Hampton Roads Criminal Justice Training Academy

Hampton Roads Criminal Justice

Training Academy

Financial Report

For the Fiscal Year Ended June 30, 2016

FINANCIAL REPORT

OF THE

HAMPTON ROADS CRIMINAL JUSTICE TRAINING

ACADEMY

For the Fiscal Year Ended June 30, 2016

Prepared by:

April Peters, City of Hampton, Virginia, Debt Manager

HAMPTON ROADS CRIMINAL JUSTICE TRAINING ACADEMY FINANCIAL REPORT

JUNE 30, 2016

TABLE OF CONTENTS

Page

Report of Independent Auditor .............................................................................................. 1 - 2 Management’s Discussion and Analysis ............................................................................... 3 - 7 Basic Financial Statements: Statement of Net Position .......................................................................................... 8 Statement of Revenues, Expenses and Changes in Net Position ............................... 9 Statement of Cash Flows ........................................................................................... 10 Notes to the Financial Statements .............................................................................. 11 - 27 Required Supplementary Information: Schedule of Academy’s Proportionate Share of Net Pension Liability ..................... 28 Schedule of Academy’s Contributions ...................................................................... 29 Report of Independent Auditor 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 ............................. 30 - 31

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Report of Independent Auditor To the Board of Directors Hampton Roads Criminal Justice Training Academy Hampton, Virginia Report on the Financial Statements We have audited the accompanying financial statements of Hampton Roads Criminal Justice Training Academy (the “Academy”), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Academy’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 an opinion 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Academy, as of June 30, 2016, and the changes in its financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on page 3-7 and the required supplementary information on pages 28-29 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 20, 2016 on our consideration of the Academy’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Academy’s internal control over financial reporting and compliance.

Virginia Beach, Virginia December 20, 2016

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MANAGEMENT’S DISCUSSION AND ANALYSIS The following discussion and analysis of the Hampton Roads Criminal Justice Training Academy’s (the “Academy”) financial performance provides an overview of the Academy’s financial activities for the fiscal year ended June 30, 2016. Please read it in conjunction with the Academy’s financial statements, which follow this section. FINANCIAL HIGHLIGHTS

The Academy’s net position (assets plus deferred outflows of resources less liabilities less deferred inflows of resources) was $1.9 million as of June 30, 2016. Of the Academy’s $1.9 million net position, $1.4 million is available for spending at the Academy’s discretion, the remaining balance being invested in capital assets or restricted for debt service.

For fiscal year 2016, the Academy had operating and non-operating revenues of $1.11 million, while operating and non-operating expenses were $1.11 million. Revenues exceeded expenses by $8,140.

OVERVIEW OF THE FINANCIAL STATEMENTS This annual financial report consists of five (5) sections: the report of independent auditor, Management’s Discussion and Analysis, basic financial statements, required supplementary information and report of independent auditor 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. The financial statements include notes to explain the information in the financial statements and to provide more detailed data. The Academy is a business-type activity that is funded by a combination of assessments of participating agencies, state police academy funds and tuition fees. The financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting, which is similar to that used by private sector companies. The following required financial statements provide both short-term and long-term information about the Academy’s overall financial status. Statement of Net Position The Statement of Net Position presents information on all of the Academy’s assets plus deferred outflows of resources less liabilities and deferred inflows of resources, with the difference between them reported as net position. This statement provides information about the nature and the amounts of investments and the obligations to the Academy’s creditors at fiscal year end. It also provides a basis for evaluating the capital structure of the Academy and assessing the liquidity and financial flexibility of the Academy.

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Statement of Revenues, Expenses and Changes in Net Position All of the revenues and expenses for the fiscal year are accounted for in the Statement of Revenues, Expenses and Changes in Net Position regardless of the timing of cash flow. This statement measures the results of the Academy’s operations for the fiscal year and can be used to determine whether the Academy has successfully recovered all of its expenses through its assessments, charges and other revenues. Statement of Cash Flows The Statement of Cash Flows reports all cash receipts, cash disbursements and changes in cash from operating, investing and non-capital and capital related financing activities. This statement provides information about all the sources and uses of cash and the net change in the balance of cash and cash equivalents for the fiscal year.

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Summary of Net Position Net position may serve as a useful indicator of an entity’s financial position. The following table presents a summary of net position for the Academy as of June 30, 2016 and 2015:

2016 2015Assets:

Current and other assets 2,337,263$ 2,361,139$ Capital assets, net 1,264,059 1,325,555

Total assets 3,601,322 3,686,694

Deferred Outflows of Resources:Related to pensions 130,690 87,799

Total deferred outflows of resources 130,690 87,799

Liabilities:Current liabilities 123,022 111,153 Long-term obligations 1,621,298 1,637,426

Total liabilities 1,744,320 1,748,579

Deferred Inflow of Resources:Related to pensions 54,671 101,033

Total deferred inflows of resources 54,671 101,033

Net Position:Net investment in capital assets 404,059 400,555 Restricted for debt service 110,636 110,581 Unrestricted 1,418,326 1,413,745

