

Poteau NonmajorGeneral Industrial Governmental Enterprise Internal

Fund Authority Funds Funds ServiceAccounts $ 35,926 $ 16,200 $ - $ 401,745 $ - Court fines 237,041 - - - - Taxes 969,678 - - - - Due from other

governments - - 4,035 - - Grants - 75,558 - - - Settlement - 848,958 - - - Accrued interest 4,763 - 5 2,214 122 Gross Receivables 1,247,408 940,716 4,040 403,959 122 Less: Allowance for

uncollectibles (94,816) - - (113,884) - Net total receivables $ 1,152,592 $ 940,716 $ 4,040 $ 290,075 $ 122

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JUNE 30, 2016

6. Interfund Receivables, Payables and Transfers

Due to / from balances as of June 30, 2016 are as follows:

General Fund Non-major governmental fund $ 1,500 Internal Service Fund General Fund 346,007 Internal Service Fund Poteau Public Works Authority 19,166 Totals $ 366,673

Transfers In Transfers Out Net TransfersGovernmental Funds

General Fund $ 45,865 $ 738,668 $ (692,803) Poteau Industrial Authority 313,680 - 313,680 Special Revenue Funds 334 - 334

Total - Governmental Funds 359,879 738,668 (378,789) Business-type Activities 426,020 47,231 378,789 Total $ 785,899 $ 785,899 $ -

7. Capital Assets

Capital asset activity for governmental activities for the year ended June 30, 2016, was as follows:

July 1, 2015 Additions Reductions June 30, 2016Capital assets, not being depreciated

Land $ 4,220,680 $ - $ - $ 4,220,680 Construction in progress - 28,000 - 28,000

Total capital assets, not beingdepreciated 4,220,680 28,000 - 4,248,680 Capital assets, being depreciated

Buildings $ 19,046,952 $ 37,751 $ 2,033 $ 19,082,670 Machinery and equipment 3,571,501 112,149 627 3,683,023 Vehicles 3,655,863 201,573 3,000 3,854,436 Other improvements 15,394,985 301,968 1,451 15,695,502 Infrastructure 5,755,751 - - 5,755,751

Total capital assets, beingdepreciated 47,425,052 653,441 7,111 48,071,382

Receivable Fund Payable Fund

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JUNE 30, 2016

7. Capital Assets (continued)

July 1, 2015 Additions Reductions June 30, 2016Less accumulated depreciation

Buildings 5,741,777 779,801 2,033 6,519,545 Machinery and equipment 2,467,118 281,915 627 2,748,406 Vehicles 2,368,347 275,321 3,000 2,640,668 Other improvements 9,489,848 550,720 1,451 10,039,117 Infrastructure 5,729,500 - - 5,729,500

Total accumulated depreciation 25,796,590 1,887,757 7,111 27,677,236 Total capital assets, beingdepreciated, net 21,628,462 (1,234,316) - 20,394,146 Governmental activities, capitalassets, net $ 25,849,142 $ (1,206,316) $ - $ 24,642,826

Depreciation expense for governmental activities is charged to functions as follows:

General government $ 4,833 Public safety 376,748 Public works 348,788 Culture and recreation 889,687 Economic development 28,143 Airport 239,558

Total depreciation for governmental activities $ 1,887,757

Capital asset activity for business-type activities for the year ended June 30, 2016, was as follows:

July 1, 2015 Additions Reductions June 30, 2016Capital assets, not being depreciated

Land $ 23,500 $ - $ - $ 23,500 Construction in progress - - - -

Total capital assets, not beingdepreciated 23,500 - - 23,500 Capital assets, being depreciated

Buildings 45,750 - - 45,750 Utility system improvements 17,576,796 176,081 - 17,752,877 Machinery and equipment 687,306 9,491 - 696,797 Vehicles 572,032 - - 572,032

Total capital assets, beingdepreciated 18,881,884 185,572 - 19,067,456

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JUNE 30, 2016

7. Capital Assets (continued)

July 1, 2015 Additions Reductions June 30, 2016Less accumulated depreciation

Buildings 45,750 - - 45,750 Utility system improvements 15,528,283 377,755 - 15,906,038 Machinery and equipment 535,680 34,289 - 569,969 Vehicles 547,034 7,973 - 555,007

Total accumulated depreciation 16,656,747 420,017 - 17,076,764 Total capital assets, beingdepreciated, net 2,225,137 (234,445) - 1,990,692 Business-type activities, capitalassets, net $ 2,248,637 $ (234,445) $ - $ 2,014,192

Depreciation expense for business-type activities is charged to functions as follows:

Administration $ 7,988 Water 159,940 Wastewater 176,666 Sewer plant 75,423 Total depreciation for governmental activities $ 420,017

8. Capital Lease Obligations

The City leases certain police cars and equipment under capital leases expiring in 2018. The assetsand liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the assets. The assets are amortized over the lesser of the leaseterm or their estimated productive lives. Amortization of assets under capital leases is included indepreciation expense for the year ended June 30, 2016.

The following is a summary of equipment held under capital leases:

Police cars and equipment $ 359,271Less: accumulated amortization (137,586)Net Book Value at June 30, 2016 $ 221,685

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JUNE 30, 2016

8. Capital Lease Obligations (continued)

Minimum future lease payments under capital leases are as follows:

For the Years Ended June 30, 2017 $ 93,5402018 93,5402019 88,294Total capital lease obligations 275,374Less interest element 7,752

267,622Less current portion 88,865Long-term capital lease obligations $ 178,757

Interest rates on capital leases are approximately 2.00% and are imputed based on the lower ofthe Company's incremental borrowing rate at the inception of the lease or the lessor's implicit rate ofreturn.

9. Long-Term Debt

Governmental Activities - Long-term debt consists of:

As Of June 30, 2016Central National Bank - loan dated July 19, 2007 in the original

amount of $1,500,000. Loan is renewed every six months.Interest at 2.4% is due upon each renewal. Current unpaid principal balance due September 5, 2017. $ 999,790

Community State bank - loan dated July 25, 2013 in the originalamount of $528,777. Monthly payments of interest only at 3.36%with unpaid principal balance due July 25, 2017. Loan securedby building. 524,393

Central National Bank - loan dated July 6, 2014 in the originalamount of $4,081,85. Loan is renewed every six months.Interest at 2.05% is due upon each renewal. Current unpaid principal balance due July 16, 2017. 3,518,644

Total 5,042,827Less current portion - Long-Term Debt $ 5,042,827

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JUNE 30, 2016

9. Long-Term Debt (continued)

Principal is scheduled to mature as follows:

June 30, Principal Interest Total

$ - $ 126,043 $ 126,043 5,042,827 37,534 5,080,361

Total $ 5,042,827 $ 163,577 $ 5,206,404

Business-Type Activities - Long-term debt consists of:

As Of June 30, 2016Oklahoma Water Resources Board - loan dated July 22, 1997 in the original

amount of $2,335,000. Payments are made semi-annually including interestat 0.8% plus an administrative fee of 0.5%, for water system improvements,with a final maturity date of September 2018. $ 370,409

Total 370,409Less current portion 146,717Long-Term Debt $ 223,692

Principal is scheduled to mature as follows:

June 30, Principal Interest Total$ 146,717 $ 4,371 $ 151,088

148,643 2,445 151,088 75,049 495 75,544

Total $ 370,409 $ 7,311 $ 377,720

Activity of the long-term debt consists of the following:

As Of July 1, 2015 Additions Reductions June 30, 2016Governmental Activities

Central National Bank $ 1,499,790 $ - $ 500,000 $ 999,790 Central National Bank 3,518,644 - - 3,518,644 Community State Bank 524,787 - 394 524,393

Total Governmental Activities 5,543,221 - 500,394 5,042,827

Business-Type ActivitiesOklahoma Water Resources Board 515,211 - 144,802 370,409

Total Business-Type Activities 515,211 - 144,802 370,409 Total $ 6,058,432 $ - $ 645,196 $ 5,413,236

20182019

2017

20172018

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JUNE 30, 2016

10. Employee Retirement Systems and Plans

The City participates in three employee defined benefit pension plans as follows:

Name of Defined Benefit Plan Type of Defined Benefit PlanOklahoma Municipal Retirement Fund Agent Multiple Employer Oklahoma Police Pension and Retirement Fund Cost Sharing Multiple Employer Oklahoma Firefighters Pension and Retirement Fund Cost Sharing Multiple Employer

Aggregate amounts for the three pension plans are as follows:OkMRF OPPRS OFPRS Total

Net pension liability $ 551,249 $ 12,889 $ 827,064 $ 1,391,202 Deferred outflows of resources 239,535 234,718 69,941 544,194 Deferred outflows of resources

contributions 173,236 132,520 28,935 334,691 Deferred inflows of resources 267,461 351,793 90,971 710,225 Pension expense 90,066 49,045 74,827 213,938

Pension items listed above for Oklahoma Municipal Retirement Fund (OkMRF) Plan have been allocatedbetween governmental activities and business-type activities on the basis of total salaries.

