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HomeMy WebLinkAbout22-23 Audit Report CITY OF McHENRY, ILLINOIS ANNUAL FINANCIAL REPORT APRIL 30, 2023 CITY OF McHENRY, ILLINOIS TABLE OF CONTENTS APRIL 30, 2023 PAGE INDEPENDENT AUDITOR’S REPORT 1 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTORL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 4 REQUIRED SUPPLEMENTARY INFORMATION Management’s Discussion and Analysis 6 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 13 Statement of Activities 14 Fund Financial Statements Balance Sheet – Governmental Funds 15 Reconciliation of the Balance Sheet to the Statement of Net Position 16 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 17 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 18 Statement of Net Position – Proprietary Funds 19 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds 20 Statement of Cash Flows – Proprietary Funds 21 Statement of Fiduciary Net Position – Fiduciary Funds 22 Statement of Changes in Fiduciary Net Position – Fiduciary Funds 23 Notes to Financial Statements 24 REQUIRED SUPPLEMENTARY INFORMATION Illinois Municipal Retirement Fund – Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios 52 CITY OF McHENRY, ILLINOIS TABLE OF CONTENTS APRIL 30, 2023 PAGE REQUIRED SUPPLEMENTARY INFORMATION (Continued) Illinois Municipal Retirement Fund – Schedule of Employer Contribution 53 Police Pension Plan – Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios 54 Police Pension Plan – Schedule of Employer Contribution 55 Other Post-Employment Benefit – Schedule of Changes in the Employer’s Total OPEB Liability and Related Ratios 56 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – General Fund 57 Notes to Required Supplementary Information 59 SUPPLEMENTAL FINANCIAL INFORMATION Combining Balance Sheet – General Fund 60 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances – General Fund 61 Combining Balance Sheet – Other Governmental Funds 63 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances – Other Governmental Funds 64 Combining Schedule of Net Position – Water and Sewer Funds 65 Combining Schedule of Revenues, Expenses, and Changes in Net Position – Water and Sewer Funds 66 Combining Schedule of Net Position – Internal Service Funds 67 Combining Schedule of Revenues, Expenses, and Changes in Net Position – Internal Service Funds 68 Combining Schedule of Net Position – Custodial Funds 69 Combining Schedule of Changes in Fiduciary Net Position – Custodial Funds 70 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Special Revenue Fund – Tax Increment Financing Fund 71 Page 1 INDEPENDENT AUDITOR’S REPORT To the Mayor and City Council Members City of McHenry McHenry, Illinois Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities, the business- type activities, each major fund, and the aggregate remaining fund information of City of McHenry as of and for the year ended April 30, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. 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 McHenry as of April 30, 2023, 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. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of City of McHenry and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Change in Accounting Principle As described in Note 22 to the financial statements, the City implemented GASB Statement No. 87, Leases. Our opinion is not modified with respect to this matter. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes Page 2 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for one year after the date that the financial statements are issued. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risk of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit 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 City of McHenry’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about City of McHenry’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the required supplementary information, as listed on the table of contents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, 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 Page 3 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. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The supplementary information, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates 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 supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 10, 2023 on our consideration of City of McHenry’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 solely 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 effectiveness of 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 McHenry’s internal control over financial reporting and compliance. Eccezion Consulting • CPAs • Technology McHenry, Illinois November 10, 2023 Page 4 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 Mayor and City Council Members City of McHenry McHenry, Illinois 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 aggregate remaining fund information of City of McHenry as of and for the year ended April 30, 2023, and the related notes to the financial statements, which collectively comprise City of McHenry’s basic financial statements, and have issued our report thereon dated November 10, 2023. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered City of McHenry’s internal control over financial reporting (internal control) as a basis for designing 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 City of McHenry’s internal control. Accordingly, we do not express an opinion on the effectiveness of City of McHenry’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 City’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. Page 5 Compliance and Other Matters As part of obtaining reasonable assurance about whether City of McHenry’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 financial statements. 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. 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 City’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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Eccezion Consulting • CPAs • Technology McHenry, Illinois November 10, 2023 REQUIRED SUPPLEMENTARY INFORMATION Page 6 CITY OF McHENRY, ILLINOIS MANAGEMENT’S DISCUSSION AND ANALYSIS APRIL 30, 2023 As management of City of McHenry (City), we offer readers of the City’s statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended April 30, 2023. We encourage readers to consider the information presented here in conjunction with additional information found in the notes to the financial statements. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. Both perspectives (government-wide and fund level financial statements) allow the user to address relevant questions, broaden a basis for comparison (year to year or government to government) and enhance the City’s accountability. 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 overview of the City’s finances, in a manner similar to a private business. The Statement of Net Position presents information on all the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources with the difference amongst those being reported as net position. Increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating when comparing year to year results. The Statement of Activities presents information showing how the City’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 future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). Both government-wide financial statements distinguish functions of the City 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 include general office, public safety, public works, and parks and recreation. The business-type activities of the City include a water and sewer division. 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, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the City 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. Page 7 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 for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City’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 14 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 which is considered to be a major fund. Data from the other 13 governmental funds are combined into a single, aggregated presentation. The other 13 funds include Pageant, Audit, Recreation Center, Capital Improvements, Capital Asset Maintenance and Replacement, Capital Equipment, Debt Service, Motor Fuel Tax, Municipal Motor Fuel Tax, Developer Donations, Tax Increment Financing, and two Special Service Areas. Proprietary Funds. The City maintains two different types of 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 an enterprise fund to account for the Water and Sewer Division. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its employee insurance, risk management, and information technology. Because these services predominately benefit governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. 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 water and sewer functions. Internal service funds are combined into a single, aggregate presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements. Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the City. Fiduciary funds are not reflected in the government-wide financial statements 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. The City’s fiduciary funds include the Police Pension Trust Fund and two Custodial 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. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s appropriation to actual for the General Fund. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $148,516,513 at April 30, 2023. By far, the largest portion of the City’s net position, 93%, reflects its net investment in capital assets (e.g., land, construction in progress, buildings, and equipment); less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt Page 8 must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 4/30/2023 4/30/2022 4/30/2023 4/30/2022 4/30/2023 4/30/2022 Assets Current and Other Assets 32,992,919$ 33,833,389$ 13,576,743$ 11,953,256$ 46,569,662$ 45,786,645$ Capital Assets 96,526,534 95,044,404 77,053,660 79,296,456 173,580,194 174,340,860 Net Pension Asset - IMRF - 1,915,256 - 884 - 1,916,140 Total Assets 129,519,453$ 130,793,049$ 90,630,403$ 91,250,596$ 220,149,856$ 222,043,645$ Deferred Outflows of Resources 11,959,807$ 8,234,178$ 1,325,114$ 537,931$ 13,284,921$ 8,772,109$ Liabilities Long-Term Liabilities Outstanding 26,838,310$ 28,826,835$ 30,747,863$ 32,696,374$ 57,586,173$ 61,523,209$ Net Pension Liability - IMRF 5,508,725 - 1,769,693 - 7,278,418 - Net Pension Liability - Police 4,348,724 469,026 - - 4,348,724 469,026 Total OPEB Liability 948,640 1,200,063 174,609 129,680 1,123,249 1,329,743 Other Liabilities 2,673,995 2,422,222 354,638 520,673 3,028,633 2,942,895 Total Liabilities 40,318,394$ 32,918,146$ 33,046,803$ 33,346,727$ 73,365,197$ 66,264,873$ Deferred Inflows of Resources 10,456,210$ 15,751,752$ 1,096,857$ 1,187,812$ 11,553,067$ 16,939,564$ Net Position Net Investment in Capital Assets 91,764,145$ 90,072,809$ 46,377,371$ 46,698,746$ 138,141,516$ 136,771,555$ Restricted 2,036,911 5,894,047 - - 2,036,911 5,894,047 Unrestricted (3,096,400) (5,609,527) 11,434,486 10,555,242 8,338,086 4,945,715 Total Net Position 90,704,656$ 90,357,329$ 57,811,857$ 57,253,988$ 148,516,513$ 147,611,317$ City of McHenry's Statement of Net Position TotalBusiness-Type ActivitiesGovernmental Activities An additional portion of the City’s net position, 1%, represents resources that are subject to external restrictions on how they may be used (e.g. Highways and Streets, Capital Projects, Police Pension and Special Service Areas). The remaining balance of unrestricted net position ($8,338,086) may be used to meet the City’s ongoing obligations to citizens and creditors. Governmental Activities. Governmental activities increased the City’s net position by $1,208,651, which was then partially offset by a net position adjustment of $(861,324). Key differences from the prior year are as follows: Page 9 FY 2023 FY 2022 FY 2023 F Y 2022 FY 2023 FY 2022 Revenues Program Revenues Charges for Services 7,241,916$ 7,142,687$ 9,427,881$ 10,247,466$ 16,669,797$ 17,390,153$ Operating Grants and Contributions 46,113 3,716,047 - - 46,113 3,716,047 Capital Grants and Contributions 773,717 5,119,713 - 2,454,222 773,717 7,573,935 General Revenues Taxes Property Taxes 5,711,748 5,565,378 - - 5,711,748 5,565,378 Intergovernmental Sales Taxes 13,346,454 12,807,479 - - 13,346,454 12,807,479 Other Taxes 7,702,910 6,433,338 - - 7,702,910 6,433,338 Other 541,044 21,008 189,104 30,872 730,148 51,880 Total Revenues 35,363,902$ 40,805,650$ 9,616,985$ 12,732,560$ 44,980,887$ 53,538,210$ Expenses General Office 8,125,923$ 4,118,881$ -$ -$ 8,125,923$ 4,118,881$ Public Safety 13,663,828 9,328,245 - - 13,663,828 9,328,245 Public Works 7,469,021 5,068,211 - - 7,469,021 5,068,211 Parks and Recreation 4,069,254 4,305,299 - - 4,069,254 4,305,299 Interest and Fees 689,635 714,641 - - 689,635 714,641 Depreciation 245,712 227,178 - - 245,712 227,178 Water - - 2,196,433 2,160,744 2,196,433 2,160,744 Sewer - - 5,651,641 5,328,003 5,651,641 5,328,003 Utility Work - - 1,122,120 930,611 1,122,120 930,611 Total Expenses 34,263,373$ 23,762,455$ 8,970,194$ 8,419,358$ 43,233,567$ 32,181,813$ Increase/(Decrease) in Net Position Before Transfers 1,100,529$ 17,043,195$ 646,791$ 4,313,202$ 1,747,320$ 21,356,397$ Transfers 94,922 93,048 (94,922) (93,048) - - Gain on Sale of Capital Assets 13,200 20,300 6,000 32,760 19,200 53,060 Increase/(Decrease) in Net Position 1,208,651$ 17,156,543$ 557,869$ 4,252,914$ 1,766,520$ 21,409,457$ Net Position - Beginning of Year 90,357,329 73,200,786 57,253,988 53,292,140 147,611,317 126,492,926 Net Position Adjustment (861,324) - - (291,066) (861,324) (291,066) Net Position - End of Year 90,704,656$ 90,357,329$ 57,811,857$ 57,253,988$ 148,516,513$ 147,611,317$ City of McHenry's Change in Net Position Governmental Activities Business-Type Activities Total Revenues decreased in the current year due to decreases in operating grants and contributions as well as capital grants and contributions which was mainly due to the receipt of the American Rescue Plan funds during FY’22 but not during the current year, as well as developer donations of over $3.1 million in the prior year but only $20,000 during FY’23. Expenses increased mainly due to increases in the expenses related to the Police Pension and IMRF Pension liabilities, increases related to OPEB expense, and increased repairs and maintenance expenses. Business-Type Activities. Business-type activities increased the City’s net position by $557,869. Revenues for business-type activities decreased in the current year due to a decrease in capital grants and contributions from developer donations. Expenses for business-type activities increased in the current year due to slight increases across the water, sewer, and utility work departments from miscellaneous personnel expenses and also increased expenses related to IMRF