Total net position 1,933,021$ 1,924,881$

Summary of Net PositionAs of June 30, 2016 and June 30, 2015

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The following table summarizes the changes in net position for the Academy for fiscal years ended June 30, 2016 and 2015:

2016 2015Operating revenues:

Charges for services 803,373$ 735,382$ Grants and contributions 310,838 309,696 Merchandise sales 68 1,731

Total operating revenues 1,114,279 1,046,809

Operating expenses:Personnel 663,871 683,614 General expenses 344,811 348,649 Depreciation and amortization 61,496 63,284

Total operating expenses 1,070,178 1,095,547

Operating income (loss) 44,101 (48,738) Net non-operating expenses (35,961) (39,935)

Increase (decrease) in net position 8,140 (88,673) Net position beginning 1,924,881 2,013,554 Net position end of year 1,933,021$ 1,924,881$

Summary of Changes in Net PositionFor the Years Ended June 30, 2016 and June 30, 2015

The two major revenue categories for the Academy are grants and contributions and charges for services. Charges for services consist of member dues, associate member dues and charges for tuition to non-members. Grants and contributions include revenues from the State Police Academy and the Department of Criminal Justice Services. Operating revenues increased by approximately $67,500 when compared to the previous year. Charges for services and grants and contributions revenues increased by approximately $68,000 and $1,000, respectively. Membership fees were raised $30 per officer in fiscal year 2016. The Academy’s personnel cost represents 62% of their operating expenses for fiscal years 2016 and 2015. The Academy finished out fiscal year 2016 with an approximate $25,000 decrease in operating expenses when compared to fiscal year 2015. This decrease is a result of adjustments for net pension liability.

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CAPITAL ASSETS The total capital assets net of accumulated depreciation decreased in fiscal year 2016 by approximately $61,500. This decrease is due to accumulated depreciation in excess of purchases in fiscal year 2016. More detailed information about the Academy’s capital assets is presented in Note 3 to the financial statements. LONG-TERM DEBT At the end of fiscal year 2016, the Academy had $860,000 in outstanding debt on revenue bonds issued through the Industrial Development Authority of the County of Stafford and the City of Staunton, Virginia. Total outstanding debt decreased in fiscal year 2016 due to normal annual debt service payments. More detailed information about the Academy’s long-term liabilities is presented in Note 4 to the financial statements. CONTACTING THE ACADEMY’S MANAGEMENT This financial report is designed to provide our members and creditors with a general overview of the Academy’s finances and to display the Academy’s accountability for the money it receives. If you have any questions or need other information regarding the Academy, please contact Mr. Vince Ferrara, Executive Director at 805 City Center Boulevard, Newport News, VA 23606. The phone number is (757) 591-9059.

Current assets:Cash and cash equivalents 2,225,999$

Total current assets 2,225,999

Restricted assets:Cash and cash equivalents - restricted for debt service 110,636

Other assets 628 Capital assets:

Land 180,000 Building 1,661,643 Office and operating equipment 75,456 Vehicle fleet 63,591

Less accumulated depreciation (716,631) Total capital assets (net of accumulated depreciation) 1,264,059

Total assets 3,601,322

Related to pensions 130,690 Total deferred outflows of resources 130,690

Current liabilities:Accounts payable 13,556 Accrued interest payable 15,489 Current portion of compensated absences 15,751 Current portion of bonds payable 70,000 Due to City of Hampton, Virginia 27 Other liabilities 8,199

Total current liabilities 123,022

Noncurrent liabilities:Bonds payable 790,000 Compensated absences 31,998 Net pension liability 799,300

Total noncurrent liabilities 1,621,298

Total liabilities 1,744,320

Related to pensions 54,671 Total deferred inflows of resources 54,671

Net investment in capital assets 404,059 Restricted for debt 110,636 Unrestricted 1,418,326

Total net position 1,933,021$

Hampton Roads Criminal Justice Training AcademyStatement of Net Position

ASSETS

DEFERRED OUTFLOWS OF RESOURCES

LIABILITIES

DEFERRED INFLOWS OF RESOURCES

June 30, 2016

NET POSITION

The notes to the financial statements are an integral part of this statement.

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Operating revenues:Charges for services 803,373$ Grants and contributions 310,838 Miscellaneous revenues 68

Total operating revenues 1,114,279

Operating expenses:Salaries 518,335 Benefits 145,536 Insurance 10,828 Utilities 24,269 Rental expense 18,882 Repairs and maintenance 50,527 General expenses 119,423 Supplies 49,070 Professional services 63,707 Telephone and postage 8,105 Depreciation expense 61,496

Total operating expenses 1,070,178 Operating income 44,101

Nonoperating revenues (expenses):Interest revenue 55 Interest expense (37,456) Net gain on disposal of capital assets 1,440

Total nonoperating expenses, net (35,961)

Change in net position 8,140

Net position beginning of year 1,924,881 Net position end of year 1,933,021$

Hampton Roads Criminal Justice Training AcademyStatement of Revenues, Expenses and Changes in Net Position