Pension items listed above for Oklahoma Police Pension and Retirement Fund (OPPRS) and OklahomaOklahoma Firefighters Pension and Retirement Fund (OFPRS) have been recorded in governmentalactivities.

Oklahoma Municipal Retirement Fund - Defined Benefit

The City contributes to the OkMRF for all eligible employees. The plan is an agent multiple employer - defined benefit plan administered by OkMRF. The OkMRF plan issues a separate financial report and canbe obtained from the OkMRF or their website: www.okmrf.org/reports.html. Benefits are established oramended by the City Council in accordance with O.S. Title 11, Section 48-101-102.

Eligibility Factors and Benefit Provisions

Eligibility - All regular, full-time employees except police, firefighters and other employees who arecovered under an approved system.

Probationary period - None

Employee contributions - 4.25% of pay.

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JUNE 30, 2016

10. Employee Retirement Systems and Plans (continued)

ServiceCredited service - The last period of continuous employment with the employer.Vesting - Credited service plus transferred service from other OkMRF employers.

Benefit Eligibility - 10 or more years of vesting service.

Final Average Compensation - The average of the 5 highest consecutive years of salaries out of the last 10 years of service.

Accrued Benefit - Plan BB. 2.25% of final average compensation multiplied by the number of years of credited service.

Normal Retirement Age - Age 65 with 10 or more years of vesting service.

Normal RetirementEligibility - Termination of employment on or after normal retirement age.Benefit - The accrued benefit payable immediately.

Early RetirementEligibility - Termination after age 55 with 10 or more years of vesting service.Benefit - The accrued benefit payable starting at normal retirement age, or the accrued benefit reduced 5% per year for commencement prior to normal retirement age.

Disability RetirementEligibility - Total and permanent disability after 10 or more years of service.Benefit - The accrued benefit is payable upon disablement without reduction for early payment.

Termination Before Retirement AgeBefore vesting - Return of employee contributions, if any, with interest.After vesting - The accrued benefit payable starting at normal retirement age, or a reduced benefit payable at an early retirement age.

In-service DeathBefore vesting - Return of employee contributions, if any, with interest.After vesting (married participants only) - 50% of the accrued benefit is payable to the spouse until death or remarriage.After vesting (other participants) - 50% of the accrued benefit is payable for 5 years certain.

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JUNE 30, 2016


Payment OptionsNormal form - The normal form of payment of the accrued benefit is a monthly lifetime annuity with 5 years certain.Optional forms - Disability retirement benefits are paid only under the normal form. Other retirement benefits are available under actuarially equivalent optional forms:

Joint and 50% survivor annuityJoint and 66-2/3rds% last survivor annuityJoint and 100% survivor annuity

Cost of Living - This plan has not elected the automatic post-retirement cost-of-living adjustments.

Contributions

The City Council has the authority to set and amend contributions rates by ordinance for the OkMRFdefined benefit plan in accordance with O.S. Title 11, Section 48-102. The employer contribution rate was10.00% for the fiscal year ending June 30, 2016. Contributory members are required to contribute 4.25%of gross wages to OkMRF.

Actuarial Assumptions

The total pension liability in the June 30, 2015 actuarial valuation was determined using the followingactuarial assumptions, applied to all periods included in the measurement:

Date of last actuarial valuation July 1, 2015Actuarial cost method Entry age normalRate of return on investments and discount rate 7.75%Projected salary increase 4.00% - 7.42%Post retirement cost-of-living increase NoneInflation rate 3%Mortality table UP 1994, with projected mortality improvementPercent of married employees 100%Spouse age difference 3 years (female spouses younger)Turnover Select and ultimate rates

Ultimate rates are age-related as shownAdditional rates per thousand are addedduring the first 5 years:

Year 1: 215Year 2: 140Year 3: 95Year 4: 65Year 5: 40

Date of last experience study September 2012 for the fiscal years 2007 thru2011 38



JUNE 30, 2016


Discount Rate

The discount rate used to value benefits was the long-term expected rate of return on plan investments,7.75% since the plan's net fiduciary position is projected to be sufficient to make projected benefits.

The City has adopted a funding method that is designed to fund all benefits payable to participants overthe course of their working careers. Any differences between actual and expected experience are fundedover a fixed period to ensure all funds necessary to pay benefits have been contributed to the trust beforethose benefits are payable. Thus, the sufficiency of pension plan assets was made without a separateprojection of cash flows.

Long-Term Expected Rate of Return

The long-term expected rate of return on pension plan investments was determined using a building-blockmethod in which best-estimate ranges of expected future real rates of return (expected returns, net ofpension plan investment expense and inflation) are developed for each major asset class. These rangesare combined to produce the long-term expected rate of return by weighting the expected future real ratesof return by the target asset allocation percentage and by adding expected inflation (3.0%). Best estimatesof arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of July 1, 2015 are summarized in the following table:

Target WeightedAllocation Real Return Return

Large cap stocks - S&P 500 25% 5.40% 1.35%Small/mid cap stocks - Russell 2500 10% 7.50% 0.75%Long/short equity - MSCI ACWI 10% 6.10% 0.61%International stocks - MSCI EAFE 20% 5.10% 1.02%Fixed income bonds - Barclay's Capital Aggregate 30% 2.60% 0.78%Real estate - NCREIF 5% 4.80% 0.24%Cash equivalents - 3 month Treasury 0% 0.00% 0.00%Total 100%

Average real return 4.75%Inflation 3.00%Long-term expected return 7.75%

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JUNE 30, 2016


Sensitivity of the net pension liability to changes in the discount rate

The following presents the net pension (asset)/ liability of the City, calculated using the discount rate of 7.75%, as well as what the City's net pension liability would be if it were calculated using a discount ratethat is 1-percentage-point lower (6.75 percent) or 1-percentage-point higher (8.75 percent) than the currentrate:

1% Decrease Current Rate 1% Increase6.75% 7.75% 8.75%

Net Pension Liability $ 1,319,676 $ 551,249 $ (93,697)

Changes in Net Pension Liability

The total pension liability was determined based on an actuarial valuation performed as of July 1, 2015which is also the measurement date. There were no changes in assumptions or changes in benefit termsthat affected measurement of the total pension liability. There were also no changes between themeasurement date of July 1, 2015 and the City's report ending date of June 30, 2016, that would have hada significant impact on the net pension liability.

Deferred Outflows/Inflows of Resources and Pension Expense

The City reported $90,066 in pension expense for the year ended June 30, 2016. At June 30, 2016, theCity reported deferred outflows of resources and deferred inflows of resources related to pensions fromthe following resources:

Deferred Outflows Deferred Inflowsof Resources of Resources

Differences between expected andactual experience $ 30,601 $ -

Changes in assumptions - - Net difference between projected

and actual earnings on pensionplan investments 208,934 267,461

City contributions subsequent to themeasurement date 173,236 -

Total $ 412,771 $ 267,461

$173,236 reported as deferred outflows of resources related to pensions resulting from City contributionssubsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. any other amounts reported as deferred outflows of resources and deferredinflows of resources related to pensions will be recognized in pension expense as follows:

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JUNE 30, 2016


Net Increase / (Decrease)Year ended June 30, In Pension Expense2017 $ (29,475) 2018 (29,475) 2019 (29,475) 2020 59,676 2021 823 Total $ (27,926)

Oklahoma Police Pension and Retirement Plan

The City participates in the Oklahoma Police Pension and Retirement Plan, a cost-sharing, multiple-employer defined benefit pension plan administered by the Oklahoma Police Pension and RetirementSystem (OPPRS). Title 11 of the Oklahoma State Statutes, through Oklahoma legislature, grants theauthority to establish and amend the benefit terms to the OPPRS. OPPRS is administered by the Oklahoma Police pension and retirement Board consisting of thirteen members. The Board shall be responsible for the policies and rules for the general administration of the system. OPPRS issues a publicly available financial report that can be obtained at www.ok.gov/OPPRS.


Eligibility - All persons employed as full-time officers working more than 25 hours per week or any personundergoing police training to become a permanent police officer with a police department, with ages notless than twenty-one nor more than forty-five when accepted for membership.

Service Considered - Credited service consists of the period during which the employee participated in the System or predecessor municipal plan as an active employee, plus any service prior to the establishment of the municipal plan which was credited under the predecessor municipal systems or credited service granted by the State board, plus any applicable military service.

Salary Considered - Base salary used in the determination of benefits does not include payment for accumulated sick and annual leave upon termination of employment or uniform allowances. Final average salary means the average paid base salary for normally scheduled hours of an officer over thehighest 30 consecutive months of the last 60 months of credited service.