and OPEB liabilities. Page 10 FINANCIAL ANALYSIS OF THE CITY’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, unassigned fund balance may serve as a useful measure of the City’s net resources available for spending at the end of the fiscal year. At April 30, 2023, the City’s governmental funds reported combined ending fund balances of $24,338,475, an increase of $652,175 in comparison with the prior year, which includes a fund balance adjustment of $(861,324). Approximately 39% of this total amount constitutes unassigned fund balance which is available for spending at the City’s discretion. Of the remaining fund balance, 52% constitutes assigned fund balance, with the remainder of the fund balance restricted to indicate that it is not available for new spending because it has already been restricted for specific purposes or is nonspendable. The General Fund is the chief operating fund of the City. At April 30, 2023, the fund balance of the General Fund was $19,553,883, of which $9,739,783 is unassigned. As a measure of the General Fund’s liquidity, it may be useful to compare unassigned fund balance to total fund expenditures. Unassigned fund balance represents 36% of total General Fund expenditures. The General Fund’s fund balance increased by $2,436,254 during the year ended April 30, 2023, which includes a fund balance adjustment of $(861,324). This was mainly due to increases in state sales tax and state income taxes. There was also an increase in Federal grants, which was mainly due to the receipt of the American Rescue Plan grant. Other significant highlights in the governmental funds for the year ended April 30, 2023 are outlined below: • Debt service expenses of $2,677,337 were paid to meet the debt service requirements of the City. • Other governmental funds show a total decrease in fund balance of $1,784,079. Proprietary Funds. The City’s proprietary funds provide the same type of information found in the government-wide financial statements, but in more detail. Fiduciary Funds (Police Pension and Custodial Funds). At April 30, 2023, the Police Pension Fund’s net position amounted to $55,718,519. Deductions exceeded additions during the year, resulting in a decrease of $919,521 in net position. The decrease was largely due to losses on sales of investments. GENERAL FUND BUDGETARY HIGHLIGHTS The City amended their budget during the year ended April 30, 2023. A significant difference between original and final budget was an increase in capital outlay expenditures of $960,000. The General Fund actual revenue exceeded budgeted revenue by $5,265,609. This difference was primarily due to more than expected revenue from state sales and income taxes, receipt of the American Rescue Plan grant, and interest income. Budgeted expenditures exceeded actual expenditures by $746,982. The difference was mainly due to less than expected expenditures in all areas, aside from Public Safety and Parks and Recreation which were slightly higher than expected. Page 11 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets. The City’s investment in capital assets for its governmental and business-type activities as of April 30, 2023 amounts to $173,580,194 (net of accumulated depreciation). This investment includes land, land improvements, art and historical treasures, intangibles, construction in progress, buildings, vehicles, systems and equipment, and infrastructure. 4/30/2023 4/30/2022 4/30/2023 4/30/2022 4/30/2023 4/30/2022 Land 43,651,504$ 42,664,844$ 2,208,117$ 2,208,117$ 45,859,621$ 44,872,961$ Land Improvements 2,946,509 2,584,275 - - 2,946,509 2,584,275 Art and Historical Treasures 1,658,927 1,658,927 - - 1,658,927 1,658,927 Intangibles 300,000 300,000 - - 300,000 300,000 Construction in Progress 1,831,979 1,463,648 92,944 57,193 1,924,923 1,520,841 Buildings 12,924,652 12,352,919 334,701 361,206 13,259,353 12,714,125 Vehicles 1,810,670 1,574,244 727,933 778,748 2,538,603 2,352,992 Systems and Equipment 1,505,373 1,468,179 73,689,965 75,891,191 75,195,338 77,359,370 Infrastructure 29,896,920 30,977,368 - - 29,896,920 30,977,368 Total 96,526,534$ 95,044,404$ 77,053,660$ 79,296,455$ 173,580,194$ 174,340,859$ City of McHenry's Capital Assets (net of depreciation) Governmental Activities Business-Type Activities Total Major capital asset events during the year ended April 30, 2023 included the following: • Construction in progress additions totaling $2,715,606 • The purchase of three land parcels totaling $986,660 • The purchase of eleven new vehicles totaling $634,484 For further information on the City’s capital assets see Note 3 in the notes to the financial statements. Long-Term Debt. At April 30, 2023, the City had total bonded debt outstanding of $29,155,000, all of which is backed by the full faith and credit of the City. 4/30/2023 4/30/2022 4/30/2023 4/30/2022 4/30/2023 4/30/2022 General Obligation Bonds 25,530,000$ 27,205,000$ 3,625,000$ 3,995,000$ 29,155,000$ 31,200,000$ IEPA Revolving Loan Fund - - 26,742,871 28,275,383 26,742,871 28,275,383 Notes Payable 635,548 956,419 - - 635,548 956,419 Bond Premium 32,169 40,547 280,809 327,327 312,978 367,874 Bond Discount (182) (371) - - (182) (371) Total 26,197,535$ 28,201,595$ 30,648,680$ 32,597,710$ 56,846,215$ 60,799,305$ City of McHenry's Outstanding Debt Governmental Activities Business-Type Activities Total For further information on the City’s long-term debt see Note 5 in the notes to the financial statements. ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES The City has a diversified economy with the manufacturing and health fields being its primary base. McHenry is among the State’s fastest growing communities with the official population increasing from 16,177 in 1990 to 27,135 in 2020. In addition, the City experienced significant growth in the retail, office, and industrial space, and a downtown revitalization plan has spurred residential and commercial development in the Downtown TIF District. The City’s economic conditions are as follows: • The average unemployment rate for McHenry County in 2021 was 4.3 percent, which is 10.4 percent lower than a year ago. This is lower than the State’s average unemployment rate of 4.6 percent. Page 12 • Inflation in the area compares to the national consumer price index. Similar to a nationwide trend, residential growth in the City has slowed, but has been increasing over the last few years. The number of single family residential building permits issued by the City has decreased from 139 in 2007 to 85 in 2020 and 22 in 2022. However, there has been a large increase in multi-family from 0 in 2012 to 378 in 2021. The total value of all commercial and residential improvements and new permits increased from $15.2 million in 2012 to $73.3 million in 2021 and $56.3 million in 2022. Development and adoption of the 2023/24 budget was premised on providing core municipal services while having an operationally balanced budget. It was expected there was going to be a volatile economic forecast when the pandemic began, but the City is fortunate to be in a favorable financial situation because of rebounding revenues and controlled operating expenses. Property tax revenues were increased for the first time since 2010 in 2021, but then left flat for 2022. EAV values have been gradually increasing which caused the City’s tax rate to continue to decrease from $0.605781 in 2021 to $0.555713 in 2022. In April 2023, the City Council approved the proposed fiscal year 2023/24 General Fund budget increasing the prior year’s budget by $3,759,316. These increases were primarily due to personnel and capital outlay expenses. In the last few years, capital expenditures have been funded with Fund Balance Reserves which have been built up due to cost reduction measures necessary to adopt a balanced budget in the past years as well as rebounding state shared revenues. These reserves have been decreasing over the years due to this Capital Spending Policy which has highlighted the need for a dedicated revenue source for the replacement and maintenance of capital assets. With the adoption of the Electric Utility Tax (adopted February 2, 2022 and placed in effect June 1, 2022), there is now a dedicated revenue stream for the replacement and maintenance of City capital assets. Management is always closely monitoring revenues as well as expenses for any changes. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: City of McHenry, 333 South Green St., McHenry, Illinois, 60050. BASIC FINANCIAL STATEMENTS Governmental Business-Type Activities Activities Total ASSETS Cash and Cash Equivalents 18,663,151$ 4,899,474$ 23,562,625$ Deposit with Paying Agent 32,240 - 32,240 Investments 3,574,643 6,637,249 10,211,892 Prepaid Items 266,209 42,118 308,327 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 472,544 48,211 520,755 Accounts Receivable - Unbilled 281,102 1,333,209 1,614,311 Property Taxes 5,875,439 - 5,875,439 Accrued Interest 13,145 14,187 27,332 Due from Other Governmental Units 3,328,801 97,714 3,426,515 Grants Receivable 178,164 - 178,164 Cable Franchise Fee Receivable 122,912 - 122,912 Inventory 184,569 - 184,569 Right-of-Use Lease Receivable - 504,581 504,581 Capital Assets Land, Construction in Progress, and Other Non-Depreciable Assets 47,442,410 2,301,061 49,743,471 Other Capital Assets, Net of Depreciation 49,084,124 74,752,599 123,836,723 TOTAL ASSETS 129,519,453$ 90,630,403$ 220,149,856$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 3,744,278$ 1,054,909$ 4,799,187$ Pension Expense/Revenue - Police Pension 6,729,641 - 6,729,641 OPEB Expense/Revenue 1,485,888 270,205 1,756,093 TOTAL DEFERRED OUTFLOWS OF RESOURCES 11,959,807$ 1,325,114$ 13,284,921$ LIABILITIES Accounts Payable and Accrued Expenses 1,869,257$ 238,775$ 2,108,032$ Security Deposits Held - 3,000 3,000 Due to Other Governmental Units 49,041 - 49,041 Due to Other Funds 129,766 (129,766) - Due to Police Pension Fund 4,908 - 4,908 Unearned Revenue 399,787 - 399,787 Accrued Interest 221,236 242,629 463,865 Non-Current Liabilities Due Within One Year 2,672,661 2,101,849 4,774,510 Due in More Than One Year 24,165,649 28,646,014 52,811,663 Police Pension Liability 4,348,724 - 4,348,724 IMRF Net Pension Liability 5,508,725 1,769,693 7,278,418 Total OPEB Liability 948,640 174,609 1,123,249 TOTAL LIABILITIES 40,318,394$ 33,046,803$ 73,365,197$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 5,875,439$ -$ 5,875,439$ Unavailable Revenue - Right-of-Use Leases - Lessor - 545,559 545,559 Pension Expense/Revenue - IMRF 426,822 120,253 547,075 Pension Expense/Revenue - Police Pension 1,783,585 - 1,783,585 OPEB Expense/Revenue 2,370,364 431,045 2,801,409 TOTAL DEFERRED INFLOWS OF RESOURCES 10,456,210$ 1,096,857$ 11,553,067$ NET POSITION Net Investment in Capital Assets 91,764,145$ 46,377,371$ 138,141,516$ Restricted for: Highways and Streets 1,608,945 - 1,608,945 Capital Projects 195,936 - 195,936 Special Service Areas 29 - 29 Tax Increment Financing 232,001 - 232,001 Unrestricted/(Deficit)(3,096,400) 11,434,486 8,338,086 TOTAL NET POSITION 90,704,656$ 57,811,857$ 148,516,513$ APRIL 30, 2023 CITY OF MCHENRY, ILLINOIS STATEMENT OF NET POSITION GOVERNMENT-WIDE FINANCIAL STATEMENTS Page 13 The Notes to Financial Statements are an integral part of this statement. Operating Capital Charges for Grants and Grants and Governmental Business-Type Expenses Services Contributions Contributions Activities Activities Total Functions/Programs Governmental Activities General Office 8,125,923$ 5,593,799$ -$ 279,073$ (2,253,051)$ -$ (2,253,051)$ Public Safety 13,663,828 1,229,601 - - (12,434,227) - (12,434,227) Public Works 7,469,021 - 46,113 494,644 (6,928,264) - (6,928,264) Parks and Recreation 4,069,254 418,516 - - (3,650,738) - (3,650,738) Interest and Fees on Long-Term Debt 689,635 - - - (689,635) - (689,635) Depreciation - Unallocated 245,712 - - - (245,712) - (245,712) 34,263,373$ 7,241,916$ 46,113$ 773,717$ (26,201,627)$ -$ (26,201,627)$ Business-Type Activities Water 2,196,433$ 3,405,570$ -$ -$ -$ 1,209,137$ 1,209,137$ Sewer 5,651,641 6,021,470 - - - 369,829 369,829 Utility Work 1,122,120 841 - - - (1,121,279) (1,121,279) 8,970,194$ 9,427,881$ -$ -$ -$ 457,687$ 457,687$ Total Primary Government 43,233,567$ 16,669,797$ 46,113$ 773,717$ (26,201,627)$ 457,687$ (25,743,940)$ General Revenues Taxes Property Tax, Levied for General Purposes 5,711,748$ -$ 5,711,748$ Intergovernmental State Sales Tax 13,346,454 - 13,346,454 State Income Tax 4,384,429 - 4,384,429 State Motor Fuel Tax 1,503,741 - 1,503,741 Other Taxes 1,814,740 - 1,814,740 Unrestricted Investment Earnings 541,044 189,104 730,148 Gain on Sale of Capital Assets 13,200 6,000 19,200 Transfers 94,922 (94,922) - Total General Revenues and Transfers 27,410,278$ 100,182$ 27,510,460$ Change in Net Position 1,208,651$ 557,869$ 1,766,520$ Net Position - May 1, 2022 90,357,329 57,253,988 147,611,317 Net Position Adjustment (Note 9)(861,324) - (861,324) Net Position - April 30, 2023 90,704,656$ 57,811,857$ 148,516,513$ CITY OF MCHENRY, ILLINOIS GOVERNMENT-WIDE FINANCIAL STATEMENTS STATEMENT OF ACTIVITIES FOR THE YEAR ENDED APRIL 30, 2023 Net (Expense) Revenue and Changes in Net PositionProgram Revenues Page 14 The Notes to Financial Statements are an integral part of this statement. Other Total General Governmental Governmental Fund Funds Funds ASSETS Cash and Cash Equivalents 14,948,173$ 3,376,949$ 18,325,122$ Deposit with Paying Agent - 32,240 32,240 Investments 2,055,728 1,510,620 3,566,348 Prepaid Items 173,819 - 173,819 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 443,728 28,517 472,245 Accounts Receivable - Unbilled 158,311 114,553 272,864 Property Taxes 5,017,348 858,091 5,875,439 Accrued Interest 3,121 9,884 13,005 Due from Other Governmental Units 3,176,525 152,276 3,328,801 Grants Receivable - 178,164 178,164 Cable Franchise Fee Receivable 122,912 - 122,912 Inventory 184,569 - 184,569 TOTAL ASSETS 26,284,234$ 6,261,294$ 32,545,528$ LIABILITIES Accounts Payable and Accrued Expenditures 1,264,703$ 567,170$ 1,831,873$ Due to Other Governmental Units - 49,041 49,041 Due to Other Funds 133,401 - 133,401 Unearned Revenue 314,899 2,400 317,299 TOTAL LIABILITIES 1,713,003$ 618,611$ 2,331,614$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 5,017,348$ 858,091$ 5,875,439$ TOTAL DEFERRED INFLOWS OF RESOURCES 5,017,348$ 858,091$ 5,875,439$ FUND BALANCES Nonspendable 173,819$ -$ 173,819$ Restricted for: Capital Projects - 195,936 195,936 Highways and Streets - 1,608,945 1,608,945 Special Service Areas - 29 29 Tax Increment Financing - 232,001 232,001 Assigned for: Alarm 1,106,887 - 1,106,887 Tourism 161,550 - 161,550 Band 11,040 - 11,040 Highways and Streets - 926,898 926,898 Capital Projects 8,050,248 1,878,224 9,928,472 Revolving Loan 302,408 - 302,408 Civil Defense 8,148 - 8,148 Debt Service - 7,611 7,611 Parks and Recreation - 114,087 114,087 Unassigned 9,739,783 (179,139) 9,560,644 TOTAL FUND BALANCES 19,553,883$ 4,784,592$ 24,338,475$ TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 26,284,234$ 6,261,294$ 32,545,528$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS BALANCE SHEET GOVERNMENTAL FUNDS APRIL 30, 