For the Year Ended June 30, 2016


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Cash flows from operating activities:Cash received from customers 1,114,279$ Cash payments to suppliers for goods and services (522,729) Cash payments to employees for services (513,316)

Net cash provided by operating activities 78,234

Cash flows from capital and related financing activities:Proceeds from sale of capital assets 1,440 Principal paid on long term debt (65,000) Interest paid (38,539)

Net cash used in capital and related financing activities (102,099)

Cash flows from investing activities:Interest and dividends on investments 55

Net cash provided by investing activities 55

Net decrease in cash and cash equivalents including restricted amounts (23,810)

Cash and cash equivalents (including restricted) - July 1 2,360,445

Cash and cash equivalents (including restricted) - June 30 2,336,635$

Operating income 44,101$

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

Depreciation expense 61,496 Increase (decrease) in:

Accounts payable and accrued expenses 5,979 Accrued leave and payroll 5,019 Net pension liability and related deferrals

as operating activity (38,361) Total adjustments 34,133

Net cash provided by operating activities 78,234$

Hampton Roads Criminal Justice Training AcademyStatement of Cash Flows

For the Year Ended June 30, 2016


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Hampton Roads Criminal Justice Training Academy Notes to the Financial Statements

June 30, 2016

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1. Summary of Significant Accounting Policies The Hampton Roads Criminal Justice Training Academy (the “Academy”) is a political subdivision of the Commonwealth of Virginia, established on July 1, 2000 by joint agreement of the Cities of Hampton, Newport News, Portsmouth, Poquoson and Williamsburg, and the counties of James City and York. This agreement revised the charter of and re-named the Hampton Roads Regional Academy of Criminal Justice, an earlier police academy, converting it into the current academy. The agreement allowed other jurisdictions to join as full voting members of the Academy. All parties to the 2000 agreement were members of the prior academy. In addition to the above mentioned members, there are 29 board member agencies and 22 associate member agencies. Associate members may not hold board seats or vote but have all other privileges of membership. The Academy provides training programs for new police and experienced police officers. The basic law enforcement class required for new police officers to meet certification is held three times per year. This class runs 18 weeks and averages 40 participants per class. The Academy also provides the basic combined jailor class for certification for jail, courtroom security and civil process officers. This 13-week class is held four times per year, and averages 40 participants per class. The basic dispatch class, for new E-911 dispatchers, is held three times per year for two weeks each and averages 15 participants per class. The Academy also provides in-service courses to certified police officers. All certified officers are required to complete 40 hours of continuing in-service training every two years. These courses are provided both on-line and in traditional classroom settings. The Academy receives intergovernmental revenues from the Commonwealth of Virginia and earns revenue from small items such as merchandise sales. The following is a summary of the significant accounting policies. Basis of Accounting The Academy utilizes the economic resources measurement focus and the accrual basis of accounting in preparing its financial statements where revenues are recognized when earned and expenses when incurred. The Academy distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with the Academy’s principal ongoing operations. The principal operating revenues of the Academy are charges to participating organizations for services. Operating expenses include the cost of services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

Hampton Roads Criminal Justice Training Academy Notes to the Financial Statements, Continued

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1. Summary of Significant Accounting Policies (continued) Cash and Equivalents The Academy’s restricted cash is comprised of cash maintained for debt payments as required by a bond covenant. For purposes of the Statement of Cash Flows, the Academy considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Capital Assets Capital outlays are capitalized to the extent the Academy’s capitalization threshold is met. The threshold is $2,500 for assets other than computer equipment. Computer equipment having a cost of $1,000 or more is capitalized. Depreciation is recorded on general capital assets using the straight-line method and the following estimated useful lives: Buildings and improvements 10 - 40 years Improvements other than buildings 10 - 25 years Equipment and vehicles 3 - 20 years All capital assets are recorded at historical cost or estimated historical cost if actual cost is not available. Gifts and contributions are recorded at acquisition value upon receipt. When assets are sold or retired, their costs are removed from the accounts and the proceeds, if any, are reflected as current year revenues. Deferred outflows/inflows of resources In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Net Position The Academy’s net position is comprised of three categories: (1) net investment in capital assets; (2) restricted for debt; and (3) unrestricted net position. The first category represents the portion of net position that is associated with non-liquid, capital assets, less the associated outstanding debt. Restricted net position reflects the assets whose use is restricted by outside parties or legal constraints. Net position, which is neither restricted nor invested in capital assets, is reported as unrestricted net position. As of June 30, 2016, the Academy’s restricted net position represent funds restricted for debt service by a bond covenant.