Normal Retirement Benefit - Eligibility - 20 years of credited serviceBenefit - 2 1/2% of the final salary multiplied by the years of credited service, with a

maximum of 30 years of credited service consideredForm of Benefit - The normal form of benefit is a joint and 100% Survivor annuity if member

has been married 30 months prior to death

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JUNE 30, 2016


Cost of Living Police officers eligible to receive increased benefits according to repealed SectionAdjustments - 50-120 of Title 11 of the Oklahoma Statutes pursuant to a court order shall

receive and adjustment of 1/3 to 1/2 of the increase or decrease of any adjustment to base salary of a regular police officer

Termination - Less than 10 years A refund of contributions without interest

of service -More than 10 years If greater than 10 years of service, but not eligible for the normal retirement

of service - benefit, the benefit is payable at the later of the date the member would have had20 years of service or attained age 50 in an amount equal to 2 1/2% of the finalaverage salary multiplied by the years of credited service. The member may elect a refund of contributions instead of retirement benefits.

Disability Benefit (Duty) - Total Disability - Upon determination of total disability incurred as a result of the performance of

duty, the normal disability is 50% of final average salary.Partial Disability - Upon determination of partial disability incurred as a result of the performance of

duty, the normal disability is reduced according to the percentage of impairment,as outlined in the "American Medical Association's Guide to the Evaluation ofPermanent Impairment".

Disability Benefit (Non-Duty) -More than 10 years Upon determination of disability after 10 years service due to causes other

of service - than duty, the benefit equals the accrued benefit of 2 1/2% of final average salary times years of credited service (maximum of 30 years) times:- 100%, if permanent, or- the following percentages, if partial disability

% Impairment % of Benefit1% to 24% 25%25% to 49% 50%50% to 74% 75%75% to 99% 90%

Death Benefits Payable to Beneficiaries - Prior to Retirement 1) 2 1/2% of final average salary times years of credited service (maximum 30

Duty - years), or2) 50% of final average salary

Prior to Retirement After 10 years of service, a benefit equal to 2 1/2% of final average salary timesNon-Duty - years of credited service (maximum 30 years). Prior to 10 years of service, a

refund of the accumulated contributions made by the member will be paid to theestate.

After Retirement - 100% of the member's retirement or deferred vested benefit, payable when themember would have been eligible to receive it, payable to the beneficiary

Death Benefit - The beneficiary shall receive a death benefit amount of $5,000

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JUNE 30, 2016


Beneficiary - Surviving spouses must be married to the member for 30 continuous monthsprior to the date of death (waived in the case of duty related death). If the beneficiary is a child, the benefits are payable to age 18, or 22 if a full-timestudent.

Deferred Option A member who has 20 or more years of service and continues employment mayPlan - elect to participate in the Deferred Option Plan (DOP). Participation in the DOP

shall not exceed 5 years. The employees' contributions cease upon entering thePlan, but the employer contributions are divided equally between the System andthe DOP. The monthly retirement benefits that the employee is eligible to receiveare paid into the DOP account.

A member is also allowed to retroactively elect to join the DOP as of a back-drop-date which is no earlier than the member's normal retirement date or five years before his termination date. The monthly retirement benefits and employeecontributions that would have been payable had the member elected to join theDOP are credited to the member's DOP account with interest.

The retirement benefits are not recalculated for service and salary past theelection date to join the DOP. However, the benefits may be increased by anyapplicable cost-of-living increases.

When the member actually retires from active service, the DOP accountbalance may be paid in a lump sum, to an annuity provider, or transferred to a Deferred Option Payout Account. Monthly retirement benefits are then paiddirectly to the retired member.

The original Plan became effective during the July 1, 1990 to June 30, 1991 PlanYear with the back-drop and Payout Account provisions added subsequently. The DOP account of an active member is guaranteed a minimum of the valuationinterest rate for investment return, or 2% less than the fund rate of return, ifgreater. If the balance is transferred to a Payout Account upon retirement, theaccount is credited with interest at a rate of 2% below the total fund net earningsif the fund returns more than 2%. If the fund realizes negative returns, the account is reduced at a rate equal to the fund net earnings. Alternatively, if thefund realizes a positive return of less than 2%, the account is credited with a rate of zero.

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JUNE 30, 2016


Contributions

The Board has the Authority to establish and amend the contribution requirements of the City and activeemployees. Members of the OPPRS are required to pay 8% of their base pay to the pension plan. The City is contractually required to pay 13% of base salary. The State of Oklahoma made on-behalf paymentsto OPPRS totaling $112,184 during the measurement period. These on-behalf payments were recognizedas both revenue and expenditures in the accompanying general fund statement of revenues, expendituresand changes in fund balance. In the government-wide financial statements, revenue is recognized for the State's on-behalf contributions. These on-behalf payments did not meet criteria of a special funding situation.



Date of last actuarial valuation July 1, 2015Actuarial cost method Entry age normalRate of return on investments and discount rate 7.5%Projected salary increase 1.50% - 14.00%Post retirement cost-of-living increase 1/3 to 1/2 of the increase or decrease of any

adjustment to the base salary of a regularpolice officer, based on an increase in basesalary of 3%

Inflation rate 3%Retirement Rates

Years of Service20

21-232425

26-282930

Mortality table RP-2000 Blue Collar Healthy CombinedDisability Rates Graduated rates based on ageWithdrawal Rates Graduated rates by years of servicePercent of married employees 85%Spouse age difference 3 years (female spouses younger)Date of last experience study For the five year period from July 1, 2007 through

June 30, 2012

20610

100

Per 100 Eligible MembersAnnual Rates of Retirement

201015

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JUNE 30, 2016


Discount Rate

The discount rate used to measure the total pension liability was 7.5%. The projection of cash flowsused to determine the discount rate assumed that contributions from plan members will be made at thecurrent contribution rate and that contributions from employers will be made at contractually requiredrates, determined by the Oklahoma Statutes. Projected cash flows also assume the State of Oklahoma will continue contributing 14% of the insurance premium, as established by statute. Based on theseassumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return onpension plan investments was applied to all periods of projected benefit payments to determine the totalpension liability.


The long-term expected rate of return on pension plan investments was determined using a building-blockmethod in which best-estimate ranges of expected future real rates of return (expected returns, net ofpension plan investment expense and inflation) are developed for each major asset class. These rangesare combined to produce the long-term expected rate of return by weighting the expected future real ratesof return by the target asset allocation percentage and by adding expected inflation. Best estimates ofarithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of June 30, 2015 are summarized in the following table:

Asset ClassFixed IncomeDomestic EquityInternational EquityReal EstatePrivate EquityCommodities




Net Pension Liability $ 774,378 $ 12,888 $ (629,102)

7.68%5.47%5.80%2.96%

Long-Term ExpectedReal Rate of Return

2.24%4.87%

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JUNE 30, 2016



The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2015. The City'sproportion of the net pension liability was based on the City's contributions received by the pension planrelative to the total contributions received by the pension plan for all participating employers as of June 30,2015. Based on this information, the City's proportionate share was 0.3161%

There were no changes in assumptions or changes in benefit terms that affected measurement of the totalpension liability. There were also no changes between the measurement date of July 1, 2015 and the City's report ending date of June 30, 2016, that would have had a significant impact on the net pensionliability.




Differences between expected andactual experience $ $ 71,263



Changes in proportion 3,779 - City contributions subsequent to the

measurement date 132,520 - Total $ 367,238 $ 351,793


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JUNE 30, 2016


Net Increase / (Decrease) InYear ended June 30, In Pension Expense2017 $ (51,872) 2018 (51,872) 2019 (59,969) 2020 44,682 2021 1,956 Total $ (117,075)

Oklahoma Firefighters Pension and Retirement Plan

The City participates in the Oklahoma Firefighters Pension and Retirement Plan, a cost-sharing, multiple-employer defined benefit pension plan administered by the Oklahoma Firefighters Pension and RetirementSystem (OFPRS). Title 11 of the Oklahoma State Statutes, through Oklahoma legislature, grants theauthority to establish and amend the benefit terms to the OFPRS. OFPRS is administered by the Oklahoma Police pension and retirement Board consisting of thirteen members. The Board shall be responsible for the policies and rules for the general administration of the system. OFPRS issues a publicly available financial report that can be obtained at www.ok.gov/FPRS.


In general, OFPRS provides defined retirement benefits based on members' final average compensation,age, and term of service. In addition, the retirement program provides for benefits upon disability and to survivors upon death of eligible members. The Plan's benefits are established and amended by Oklahomastatute. Retirement provisions are as follows:

Normal Retirement

Hired Prior to November 1, 2013 - Normal retirement is attained upon completing 20 years of service.The normal retirement benefit is equal to 50% of the member's final average compensation. Final average compensation is defined as the monthly average of the highest 30 consecutive months of thelast 60 months of participating service. For volunteer firefighters, the monthly pension benefit for normal retirement is $150.60 per month.

Hired After November 1, 2013 - Normal retirement is attained upon completing 22 years of service.The normal retirement benefit is equal to 55% of the member's final average compensation. Final average compensation is defined as the monthly average of the highest 30 consecutive months of thelast 60 months of participating service. Also, participants must be age 50 to begin receiving benefits.For volunteer firefighters, the monthly pension benefit for normal retirement is $165.66 per month.