2023 Page 15 The Notes to Financial Statements are an integral part of this statement. Total Fund Balances - Governmental Funds 24,338,475$ Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Capital Assets, net of accumulated depreciation 96,526,534 Deferred charges and credits for debt issue discounts or premiums and other debt issue costs are not financial resources and therefore are not reported in the funds. Bond Discounts, net of related amortization 182 Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Bonds and Notes Payable (26,165,548)$ Bond Premiums, net of related amortization (32,169) Accrued Interest on Long-Term Debt, net of receivable (221,236) Compensated Absences (640,775) Total OPEB Liability (948,640) Net Pension Asset/(Liability) - IMRF (5,508,725) Net Pension Asset/(Liability) - Police Pension (4,348,724) (37,865,817) Deferred pension and OPEB costs in governmental activities are not financial resources and therefore are not reported in the funds. Pension Deferred Outflows - Police Pension 6,729,641$ Pension Deferred Outflows - IMRF 3,744,278 Pension Deferred Inflows - Police Pension (1,783,585) Pension Deferred Inflow - IMRF (426,822) OPEB Deferred Outflows 1,485,888 OPEB Deferred Inflows (2,370,364) 7,379,036 Internal service funds are used by management to charge the cost of certain activities, such as insurance and information technology, to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the government-wide Statement of Net Position (net of amount allocated to business-type activities). Internal service fund balances are not included in other reconciling items above except for long-term debt and long-term pension items. Current Assets 447,391$ Current Liabilities (121,145) 326,246 Net Position of Governmental Activities 90,704,656$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION APRIL 30, 2023 Page 16 The Notes to Financial Statements are an integral part of this statement. Other Total General Governmental Governmental Fund Funds Funds REVENUES Local Taxes Property Tax 4,975,755$ 735,993$ 5,711,748$ Intergovernmental State Sales Tax 13,346,454 - 13,346,454 State Income Tax 4,384,429 - 4,384,429 State Replacement Tax 246,433 - 246,433 State Motor Fuel Tax - 1,503,741 1,503,741 State Pull Tab/Games Tax 1,312 - 1,312 Inter Track Wagering Tax 39,296 - 39,296 State Telecommunications Tax 198,361 - 198,361 State Grants - 474,644 474,644 Cannabis Use Tax 42,240 - 42,240 Federal Grants 1,841,293 - 1,841,293 Other Local Sources Hotel/Motel Tax 243,574 - 243,574 Electric Use Tax - 1,043,524 1,043,524 Franchise Fees 379,078 - 379,078 Licenses and Permits 1,247,056 - 1,247,056 Fines and Forfeitures 451,894 - 451,894 Charges for Services 1,423,862 537,711 1,961,573 Interest 454,024 87,020 541,044 Local Grants 46,113 - 46,113 Miscellaneous Rent 14,489 59,238 73,727 Royalties 175,000 - 175,000 Donations 13,348 265,725 279,073 Reimbursements 2,554,441 104,425 2,658,866 Other Miscellaneous 255,656 59,066 314,722 32,334,108$ 4,871,087$ 37,205,195$ EXPENDITURES Current General Office 4,897,571$ 163,187$ 5,060,758$ Public Safety 12,386,012 - 12,386,012 Public Works 4,189,954 182 4,190,136 Parks and Recreation 2,847,744 730,418 3,578,162 Capital Outlay 2,383,586 5,600,783 7,984,369 Debt Service Principal 296,769 1,675,000 1,971,769 Interest and Fees 29,800 675,768 705,568 27,031,436$ 8,845,338$ 35,876,774$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES 5,302,672$ (3,974,251)$ 1,328,421$ OTHER FINANCING SOURCES/(USES) Transfers (2,018,294)$ 2,190,172$ 171,878$ Sale of City Property 13,200 - 13,200 (2,005,094)$ 2,190,172$ 185,078$ NET CHANGE IN FUND BALANCES 3,297,578$ (1,784,079)$ 1,513,499$ FUND BALANCES - MAY 1, 2022 17,117,629 6,568,671 23,686,300 FUND BALANCE ADJUSTMENT (Note 9)(861,324) - (861,324) FUND BALANCES - APRIL 30, 2023 19,553,883$ 4,784,592$ 24,338,475$ FOR THE YEAR ENDED APRIL 30, 2023 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Page 17 The Notes to Financial Statements are an integral part of this statement. Net Change in Fund Balances - Total Governmental Funds 1,513,499$ Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeds depreciation expense in the current period. Depreciation Expense (3,387,313)$ Capital Outlays 4,823,587 1,436,274 Donated capital assets used in governmental activities are not current financial resources and therefore are not reported as revenue in the governmental funds.20,000 Some revenue/expenses reported in the Statement of Activities do not provide/use current financial resources and therefore are deferred in the governmental funds. Prior Year Fund Deferred Grant Revenue (1,841,293) Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Accrued Interest on Long-Term Debt 7,743$ Bond Discount - Amortization (189) Bond Premium - Amortization 8,378 Pension Expense - Police (1,756,911) Pension Expense - IMRF (1,772,114) OPEB Expense 190,758 Compensated Absences (11,189) (3,333,524) Employer Pension and OPEB Contributions are expensed in the fund financial statements but are treated as a reduction in the Net Pension Liability on the government-wide financial statements. Pension Employer Contributions - IMRF 665,638$ Pension Employer Contributions - Police Pension 621,970 OPEB Employer Contributions 107,490 1,395,098 Repayment of long-term debt requires the use of current financial resources of governmental funds and is therefore shown as an expenditure in the Statement of Revenues, Expenditures, and Changes in Fund Balances, but the repayment reduces long-term liabilities in the Statement of Net Position and is therefore not reported in the Statement of Activities. Repayment of Long-Term Debt 1,971,768 Internal service funds are used by management to charge the costs of certain activities, such as insurance and information technology, to individual funds. The net revenue of the internal service funds is reported with governmental activities in the government-wide Statement of Activities (net of amount allocated to business-type activities). Change in Net Position (42,233)$ Pension Expense - IMRF (included in Pension - IMRF Expense above)58,100 IMRF Employer Contributions (included in IMRF Contributions above)(23,522) OPEB Expense (included in OPEB Expense above)3,820 OPEB Employer Contributions (included in OPEB Employer Contributions above)(2,275) Depreciation Expense (included in Change in Net Position above)52,939 46,829 Change in Net Position of Governmental Activities 1,208,651$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND FOR THE YEAR ENDED APRIL 30, 2023 CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Page 18 The Notes to Financial Statements are an integral part of this statement. Business Type Governmental Activities -Activities - Enterprise Fund Internal Water and Sewer Service Funds ASSETS Current Assets Cash and Cash Equivalents 4,899,474$ 338,029$ Investments 6,637,249 8,295 Prepaid Items 42,118 92,390 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 48,211 299 Accounts Receivable - Unbilled 1,333,209 8,238 Accrued Interest 14,187 140 Due from Other Governmental Units 97,714 - Due from Other Funds 129,766 - 13,201,928$ 447,391$ Non-Current Assets Right-of-Use Lease Receivable 504,581$ -$ Capital Assets Land 2,208,117 - Buildings 2,736,098 - Systems and Equipment 112,701,173 716,613 Vehicles 1,679,661 - Construction in Progress 92,944 - Less: Accumulated Depreciation (42,364,333) (547,155) 77,558,241$ 169,458$ TOTAL ASSETS 90,760,169$ 616,849$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 1,054,909$ 122,761$ OPEB Expense/Revenue 270,205 31,444 TOTAL DEFERRED OUTFLOWS OF RESOURCES 1,325,114$ 154,205$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses 238,775$ 37,384$ Security Deposits Held 3,000 - Due to Other Funds - 1,273 Unearned Revenue - 82,488 Accrued Interest 242,629 - Compensated Absences - Current 99,183 7,993 IEPA Loan Payable - Current 1,561,149 - Bonds Payable - Current 441,517 - 2,586,253$ 129,138$ Non-Current Liabilities IMRF Net Pension Liability 1,769,693$ 214,432$ Total OPEB Liability 174,609 14,992 IEPA Loan Payable (Net of Current Portion Shown Above)25,181,722 - Bonds Payable (Net of Current Portion Shown Above)3,464,292 - 30,590,316$ 229,424$ TOTAL LIABILITIES 33,176,569$ 358,562$ DEFERRED INFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 120,253$ 13,994$ OPEB Expense/Revenue 431,045 50,161 Unavailable Revenue - Right-of-Use Leases - Lessor 545,559 - TOTAL DEFERRED INFLOWS OF RESOURCES 1,096,857$ 64,155$ NET POSITION Net Investment in Capital Assets 46,377,371$ 163,592$ Unrestricted/(Deficit)11,434,486 184,745 TOTAL NET POSITION 57,811,857$ 348,337$ APRIL 30, 2023 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF NET POSITION PROPRIETARY FUNDS Page 19 The Notes to Financial Statements are an integral part of this statement. Business Type Governmental Activities -Activities - Enterprise Fund Internal Water and Sewer Service Funds OPERATING REVENUES Charges for Services Customer Fees 5,712,050$ -$ Capital Fees 1,055,565 - Debt Service Fees 2,346,224 - Penalties 134,143 - Water Meter Sales 20,650 - Other 29,922 - Internal Service Funds - 5,555,806 9,298,554$ 5,555,806$ OPERATING EXPENSES Water Department Personnel Salaries 432,534$ -$ Miscellaneous Personnel Expenses 233,500 - Other Operating Expenses 849,256 - Depreciation 647,212 - Sewer Department Personnel Salaries 790,937 - Miscellaneous Personnel Expenses 515,086 - Other Operating Expenses 1,474,307 - Depreciation 2,157,391 - Utility Work Department Personnel Salaries 640,079 - Miscellaneous Personnel Expenses 427,624 - Other Operating Expenses 54,417 - Internal Service Funds Personnel Salaries - 221,138 Miscellaneous Personnel Expenses - 3,686,832 Other Operating Expenses - 1,563,864 Depreciation - 52,939 8,222,343$ 5,524,773$ OPERATING INCOME/(LOSS)1,076,211$ 31,033$ NON-OPERATING REVENUE/(EXPENSE) Interest Income 136,664$ 3,690$ Unrealized Gain/Loss 52,440 - Rental Income 82,810 - Interest and Fees (747,851) - Amortization 46,517 - Gain/(Loss) on Sale of Fixed Asset 6,000 - (423,420)$ 3,690$ INCOME/(LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 652,791$ 34,723$ TRANSFERS (TO)/FROM OTHER FUNDS (94,922) (76,956) CHANGE IN NET POSITION 557,869$ (42,233)$ NET POSITION - MAY 1, 2022 57,253,988 390,570 NET POSITION - APRIL 30, 2023 57,811,857$ 348,337$ FOR THE YEAR ENDED APRIL 30, 2023 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS Page 20 The Notes to Financial Statements are an integral part of this statement. Business Type Governmental Activities -Activities - Enterprise Fund Internal Water and Sewer Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from Customers 9,391,967$ -$ Receipts from Employees for Services - (10,738) Receipts from Other Funds for Services - 5,555,806 Payments to Suppliers for Goods and Services (3,573,878) (5,269,795) Payments to Employees for Services (1,471,222) (180,669) Payments to Other Funds for Services (2,390) (69,161) Internal Activity - Payments (to)/from Other Funds (66,336) 1,273 Net Cash Provided/(Used) by Operating Activities 4,278,141$ 26,716$ CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES Transfers (to)/from Other Funds (94,922)$ (76,956)$ Net Cash Provided/(Used) by Non-Capital Financing Activities (94,922)$ (76,956)$ CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from the Sale of Capital Assets 6,000$ -$ Purchase of Capital Assets (561,808) (25,857) Interest Paid on Capital Debt, Net of Rebate (763,811) - Principal Paid on Capital Debt (1,902,513) (24,103) Other Receipts/(Payments)57,113 - Net Cash Provided/(Used) by Capital and Related Financing Activities (3,165,019)$ (49,960)$ CASH FLOWS FROM INVESTING ACTIVITIES Interest on Cash and Cash Equivalents and Investments 123,115$ 3,548$ Purchase of Investments (3,961,121) - Net Cash Provided/(Used) by Investing Activities (3,838,006)$ 3,548$ NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (2,819,806)$ (96,652)$ CASH AND CASH EQUIVALENTS BALANCE - MAY 1, 2022 (INCLUDING RESTRICTED CASH AND OVERDRAFTS)7,785,955 434,681 CASH AND CASH EQUIVALENTS BALANCE - APRIL 30, 2023 (INCLUDING RESTRICTED CASH AND OVERDRAFTS)4,966,149$ 338,029$ RECONCILIATION OF OPERATING INCOME/(LOSS) TO NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES Operating Income/(Loss)1,076,211$ 31,033$ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation Expense 2,804,603 52,939 Change in assets, liabilities and deferred amounts: Receivables, net (39,598) (4,423) Prepaid Items (5,015) (11,118) Accounts Payable and Other Payables (16,544) (71,522) Unearned Revenue 66,675 (6,315) Pension Liabilities 1,770,577 221,798 OPEB Liabilities 44,929 (2,828) Deferred Pension Expenses/Revenues (1,484,082) (187,221) Deferred OPEB Expenses/Revenue 60,385 4,373 Net Cash Provided/(Used) by Operating Activities 4,278,141$ 26,716$ NONCASH CAPITAL FINANCING ACTIVITIES -$ -$ FOR THE YEAR ENDED APRIL 30, 2023 CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Page 21 The Notes to Financial Statements are an integral part of this statement. POLICE PENSION CUSTODIAL TRUST FUND FUNDS ASSETS Cash and Cash Equivalents 1,162,974$ 42,364$ Investments, at fair value Illinois Police Pension Consolidated Investment Fund 54,550,697 - Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Unbilled - 13,938 Due from General Fund 3,635 - Due from Internal Service Fund 1,273 - TOTAL ASSETS 55,718,579$ 56,302$ LIABILITIES Accounts Payable 60$ 243$ TOTAL LIABILITIES 60$ 243$ NET POSITION Restricted for Pensions 55,718,519$ -$ Restricted for Developers, Property Owners, and Others - 56,059 TOTLA NET POSITION 55,718,519$ 56,059$ CITY OF MCHENRY, ILLINOIS STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS APRIL 30, 2023 FUND FINANCIAL STATEMENTS Page 22 The Notes to Financial Statements are an integral part of this statement. POLICE PENSION CUSTODIAL TRUST FUND FUNDS ADDITIONS Contributions Employer 621,970$ -$ Plan Members 491,717 - Developers, Property Owners, and Others - 34,573 Other Additions 16,531 - Total Contributions 1,130,218$ 34,573$ Investment Income Interest and Dividends 1,326,285$ 24$ Gain/(Loss) on Sale of Investments (5,542,682) - Net Appreciation/(Depreciation) in Fair Value of Investments 4,572,665 - 356,268$ 24$ Less: Investment Management Fees 102,095 - Net Investment Income 254,173$ 24$ TOTAL ADDITIONS 1,384,391$ 34,597$ DEDUCTIONS Benefits 2,279,928$ -$ Administrative Expenses 23,631 - Engineering and Legal Fees 353 34,573 TOTAL DEDUCTIONS 2,303,912$ 34,573$ CHANGE IN NET POSITION (919,521)$ 24$ NET POSITION - MAY 1, 2022 56,638,040 56,035 NET POSITION - APRIL 30, 2023 55,718,519$ 56,059$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE YEAR ENDED APRIL 30, 2023 Page 23 The Notes to Financial Statements are an integral part of this statement. Page 24 CITY OF McHENRY, ILLINOIS NOTES TO FINANCIAL STATEMENTS APRIL 30, 2023 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES City of McHenry, Illinois’ (City) financial statements are prepared in accordance with generally accepted accounting principles (GAAP) as applied to local governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The most significant accounting