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1. Summary of Significant Accounting Policies (continued) Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Academy’s retirement plans (Plans) and the addition to/deductions from the Plans’ net fiduciary position have been determined on the same basis as they are reported by the Virginia Retirement System (VRS) and the Hampton Employees’ Retirement System (HERS). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Compensated Absences It is the Academy’s policy to permit employees to accumulate a limited amount of earned but unused annual and sick leave benefits, which will be utilized in future periods or will be paid to employees upon separation from Academy. The cost of annual and sick benefits is recognized when the leave is accrued. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, deferred flows of resources, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2. Deposits On June 30, 2016, the carrying value of the Academy’s deposits was $2,336,635. The Academy funds are managed and invested by the City of Hampton (the “City”), its fiscal agent. Funds are held in the same bank account with City funds by the City Treasurer’s office, except for the amount restricted for debt service. All of the bank balances are covered by the Federal Deposit Insurance Corporation (FDIC) and collateralized in accordance with the Virginia Security for Public Deposits Act (the “Act”) Section 2.2-4400 et. seq. of the Code of Virginia. Under the Act, banks and savings institutions holding public deposits in excess of the amount insured by the FDIC must pledge collateral to the Commonwealth of Virginia Treasury Board. Financial institutions may choose between two collateralization methodologies and depending upon that choice will pledge collateral that ranges in the amounts from 50% to 130% of excess deposits. Accordingly, all deposits are considered fully collateralized.


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3. Capital Assets Capital asset activity for the year ended June 30, 2016 is as follows:

Beginning Balance Additions Reductions

Ending Balance

Capital assets not being depreciatedLand 180,000$ -$ -$ 180,000$

Total capital assets not being depreciated 180,000$ -$ -$ 180,000$

Capital assets being depreciatedBuildings 1,661,643$ -$ -$ 1,661,643$ Vehicles 84,194 - (20,603) 63,591 Equipment 81,403 - (5,947) 75,456

Total capital assets being depreciated 1,827,240$ -$ (26,550)$ 1,800,690$

Total capital assets 2,007,240$ -$ (26,550)$ 1,980,690$

Less accumulated depreciation forBuildings (581,575)$ (41,541)$ -$ (623,116)$ Vehicles (48,453) (12,726) 20,603 (40,576) Equipment (51,657) (7,229) 5,947 (52,939)

Total accumulated depreciation (681,685) (61,496) 26,550 (716,631)

Total capital assets being depreciated, net 1,145,555 (61,496) - 1,084,059 Academy capital assets, net 1,325,555$ (61,496)$ -$ 1,264,059$

4. Long-Term Debt

The following is a summary of the changes in the Academy’s indebtedness during the year ended June 30, 2016:

Beginning Balance Additions Reductions

Ending Balance

Due Within One Year

Bonds payable 925,000$ -$ (65,000)$ 860,000$ 70,000$ Compensated absences 44,985 18,515 (15,751) 47,749 15,751 Net pension liability 748,408 50,892 - 799,300 -

Total long-term liabilities 1,718,393$ 69,407$ (80,751)$ 1,707,049$ 85,751$


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4. Long-Term Debt (continued) Public Improvement Bonds (the “Bonds”) were issued in the amount of $1,410,000, on December 22, 2005, through the Industrial Development Authority of the County of Stafford and the City of Staunton. The interest rates on the bonds range from 4.0% to 4.5%. Interest on the bonds is due and payable semi-annually, on each February 1 and August 1. The proceeds of the bonds were used to purchase the Academy’s building, which is used for training of new and veteran police officers. Revenue bond debt service requirements to maturity are as follows:

Fiscal Year Ending June 30 Principal Interest2017 70,000$ 35,774$ 2018 75,000 32,827 2019 75,000 29,686 2020 80,000 26,392 2021 85,000 12,346

2022-2026 475,000 65,688 860,000$ 202,713$

5. Defined Benefit Pension Plans

The Academy contributes to two pension plans for its employees, the Hampton Employees’ Retirement System (HERS) and the Virginia Retirement System (VRS). HERS covers all full-time salaried employees who were first hired prior to July 1, 1984 and VRS covers all full-time salaried employees. Plan Description – HERS: HERS is a single employer public employee defined benefit pension plan established and administered by the City to augment the retirement benefits provided to full-time permanent City, Academy and School Board employees under the VRS. HERS was established as a separate trust fund in 1966 and became non-contributory on January 1, 1975. The authority to establish and amend benefit provisions of HERS is governed by statue as set out in Chapter 28 of the Code of the City. All full-time permanent employees of the City, Academy and Component Unit – School Board, who are members of VRS and have credit with HERS for service rendered prior to July 1, 1984, are members. HERS was closed to new entrants effective July 1, 1984.

HERS provides retirement benefits as well as death-in-service and disability benefits. All benefits vest after five years of credited service. Employees who retire on or after age 60 with five or more years of credited service or upon attaining age 55 with 25 or more years