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JUNE 30, 2016


All firefighters are eligible for immediate disability benefits. For paid firefighters, the disability in-the-line-of-duty benefit for firefighters with less than 20 years of service is equal to 50% of final averagemonthly compensation, based on the most recent 30 months of service. For firefighters with over 20 years of service, a disability in-the-line-of-duty is calculated based on 2.5% of final average monthlycompensation, based on the most recent 30 months, per year of service, with a maximum of 30 years of service. For disabilities not-in-the-line-of-duty, the benefit is limited to only those with less than 20 yearsof service and is 50% of final average monthly compensation, based on the most recent 60-month salaryas opposed to 30 months. For volunteer firefighters, the not-in-the-line-of-duty disability is also limitedto only those with less than 20 years of service and is $7.53 per year of service. For volunteer firefightersthe in-line-of-duty pension is $150.60 with less than 20 years, or $7.53 per year of service, with a maximum of 30 years.

A $5,000 lump sum death benefit is payable to the qualified spouse or designated recipient upon theparticipant's death. The $5,000 death benefit does not apply to members electing the vested benefit.

Terminations

Hired Prior to November 1, 2013 - A member who terminates after 10 years of credited service is eligible for a vested severance benefit determined by the normal retirement formula, based on serviceand salary history to date of termination. The benefit is payable at age 50, or when the member wouldhave completed 20 years of service, whichever is later, provided the member's contribution accumulation is not withdrawn. Members terminating with less than 10 years of credited servicemay elect to receive a refund of their contribution accumulation without interest.

Hired After November 1, 2013 - A member who terminates after 11 years of credited service is eligible for a vested severance benefit determined by the normal retirement formula, based on serviceand salary history to date of termination. The benefit is payable at age 50, or when the member wouldhave completed 22 years of service, whichever is later, provided the member's contribution accumulation is not withdrawn. Members terminating with less than 11 years of credited servicemay elect to receive a refund of their contribution accumulation without interest.

Firefighters hired prior to November 1, 2013, with 20 or more years of service may elect to participate inthe Oklahoma Firefighters Deferred Retirement Option Plan (the "Deferred Option Plan"). Firefightershired after November 1, 2013, with 22 years or more years of service may elect to participate in theDeferred Option Plan, Active participation (having benefit payments credited to the account) in theDeferred Option Plan shall not exceed 5 years. Under the deferred Option Plan, retirement benefits arecalculated based on compensation and service at the time of election. The retirement benefits plus half of the municipal contributions on behalf of the participant are deposited into a deferred retirement account.The Deferred Option Plan accounts are credited with interest at a rate of 2% below the rate of return onthe investment portfolio of the Plan, with a guaranteed minimum interest rate equal to the assumed actuarial interest rate of 7.5%, as approved by the Board. The participant is no longer required to makecontributions. Upon retirement, the firefighter receives his/her monthly retirement benefit as calculatedat the time of election. The member can elect to either leave the account balance accumulated in the 48



JUNE 30, 2016


Deferred Option Plan account or they can elect to have the balance paid to them as a lump sum or inspecified monthly payments. If the member elects to leave their account balance in the Deferred OptionPlan account, they will continue to earn interest on their balance at the rate described above; however,no more benefit payments will be credited to their account. The member can leave their account balance in the Deferred Option Plan account until the age of 70 1/2. When the member reaches 70 1/2 years ofage, they must either begin receiving regular monthly payments, based on the annuity method, or alump sum distribution.

The Deferred Option Plan was modified effective November 1, 2013, to limit post-retirement interest for new members to a rate of return on the portfolio, less a 1% administrative fee. In addition, the membersparticipating must withdraw all money by the age of 70 1/2.

In the 2003 Legislative Session, Senate Bill 286 and house Bill 1464 created a "Back" DROP for membersof the System effective July 1, 2003. The "Back" DROP is a modified deferred retirement option plan. The "Back" DROP allows the member flexibility by not having to commit to terminate employment within5 years. Once a member has met their normal retirement period of 20 years for those hired prior toNovember 1, 2013, and 22 years for those hired after November 1, 2013, the member can choose, upon retirement, to be treated as if the member had entered into the Deferred Option Plan. A member, however,cannot receive credit to the Deferred Option Plan account based upon any years prior to when the memberreached their normal retirement date. Once a member is ready to retire, the member can make the election to participate in the "Back" DROP and can receive Deferred Option Plan benefit based upon 5years of participation. The member's regular retirement benefit will not take into account any years of service credited to the "Back" DROP.

Firefighters with 20 years of service or who were receiving pension benefits as of May 26, 1983, are entitledto post-retirement adjustments equal to one-half the increase or decrease for top-step firefighters. Pensionswill not be adjusted below the level at which the firefighter retired.

Contributions

The contributions requirements of the Plan are at an established rate determined by Oklahoma statute andare not based on actuarial valuations. Members of the OFPRS are required to pay 9% of their base pay to the pension plan. The City is contractually required to pay 14% of base salary. The State of Oklahoma made on-behalf payments to OFPRS totaling $71,092 during the measurement period. These on-behalf payments were recognized as both revenue and expenditures in the accompanying general fund statementof revenues, expenditures and changes in fund balance. In the government-wide financial statements, revenue is recognized for the State's on-behalf contributions. These on-behalf payments did not meet criteria of a special funding situation.

49



JUNE 30, 2016




Date of last actuarial valuation July 1, 2015Actuarial cost method Entry age normalRate of return on investments and discount rate 7.5%Projected salary increase 3.50% - 9.00%Inflation rate 3%Mortality table RP2000 combined healthy with blue collar

adjustment as appropriate, with adjustmentsfor generational mortality improvement usingAA for healthy lives and no mortalityimprovement for disabled lives

Date of last experience study For the five year period from July 1, 2007 throughJune30, 2012

Discount Rate

The discount rate used to measure the total pension liability was 7.5%. The projection of cash flowsused to determine the discount rate assumed that contributions from plan members will be made at thecurrent contribution rate and that contributions from employers will be made at the contractually requiredrates, determined by the Oklahoma statutes. Projected cash flows also assume the State of Oklahoma will continue contributing 36% of the insurance premium, as established by Oklahoma statute. Based onthese assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.


The long-term expected rate of return on pension plan investments was determined using a building-blockmethod in which best-estimate ranges of expected future real rates of return (expected returns, net ofpension plan investment expense and inflation) are developed for each major asset class. These rangesare combined to produce the long-term expected rate of return by weighting the expected future real ratesof return by the target asset allocation percentage and by adding expected inflation. Best estimatesof arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation as of June 30, 2015 are summarized in the following table:

50



JUNE 30, 2016


Asset ClassFixed IncomeDomestic EquityInternational EquityReal EstateOther Assets




Net Pension Liability $ 1,073,851 $ 827,064 $ 620,076


The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2015. The City'sproportion of the net pension liability was based on the City's contributions received by the pension planrelative to the total contributions received by the pension plan for all participating employers as of June 30,2015. Based on this information, the City's proportionate share was 0.077921%

There were no changes in assumptions or changes in benefit terms that affected measurement of the totalpension liability. There were also no changes between the measurement date of July 1, 2015 and the City's report ending date of June 30, 2016, that would have had a significant impact on the net pensionliability.



Long-Term ExpectedReal Rate of Return

5.13%8.02%9.94%7.47%6.25%

51



JUNE 30, 2016



Differences between expected andactual experience $ 16,339 $ -



Changes in proportion 24,282 - City contributions subsequent to the

measurement date 28,935 - Total $ 98,876 $ 90,971


Net Increase / (Decrease)Year ended June 30, In Pension Expense2017 $ (14,714) 2018 (14,714) 2019 (14,714) 2020 15,609 2021 1,618 2022 5,885 Total $ (21,030)

11. Other Post Employment Benefits (OPEB)

Plan Description

The City provides postemployment benefit options for medical and prescription drug benefits for retiredemployees and their dependents that elect to make required contributions. The benefits are provided inaccordance with State law, police and firefighter's union contracts and the Consolidated Omnibus BudgetReconciliation Act of 1985 (COBRA). The relationship for these benefits is not formalized in a contract or plan document. These benefits are considered for accounting purposes to be provided in accordancewith a single employer substantive plan. A substantive plan is one in which plan terms are understoodby the City and plan members. This understanding is based on communications between employer andplan members and the historical pattern of practice with regard to the sharing of benefit costs. Substantially all of the City's employees may become eligible for those post-retirement benefits if theyreach normal retirement age while working for the City.

52



JUNE 30, 2016

11. Other Post Employment Benefits (OPEB) (continued)

Funding Policy

The contribution requirement of the City is an implicit subsidy. The implicit subsidy is not a direct paymentfrom the employer on behalf of the member but rather stems from retiree contribution levels that are lessthan the claims cost at retiree ages. Since claims experience for employees and non-Medicare eligible retirees are pooled when determining premiums, these retired members may pay a premium based on apool of members that, on average, are younger and healthier. There is an implicit subsidy from theemployee group since the premiums paid by the retirees are lower than they would have been if the retireeswere insured separately. The subsidies are valued using the difference between the age-based claimscosts and the premium paid by the retiree. The amount required to fund the implicit rate is based on projected pay-as-you-go financing requirements. For the fiscal year 2016, Plan members receivingbenefits contributed $42,663, or 100% of the total premiums, through their required contributions of $475per month for retiree-only coverage and $993 per month for retiree and spouse medical coverage.