policies used by the City are discussed below. A. Reporting Entity The accompanying financial statements comply with the provisions of GASB statements, in that the financial statements include all organizations, activities, and functions that comprise the City. Component units are legally separate entities for which the City (the primary entity) is financially accountable. Financial accountability is defined as the ability to appoint a voting majority of the organization’s governing body and either (1) the City’s ability to impose its will over the organization or (2) the potential that the organization will provide a financial benefit to, or impose a financial burden on, the City. Using these criteria, the City has determined that the Police Pension Fund meets the above criteria. The Police Pension Fund is blended into the City’s primary government financial statements as a fiduciary fund although it remains a separate legal entity. In addition, the City is not included as a component unit in any other governmental reporting entity as defined by GASB pronouncements. B. Basic Financial Statements – Government-Wide Statements The City’s basic financial statements include both government-wide (reporting the City as a whole) and fund (reporting the City’s major funds) financial statements. Both the government-wide and fund financial statements categorize primary activities as either governmental or business-type. The City’s general office, public safety, public works, and parks and recreation services are classified as governmental activities. The City’s water and sewer services are classified as business-type activities. In the government-wide Statement of Net Position, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, and (b) are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The City’s net position is reported in three parts – net investment in capital assets; restricted net position; and unrestricted net position. The City first utilizes restricted resources to finance qualifying activities. The government-wide Statement of Activities reports both the gross and net cost of each of the City’s functions and business-type activities. The functions are also supported by general government revenues (property taxes, sales taxes, unrestricted investment earnings, etc.). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. Program revenues must be directly associated with the function (public safety, public works, parks and recreation, etc.) or a business-type activity. Program revenues include charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. Program revenues also include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. In the process of aggregating data for the government-wide financial statements, some amounts reported as interfund activity and balances were eliminated or reclassified. Interfund services provided and used are not eliminated in the process of consolidation. NOTES TO FINANCIAL STATEMENTS (Continued) Page 25 The net costs (by function or business-type activity) are normally covered by general revenue (property taxes, sales taxes, unrestricted investment earnings, etc.). The City does not allocate indirect costs. This government-wide focus is more on the sustainability of the City as an entity and the change in the City’s net position resulting from the current year’s activities. C. Basic Financial Statements – Fund Financial Statements The financial transactions of the City are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, reserves, fund equity, revenues, and expenditures/expenses. The various funds are reported by generic classification within the financial statements. The emphasis in fund financial statements is on the major funds in either the governmental or business- type activities categories. Nonmajor funds by category are summarized into a single column. GASB Statement No. 34 sets forth minimum criteria (percentage of the assets, liabilities, revenues, or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The following fund types are used by the City: 1. Governmental Funds The focus of the governmental funds’ measurement (in the fund statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The City reports these governmental funds and fund types: General Fund – The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The Annexation, Alarm Board, Band, Civil Defense, Revolving Loan, Tourism, and Employee Flex Funds are included in this fund. Special Revenue Funds – The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. Debt Service Fund – The Debt Service Fund is used to account for the accumulation of funds for the periodic payment of principal, interest, and related fees on general long-term debt. Capital Projects Funds – The Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by business- type/proprietary funds). The activities reported in these funds are reported as governmental activities in the government-wide financial statements. 2. Proprietary Fund Types The focus of proprietary fund measurement is upon determination of operating income, changes in net position, financial position, and cash flows. The generally accepted accounting principles applicable are those similar to businesses in the private sector. The City reports the following proprietary fund types: Enterprise Funds – Enterprise Funds are required to be used to account for operations for which a fee is charged to external users for goods or services and the activity is financed with debt that is solely secured by a pledge of the net revenues. The activities reported in these funds are reported as business-type activities in the government-wide financial statements. NOTES TO FINANCIAL STATEMENTS (Continued) Page 26 Internal Service Funds – Internal Service Funds are used to account for the financing of goods or services provided by an activity to other departments or funds of the City on a cost-reimbursement basis. Because the principal users of the internal services are the City’s governmental activities, the financial statement of the Internal Service Fund is consolidated into the governmental column when presented in the government-wide financial statements. 3. Fiduciary Fund Types Fiduciary Funds are used to report assets held in a trustee or custodial capacity for others and therefore are not available to support City programs. The reporting focus is on net position and changes in net position and is reported using accounting principles similar to proprietary funds. The City’s Fiduciary Funds are presented in the Fiduciary Fund financial statements by type (pension and custodial). Since by definition these assets are being held for the benefit of a third party (pension participants, developers, etc.) and cannot be used to address activities or obligations of the City, these funds are not incorporated into the government-wide statements. D. Basis of Accounting Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made regardless of the measurement focus applied. 1. Accrual Both governmental and business-type activities in the government-wide financial statements and the proprietary and fiduciary fund financial statements are presented on the accrual basis of accounting. Property tax revenues are recognized in the period for which levied. Other nonexchange revenues, including intergovernmental revenues and grants, are reported when all eligibility requirements are met. Fees and charges and other exchange revenues are recognized when earned and expenses are recognized when incurred. 2. Modified Accrual The governmental fund financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. “Available” means collectible within the current period or within 60 days after year-end. Property tax revenues are recognized in the period for which levied provided they are also available. Intergovernmental revenues and grants are recognized when all eligibility requirements are met and the revenues are available. Expenditures are recognized when the related liability is incurred. Exceptions to this general rule include principal and interest on general obligation long-term debt and employee vacation and sick leave, which are recognized when due and payable. E. Cash and Cash Equivalents and Investments Separate bank accounts are not maintained for all of the City’s funds. Instead, the funds maintain their uninvested cash balances in common checking accounts, with accounting records being maintained to show the portion of the common bank account balances attributable to each participating fund. Occasionally certain of the funds participating in the common bank accounts will incur overdrafts (deficits) in the accounts. Such overdrafts in effect constitute cash borrowed from other City funds and are, therefore, interfund loans that have not been authorized by City Board action. The following funds incurred overdraft balances at April 30, 2023: NOTES TO FINANCIAL STATEMENTS (Continued) Page 27 Audit Fund 536$ Recreation Center Fund 260,833 Capital Improvements Fund 781,040 Debt Service Fund 40,993 SSA #4 Lakewood Fund 382 SSA #6 Huntersville Fund 179,115 1,262,899$ Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with an original maturity of three months or less from the date of acquisition. Investments are stated at fair value. Fair value is determined by quoted market prices. Gains or losses on the sale of investments are recognized as they are incurred. F. Receivables Receivables are reported net of estimated uncollectible amounts. No property tax receivable allowance is recorded as the City receives approximately 100% of the amount levied. The allowance for water and sewer accounts receivable is $53,512 and all other allowances for other accounts receivable is $555,624. G. Prepaid Items Prepaid items are for payments made by the City in the current year for goods and services received in the subsequent fiscal year. H. Inventories Inventories consist of the cost of unused salt for the roads. The salt inventory as of April 30, 2023 is $184,569. I. Interfund Activity Interfund activity is reported either as loans, services provided, reimbursements or transfers. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or between proprietary funds are netted as part of the reconciliation to the government-wide financial statements. J. Capital Assets Capital assets purchased or acquired with an original cost of $5,000 or more, and $10,000 or more for construction projects, are reported at historical cost or estimated historical cost. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are reported at acquisition value. Additions, improvements and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line half-year basis over the following estimated useful lives: Vehicles 5-15 y ears Systems and Equipment 5-40 years Building and Improvements 5-62 years Infrastructure 10-40 years NOTES TO FINANCIAL STATEMENTS (Continued) Page 28 GASB Statement No. 34 required the City to report and depreciate new infrastructure assets effective as of May 1, 2003. Infrastructure assets include roads, bridges, underground pipe (other than related to utilities), traffic signals, etc. These infrastructure assets constitute the largest asset class of the City. K. Deferred Outflows and Inflows of Resources In addition to assets and liabilities, the Balance Sheets and Statements of Net Position will sometimes report separate sections for deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources represent a consumption of net position that applies to a future period and so will not be recognized as an outflow of resource until then. Deferred inflows of resources represent an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resource until that time. L. Compensated Absences The City accrues accumulated unpaid vacation and associated employee-related costs when earned (or estimated to be earned) by the employee. The noncurrent portion (the amount estimated to be used in subsequent fiscal years) for governmental funds is reported only as a general long-term debt obligation in the government-wide Statement of Net Position and represents a reconciling item between the fund and government-wide presentations. In accordance with the provisions of Statement of Financial Accounting Standards No. 43, “Accounting for Compensated Absences”, no liability is recorded for nonvesting accumulating rights to receive sick pay benefits. M. Long-Term Obligations In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities or business-type activities and proprietary fund Statement of Net Position. Bond premiums and discounts are amortized over the life of the bonds on a straight-line basis, rather than expensed in the current year. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as debt service expenditures in the year they occur. In the fund financial statements, governmental funds recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. N. Government-Wide and Proprietary Fund Net Position Government-wide and proprietary fund net position is divided into three components: 1. Net investment in capital assets – consists of the historical cost of capital assets less accumulated depreciation and less any debt that remains outstanding that was used to finance those assets. 2. Restricted net position – consists of net position that is restricted by the City’s creditors (for example, through debt covenants), by the state enabling legislation (through restrictions on shared revenues), by grantors (both federal and state), and by other contributors. 3. Unrestricted – all other net position is reported in this category. O. Governmental Fund Balances Governmental fund balances are divided between nonspendable and spendable. NOTES TO FINANCIAL STATEMENTS (Continued) Page 29 Nonspendable 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. The spendable fund balances are arranged in a hierarchy based on spending constraints. 1. Restricted – Restricted fund balances are restricted when constraints are placed on the use by either (a) external creditors, grantors, contributors, or laws or regulations of other governments or (b) law through constitutional provisions or enabling legislation. 2. Committed – Committed fund balances are amounts that can only be used for specific purposes as a result of constraints of the City Council. Committed amounts cannot be used for any other purpose unless the City Council removes those constraints by taking the same type of action (e.g. legislation, resolution, ordinance). Committed fund balances differ from restricted balances because the constraints on their use do not come from outside parties, constitutional provisions, or enabling legislation. 