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5. Defined Benefit Pension Plans (continued) of credited service (age 50 for public safety officers) are entitled to an annual benefit, payable monthly for life, in an amount equal to 2% of their final average compensation for each of the first 20 years of credited service, plus 2¼% for each year of service thereafter, offset by an assumed VRS benefit equal to 1½% of their average final compensation for credited service with VRS resulting for City service. Final average compensation is the employee’s average salary, excluding overtime, over the three highest consecutive years of credited service as a member. Employees with five years of credited service may retire on or after 55 (age 50 for public safety officers) and receive a reduced retirement benefit. Additionally, a plan amendment passed in 1999 allows for early retirement at age 50 for school and general members having at least 10 years of credited service. Effective July 1, 2001, a plan amendment provided for a one-time cost of living adjustment of 3.5% to the gross monthly retirement benefits for retired members and beneficiaries who were receiving retirement benefits on that date and hired prior to July 1, 1999. COLAs are not automatic under the plan. Contributions – HERS The contribution requirements of plan members are established and may be amended by City Council. Plan members do not contribute. The Academy is required to contribute an actuarially determined amount, which was $48,822 during the fiscal year 2016. Net Pension Liability – HERS The Academy’s net pension liability was measured as of June 30, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. At June 30, 2016, the Academy reported deferred outflows of $66,924 for the net difference in projected and actual earnings on investments during the fiscal year 2016 and a net pension liability of $291,304. The Academy’s allocation was based on their proportionate share of net pension liability at 0.7934%. HERS is considered a part of the City’s reporting entity and is included in the City’s financial reports as a pension trust fund. HERS issues a publicly available financial report that includes financial statements and required supplementary information for HERS. The financial report may be obtained by writing to City of Hampton, Finance Department, 22 Lincoln Street, Hampton, Virginia, 23669 or by calling (757) 727-6230. Plan Description – VRS The Academy contributes to the VRS, an agent and cost-sharing multiple-employer defined benefit pension plan administered by VRS.


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5. Defined Benefit Pension Plans (continued) All full-time, salaried permanent (professional) employees of participating employers are automatically covered by VRS upon employment. Members earn one month of service credit for each month they are employed and they and their employer are paying contributions to VRS. Members are eligible to purchase prior public service, active duty military service, certain periods of leave and previously refunded VRS service as a service credit in their plan. Within the VRS Plan, the System administers three different defined benefit plans for local government employees – Plan 1, Plan 2 and Hybrid. The specific information for each plan and the eligibility for covered groups within each plan are set out in the table below:

PLAN 1

PLAN 2

HYBRID RETIREMENT PLAN

About Plan 1 Plan 1 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. Employees are eligible for Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013.

About Plan 2 Plan 2 is a defined benefit plan. The retirement benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. Employees are eligible for Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013.

About the Hybrid Retirement Plan The Hybrid Retirement Plan combines the features of a defined benefit plan and a defined contribution plan. Most members hired on or after January 1, 2014 are in this plan, as well as Plan 1 and Plan 2 members who were eligible and opted into the plan during a special election window. (See “Eligible Members”) • The defined benefit is based on a member’s age, creditable service and average final compensation at retirement using a formula. • The benefit from the defined contribution component of the plan depends on the member and employer contributions made to the plan and the investment performance of those contributions.


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• In addition to the monthly benefit payment payable from the defined benefit plan at retirement, a member may start receiving distributions from the balance in the defined contribution account, reflecting the contributions, investment gains or losses, and any required fees.

Eligible Members Employees are in Plan 1 if their membership date is before July 1, 2010, and they were vested as of January 1, 2013. Hybrid Opt-In Election VRS non-hazardous duty covered Plan 1 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014. The Hybrid Retirement Plan’s effective date for eligible Plan 1 members who opted in was July 1, 2014. If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan. Members who were eligible for an optional retirement plan (ORP) and had prior service under Plan 1 were not eligible to elect the Hybrid Retirement Plan and remain as Plan 1 or ORP.

Eligible Members Employees are in Plan 2 if their membership date is on or after July 1, 2010, or their membership date is before July 1, 2010, and they were not vested as of January 1, 2013. Hybrid Opt-In Election Eligible Plan 2 members were allowed to make an irrevocable decision to opt into the Hybrid Retirement Plan during a special election window held January 1 through April 30, 2014. The Hybrid Retirement Plan’s effective date for eligible Plan 2 members who opted in was July 1, 2014. If eligible deferred members returned to work during the election window, they were also eligible to opt into the Hybrid Retirement Plan. Members who were eligible for an optional retirement plan (ORP) and have prior service under Plan 2 were not eligible to elect the Hybrid Retirement Plan and remain as Plan 2 or ORP.

Eligible Members Employees are in the Hybrid Retirement Plan if their membership date is on or after January 1, 2014. This includes:

• School division employees • Political subdivision employees* • Members in Plan 1 or Plan 2 who elected to opt into the plan during the election window held January 1-April 30, 2014; the plan’s effective date for opt-in members was July 1, 2014

*Non-Eligible Members Some employees are not eligible to participate in the Hybrid Retirement Plan. They include:

• Political subdivision employees who are covered by enhanced benefits for hazardous duty employees

Those employees eligible for an optional retirement plan (ORP) must elect the ORP plan or the Hybrid Retirement Plan. If these members have prior service under Plan 1 or Plan 2, they are not eligible to


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elect the Hybrid Retirement Plan and must select Plan 1 or Plan 2 (as applicable) or ORP.