Annual OPEB Cost and net OPEB Obligation

The City's annual other post-employment benefit (OPEB) expense is calculated based on the annual required contribution of the employer (ARC), and amount actuarially determined in accordance with theparameters of GASB Statement N0. 45. The ARC represents a level of funding that, if paid on an ongoingbasis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.

The following table shows the components of the City's annual OPEB cost for the year, the amount actually contributed to the plan, and the changes in the City's net OBEB obligation:

Annual required contribution $ 134,376 Interest on net OPEB obligation 11,594 Adjustment to annual required contribution (24,873) Annual OPEB cost 121,097 Total annual employer contribution (pay-as-you-go) (26,255) Increase in net OPEB obligation 94,842 Net OPEB obligation - beginning of the year 386,462 Net OPEB obligation - end of the year $ 481,304

The City's annual OPEB cost, the percentage of annual OPEB cost contribution to the plan, and the net OPEB obligation for 2016 is as follows:

Percentageof Annual

Fiscal Year Annual Net OPEB Cost Net OPEBEnded OPEB Cost Contribution Contributed Obligation

6/30/2016 $ 121,097 26,255 22% $ 480,304 6/30/2015 82,063 23,301 28% 386,462 6/30/2014 82,063 20,302 25% 323,648 53



JUNE 30, 2016

11. Other Post Employment Benefits (OPEB) (continued)

Funded Status and Funding Progress

As of July 1, 2015, the most recent actuarial valuation date, the plan was not funded. The actuarialaccrued liability for benefits was $1,028,268 and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UALL) of $1,028,268. The covered payroll (annual payroll of activeemployees covered by the plan) was $2,916,000, and the ratio of the UAAL to the covered payrollwas 35%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptionsabout the probability of occurrence of events far into the future. Examples include assumptions aboutfuture employment, mortality, and the healthcare cost trend. Amounts determined regarding the fundedstatus 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 are made about the future. Theschedule of funding progress, presented as required supplementary information following the notes tothe financial statements, presents multi-year trend information about whether the actuarial value of planassets is increasing or decreasing over time relative to actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

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

The following assumptions were used in the June 30, 2016 actuarial valuation:

Actuarial Cost Method Projected Unit CostDiscount Rate 3.00%Healthcare Trend and Contribution

Increases 6.12% in 2016 graded to 4.87% in 2060Acceptance Rate - Medical

Civilians 25%Police and Fire 50%

Spouse covered if retiree is covered 50%Mortality RP2000 ProjectedTurnover and Retirement Rates ExperienceRemaining Amortization Period 24 years

54



JUNE 30, 2016

12. Fund Balance Reporting

The City follows GASB 54 as part of its 2015-2016 fiscal year reporting. The intention of the GASB isto provide a more structured classification of fund balance and to improve the usefulness of fund balancereporting to the users of the City's financial statements. The reporting standard establishes a hierarchyfor fund balance classifications and the constraints imposed on the uses of those resources.

GASB 54 provides for two major types of fund balances, which are non-spendable and spendable. Non-spendable fund balances are balances that cannot be spent because they are not expected to be converted to cash or they are legally or contractually required to remain intact. Examples of this classification are prepaid items, inventories, and principal (corpus) of an endowment fund. The Citydoes not have any non-spendable funds related to endowments.

As of June 30, 2016, fund balances of the governmental funds are classified as follows:

Non-spendable - amounts that cannot be spent either because they are in non-spendable form or because they are legally or contractually required to be maintained intact.

Restricted - amounts that can be spent only for specific purposes because of constitutional provisions,charter requirements or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments.

Committed - amounts that can be used only for specific purposes determined by a formal action of theCity. The council is the highest level of decision making authority for the City. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by the council.

Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes.

Unassigned - all other spendable amounts.Poteau Total

Industrial Special Capital Governmental

General Authority Revenue Projects Funds

Fund BalancesNon-spendable

Prepaids $ 54,435 $ - $ 14,385 $ - $ 68,820 Restricted

Law Enforcement - - 9 - 9 Juvenile Court - - 38,916 - 38,916 Police Drug - - 69,132 - 69,132 Cemetery Care - - - 41,694 41,694

Nonmajor Funds

55



JUNE 30, 2016

12. Fund Balance Reporting (continued)

AssignedPoteau Industrial Authority - 1,214,944 - - 1,214,944

Unassigned 5,793,084 - (962,123) - 4,830,961 Total Fund Balances$ 5,847,519 $ 1,214,944 $ (839,681) $ 41,694 $ 6,264,476

13. Operating Leases

The City leases equipment items under separate operating leases. Total lease expense wasapproximately $54,000 for the year ended June 30, 2016.

Future minimum annual rental commitments under the non-cancellable operating leases at June 30,2016 are as follows:

Year ending June 30,

Govern-mental Funds

Poteau Public Works

Authority Total2017 $ 22,200 $ 32,000 $ 54,200 2018 16,650 - 16,650 Total $ 38,850 $ 32,000 $ 70,850

14. Sales Tax

The sales tax rate in the City of Poteau is 9.50%. The State of Oklahoma receives 4.50%, the City3.00% and LeFlore County 2.00%. The 3.00% for the City of Poteau is broken down as follows:

- 2.75% remains in the General Fund to fund City operations. - 0.25% is transferred to the Poteau Public Works Authority for debt service.

The use tax mirrors the sales tax rate and applies to purchases by a resident or business in Poteaufor the use, storage or consumption of goods in Oklahoma that were purchased outside the state.

15. Concentrations of Credit Risks

Financial instruments that potentially subject the City and Poteau Public Works Authority to credit riskconsist primarily of the accounts receivable of Poteau Public Works Authority. Poteau Public Works Authority sells primarily to members in and around Poteau, Oklahoma.

56



JUNE 30, 2016

16. Settlement Proceeds

In November 2015, the Poteau Industrial Authority (PIA) entered into a general release and settlementagreement with a guarantor, conveying a personal guarantee of debt incurred by PIA in relation to a building owned by the guarantor. As part of the agreement, the guarantor will pay a total of $1,750,000plus interest on the unpaid balance of 3%. The settlement will be paid in quarterly principal payments of$208,333 plus interest paid in full. As of June 30, 2016, the City has received $938,750, of which $916,666 was principal and $22,084 was interest. The PIA has a receivable balance of $848,958 atJune 30, 2016 that includes both principal of $833,34 and interest of $15,625, all of which is exceptedto be collected within the next fiscal year. The funds will be used to retire PIA's note payable to CentralNational Bank that has a balance of $999,790 at June 30, 2016.

17. Prior Period Adjustment

A prior period adjustment was made to net position (government-wide) and fund balance (governmentfunds) to correct some account balances. The effect of these adjustments is as follows:

Governmental GovernmentActivities Funds

Remove deferred revenue $ - $ 110,074 Remove delinquent accounts receivable (27,994) (27,994) Remove cash account transferred to school district (25,526) (25,526) Add capital assets previously not recorded, net accumulated depreciation 276,880 - Net Increase in Net Position / Fund Balance $ 223,360 $ 56,554

There was also a prior period adjustment made to reclass the other post employment obligationbetween funds. The effect was to increase Poteau Public Works Authority net position by $85,196,increase government-wide net position by $301,370 and decrease the Poteau Insurance fund net position by $386,566. This entry gets eliminated in it's entirety when the Poteau Insurance fundis added in the government-wide statement of activities.

18. Risk Management

The City is exposed to various levels of loss related to torts; theft of, damage to, and destruction ofassets; errors and omissions; injuries to employees; and natural disasters. The City carries commercialinsurance for risk of loss.

There has been no significant reduction in the City's insurance coverage from the previous year. Inaddition, there have been no settlements in excess of the City's coverage in any of the prior threefiscal years.

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JUNE 30, 2016

18. Risk Management (continued)

The general fund and Poteau Public Works Authority fund participate in the City's medical insuranceprogram and make payments to the self-insurance fund based on estimates of the amounts needed topay prior and current year claims and to establish a reserve for future claims. At June 30, 2016, the netposition in the Poteau Insurance fund was $23,242. The claims liability balance of $52,895 is based onthe requirements of GASB Statement 10, Accounting and Financial Reporting Risk Financing andRelated Insurance Issues, which requires that a liability for claims be reported if information prior to

the issuance of the financial statements indicates that it is probable that a liability has been incurredat the date of the financial statements and the amount of the loss can be reasonably estimated. Theclaims are accruals for claims incurred but not reported and are the City's best estimate based on the available information.