3. Assigned – Assigned fund balances are amounts that are constrained by the City’s intent to be used for specific purposes but are neither restricted nor committed. Intent is expressed by an appointed body (e.g. a budget or finance committee) or official to which the Board of Trustees has delegated the authority to assign, modify or rescind amounts to be used for specific purposes. Pursuant to resolution #R-12-019 by the City Council, the Finance Director has been delegated this authority, with the advice and consent of the Finance and Personnel Committee. Assigned fund balances also include (a) all remaining amounts that are reported in governmental funds (other than the General Fund) that are not classified as nonspendable, restricted or committed, and (b) amounts in the General Fund that are intended to be used for a specific purpose. Specific amounts that are not restricted or committed in a special revenue fund are assigned for purposes in accordance with the nature of their fund type. Assignment within the General Fund conveys that the intended use of those amounts is for a specific purpose that is narrower than the general purpose of the City itself. All assigned fund balances are the residual amounts of the fund. 4. Unassigned – Unassigned fund balance is the residual classification for the General Fund. This classification represents the General Fund balance that has not been assigned to other funds, and that has not been restricted, committed, or assigned to specific purposes within the General Fund. This classification is also used to represent negative fund balances in other funds. The City permits funds to be expended in the following order: Restricted, Committed, Assigned and Unassigned. P. Minimum Fund Balance The City has adopted a formal minimum fund balance policy. For the General, Recreation Center, and Information Technology Funds, fund balance will be maintained at 120 days of estimated operating expenditures. If the balance falls below this minimum a plan will be developed to return to the minimum balance within a reasonable period of time. Funds in excess of the minimum may be considered for the funding of one-time, nonrecurring expenditures, assigned for future capital activities, or used for the funding of other long-term obligations. Q. Property Tax Calendar and Revenues The City’s property tax is levied each calendar year on all taxable real property located in the City’s district on or before the last Tuesday in December. The 2022 levy was passed by the Board on December 19, 2022. Property taxes attach as an enforceable lien on property as of January 1 of the calendar year they are for and are payable in two installments early in June and early in September of the following calendar year. The City receives significant distributions of tax receipts approximately one month after these dates. NOTES TO FINANCIAL STATEMENTS (Continued) Page 30 R. Lease Arrangements The City recognizes a right-to-use liability and a right-to-use asset for various lease agreements in the government-wide financial statements. At the commencement of a lease, the City initially measures the right-to-use liability at the present value of payments expected to be made during the agreement term. Subsequently, the right-to-use liability is reduced by the principal portion payments made. The right-to-use asset is initially measured as the initial amount of the right-to-use liability, adjusted for payments made at or before the commencement date, plus certain initial direct costs. Subsequently, the right-to-use asset is amortized on a straight-line basis over the term of the lease agreement. Key estimates and judgments related to lease agreements include how the City determines (1) the discount rate it uses to discount the expected payments to present value, (2) lease term, and (3) lease payments. The City currently does not have any material lessee lease agreements that fall under this type of arrangement. The City is a lessor for a lease related to the use of a cell tower by a mobile phone carrier. At the commencement of the lease, the District initially measures the lease receivable at the present value of payments expected to be made during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments made. The unavailable lease revenue is initially measured as the initial amount of the lease receivable. Subsequently, the unavailable lease revenue is recognized on a straight-line basis over the lease term. Key estimates and judgments related to leases include how the District determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments. The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City uses its estimated incremental borrowing rate as the discount rate for lease agreements. The term includes the noncancellable period of the lease agreement. Payments included in the measurement of the right-to-use liability are composed of fixed payments and purchase option prices that the City is reasonably certain to exercise. The City monitors changes in circumstances that would require a remeasurement of its lease agreements and will remeasure the right-to-use asset and liability if certain changes occur that are expected to significantly affect the amount of the right-to-use liability. Right-to-use assets are reported with Capital Assets and right-to-use liabilities are reported with Long Term Liabilities on the Statement of Net Position. S. Defining Operating Revenues and Expenses The City’s proprietary funds distinguish between operating and nonoperating revenues and expenses. Operating revenues and expenses of the City’s Water and Sewer Fund consist of charges for services (including tap fees for the water function and systems development charges for the sewer function) and the costs of providing those services, including depreciation and excluding interest cost. All other revenue and expenses are reported as nonoperating. T. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. NOTE 2 - DEPOSITS, INVESTMENTS, AND FAIR VALUE MEASUREMENTS Deposits with financial institutions are fully insured or collateralized by securities held in the City’s name. NOTES TO FINANCIAL STATEMENTS (Continued) Page 31 The City is allowed to invest in securities as authorized by the Illinois Compiled Statutes, Chapter 30, Act 235/Articles 2 and 6, and Chapter 40, Act 5/Article 3 – Pensions. Investments The Police Pension Fund holds all investments within the Illinois Police Officers’ Pension Investment Fund (IPOPIF). IPOPIF was created by Public Act 101-0610 and codified within the Illinois Pension Code, becoming effective January 1, 2020, to streamline investments and eliminate unnecessary and redundant administrative costs, thereby ensuring assets are available to fund pension benefits for the beneficiaries of the participating pension funds as defined in 40 ILCS 5/22B-105. Participation in IPOPIF by Illinois suburban and downstate police pension funds is mandatory and investments were contributed to the IPOPIF Investment Fund on August 1, 2022. IPOPIF’s investment police was originally adopted by the Board of Trustees on December 17, 2021. IPOPIF has the authority to invest trust fund assets in any type of security subject to the requirements and restrictions set forth in the Illinois Pension Code and is not restricted by the Pension Code sections that pertained exclusively to the Article 3 participating police pension funds. As of April 30, 2023, the City and Police Pension had the following investments, maturities, and fair value measurements: City Credit Quality/ Segmented Time Net Asset Types of investments Ratings Distribution A mount Level 1 Level 2 Value (NAV) Debt Securities: U.S. Treasury Securities Not Rated less than 1 year 8,160,308$ 8,160,308$ -$ -$ External Investment Pools AAAmmf less than 1 year 21,299,653 - - 21,299,653 Certificates of Deposit N/A less than 1 year 1,729,354 - 1,729,354 - Certificates of Deposit N/A 1 to 5 years 322,228 - 322,228 - Total Debt Securities 31,511,543$ 8,160,308$ 2,051,582$ 21,299,653$ Total Investments 31,511,543$ 8,160,308$ 2,051,582$ 21,299,653$ Fair Value Measurement Using Police Pension Credit Quality/ Segmented Time Net Asset Types of investments Ratings Distribution Amount Level 1 Level 2 Value (NAV) External Investment Pool AAAmmf less than 1 year 415,414$ -$ -$ 415,414$ IPOPIF Consolidated Investment Fund Not Rated less than 1 year 54,550,697 - - 54,550,697 Total Investments 54,966,111$ -$ -$ 54,966,111$ Fair Value Measurement Using The City and Police Pension Fund categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; debt securities and certificates of deposit classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices; Level 3 inputs are significant unobservable inputs. Debt and equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Debt securities and certificates of deposit classified in Level 2 of the fair value hierarchy are valued using a matrix pricing technique. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices. The Police Pension Fund held no investments subject to fair value measurement as of April 30, 2023. The Police Pension Fund’s pooled investment in IPOPIF, as noted in the table above, is valued at Net Asset Value per share. The pooled investments consist of the investments as noted in the target allocation table available at www.ipopif.org under Governing Documents, Policies, and Investment Policy NOTES TO FINANCIAL STATEMENTS (Continued) Page 32 Statement. Investments in IPOPIF are valued at IPOPIF’s share price, which is the amount it would cost to buy the shares in the investment pool. The fair value of investments in the External Investment Pools is the same as the value of pool shares. The External Investment Pools are not SEC-registered but have regulatory oversight through the State of Illinois. Interest Rate Risk. The City will minimize the risk that the market value of securities in the portfolio will fall due to changes in general interest rates, by: • Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity. • Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools. Credit Risk. The City minimizes credit risk, the risk of loss due to the failure of the security issuer or backer, by: • Limiting investments to the safest type of securities. • Pre-qualifying the financial institutions, brokers/dealers, intermediaries, and advisers with which the City will do business. • Diversifying the investment portfolio so that potential losses on individual securities will be minimized. Concentration of Credit Risk. The City places no specific limit on the amount the City may invest in any one issuer. There are currently no investments in any one organization that represent 5% or more of the City’s total investments. NOTE 3 - CAPITAL ASSETS Capital asset activity for the year ended April 30, 2023 was as follows: Balance Balance May 1, 2022 Increases Decreases April 30, 2023 Governmental Activities Capital Assets not being depreciated Land 42,664,844$ 986,660$ -$ 43,651,504$ Art and Historical Treasures 1,658,927 - - 1,658,927 Intangibles 300,000 - - 300,000 Construction in Progress 1,463,648 2,715,606 2,347,275 1,831,979 Total Capital Assets not being depreciated 46,087,419$ 3,702,266$ 2,347,275$ 47,442,410$ Other Capital Assets Land Improvements 7,040,320$ 637,489$ -$ 7,677,809$ Buildings 18,705,237 1,017,304 - 19,722,541 Vehicles 4,864,400 618,251 54,499 5,428,152 Equipment 4,868,609 337,740 11,633 5,194,716 Infrastructure 83,790,172 903,668 - 84,693,840 Total Other Capital Assets at Historical Cost 119,268,738$ 3,514,452$ 66,132$ 122,717,058$ Less Accumulated Depreciation for: Land Improvements 4,456,045$ 275,255$ -$ 4,731,300$ Buildings 6,352,318 445,571 - 6,797,889 Vehicles 3,290,156 381,825 54,499 3,617,482 Equipment 3,400,430 300,546 11,633 3,689,343 Infrastructure 52,812,804 1,984,116 - 54,796,920 Total Accumulated Depreciation 70,311,753$ 3,387,313$ 66,132$ 73,632,934$ Other Capital Assets, Net 48,956,985$ 127,139$ -$ 49,084,124$ Governmental Activities Capital Assets, Net 95,044,404$ 3,829,405$ 2,347,275$ 96,526,534$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 33 Balance Balance May 1, 2022 Increases Decreases April 30, 2023 Business-Type Activities Capital Assets not being depreciated Land 2,208,117$ -$ -$ 2,208,117$ Construction in Progress 57,193 130,739 94,988 92,944 Total Capital Assets not being depreciated 2,265,310$ 130,739$ 94,988$ 2,301,061$ Other Capital Assets Buildings 2,736,098$ -$ -$ 2,736,098$ Vehicles 1,702,060 16,233 38,632 1,679,661 Systems and Equipment 112,191,349 509,824 - 112,701,173 Total Other Capital Assets at Historical Cost 116,629,507$ 526,057$ 38,632$ 117,116,932$ Less Accumulated Depreciation for: Buildings 2,374,892$ 26,505$ -$ 2,401,397$ Vehicles 923,312 67,048 38,632 951,728 Systems and Equipment 36,300,158 2,711,050 - 39,011,208 Total Accumulated Depreciation 39,598,362$ 2,804,603$ 38,632$ 42,364,333$ Other Capital Assets, Net 77,031,145$ (2,278,546)$ -$ 74,752,599$ Business-Type Activities Capital Assets, Net 79,296,455$ (2,147,807)$ 94,988$ 77,053,660$ Depreciation expense was charged to functions as follows: NOTE 4 - NET INVESTMENT IN CAPITAL ASSET CALCULATION Net investment in capital asset calculation as of April 30, 2023 was as follows: Governmental Activities Capital Assets, Net of Accumulated Depreciation 96,526,534$ Less: Capital Related Debt (4,057,535) Capital Assets in Accounts Payable (704,854) Investment in Capital Assets 91,764,145$ Business-Type Activities Capital Assets, Net of Accumulated Depreciation 77,053,660$ Less: Capital Related Debt (30,648,680) Capital Assets in Accounts Payable (27,609) Investment in Capital Assets 46,377,371$ NOTE 5 - LONG-TERM LIABILITY ACTIVITY Long-term liability activity for the year ended April 30, 2023 was as follows: Governmental Activities Public Safety 365,184$ Public Works 2,274,259 Parks and Recreation 502,158 Unallocated 245,712 Total Governmental Activities Depreciation Expense 3,387,313$ Business-Type Activities Water 647,212$ Sewer 2,157,391 Total Business-Type Activities Depreciation Expense 2,804,603$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 34 Amounts Balance Balance Due Within May 1, 2022 Additions Retirements April 30, 2023 One Year Governmental Activities Bonds and Notes Payable General Obligation Bonds 27,205,000$ -$ 1,675,000$ 25,530,000$ 1,695,000$ Unamortized Bond Discount (371) 189 - (182) (182) Unamortized Bond Premium 40,547 - 8,378 32,169 8,378 Note Payable 956,419 - 320,871 635,548 328,690 Total Bonds and Notes Payable 28,201,595$ 189$ 2,004,249$ 26,197,535$ 2,031,886$ Other Long-Term Liabilities Compensated Absences 625,240$ 640,775$ 625,240$ 640,775$ 640,775$ Total Other Long-Term Liabilities 625,240$ 640,775$ 625,240$ 640,775$ 640,775$ Governmental Activities Long-Term Obligations 28,826,835$ 640,964$ 2,629,489$ 26,838,310$ 2,672,661$ Business-Type Activities Bonds and Notes Payable General Obligation Bonds 3,995,000$ -$ 370,000$ 3,625,000$ 395,000$ IEPA Revolving Loan Fund 28,275,383 - 1,532,512 26,742,871 1,561,149 Unamortized Bond Premium 327,327 - 46,518 280,809 46,517 Total Bonds and Notes Payable 32,597,710$ -$ 1,949,030$ 30,648,680$ 2,002,666$ Other Long-Term Liabilities Compensated Absences 98,664$ 99,183$ 98,664$ 99,183$ 99,183$ Total Other Long-Term Liabilities 98,664$ 99,183$ 98,664$ 99,183$ 99,183$ Business-Type Activities Long-Term Obligations 32,696,374$ 99,183$ 2,047,694$ 30,747,863$ 2,101,849$ Bonds and notes payable consisted of the following at April 30, 2023: Maturity Interest Face Carrying Date Rate Amount Amount Governmental Activities General Obligation Bonds 2012 12/15/2027 