Retirement Contributions Members contribute up to 5% of their compensation each month to their member contribution account through a pre-tax salary reduction. Some school divisions and political subdivisions elected to phase in the required 5% member contribution but all employees will be paying the full 5% by July 1, 2016. Member contributions are tax-deferred until they are withdrawn as part of a retirement benefit or as a refund. The employer makes a separate actuarially determined contribution to VRS for all covered employees. VRS invests both member and employer contributions to provide funding for the future benefit payment.

Retirement Contributions Employees contribute up to 5% of their compensation each month to their member contribution account through a pre-tax salary reduction. Some school divisions and political subdivisions elected to phase in the required 5% member contribution but all employees will be paying the full 5% by July 1, 2016.

Retirement Contributions A member’s retirement benefit is funded through mandatory and voluntary contributions made by the member and the employer to both the defined benefit and the defined contribution components of the plan. Mandatory contributions are based on a percentage of the employee’s creditable compensation and are required from both the member and the employer. Additionally, members may choose to make voluntary contributions to the defined contribution component of the plan, and the employer is required to match those voluntary contributions according to specified percentages.

Creditable Service Creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors used to determine their eligibility for retirement and to calculate their retirement

Creditable Service Same as Plan 1.

Creditable Service Defined Benefit Component: Under the defined benefit component of the plan, creditable service includes active service. Members earn creditable service for each month they are employed in a covered position. It also may include credit for prior service the member has purchased or additional creditable service the member was granted. A member’s total creditable service is one of the factors


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benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit.

used to determine their eligibility for retirement and to calculate their retirement benefit. It also may count toward eligibility for the health insurance credit in retirement, if the employer offers the health insurance credit. Defined Contributions Component: Under the defined contribution component, creditable service is used to determine vesting for the employer contribution portion of the plan.

Vesting Vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members become vested when they have at least five years (60 months) of creditable service. Vesting means members are eligible to qualify for retirement if they meet the age and service requirements for their plan. Members also must be vested to receive a full refund of their member contribution account balance if they leave employment and request a refund. Members are always 100% vested in the contributions that they make.

Vesting Same as Plan 1.

Vesting Defined Benefit Component: Defined benefit vesting is the minimum length of service a member needs to qualify for a future retirement benefit. Members are vested under the defined benefit component of the Hybrid Retirement Plan when they reach five years (60 months) of creditable service. Plan 1 or Plan 2 members with at least five years (60 months) of creditable service who opted into the Hybrid Retirement Plan remain vested in the defined benefit component. Defined Contributions Component: Defined contribution vesting refers to the minimum length of service a member needs to be eligible to withdraw the employer contributions from


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the defined contribution component of the plan. Members are always 100% vested in the contributions that they make. Upon retirement or leaving covered employment, a member is eligible to withdraw a percentage of employer contributions to the defined contribution component of the plan, based on service.

• After two years, a member is 50% vested and may withdraw 50% of employer contributions. • After three years, a member is 75% vested and may withdraw 75% of employer contributions. • After four or more years, a member is 100% vested and may withdraw 100% of employer contributions.

Distribution is not required by law until age 70½.

Calculating the Benefit The Basic Benefit is calculated based on a formula using the member’s average final compensation, a retirement multiplier and total service credit at retirement. It is one of the benefit payout options available to a member at retirement. An early retirement reduction factor is applied to the Basic

Calculating the Benefit See definition under Plan 1.

Calculating the Benefit Defined Benefit Component: See definition under Plan 1 Defined Contribution Component: The benefit is based on contributions made by the member and any matching contributions made by the employer, plus net investment earnings on those contributions.


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Benefit if the member retires with a reduced retirement benefit or selects a benefit payout option other than the Basic Benefit.

Average Final Compensation A member’s average final compensation is the average of the 36 consecutive months of highest compensation as a covered employee.

Average Final Compensation A member’s average final compensation is the average of their 60 consecutive months of highest compensation as a covered employee.

Average Final CompensationSame as Plan 2. It is used in the retirement formula for the defined benefit component of the plan.

Service Retirement Multiplier The retirement multiplier is a factor used in the formula to determine a final retirement benefit. The retirement multiplier for non-hazardous duty members is 1.7%. Sheriffs and regional jail superintendents: The retirement multiplier for sheriffs and regional jail superintendents is 1.85%.

Political subdivision hazardous duty employees: The retirement multiplier of eligible political subdivision hazardous duty employees other than sheriffs and regional jail superintendents is 1.7% or 1.85% as elected by the employer.

Service Retirement Multiplier Same as Plan1 for service earned, purchased or granted prior to January 1, 2013. For non-hazardous duty members the retirement multiplier is 1.65% for creditable service earned, purchased or granted on or after January 1, 2013. Sheriffs and regional jail superintendents: Same as Plan 1.

Political subdivision hazardous duty employees: Same as Plan 1.

Service Retirement Multiplier Defined Benefit Component: The retirement multiplier for the defined benefit component is 1.0%. For members that opted into the Hybrid Retirement Plan from Plan 1 or Plan 2, the applicable multipliers for those plans will be used to calculate the retirement benefit for service credited in those plans. Sheriff and regional jail superintendents: Not applicable.

Political subdivision hazardous duty employees: Not applicable. Defined Contribution Component: Not applicable.