19. Rate Covenant

The Oklahoma Water Resources Board loan dated July 22, 1997 requires that Poteau Public WorksAuthority maintain a debt service coverage ratio of 1.25. As of June 30, 2016, Poteau Public Works Authority was in compliance with this covenant.

20. Contingent Liability

The Poteau Library Building Project, Inc. executed an agreement with Meta Markets OK, LLC on July 18,2011 in the amount of $1,535,675, whereby the Poteau Library Building Project, Inc. would be liable forlost tax credits of an equal amount should the project not be completed. The contingent liability will expire after seven years. The Poteau Library Building Project, Inc. was organized to construct a newlibrary building in the City of Poteau and is wholly-owned by the City of Poteau. No principal or interestpayments have been paid or were due since inception of the agreement and it is anticipated by management that the contingent liability will be forgiven in full on July 18, 2018.

21. Subsequent Events

The City has evaluated events and transactions for subsequent events that would impact the financialstatements for the year ended June 30, 2016 through April 14, 2017, the date the financial statementswere available to be issued. There were no subsequent events that require recognition or disclosure inthe financial statements.

58

REQUIRED SUPPLEMENTARY INFORMATION


BUDGETARY COMPARISON SCHEDULE - GENERAL FUND


VarianceFavorable

Original Final Actual (Unfavorable)RevenuesTaxes $ 5,833,415 $ 5,872,415 $ 5,814,128 $ (58,287) Licenses and permits 12,281 16,781 20,057 3,276 Intergovernmental 303,882 303,882 473,586 169,704 Fines and forfeitures 297,680 297,680 243,520 (54,160) Charges for services 275,250 285,474 213,206 (72,268) Grant income 400,000 9,923 9,923 - Other 251,771 251,771 240,468 (11,303) Interest 23,930 23,930 17,554 (6,376)

Total Revenues 7,398,209 7,061,856 7,032,442 (29,414) ExpendituresGeneral government 683,763 678,763 647,900 30,863 Public safety 2,628,157 2,661,962 2,788,710 (126,748) Public works 1,793,406 1,760,154 1,573,627 186,527 Culture and recreation 1,095,127 1,103,627 978,504 125,123 Economic development 5,500 28,000 27,844 156 Capital outlay 708,273 632,773 451,634 181,139 Debt service:

Principal 79,723 80,518 80,303 215 Interest 88,000 88,000 87,463 537

Total Expenditures 7,081,949 7,033,797 6,635,985 397,812

Excess of Revenues Over Expenditures 316,260 28,059 396,457 368,398

Total Other Financing Sources (252,457) (252,457) (692,803) (440,346)

Net Change in Fund Balance 63,803 (224,398) (296,346) (71,948)

Fund Balance, Beginning of Year as previously stated 6,087,311 6,087,311 6,087,311 - Prior period adjustment - - 56,554 56,554 Fund Balance, Beginning of Year as restated 6,087,311 6,087,311 6,143,865 56,554

Fund Balance, End of Year $ 6,151,114 $ 5,862,913 $ 5,847,519 $ (15,394)

See independent auditor's report.

59

Budget


BUDGETARY COMPARISON SCHEDULE - POTEAU INDUSTRIAL AUTHORITY


VarianceFavorable

Original Final Actual (Unfavorable)RevenuesCharges for services $ 21,600 $ 21,600 $ 21,600 $ - Grant income - - 79,044 79,044 Other 2,000 2,000 - (2,000) Interest 300 300 505 205

Total Revenues 23,900 23,900 101,149 77,249 ExpendituresEconomic development 134,000 227,000 207,106 19,894 Capital outlay - 195,000 193,906 1,094 Debt service:

Principal 1,499,790 1,211,790 500,394 711,396 Interest 35,000 35,000 53,828 (18,828)

Total Expenditures 1,668,790 1,668,790 955,234 713,556

Excess of Revenues Over Expenditures (1,644,890) (1,644,890) (854,085) 790,805

Other Financing Sources (Uses)Operating transfers 144,890 144,890 313,680 168,790 Settlement proceeds 1,500,000 1,500,000 1,668,647 168,647

Total Other Financing Sources 1,644,890 1,644,890 1,982,327 337,437

Net Change in Fund Balance - - 1,128,242 1,128,242

Fund Balance, Beginning of Year 86,702 86,702 86,702 - Fund Balance, End of Year $ 86,702 $ 86,702 $ 1,214,944 $ 1,128,242

Budget


60


SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATEDRATIOS LAST TWO FISCAL YEARS - OKLAHOMA MUNICIPAL RETIREMENT FUND


2015 2014Total Pension LiabilityService cost $ 138,570 $ 125,399 Interest cost 464,577 449,507 Benefit changes due to plan amendments - - Difference between expected and actual experience 38,046 - Changes of assumptions - - Benefit payment, including refunds of employee contributions (275,121) (235,739) Net change in total pension liability 366,072 339,167 Total pension liability - beginning 6,129,534 5,790,367 Total pension liability - ending $ 6,495,606 $ 6,129,534

Plan Net Fiduciary PositionContributions - employer $ 168,274 $ 177,346 Contributions - employee 71,516 75,372 Net investment income 163,006 822,213 Benefit payments, including refunds of employee contributions (275,121) (235,739) Administrative (12,084) (12,176) Other changes - - Net change in plan net fiduciary position 115,591 827,016 Plan net fiduciary position - beginning 5,828,766 5,001,750 Plan net fiduciary position - ending $ 5,944,357 $ 5,828,766

Net pension liability - ending $ 551,249 $ 300,768

Plan net fiduciary position as percentage of total pension liability 91.51% 95.09%

Covered employee payroll $ 1,599,660 $ 1,738,399

Net pension liability positon as percentage of covered employeepayroll 34.46% 17.30%

Note to Schedule:Only two current fiscal years are presented because 10-year data in not yet available.


61


SCHEDULE OF EMPLOYER CONTRIBUTIONS LAST FISCAL YEAROKLAHOMA MUNICIPAL RETIREMENT FUND


2015 2014Contractually required contribution $ 168,724 $ 177,346

Contributions in relation to the contractually required contribution (168,724) (177,346) Contribution deficiency (excess) $ - $ -

City's covered-employee payroll $ 1,599,660 $ 1,738,399

Contributions as a percentage of covered-employee payroll 10.55% 10.20%



62


SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITYOKLAHOMA FIREFIGHTERS PENSION AND RETIREMENT FUND


2015 2014Proportion of the net pension liability 0.077921% 0.075433%

Proportionate share of the net pension liability $ 827,064 $ 775,713

Covered employee payroll $ 213,221 $ 209,143

Proportionate share of the net pension liability as a percentage of its covered employee payroll 388% 371%

Plan fiduciary net position as a percentage of thetotal pension liability 67.59% 68.12%



63


SCHEDULE OF EMPLOYER CONTRIBUTIONS LAST FISCAL YEAROKLAHOMA FIREFIGHTERS PENSION AND RETIREMENT FUND




District's covered-employee payroll $ 213,221 $ 209,143




64


SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITYOKLAHOMA POLICE PENSION AND RETIREMENT FUND


2015 2014Proportion of the net pension liability 0.3161% 0.3115%

Proportionate share of the net pension liability (asset) $ 12,889 $ (104,878)

Covered employee payroll $ 896,900 $ 867,629

Proportionate share of the net pension liability as a percentage of its covered employee payroll 1% -12%

Plan fiduciary net position as a percentage of thetotal pension liability 99.82% 101.53%



65


SCHEDULE OF EMPLOYER CONTRIBUTIONS LAST FISCAL YEAROKLAHOMA POLICE PENSION AND RETIREMENT FUND




District's covered-employee payroll $ 896,900 $ 867,629




66


SCHEDULE OF FUNDING PROGRESSOTHER POST EMPLOYMENT BENEFITS


UnfundedActuarialAccrued

Value of Unfunded Liability as aActuarial Assets Actuarial Actuarial Annual PercentageValuation Available Accrued Accrued Percentage Covered of Covered

Date for Benefits Liability Liability Funded Payroll Payroll

7/1/2015 - 1,028,268 1,028,268 0.0% 2,916,000 35.3%7/1/2012 - 713,847 713,847 0.0% 2,695,000 26.5%7/1/2009 - 574,080 574,080 0.0% 1,800,000 31.9%


67

ADDITIONAL SUPPLEMENTARY INFORMATION


COMBINING BALANCE SHEET - GENERAL FUND

AS OF JUNE 30, 2016

General TotalGeneral Fund General

Fund Reserve FundAssetsCash and cash equivalents $ 1,115,577 $ $ 1,115,577 Certificates of deposit 1,681,630 2,506,736 4,188,366 Receivables, net allowance for doubtful accounts 1,149,402 3,190 1,152,592 Due from other funds 1,500 - 1,500 Other assets 54,435 - 54,435 Total Assets $ 4,002,544 $ 2,509,926 $ 6,512,470

Liabilities & Fund BalancesLiabilitiesAccounts payable $ 250,542 $ - $ 250,542 Payroll and payroll withholdings 68,402 - 68,402 Due to other funds 346,007 - 346,007 Total Liabilities 664,951 - 664,951