2.00% - 2.50%850,000$ 320,000$ General Obligation Bonds 2013 5/1/2027 0.40% - 2.75%415,000 170,000 General Obligation Bonds 2015 12/15/2035 2.00% - 3.25%6,375,000 2,900,000 General Obligation Bonds 2020B 4/30/2040 0.849% - 3.376%24,265,000 22,140,000 Note Payable 2/20/2024 3.50%574,171 65,477 4 parcels of land pledged as collateral to this loan Note Payable 5/25/2024 3.10%1,300,151 570,071 26 vehicles pledged as collateral to this loan Capital Lease - Dell Financial 7/31/2022 0.00%72,310 - Total 33,851,632$ 26,165,548$ Business-Type Activities General Obligation Bonds 2012 12/15/2032 2.00% - 2.80%2,250,000$ 1,285,000$ General Obligation Bonds 2020A 4/30/2030 4.00%2,855,000 2,340,000 IEPA Revolving Loan Fund 12/30/2037 1.86%31,507,182 26,742,871 Total 36,612,182$ 30,367,871$ At April 30, 2023, the annual debt service requirements to service all long-term debt attributable to governmental activities are: NOTES TO FINANCIAL STATEMENTS (Continued) Page 35 Year Ending April 30 Principal Interest Total 2024 2,023,690$ 670,482$ 2,694,172$ 2025 1,996,460 636,599 2,633,059 2026 1,565,398 600,660 2,166,058 2027 1,560,000 573,793 2,133,793 2028 1,595,000 543,817 2,138,817 2029 - 2033 6,770,000 2,221,895 8,991,895 2034 - 2038 7,485,000 1,243,344 8,728,344 2039 - 2040 3,170,000 161,372 3,331,372 26,165,548$ 6,651,962$ 32,817,510$ At April 30, 2023 the annual debt service requirements to service all long-term debt attributable to business-type activities are: Year Ending April 30 Principal Interest Total 2024 1,956,149$ 616,099$ 2,572,248$ 2025 2,005,322 573,217 2,578,539 2026 2,050,039 529,084 2,579,123 2027 2,100,312 483,509 2,583,821 2028 2,156,151 436,650 2,592,801 2029 - 2033 10,348,882 1,472,943 11,821,825 2034 - 2038 9,751,016 505,689 10,256,705 30,367,871$ 4,617,191$ 34,985,062$ Industrial Development Revenue Bonds, Series 2016A and 2016B During fiscal year 2017, the City issued Industrial Development Revenue Bonds on behalf of Fabrik Industries. The bonds are not obligations of the City; therefore, the City does not record the assets or liabilities resulting from the bond issuance as its primary function is to arrange financing between Fabrik and the bond holders. All funds are controlled by the trustee of the bonds (American Community Bank & Trust). The original issue of the bonds aggregated to $7,500,000, and at April 30, 2023 the outstanding balance on the bonds was $1,114,812. Long-term liabilities are being repaid from the following funds: Obligation Fund Governmental Activities General Obligation Bonds General Fund, Annexation Fund, Capital Improvements Fund, TIF Fund, Recreation Center Fund, Water and Sewer Fund Note Payable General Fund, Tourism Fund, Information Technology Fund Compensated Absences General Fund, Information Technology Fund Business-Type Activities General Obligation Bonds Water and Sewer Fund IEPA Revolving Loan Fund Water and Sewer Fund Compensated Absences Water and Sewer Fund NOTE 6 - RESTRICTED EQUITY The following amounts are restricted equity balances at April 30, 2023: Restricted Restricted Restricted for Net Position Fund Balance Governmental Activities/Governmental Funds Highways and Streets 1,608,945$ 1,608,945$ Capital Projects 195,936 195,936 Special Service Areas 29 29 Tax Increment Financing 232,001 232,001 2,036,911$ 2,036,911$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 36 NOTE 7 - DESIGNATED NET POSITION City management has designated certain Water and Sewer Fund revenues to be used only for debt service. The amount designated at April 30, 2023 was $4,998,159. NOTE 8 - DEFICIT FUND BALANCE At April 30, 2023 a deficit fund balance existed in the following funds: Audit Fund 24$ SSA #6 Huntersville Fund 179,115 179,139$ NOTE 9 - NET POSITION/FUND BALANCE ADJUSTMENT During the year, the City made the following net position/fund balance adjustments: Governmental Funds Fund Balance General Fund Adjustment to reverse FY'22 Income Tax Accrual (861,324)$ Governmental Activities Net Position Adjustment to reverse FY'22 Income Tax Accrual (861,324)$ In prior years, the City accrued two months of income and personal property from the State of Illinois. In the current year, the City began recognizing these revenues based on when the state has vouchered or allocated these payments as these amounts are not derived tax revenues at the local government level. Instead, these revenues fall in line with a voluntary non-exchange transaction, in which eligibility then availability requirements should both be determined before recognizing the revenue. In the case of revenues, these eligibility and availability requirements are not met until the month the funds are vouchered by the state. Due to this, a fund balance adjustment and corresponding net position adjustment were made for the prior year accrual amount noted above, as these eligibility requirements were not met in the prior year as well. NOTE 10 - PROPERTY TAXES Property taxes receivable and unavailable revenue recorded in these financial statements, in the amount of $5,875,439, are from the 2022 tax levy. The unavailable revenue is 100% of the 2022 tax levy. These taxes are unavailable as none of the taxes are collected before the end of the fiscal year and the City does not consider the amounts to be available and does not budget for their use in fiscal year 2023. The City has determined that 100% of the amounts collected for the 2021 levy ($5,711,748) are allocable for use in fiscal year 2023 and, therefore, are recorded in these financial statements as property taxes revenue. A summary of the assessed valuation, rates, and extensions for the years 2022, 2021, and 2020 follows: Tax Year Assessed Valuation Rates Extensions Rates Extensions Rates Extensions General 0.0427 364,100$ 0.0524 410,155$ 0.0344 255,869$ Bond 0.1953 1,665,073 0.2129 1,839,230 0.2241 1,667,294 Police Protection 0.0643 547,962 0.0701 547,965 0.0737 547,966 Insurance 0.0586 499,995 0.0639 499,998 0.0672 499,999 Retirement 0.0468 399,202 0.0510 399,197 0.0537 399,198 Social Security 0.0661 563,752 0.0721 563,749 0.0758 563,751 Audit 0.0031 26,431 0.0034 26,428 0.0036 26,431 Police Pension 0.0788 671,460 0.0800 625,607 0.0885 658,311 Total Taxes Extended 0.5557 4,737,975$ 0.6058 4,912,329$ 0.6209 4,618,819$ 2020 $743,912,520 2022 $864,035,912 2021 $782,126,233 NOTES TO FINANCIAL STATEMENTS (Continued) Page 37 Tax Year Rates Extensions Rates Extensions Rates Extensions Road and Bridge (from Townships)- 305,803$ - 292,407$ - 273,254$ Special Service Area #4A - 15,580$ - 15,580$ - 16,123$ Tax Increment Financing - 816,081$ - 732,268$ - 680,014$ 202020222021 NOTE 11 - EXCESS OF EXPENDITURES OVER BUDGET For the year ended April 30, 2023, the following funds had expenditures that exceeded the budget: Fund Budget Actual Audit $ 51,000 $ 51,825 825$ Recreation Center 551,463 606,912 55,449 Capital Asset Maintenance and Replacement 177,515 179,313 1,798 Excess of Actual Over Budget NOTE 12 - ILLINOIS MUNICIPAL RETIREMENT FUND A. Plan Description The City’s defined benefit pension plan for regular employees provides retirement and disability benefits, post-retirement increases, and death benefits to plan members and beneficiaries. The City’s plan is managed by the Illinois Municipal Retirement Fund (IMRF), the administrator of an agent multiple-employer public pension fund. A summary of IMRF’s pension benefits is provided in the “Benefits Provided” section of this document. Details of all benefits are available from IMRF. Benefit provisions are established by statute and may only be changed by the General Assembly of the State of Illinois. IMRF issues a publicly available Annual Comprehensive Financial Report that includes financial statements, detailed information about the pension plan’s fiduciary net position, and required supplementary information. The report is available for download at www.imrf.org. B. Benefits Provided IMRF has three benefit plans. The vast majority of IMRF members participate in the Regular Plan (RP). The Sheriff’s Law Enforcement Personnel (SLEP) plan is for sheriffs, deputy sheriffs, and selected police chiefs. Counties could adopt the Elected County Official (ECO) plan for officials elected prior to August 8, 2011 (the ECO plan was closed to new participants after that date). All three IMRF benefit plans have two tiers. Employees hired before January 1, 2011 are eligible for Tier 1 benefits. Tier 1 employees are vested for pension benefits when they have at least eight years of qualifying service credit. Tier 1 employees who retire at age 55 (at reduced benefits) or after age 60 (at full benefits) with eight years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earnings for the first 15 years of service credit, plus 2% for each year of service credit after 15 years to a maximum of 75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any consecutive 48 months within the last ten years of service, divided by 48. Under Tier 1, the pension is increased by 3% of the original amount on January 1 every year after retirement. Employees hired on or after January 1, 2011 are eligible for Tier 2 benefits. For Tier 2 employees, pension benefits vest after ten years of service. Participating employees who retire at age 62 (at reduced benefits) or after age 67 (at full benefits) with ten years of service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to 1-2/3% of the final rate of earnings for the first 15 years of service credit, plus 2% for each year of service credit after 15 years to a maximum of 75% of their final rate of earnings. Final rate of earnings is the highest total earnings during any 96 consecutive months within the last ten years of service, divided by 96. Under Tier 2, the pension is increased on January 1 every year after retirement, upon reaching age 67, by the lesser of: NOTES TO FINANCIAL STATEMENTS (Continued) Page 38 • 3% of the original pension amount, or • 1/2 of the increase in the Consumer Price Index of the original pension amount. C. Employees Covered by Benefit Terms All appointed employees of a participating employer who are employed in a position normally requiring 600 hours (1,000 hours for certain employees hired after 1981) or more of work in a year are required to participate. As of December 31, 2022, the following employees were covered by the benefit terms: Inactive plan members or beneficiaries currently receiving benefits 101 Inactive plan members entitled to but not yet receiving benefits 53 Active plan members 97 Total 251 D. Contributions As set by statute, the City’s Regular Plan Members are required to contribute 4.5% of their annual covered salary. The statute requires employers to contribute the amount necessary, in addition to member contributions, to finance the retirement coverage of its own employees. The City’s annual contribution rate for calendar year 2022 and 2023 was 10.82% and 9.42%, respectively. For the fiscal year ended April 30, 2023, the City contributed $878,407 to the plan. The City also contributes for disability benefits, death benefits, and supplemental retirement benefits, all of which are pooled at the IMRF level. Contribution rates for disability and death benefits are set by IMRF’s Board of Trustees, while the supplemental retirement benefits rate is set by statute. E. Net Pension (Asset)/Liability The components of the net pension (asset)/liability of the IMRF actuarial valuation performed as of December 31, 2022, with a measurement date as of that date, calculated in accordance with GASB Statement No. 68, were as follows: Total Pension (Asset)/Liability 47,463,892$ IMRF Fiduciary Net Position 40,185,474 City's Net Pension Liability 7,278,418 IMRF Fiduciary Net Position as a Percentage of the Total Pension Liability 84.67% See the Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios in the Required Supplementary Information following the notes to the financial statements for additional information related to the funded status of the plan. F. Actuarial Assumptions The total pension liability above was determined by an actuarial valuation performed as of December 31, 2022 using the following actuarial methods and assumptions: Assumptions Inflation 2.25% Salary Increases 2.85% - 13.75% including inflation Interest Rate 7.25% Asset Cost Method Entry Age Normal Asset Valuation Method Market Value of Assets Projected Retirement Age Experience-based Table of Rates,specific to the type of eligibility condition,last updated for the 2020 valuation according to an experience study from years 2017 to 2019 NOTES TO FINANCIAL STATEMENTS (Continued) Page 39 For non-disabled retirees, the Pub-2010, Amount-Weighted, below-median income, General, Retiree, Male (adjusted 106%) and Female (adjusted 105%) tables, and future mortality improvements projected using scale MP-2020 were used. For disabled retirees, the Pub-2010, Amount-Weighted, below-median income, General, Disabled Retiree, Male and Female (both unadjusted) tables, and future mortality improvements projected using scale MP-2020 were used. For active members, the Pub-2010, Amount- Weighted, below-median income, General, Employee, Male and Female (both unadjusted) tables, and future mortality improvements projected using scale MP-2020 were used. G. Long-Term Expected Rate of Return The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense, and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return to the target asset allocation percentage and adding expected inflation. The target allocation and best estimates of geometric real rates of return for each major asset class are summarized in the following table as of December 31, 2022: Asset Class Target Allocation Projected Return Equities 35.50% 6.50% International Equities 18.00% 7.60% Fixed Income 25.50% 4.90% Real Estate 10.50% 6.20% Alternatives 9.50% Private Equity 9.90% Hedge Funds N/A Commodities 6.25% Cash Equivalents 1.00% 4.00% 100.00% H. Single Discount Rate A Single Discount Rate of 7.25% was used to measure the total pension liability as of December 31, 2022. The projection of cash flow used to determine this Single Discount Rate assumed that the plan members’ contributions will be made at the current contribution rate, and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. 