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Normal Retirement Age: Age 65. Political subdivisions hazardous duty employees: Age 60.

Normal Retirement Age: Normal Social Security retirement age. Political subdivisions hazardous duty employees: Same as Plan 1.

Normal Retirement Age Defined Benefit Component: Same as Plan 2. Political subdivisions hazardous duty employees: Not applicable. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Earliest Unreduced Retirement Eligibility Age 65 with at least five years (60 months) of creditable service or at age 50 with at least 30 years of creditable service. Political subdivisions hazardous duty employees: Age 60 with at least five years of creditable service or age 50 with at least 25 years of creditable service.

Earliest Unreduced Retirement Eligibility Normal Social Security retirement age and have at least five years (60 months) of creditable service or when their age and service equal 90. Political subdivisions hazardous duty employees: Same as Plan 1.

Earliest Unreduced Retirement Eligibility Defined Benefit Component: Normal Social Security retirement age and have at least five years (60 months) of creditable service or when their age and service equal 90. Political subdivisions hazardous duty employees: Not applicable. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Earliest Reduced Retirement Eligibility Age 55 with at least five years (60 months) of creditable service or age 50 with at least 10 years of creditable service.

Earliest Reduced Retirement Eligibility Age 60 with at least five years (60 months) of creditable service.

Earliest Unreduced Retirement Eligibility Defined Benefit Component: Members may retire with a reduced benefit as early as age 60 with at least five years (60 months) of creditable service.


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Political subdivisions hazardous duty employees: 50 with at least five years of creditable service.

Political subdivisions hazardous duty employees: Same as Plan 1.

Political subdivisions hazardous duty employees: Not applicable. Defined Contribution Component: Members are eligible to receive distributions upon leaving employment, subject to restrictions.

Cost-of-Living Adjustment (COLA) in Retirement The Cost-of-Living Adjustment (COLA) matches the first 3% increase in the Consumer Price Index for all Urban Consumers (CPI-U) and half of any additional increase (up to 4%) up to a maximum COLA of 5%. Eligibility: For members who retire with an unreduced benefit or with a reduced benefit with at least 20 years of creditable service, the COLA will go into effect on July 1 after one full calendar year from the retirement date. For members who retire with a reduced benefit and who have less than 20 years of creditable service, the COLA will go into effect on July 1 after one calendar year following the unreduced retirement eligibility date.

Cost-of-Living Adjustment (COLA) in Retirement The Cost-of-Living Adjustment (COLA) matches the first 2% increase in the CPI-U and half of any additional increase (up to 2%), for a maximum COLA of 3%. Eligibility: Same as Plan 1.

Cost-of-Living Adjustment (COLA) in Retirement Defined Benefit Component: Same as Plan 2. Defined Contribution Component: Not applicable. Eligibility: Same as Plan 1 and Plan 2.


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Exceptions to COLA Effective Dates: The COLA is effective July 1 following one full calendar year (January 1 to December 31) under any of the following circumstances: • The member is within five

years of qualifying for an unreduced retirement benefit as of January 1, 2013.

• The member retires on disability.

• The member retires directly from short-term or long-term disability under the Virginia Sickness and Disability Program (VSDP).

• The member is involuntarily separated from employment for causes other than job performance or misconduct and is eligible to retire under the Workforce Transition Act or the Transitional Benefits Program.

• The member dies in service and the member’s survivor or beneficiary is eligible for a monthly death-in-service benefit. The COLA will go into effect on July 1 following one full calendar year (January 1 to December 31) from the date the monthly benefit begins.

Exceptions to COLA Effective Dates: Same as Plan 1.

Exceptions to COLA Effective Dates: Same as Plan 1 and Plan 2.

Disability Coverage Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.7% on all service, regardless of when it

Disability Coverage Members who are eligible to be considered for disability retirement and retire on disability, the retirement multiplier is 1.65% on all service, regardless of when it

Disability Coverage Eligible political subdivision and school division (including Plan 1 and Plan 2 opt-ins) participate in the Virginia Local Disability Program (VLDP) unless their local


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was earned, purchased or granted. VSDP members are subject to a one-year waiting period before becoming eligible for non-work related disability benefits. Not applicable to VRS Teacher Retirement plan members.

was earned, purchased or granted. VSDP members are subject to a one-year waiting period before becoming eligible for non-work related disability benefits. Not applicable to VRS Teacher Retirement plan members.

governing body provides and employer-paid comparable program for its members. Hybrid members (including Plan 1 and Plan 2 opt-ins) covered under VLDP are subject to a one-year waiting period before becoming eligible for non-work related disability benefits.

Purchase of Prior Service Members may be eligible to purchase service from previous public employment, active duty military service, an eligible period of leave or VRS refunded service as creditable service in their plan. Prior creditable service counts toward vesting, eligibility for retirement and the health insurance credit. Only active members are eligible to purchase prior service. When buying service, members must purchase their most recent period of service first. Members also may be eligible to purchase periods of leave without pay.

Purchase of Prior Service Same as Plan 1.