Fund BalancesNon-spendable 54,435 - 54,435 Unassigned 3,283,158 2,509,926 5,793,084 Total Fund Balances 3,337,593 2,509,926 5,847,519 Total Liabilities and Fund Balances $ 4,002,544 $ 2,509,926 $ 6,512,470


68


COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GENERAL FUND


General TotalGeneral Fund General

Fund Reserve FundRevenuesTaxes $ 5,814,128 $ - $ 5,814,128 Licenses and permits 20,057 - 20,057 Intergovernmental 473,586 - 473,586 Fines and forfeitures 243,520 - 243,520 Charges for services 213,206 - 213,206 Grant income 9,923 9,923 Other 240,468 - 240,468 Interest 7,586 9,968 17,554 Total Revenues 7,022,474 9,968 7,032,442

ExpendituresGeneral government 647,900 - 647,900 Public safety 2,788,710 - 2,788,710 Public works 1,573,627 - 1,573,627 Culture and recreation 978,504 - 978,504 Economic development 27,844 - 27,844 Capital outlay 451,634 - 451,634 Debt service: -

Principal 80,303 - 80,303 Interest 87,463 - 87,463

Total Expenditures 6,635,985 - 6,635,985 Excess of Revenues Over (Under) Expenditures 386,489 9,968 396,457

Other Financing Sources (Uses)Operating transfers (692,803) - (692,803) Proceeds from sale of property - - - Proceeds of loss recoveries - - - Total Other Financing Sources (Uses) (692,803) - (692,803) Net Change in Fund Balance (306,314) 9,968 (296,346)

Fund Balance, Beginning of Year as previously stated 3,587,353 2,499,958 6,087,311 Prior period adjustment 56,554 - 56,554 Fund Balance, Beginning of Year as restated 3,643,907 2,499,958 6,143,865

Fund Balance, End of Year $ 3,337,593 $ 2,509,926 $ 5,847,519


69


COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS

AS OF JUNE 30, 2016

Robert S. Kerr Law Juvenile Police PoliceAirport Enforcement Court Drug CourtFund Grant Fund Fund Fund Fund

AssetsCash and cash equivalents $ (398,056) $ 9 $ 38,916 $ 2,566 $ 1,916 Certificates of deposit - - - 66,561 - Receivables - - - 5 - Inventories 14,385 - - - - Total Assets $ (383,671) $ 9 $ 38,916 $ 69,132 $ 1,916

Liabilities & Fund BalancesLiabilitiesAccounts payable $ 14,916 $ - $ - $ - $ 416 Payroll and payroll withholdings 50 - - - - Due to other funds - - - - 1,500 Total Liabilities 14,966 - - - 1,916

Fund BalancesNon-spendable 14,385 - - - - Restricted - 9 38,916 69,132 - Unassigned (413,022) - - - - Total Fund Balances (398,637) 9 38,916 69,132 -

Total Liabilities and Fund Balances $ (383,671) $ 9 $ 38,916 $ 69,132 $ 1,916

Special Revenue


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COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS

AS OF JUNE 30, 2016

AssetsCash and cash equivalentsCertificates of depositReceivablesInventoriesTotal Assets

Liabilities & Fund BalancesLiabilitiesAccounts payablePayroll and payroll withholdingsDue to other fundsTotal Liabilities

Fund BalancesNon-spendableRestrictedUnassignedTotal Fund Balances

Total Liabilities and Fund Balances

CapitalProjects Total

Library Poteau Cemetery NonmajorBuilding Nutrition Care Governmental

Fund Fund Fund Funds

$ (336,027) $ (210,503) $ - $ (901,179) - - 41,694 108,255 - 4,035 - 4,040 - - - 14,385

$ (336,027) $ (206,468) $ 41,694 $ (774,499)

$ - $ 5,830 $ - $ 21,162 - 776 - 826 - - - 1,500 - 6,606 - 23,488

- - - 14,385 - - 41,694 149,751

(336,027) (213,074) - (962,123) (336,027) (213,074) 41,694 (797,987)

$ (336,027) $ (206,468) $ 41,694 $ (774,499)

Special Revenue


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COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS


Robert S. Kerr Law Juvenile Police PoliceAirport Enforcement Court Drug CourtFund Grant Fund Fund Fund Fund

RevenuesCharges for services $ 133,796 $ - $ - $ - $ - Grant income 20,521 - - - - Fines and forfeitures - - 6,252 - - Interest - - 78 270 - Total Revenues 154,317 - 6,330 270 -

ExpendituresGeneral government - - - Public safety - - 3,925 - - Public works 194,577 - - - - Culture and recreation - - - - - Economic development - - - - - Capital outlay 35,901 - - - - Debt service:

Principal - - - - - Interest - - - - -

Total Expenditures 230,478 - 3,925 - - Excess of Revenues Over (Under)

Expenditures (76,161) - 2,405 270 -

Other Financing Sources (Uses)Operating transfers - - - - - Proceeds from sale of property - - - - - Proceeds of loss recoveries - - - - - Total Other Financing Sources (Uses) - - - - - Net Change in Fund Balance (76,161) - 2,405 270 - Fund Balance, Beginning of Year (322,476) 9 36,511 68,862 - Fund Balance, End of Year $ (398,637) $ 9 $ 38,916 $ 69,132 $ -

Special Revenue


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COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS


RevenuesCharges for servicesGrant incomeFines and forfeituresInterestTotal Revenues

ExpendituresGeneral governmentPublic safetyPublic worksCulture and recreationEconomic developmentCapital outlayDebt service:

PrincipalInterest

Total Expenditures

Excess of Revenues Over (Under)

Expenditures

Other Financing Sources (Uses)Operating transfersProceeds from sale of propertyProceeds of loss recoveriesTotal Other Financing Sources (Uses)

Net Change in Fund Balance

Fund Balance, Beginning of Year

Fund Balance, End of Year

CapitalProjects Total

Library Poteau Cemetery NonmajorBuilding Nutrition Care Governmental

Fund Fund Fund Funds

$ - $ - $ - $ 133,796 - 64,045 - 84,566 - - - 6,252 - - 125 473 - 64,045 125 225,087

- - - - - - - 3,925 - 116,495 - 311,072 11 - - 11

- - - - - - - 35,901

- - - - - - - - 11 116,495 - 350,909

(11) (52,450) 125 (125,822)

- 334 - 334 - - - - - - - - - 334 - 334 (11) (52,116) 125 (125,488)

(336,016) (160,958) 41,569 (672,499) $ (336,027) $ (213,074) $ 41,694 $ (797,987)

Special Revenue


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COMBINING STATEMENT OF NET POSITION - ENTERPRISE FUNDSPOTEAU PUBLIC WORKS AUTHORITY

AS OF JUNE 30, 2016

PPWA MeterPPWA Reserve Deposit Fund Total

AssetsCurrent AssetsCash and cash equivalents $ 964,793 $ - $ - $ 964,793 Certificates of deposit 1,104,417 440,945 - 1,545,362 Receivables, net of allowance for doubtful accounts 289,425 650 - 290,075 Due from other funds 83,295 - - 83,295 Restricted assets - cash and investments - - 279,935 279,935 Total Current Assets 2,441,930 441,595 279,935 3,163,460


Land 23,500 - - 23,500 Buildings 45,750 - - 45,750 Utility system improvements 17,752,877 - - 17,752,877 Machinery and equipment 696,797 - - 696,797 Vehicles 572,032 - - 572,032 Accumulated depreciation (17,076,764) - - (17,076,764)

Capital Assets-Net 2,014,192 - - 2,014,192 Total Assets 4,456,122 441,595 279,935 5,177,652

Deferred OutflowsDeferred amounts related to pensions 148,055 - - 148,055 Total Deferred Outflows 148,055 - - 148,055

LiabilitiesCurrent LiabilitiesTrade accounts payable 262,175 - - 262,175 Payroll and payroll withholdings 22,405 - - 22,405 Interest payable 1,362 - - 1,362 Current maturity of long-term debt 146,717 - - 146,717 Payable from restricted assets

Customer meter deposits - - 278,902 278,902 Total Current Liabilities 432,659 - 278,902 711,561

Non-current LiabilitiesLong-term debt 223,692 - - 223,692 Compensated absences 45,619 - - 45,619 Other post employment benefits 102,461 - - 102,461 Pension liability 197,394 - - 197,394 Total Non-current Liabilities 569,166 - - 569,166 Total Liabilities 1,001,825 - 278,902 1,280,727

Deferred InflowsDeferred amounts related to pensions 95,774 - - 95,774 Total Deferred Inflows 95,774 - - 95,774

Net PositionNet investment in capital assets 1,643,783 - 1,643,783 Unrestricted 1,862,795 441,595 1,033 2,305,423 Total Net Position $ 3,506,578 $ 441,595 $ 1,033 $ 3,949,206


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COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITIONENTERPRISE FUNDS

POTEAU PUBLIC WORKS AUTHORITY


MeterPPWA Deposit

PPWA Reserve Fund TotalOperating RevenuesCharges for services

Water $ 1,094,910 $ - $ - $ 1,094,910 Wastewater 876,811 - - 876,811 Sanitation 477,629 - - 477,629 Penalties 93,155 - - 93,155 Other 2,033 - - 2,033

Total Revenues 2,544,538 - - 2,544,538

Operating ExpensesWater 910,049 - - 910,049 Wastewater 724,479 - - 724,479 Sanitation 440,509 - - 440,509 Administration 374,880 - - 374,880 Depreciation 420,017 - - 420,017

Total Operating Expenses 2,869,934 - - 2,869,934

Net Income from Operations (325,396) - - (325,396)

Non-Operating Revenue (Expenses) Interest income 7,324 1,743 - 9,067 Interest expense (6,011) - - (6,011) Miscellaneous 5,696 - - 5,696

Total Non-Operating Revenue (Expenses) 7,009 1,743 - 8,752

Net Income (Loss) Before Operating Transfers (318,387) 1,743 - (316,644) Operating transfers in / (out) 377,756 - 1,033 378,789 Change in Net Position 59,369 1,743 1,033 62,145

Net Position, Beginning of Year 3,362,013 439,852 - 3,801,865 Prior period adjustment 85,196 - - 85,196 Net Position, Beginning of Year, restated 3,447,209 439,852 - 3,887,061

Net Position, End of Year $ 3,506,578 $ 441,595 $ 1,033 $ 3,949,206


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STATEMENT OF CASH FLOWS - ENTERPRISE FUNDSPOTEAU PUBLIC WORKS AUTHORITY


MeterPPWA Deposit

PPWA Reserve Fund TotalCash Flows from Operating ActivitiesCash received from customers $ 2,517,697 $ - $ 9,285 $ 2,526,982 Cash payments to suppliers for goods and services (1,742,757) - (111) (1,742,868) Cash payments to employees (629,333) - - (629,333) Net Cash Provided (Used ) By Operating Activities 145,607 - 9,174 154,781

Cash Flows from Noncapital and Related Financing ActivitiesCash transfers 377,756 - 1,033 378,789 Net borrowings (repayment) of advances from primary

government 49,134 - (768) 48,366 Miscellaneous revenues/(expenses) 5,696 - - 5,696 Net Cash Provided For Noncapital and Related Financing

Activities 432,586 - 265 432,851

Cash Flows from Capital and Related Financing ActivitiesCash used to acquire fixed assets (185,572) - - (185,572) Principal paid on debt (144,802) - - (144,802) Interest paid on debt (6,286) - - (6,286) Net Cash Provided For Capital and Related Financing

Activities (336,660) - - (336,660)

Cash Flows from Investing ActivitiesReinvestment of certificate of deposit earnings (4,638) (1,763) - (6,401) Net activity of restricted accounts - - (9,439) (9,439) Interest income 7,324 1,763 - 9,087 Net Cash Provided (Used) By Investing Activities 2,686 - (9,439) (6,753) Net Increase / (Decrease) in Cash and Cash Equivalents 244,219 - - 244,219 Cash and Cash Equivalents, Beginning of Year 720,574 - - 720,574 Cash and Cash Equivalents, End of Year $ 964,793 $ - $ - $ 964,793

Reconciliation of Operating Income to Net Cash Provided By Operating ActivitiesOperating loss $ (325,396) $ - $ - $ (325,396) Adjustments:

Depreciation 420,017 - - 420,017 Net change in assets and liabilities:

Trade accounts receivable (26,841) - - (26,841) Accounts payable 101,714 - (111) 101,603 Payroll and payroll withholdings 3,473 - - 3,473 Customer meter deposits - 9,285 9,285 Compensated absences (1,551) - - (1,551) Other post employment benefits 17,265 - - 17,265 Net pension liability 81,634 - - 81,634 Deferred charges relating to pension (124,708) - - (124,708)

Net Cash Provided (Used) By Operating Activities $ 145,607 $ - $ 9,174 $ 154,781


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ADDITIONAL REQUIRED REPORT

4200 Jenny Lind Rd., Ste. B Fort Smith, Arkansas 72901

Ph: 479.649.0888 email: [email protected] www.selectcpa.com

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Independent Auditor’s Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit of Financial Statements Performed In Accordance With Government Auditing Standards To the City Council City of Poteau, Oklahoma We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the remaining fund information of City of Poteau, Oklahoma, as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise City of Poteau, Oklahoma’s basic financial statements, and have issued our report thereon dated April 14, 2017. Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the City of Poteau Oklahoma’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Poteau, Oklahoma’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of Poteau, Oklahoma’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control 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. We

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did identify a certain deficiency in internal control, described in the accompanying schedule of findings and responses that we consider to be significant deficiency as item 2016-002. Compliance and Other Matters

As part of obtaining reasonable assurance about whether City of Poteau, Oklahoma’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 an instance of noncompliance or other matters that is required to be reported under Government Auditing Standards, and which is described in the accompanying schedule of findings and responses as item 2016-001.

The City of Poteau’s Response to the Findings

The City’s response to the findings identified in our audit is described in the accompanying schedule of findings and responses. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Przybysz & Associates, CPAs, P.C. Fort Smith, Arkansas April 14, 2017


SCHEDULE OF FINDINGS AND RESPONSES


Findings - Financial Statement Audit

2016-001 Negative Fund Balances

Condition:The following accounting funds had an overall deficit in fund balance as of June 30, 2016:

Robert Kerr Airport Fund $ 398,637Library Building Fund $ 336,027Poteau Nutrition Fund $ 213,074

Criteria:Oklahoma statutes prohibit negative fund balances for any accounting fund.

Cause and Effect:Expenditures exceeded revenues and other sources on a cumulative basis in each of the funds. Each fund was part of the pooled cash account so disbursements were not made inexcess of cash available in the bank account. However, cash from other funds was neededto cover the excess expenditures.

Recommendation:Transfers should be made from other funds, such as the general fund, to cover the deficit fundbalance in each of the above funds.

Responsible Official's Comments and Plan of ActionTransfers will be considered from the general fund to cover these negative balances.

2016-002 Internal Controls Over Financial Statement Preparation

Condition:The City does not have sufficient internal controls over the preparation and review of the Generally Accepted Accounting Principles (GAAP) based financial statements and footnote disclosures. Management may fail to prevent or detect financial statement and footnotedisclosure errors.

Criteria:The City is required to maintain systems of controls and have trained personnel with the knowledge and expertise concerning Governmental Accounting Standards Board (GASB) pronouncements to prepare and/or review GAAP based financial statements and footnote disclosures.

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SCHEDULE OF FINDINGS AND RESPONSES (CONTINUED)


Findings - Financial Statement Audit - Current Year (continued)

2016-002 Internal Controls Over Financial Statement Preparation (continued)

Cause and Effect:The City does not maintain systems of controls over the preparation of financial statements and footnote disclosures in accordance with GAAP. Management may fail to prevent or detect financial statement and footnote disclosure errors.

Recommendation:The City should implement systems of internal controls, to the extent possible, regarding the preparation and/or review of GAAP based financial statements and footnote disclosures bytrained personnel with knowledge of GASB pronouncements which ensures the statements and dislcosures are free from errors.

Responsible Official's Comments and Plan of ActionManagement will monitor the systems of internal controls relating to the preparation of the GAAP based financial statements and footnote disclosures and implement the corrective procedures to the extent possible.

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SCHEDULE OF PRIOR YEAR FINDINGS AND RESPONSES


Findings - Financial Statement Audit

2015-001 Municipal Court

Condition:The following items were noted: - Hand written receipts are prepared for payments received rather than computer-generated

receipts - Dismissed and deferred citations are not correctly reported in the court accounting system - Time payments made on fines are not all entered into the court accounting system due to

system limitations - Supporting detail for receipts is maintained by the Court Clerk and not provided to finance for

their reconciliation with the deposits - The warrant report from the Court system did not agree with the report from the ODIS system - Receipts journal is not always reprinted after reconciliation to ensure corrections were made - Deposits are made by a police officer rather than being taken to City Hall and deposited with

all other funds collected - Court Clerk taking payments, making up thee deposit, and posting the activity - All fees collected as a single amount into the court system so it is difficult to accurately

determine the amounts due to CLEET, AAFIS and Forensic

Current Status:Corrective action was taken by management.

2015-002 Information Technology

Condition:Employee passwords do not periodically expire. Employees are asked to change their passwordsevery 90-120 days. The finance computer is not password protected, and does not shut off after alimited period. The City does not have written policies and procedures for the computer systemto include emergency plan, computer network and usage policy, passwords, and annual riskassessment.

Current Status:Corrective action was taken by management.

2015-003 Negative Fund Balances

See current year finding 2016-001

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Documents

CITY OF POTEAU, OKLAHOMA...Poteau, which include the City’s water, wastewater, and sanitation utility operations, include the Poteau Public Works Authority. The government-wide financial