Purchase of Prior Service Defined Benefit Component: Same as Plan 1, with the following exceptions:

• Hybrid Retirement Plan members are ineligible for purchase service. • The cost of purchasing refunded service is the higher of 4% of creditable compensation or average final compensation. • Plan members have one year from the date of hire or return from their leave to purchase all but refunded prior service at approximate normal cost. After that period, the rate for most categories of service will change to actuarial cost.

Defined Contribution Component: Not applicable.


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5. Defined Benefit Pension Plans (continued) Contributions - VRS The contribution requirement for active employees is governed by Title 51.1 of the Code of Virginia, as amended, but may be impacted as a result of funding options provided to political subdivisions and school divisions by the Virginia General Assembly. Employees are required to contribute 5% of their compensation toward their retirement. Prior to July 1, 2012, all or part of the 5% member contribution may have been assumed by the employer. Beginning July 1, 2012, new employees were required to pay the 5% member contribution. In addition, for existing employees, employers were required to begin making the employee pay the 5% member contribution. This could be phased in over a period of up to 5 years and the employer is required to provide a salary increase equal to the amount of the increase in the employee-paid member contribution. In addition, the Academy is required to contribute the remaining amounts necessary to fund its participation in the VRS using the actuarial basis specified in the Code of Virginia and approved by the VRS Board of Trustees. The Academy’s contribution rate for the fiscal year ended 2016 was 18.44%. Net Pension Liability - VRS The City is the fiscal agent for the Academy and provides payroll information in a single report to the VRS for the purposes of determining the net pension liability. Consequently, there is no separate actuarial calculation for the Academy. The net pension liabilities for the City were measured as of June 30, 2016 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation performed as of that date. At June 30, 2016, the Academy reported deferred outflows of $63,766 for contributions made during fiscal year 2016, a net pension liability of $507,996 for its allocated share of the total net pension liability, and deferred inflows of $54,671 for the difference between projected and actual earnings. The Academy’s allocation was based on their proportionate share of net pension liability at 0.4%. A copy of the separately issued financial statements for the City, which contain the required disclosures regarding the VRS defined benefit pension plan, may be obtained by writing to City of Hampton, Director of Finance, 22 Lincoln Street, 7th Floor, Hampton, Virginia 23669.

(a) (b) (c) (d) (e)Employer's

ProportionateShare

Employer's Employer's Employer's of the NPL as a Plan FiduciaryProportion Proportionate Covered % of its Covered Net Position asof the Net Share of the Net Employee Employee Payroll a % of the Total

Date Pension Liability Pension Liability Payroll b / c Pension Liability

June 30, 2015 0.39261% 507,996$ 351,630$ 144.47% 76.35%

June 30, 2014 0.40501% 505,119 381,790 132.30% 76.58%

June 30, 2016 0.79340% 291,304$ 52,780$ 551.92% 77.10%

June 30, 2015 0.68670% 243,289 52,780 460.95% 78.61%

Schedule is intended to show information for 10 years. Since 2015 is the first year for this presentation, no other datais available. However, additional years will be included as they become available.

Virginia Retirement System

Hampton Roads Criminal Justice Training AcademySchedule of Academy's Proportionate Share of Net Pension Liability

Year Ended June 30, 2016

Hampton Employees Retirement System

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(a) (b) (c) (d) (e)Contributions

Contributions as a Percentagein Relation to Contribution Employer's of Covered

Contractually Contractually Deficiency Covered EmployeeRequired Required (Excess) Employee Payroll

Date Contributions Contributions (a) - (b) Payroll (b) / (d)

June 30, 2016 63,766$ 63,766$ -$ 399,583$ 15.96%

June 30, 2015 64,059 64,059 - 351,630 18.22%

June 30, 2016 48,821$ 48,822$ -$ 52,780$ 92.50%

June 30, 2015 47,864 47,864 - 52,780 90.69%

Changes of benefit terms – There have been no significant changes to the System benefit provisions since the prioractuarial valuation. A hybrid plan with changes to the defined benefit plan structure and a new defined contributioncomponent went into effect in FY 2014. The hybrid plan applies to most new employees hired on or after January 1,2014 and not covered by enhanced hazardous duty benefits. The liabilities presented in this report reflect the hybridplan for the first.

Changes of assumptions – There have been no changes to the actuarial assumptons since the prior valuation.

Hampton Roads Criminal Justice Training AcademySchedule of Academy's Contributions

Year Ended June 30, 2016

Schedule is intended to show information for 10 years. Since 2015 is the first year for this presentation, no other datais available. However, additional years will be included as they become available

Virginia Retirement System

Hampton Employees Retirement System

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Report of Independent Auditor on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing Standards

To the Board of Directors Hampton Roads Criminal Justice Training Academy Hampton, Virginia 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 Hampton Roads Criminal Justice Training Academy (the “Academy”), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the Academy’s basic financial statements and have issued our report thereon dated December 20, 2016. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Academy’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Academy’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Academy’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 a 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. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Academy’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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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.

Virginia Beach, Virginia December 20, 2016

Documents

Hampton Roads Criminal Justice Training Academy