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 Single Discount Rate reflects: 1. The long-term expected rate of return on pension plan investments (during the period in which the fiduciary net position is projected to be sufficient to pay benefits), and 2. The tax-exempt municipal bond rate based on an index of 20-year general obligation bonds with an average AA credit rating (which is published by the Federal Reserve) as of the measurement date (to the extent that the contributions for use with the long-term expected rate of return are not met). For the purpose of this discount rate, the expected rate of return on pension plan investments is 7.25%; the municipal bond rate is 4.05%; and resulting single discount rate is 7.25%. The prior year single discount rate was 7.25% and increased 0.00% to the current year single discount rate. NOTES TO FINANCIAL STATEMENTS (Continued) Page 40 I. Changes in Net Pension (Asset)/Liability Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (A)(B)(A)-(B) Balances at December 31, 2021 46,142,272$ 48,058,375$ (1,916,103)$ Changes for the year: Service Cost 763,605$ -$ 763,605$ Interest on the Total Pension Liability 3,290,347 - 3,290,347 Differences Between Expected and Actual Experience of the Total Pension Liability (452,379) - (452,379) Contributions - Employer - 903,892 (903,892) Contributions - Employee - 375,925 (375,925) Net Investment Income - (6,083,896) 6,083,896 Benefit Payments, including Refunds of Employee Contributions (2,279,953) (2,279,953) - Other (Net Transfer)- (788,869) 788,869 Net Changes 1,321,620$ (7,872,901)$ 9,194,521$ Balances at December 31, 2022 47,463,892$ 40,185,474$ 7,278,418$ J. Sensitivity of the Net Pension (Asset)/Liability to Changes in the Discount Rate The following presents the plan’s net pension liability, calculated using a Single Discount Rate of 7.25%, as well as what the plan’s net pension liability would be if it were calculated using a single Discount Rate that is 1% lower or 1% higher than the current rate: Current 1% Decrease Discount Rate 1% Increase 6.25%7.25%8.25% Net Pension (Asset)/Liability 13,541,084$ 7,278,418$ 2,387,521$ K. Pension Expense/(Income) and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended April 30, 2023, the City recognized pension expense/(income) of $2,271,343. At April 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Net Outflows Expense in Future Periods Resources Resources of Resources Differences between expected and actual experience 1,006,560$ 357,606$ 648,954$ Changes of assumptions 76,120 189,469 (113,349) Net difference between projected and actual earnings on pension plan investments 3,439,214 - 3,439,214 Total deferred amounts to be recognized in pension expense in future periods 4,521,894$ 547,075$ 3,974,819$ Pension contributions made subsequent to the measurement date 277,293 - 277,293 Total deferred amounts related to pensions 4,799,187$ 547,075$ 4,252,112$ $277,293 reported as deferred outflows of resources related to pensions resulting from the City’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the reporting year ended April 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future periods as follows: NOTES TO FINANCIAL STATEMENTS (Continued) Page 41 Net Deferred Year Ending Outflows of December 31 Resources 2023 236,167$ 2024 751,514 2025 1,159,770 2026 1,827,368 2027 - Thereafter - 3,974,819$ L. Social Security Employees not qualifying for coverage under the Illinois Municipal Retirement Fund are considered “non- participating employees”. These employees and those qualifying for coverage under the Illinois Municipal Retirement Fund are covered under Social Security. The City paid the total required contribution for the current fiscal year. NOTE 13 - POLICE PENSION PLAN A. Plan Administration Full-time police sworn personnel of the City are covered by The Police Pension Fund of the City (Plan). Although this is a single-member pension plan, the defined benefits and employee and employer contribution levels are governed by Illinois Compiled Statues (40 IL CS 5/3-1) and may be amended only by the Illinois legislature. The City accounts for the Plan as a pension trust fund. The Pension Board administers the Plan and the Illinois Department of Insurance is the oversight agency. The Board consists of five elected or appointed members. B. Plan Membership At May 1, 2022, the date of the latest actuarial valuation, Plan participation consisted of: Inactive plan members or beneficiaries currently receiving benefits 33 Terminated plan members entitled to but not yet receiving benefits 10 Active plan members 48 Total 91 C. Benefits Provided The Plan provides retirement, disability, and death benefits to Plan members and their beneficiaries. Chapter 40-Pensions-Act 5/Article 3 of the Illinois Compiled Statutes assigns the authority to establish and amend the benefit provisions of the Plan to the Illinois legislature. D. Contributions Employees are required by Illinois Compiled Statutes (ILCS) to contribute 9.91% of their base salary to the Plan. If an employee leaves covered employment with less than 20 years of service, accumulated employee contributions may be refunded without accumulated interest. The City is required to contribute the remaining amounts necessary to finance the plan and the administrative costs as actuarially determined by an enrolled actuary. Effective January 1, 2011, the City has until the year 2040 to fund 90% of the past service cost for the Plan. For the year ended April 30, 2023 the City’s contribution was 12.54% of covered payroll. NOTES TO FINANCIAL STATEMENTS (Continued) Page 42 E. Net Pension (Asset)/Liability The components of the net pension liability of the Plan as of April 30, 2023, calculated in accordance with GASB Statement No. 68, were as follows: Total Pension Liability 60,067,242$ Plan Fiduciary Net Position 55,718,518 City's Net Pension (Asset)/Liability 4,348,724 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 92.76% See the Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios in the Required Supplementary Information for additional information related to the funded status of the Plan. F. Actuarial Assumptions The total pension liability above was determined by an actuarial valuation performed as of May 1, 2022 using the following actuarial methods and assumptions: Actuarial Cost Method Entry Age Normal Amortization Method Straight Line Remaining Amortization Period 20 Years Actuarial Experience and Changes in Assumptions 6.81 Years Asset Experience 5 Years Assumptions Inflation 2.25% Salary Increases 3.75% - 10.02% Interest Rate 7.00% Payroll Growth 3.00% Asset Valuation Method Market Value Mortality rates were based on the PubS-2010(A). The other non-economic actuarial assumptions used in the May 1, 2022 valuation were based on a review of assumptions in the L&A 2020 study for Illinois Police Officers. Active Mortality follows the Sex Distinct Raw Rates as developed in the PubS-2010(A) Study. Mortality improvement uses MP-2019 Improvement Rates applied on a fully generational basis. 50% of active Member deaths are assumed to be in the Line of Duty. Retiree Mortality follows the L&A Assumption Study for Police 2020. These rates are experience weighted with the Sex District Raw Rates as developed in the PubS-2010(A) Study improved to 2017 using MP- 2019 Improvement Rates. These rates are then improved fully generationally using MP-2019 Improvement Rates. Disabled Mortality follows the Sex Distinct Raw Rates as developed in the PubS-2019 Study for disabled participants. Mortality improvement uses MP-2019 Improvement Rates applied on a fully generational basis. Spouse Mortality follows the Sex Distinct Raw Rates as developed in the PubS-2010(A) Study for contingent survivors. For all rates not provided there (ages 45 and younger) the PubG-2010 Study for general employees was used. Mortality improvement uses MP-2019 Improvement Rates applied on a fully generational basis. Other actuarial assumption (demographic) rates are based on a review of the L&A Assumption Study for Police 2020. NOTES TO FINANCIAL STATEMENTS (Continued) Page 43 G. Discount Rate The discount rate used to measure the total pension liability was 7.00%. The discount rate used in the determination of the Total Pension Liability is based on a combination of the expected long-term rate of return on plan investments and the municipal bond rate. Cash flow projections were used to determine the extent which the plan’s future net position will be able to cover future benefit payments. To the extent future benefit payments are covered by the plan’s projected net position, the expected rate of return on plan investments is used to determine the portion of the net pension liability associated with those payments. To the extent future benefit payments are not covered by the plan’s projected net position, the municipal bond rate is used to determine the portion of the net pension liability associated with those payments. The Plan’s projected net position is expected to cover future benefit payments in full for the current employees. Projected benefit payments are determined during the actuarial process based on assumptions. More details on the assumptions are in the prior section. The expected contributions are based on the funding policy of the Plan. H. Changes in the Net Pension (Asset)/Liability Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (A)(B)(A)-(B) alances at April 30, 2022 57,107,066$ 56,638,040$ 469,026$ hanges for the year: Service Cost 1,133,068$ -$ 1,133,068$ Interest on the Total Pension Liability 3,939,393 - 3,939,393 Changes of Benefit Terms (53,189) - (53,189) Differences Between Expected and Actual Experience 226,460 - 226,460 Contributions - Employer - 621,970 (621,970) Contributions - Employee - 491,717 (491,717) Net Investment Income - 276,331 (276,331) Benefit Payments, including Refunds of Employee Contributions (2,285,556) (2,285,556) - Administrative Expense - (23,984) 23,984 Net Changes 2,960,176$ (919,522)$ 3,879,698$ alances at April 30, 2023 60,067,242$ 55,718,518$ 4,348,724$ I. Sensitivity of the Net Pension (Asset)/Liability to Changes in the Discount Rate The following presents the plan’s net pension liability, calculated using a Single Discount Rate of 7.00%, as well as what the plan’s net pension liability would be if it were calculated using a single Discount Rate that is 1% lower or 1% higher: Current 1% Decrease Discount Rate 1% Increase 6.00% 7.00% 8.00% Net Pension (Asset)/Liability 13,292,510$ 4,348,724$ (2,927,901)$ J. Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended April 30, 2023, the City recognized pension expense/(income) of $1,756,911. At April 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: NOTES TO FINANCIAL STATEMENTS (Continued) Page 44 Deferred Deferred Net Deferred Outflows of Inflows of Outflows of Expense in Future Periods Resources Resources Resources Differences between expected and actual experience 774,332$ 1,537,535$ (763,203)$ Assumption changes 561,750 246,050 315,700 Net difference between projected and actual earnings on pension investments 5,393,559 - 5,393,559 Total deferred amounts to be recognized in pension expense in future periods 6,729,641$ 1,783,585$ 4,946,056$ Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense in future periods as follows: Net Deferred Year Ending Outflows of April 30 Resources 2024 1,061,653$ 2025 818,545 2026 2,361,839 2027 743,479 2028 (43,010) Thereafter 3,550 4,946,056$ NOTE 14 - POST EMPLOYMENT BENEFIT COMMITMENTS Retiree Insurance Plan A. Plan Overview In addition to the retirement plans described in Notes 12 and 13, the City provides post-employment benefits other than pensions (“OPEB”) for retired employees through a single-employer defined benefit plan. The benefits, benefit levels, employee contributions and employer contributions are governed by the City and can be amended by the City through its personnel manual and union contracts. The plan is not accounted for as a trust fund, as an irrevocable trust has not been established to account for the plan. The plan does not issue a separate report. The activity of the plan is reported in the City’s governmental activities. B. Benefits Provided The City provides postemployment health care benefits to its retirees and certain disable employees. To be eligible for benefits, an employee must qualify for retirement under one of the City’s retirement plans or meet COBRA requirements. All health care benefits are provided through the City’s insured health plan. The benefit levels are the same as those afforded to active employees. The Plan provides the following coverage: Medical Coverage Employees may continue c overage into retirement on the City medical plans if they pay the entire premium. Coverage is also available for eligible dependents on a pay-all basis. Coverage may continue when Medicare eligibility is reached. Coverage for dependents can continue upon the death of the retiree given that contributions continue. Full-time sworn Police employees that suffer a catastrophic injury or are killed in the line of duty receive free lifetime coverage for the employee, their spouse, and each dependent child under the Public Safety Employee Benefits Act. C. Membership Membership in the plan consisted of the following at May 1, 2022, the date of the latest actuarial valuation: NOTES TO FINANCIAL STATEMENTS (Continued) Page 45 Active employees 117 Inactive employees entitled to but not yet receiving benefits - Inactive employees currently receiving benefits 11 Total 128 D. Total OPEB Liability The City’s total OPEB liability was measured as of April 30, 2023, and the total OPEB liability was determined by an actuarial valuation as of May 1, 2022. E. Actuarial Assumptions The total OPEB liability in the May 1, 2022 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Actuarial Method Entry Age Normal Discount rate 4.14% Inflation 3.00% Salary Rate Increase 4.00% Health Care Trend Initial Trend Rate 5.00% Ultimate Trend Rate 4.50% FY the Ultimate Rate is Reached 2039 Mortality Disability Rates Election at Retirement Marital Status Active Employees: PubG.H-2010(B)Mortality Table -General (below median income) with future mortality improvements using Scale MP-2020 60% of active employees are assumed to be married and elect spousal coverage upon retirement. Males are assumed to be three years older than females. Actual spouse date was used for current retirees. Retirees: PubG.H-2010(B)Mortality Table -General (below-median income). Male adjusted 106% and Female adjusted 105% tables,w ith future mortality improvements using scale MP-2020 Police Employees and Retirees: PubS.H-2010(A)Mortality Table -Safety w ith future mortality improvements using Scale MP-2020. IMRF Employees: Rates from the December 31, 2022 IMRF Actuarial Valuation Report Police Employees: Rates from the City of McHenry Police Pension Fund Actuarial Valuation for the Year Beginning May 1, 2021 10% of active employees are assumed to elect coverage at retirement The actuarial assumptions used in the May 1, 2022 valuation were based on information found in the most recent IMRF and Police Pension actuarial valuation reports. Assumption changes reflect a change in the discount rate of 0.16 from 3.98% for the beginning of the year values and 4.14% for the disclosure date. There is no long-term expected rate of return on OPEB plan investments because the City does not have a trust dedicated exclusively to the payment of OPEB benefits. F. Discount Rate The City does not have a dedicated trust to pay retiree healthcare benefits. Per GASB 75, the discount rate should be a yield or index rate for 20-year, tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher (or equivalent quality on another rating scale). A rate of 4.14% is used, which is the S&P Municipal Bond 20-Year High-Grade Rate Index as of April 30, 2023. NOTES TO FINANCIAL STATEMENTS (Continued) Page 46 G. Changes in the Total OPEB Liability Total OPEB Plan Fiduciary Net OPEB Liability Net Position Liability (a)(b)(a) - (b) Balances at April 30, 2022 1,329,743$ -$ 1,329,743$ Changes for the year: Service Cost 31,957$ -$ 31,957$ Interest on Total OPEB Liability 50,394 - 50,394 Difference between Expected & Actual Experience (120,341) - (120,341) Assumption Changes (41,468) - (41,468) Benefit Payments (127,036) - (127,036) Net Changes (206,494)$ -$ (206,494)$ Balances at April 30, 2023 1,123,249$ -$ 1,123,249$ Increase/(Decrease) H. Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is 1 percentage-point lower or 1 percentage-point higher than the current discount rate: 1% Decrease 10.25%Valuation Rate 1% Increase 8.63% 1,238,358$ 1,123,249$ 1,026,334$ Plan's Total OPEB Liability/(Asset) 46 I. Sensitivity of the Total OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1 percentage-point lower or 1 percentage-point higher than the current healthcare cost trend rates: 1% Decrease Healthcare Cost 1% Increase 10.13%Valuation Rate 12.28% 1,009,423$ 1,123,249$ 1,261,192$ Plan's Total OPEB Liability/(Asset) J. OPEB Expense/(Income) and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the fiscal year ended April 30, 2023, the City recognized OPEB expense/(income) of $(65,897). At April 30, 2023, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows Deferred Inflows Net Inflows of Resources of Resources of Resources Differences Between Expected and Actual Experience 311,144$ 1,049,479$ (738,335)$ Changes of Assumptions 1,444,949 1,751,930 (306,981) Total 1,756,093$ 2,801,409$ (1,045,316)$ Changes in total OPEB liability related to the difference in actual and expected experience, or changes in assumptions regarding future events, are recognized in OPEB expense over the expected remaining service life of all employees (9.99 years, active and retired) in the postretirement plan. NOTES TO FINANCIAL STATEMENTS (Continued) Page 47 Amounts reported as deferred outflows of resources related to OPEB will be recognized as future OPEB expense in future periods as follows: Year ending April 30 Net Inflows of Resources 2024 (148,250)$ 2025 (148,250) 2026 (148,250) 2027 (148,250) 2028 (124,771) 2029-2032 (327,545) (1,045,316)$ NOTE 15 - INTERFUND BALANCES AND TRANSFERS Interfund balances at April 30, 2023 consisted of the following: Due From Due To A mount General Fund Water and Sewer Fund 129,766$ General Fund Police Pension Fund 3,635 Internal Service Fund Police Pension Fund 1,273 The above interfund balances resulted from a time lag between the dates that (1) revenue was collected and remitted to the appropriate funds and (2) expenditures were incurred and reimbursed between funds. Interfund transfers for the year ended April 30, 2023 consisted of the following: Transfer From Transfer To A mount Water and Sewer Fund Nonmajor Governmental Funds 94,922$ General Fund Nonmajor Governmental Funds 2,095,250 Internal Service Fund General Fund 76,956 Transfers are used to (1) move revenues from the fund that is required to collect them to the fund that is required to expend them, and (2) move receipts restricted to debt service from the funds collecting the receipts to the Debt Service Fund as debt service payments become due. The transfer from the Internal Service Fund to the General Fund nets to zero on the government-wide financials due to the internal service funds being combined into the governmental activities’ column. NOTE 16 - RISK MANAGEMENT The City is exposed to various risks related to torts; theft of, damage to, and destruction of assets; errors and omissions; and injuries to employees. The City is a member of the McHenry County Municipal Risk Management Agency (MCMRMA), a public entity risk pool through which property, general liability, automobile liability, crime, excess property, excess liability, and boiler and machinery coverage is provided in excess of specified limits for the members, acting as a single insurable unit. The relationship between the City and MCMRMA is governed by a contract and by-laws that have been adopted by resolution of each unit’s governing body. The City is contractually obligated to make all annual and supplementary contributions for MCMRMA, to report claims on a timely basis, cooperate with MCMRMA, its claims administrator and attorneys in claims investigation and settlement, and to follow risk management procedures as outlined by MCMRMA. Members have a contractual obligation to fund any deficit of MCMRMA attributable to a membership year during which they were a member. MCMRMA is responsible for administering the self-insurance program and purchasing excess insurance according to the direction of the Board of Directors. MCMRMA also provides its members with risk management services, including the defense of and settlement of claims, and establishes reasonable and necessary NOTES TO FINANCIAL STATEMENTS (Continued) Page 48 loss of reduction and prevention procedures to be followed by the members. During fiscal year 2023 there was no significant reduction in insurance coverage for any category. There have been no settlement amounts that have exceeded insurance coverage. The City is insured under a retrospectively-rated policy for workers’ compensation coverage. Whereas the initial premium may be adjusted based on actual experience. Adjustments in premiums are recorded when paid or received. During the year ended April 30, 2023, there were no significant adjustments in premiums based on actual experience. NOTE 17 - CONSTRUCTION COMMITMENTS At any point in time, the City is involved in numerous construction contracts. For the governmental activities, there were contract commitments in place for various road projects, parking lot improvements, riverwalk construction, horse barn improvements, and other various parks projects as of April 30, 2023 totaling $2,455,285. Beginning in May 2023, the City has contract commitments in place for various road, parking lot, and other projects for $3,740,193. For the Water and Sewer Fund as of April 30, 2023, there were contract commitments in place for Well #14 engineering totaling $40,689. NOTE 18 - CONTINGENCIES There is no outstanding litigation which may have a materially adverse effect on the City’s financial position. NOTE 19 - LEGAL DEBT LIMITATION The Illinois Compiled Statutes limits the amount of indebtedness to 8.625% of the most recent available equalized assessed valuation (EAV) of the City. 2022 EAV 861,184,991$ X 8.625% Debt Margin 74,277,205$ Current Debt 29,790,548 Remaining Debt Margin 44,486,657$ NOTE 20 - TAX ABATEMENT AGREEMENTS The City negotiates property and sales tax abatement agreements on an individual basis. All abatement agreements are entered into under the authority of the Mayor, City Clerk, and City Council. The City has tax abatement agreements with various entities as of April 30, 2023 as follows: Name of Eligibility Criteria Amount of Taxes Abatement Type of Taxes and Mechanism Abated During Agreement Abated of Abatement the Fiscal Year Gary Lang Business District Development Agreement Sales taxes First $450,000 in sales tax revenues generated within the Business District Property are retained by the City, 100% of the sales tax revenue generated within the Business District Property between $450,000 and $750,000 annuallyshall be rebated to Gary Lang,60% of sales tax revenue generated within the Business District Property above $750,000 shall be rebated to Gary Lang.The total rebate for the year cannotexceed 55% of the total annual sales tax revenue generated with the Business District Property.The total rebate payments cannot exceed $8,441,377.04 or 20 years. 549,803$ 1110 N Green LLC Redevelopment Agreement TIF property taxes Rebate 100% of the TIF Increment assessed up to $624,028.-$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 49 Name of Eligibility Criteria Amount of Taxes Abatement Type of Taxes and Mechanism Abated During Agreement Abated of Abatement the Fiscal Year McHenry Commons Shopping Center Economic Incentive Agreement Sales taxes Rebate 100% of bas e sales tax received by the State attributable to the gross sales generated at the Hobby Lobby Store.The total rebate payments cannotexceed $677,500 or 20 years. 41,547$ CVS Pharmacy Economic Incentive Agreement Sales taxes Rebate 50% of s ales tax revenues generated by CVS Pharmacy in calendar years 2016 through 2020 and 25% of sales tax revenues generated by CVS Pharmacy in calendar years 2021 through 2025.The total rebate payments cannot exceed $175,000. -$ 3017 Route 120 & Northwest Suburban Auto Group Economic Incentive Agreement Sales taxes Rebate 50% of bas e sales tax in calendar years 2017 through 2021 and 25% of base sales tax in calendar years 2022 through 2026 received by the State attributable to the gross sales generated atNorthwest Suburban Auto Group.The total rebate payments cannot exceed $150,000. -$ McHenry Donuts, Inc. Economic Incentive Agreement Sales taxes Rebate 100% of Non-Home Rule Sales taxes in 2017 through 2026 up to $62,500.13,818$ Sunnyside Auto Finance Company Economic Incentive Agreement Sales taxes Rebate percentage during years 2017-2019 75% above $66,212.Years 2020-2027 50% above $66,212. Years 2028-2036 25% above $66,212. Not to exceed $300,000. 5,387$ Curt Ames DBA Chain O'Lakes Brewing Company Redevelopment Agreement TIF Property Taxes Rebate 100% of th e TIF Increment assessed up to $17,585.216$ Seth Wagner and Associates Real Estate Company Property Tax Abatement Agreement Property Taxes Abate real e state taxes levied against the subject property each year that the taxing body's propertytaxes exceed the dollar amount from the 2014 base property tax year ($3,458.64) through December 31, 2026. 5,607$ Boone Creek Crossing LLC Redevelopment Agreement TIF Property Taxes Rebate 100% of th e TIF Increment assessed up to $25,000 2,180$ Graham Enterprise Inc Economic Incentive Agreement Sales taxes Rebate 50% ofbas e and home rule sales tax received above $1,666.67 per month by the State attributable to the gross sales generated at McHenry BP sites at 5301 Bull Valley Road and 5520 W.Elm Street.The total rebate payments cannot exceed $1,000,000 and end December 31,2039. These rebates do not begin until buildings are torn down at 5301 Bull ValleyRoad, 5520 W.Elm St,and 4410 W.Elm St;and a new building is built at 5301 Bully Valley Road. 114,741$ BPI, Break Parts Inc LLC Property Tax Abatement Agreement Property Taxes 10-year 100% abatement over and above the 2018 taxes commencing with the 2019 tax bill payable in 2020 through the 2028 tax bill payable in 2029. 12,300$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 50 Name of Eligibility Criteria Amount of Taxes Abatement Type of Taxes and Mechanism Abated During Agreement Abated of Abatement the Fiscal Year RR McHenry LLC Economic Incentive Agreement Sales taxes Rebate 50% ofbas e and home rule sales tax received by the State attributable to the property at the NW corner of IL Route 120 and Chapel Hill Road, excluding the Riverside Chocolate Factory parcel.The total rebate payments cannot exceed $1,000,000 and end after the 20th Sales Tax Incentive Year. 84,649$ Advance Real Estate Management LLC Economic Incentive Agreement Sales taxes Rebate $75,000 from the base sales tax generated from the subject property, and in addition, 50% of the base sales tax in excess of the sales tax revenue baseline received by the city of$195,745. $250,000 in tenant incentive improvements are paid when improvements are made in two tenant spaces. Total rebate cannot exceed $1,500,000 and ends after the 20th anniversary of the completion date. 89,713$ Jessup Manufacturing Company Property Tax Abatement Agreement Property Taxes Abate real e state taxes levied against the subject property each year that the taxing body's propertytaxes exceed the dollar amount from the 2018 base property tax year ($4,570.54) through December 31, 2026 1,351$ Munson Ski & Inboard Water Sports, Inc. DBA Munson Ski & Marine Economic Incentive Agreement Sales taxes Rebate 100% of bas e sales tax received by the State attributable to the gross sales generated at Munson Ski &Marine at Watertower. Total rebate payments cannot exceed $500,000 and ends on December 31, 2043. 2,591$ 1325 Riverside Inc. DBA Whiskey Diablo Economic Incentive Agreement Sales taxes Rebate 100% of bas e sales tax received by the State attributable to the gross sales generated at 1325 Riverside Dr McHenry,IL .Total rebate payments cannot exceed $62,149. -$ NOTE 21 - LEASE ARRANGEMENTS The City, as lessor, has the following lease arrangements: Contract Start Contract End Items Initial Terms Optional Terms Initial Contract V alue Borrowing Rate (per year) Business-Type Activities Cell Tower 7/21/2014 7/21/2044 Cell Tower 120 months see below 300,000$ N/A Lease revenue for the fiscal year ended April 30, 2023 was $25,697. A summary of deferred inflows - leases activity during the year ended April 30, 2023 is as follows: Balance Balance May 1, 2022 Additions Deletions April 30, 2023 Business-Type Activities Deferred Inflows - Leases:571,256$ -$ -$ 571,256$ Total Deferred Inflows - Leases 571,256$ -$ -$ 571,256$ Less earned revenue amounts: Deferred Inflows - Leases -$ 25,697$ -$ 25,697$ Total Revenue Earned -$ 25,697$ -$ 25,697$ Total Deferred Inflows - Leases, Net 571,256$ (25,697)$ -$ 545,559$ NOTES TO FINANCIAL STATEMENTS (Continued) Page 51 Revenue was recognized in rental income within the Water and Sewer Fund. The cell tower lease has an initial lease term of ten years running from July 21, 2014 through July 21, 2024. The lease also contains an optional extension provision. The parties may extend the term of the lease for four additional five-year terms by mutual agreement or terminate the lease no later than May 21, 2024. These additional terms have been taken into account as both parties are reasonably certain that the extension will take place as of the current fiscal year end. Lease payments for each five- year extension term are as follows: Lease Term Rental Payment 7/21/2024 - 7/21/2029 156,000$ 7/21/2029 - 7/21/2034 162,000 7/21/2034 - 7/21/2039 168,000 7/21/2039 - 7/21/2044 174,000 The lease payments are required to be paid up front at the start of each lease term and are shown as unavailable revenue within both the proprietary fund and government-wide financial statements. The City will recognize revenue each year as it is earned. At April 30, 2023, the annual lease payments and subsequent receipts are as follows: Year Ending April 30 Principal Interest Total 2024 -$ -$ -$ 2025 122,324 33,676 156,000 2026 - - - 2027 - - - 2028 - - - 2029-2033 104,630 57,370 162,000 2034-2038 126,333 41,667 168,000 2039-2043 151,294 22,706 174,000 2044-2048 - - - Total 504,581$ 155,419$ 660,000$ NOTE 22 - CHANGE IN ACCOUNTING PRINCIPLE The City has implemented GASB Statement No. 87, Leases. This statement establishes financial reporting standards related to leases. Implementation of this standard resulted in recognizing the fair market value of the liability and asset at the commencement of the agreement. There have been no changes to the previously issued audited financial statements which would be required on a retrospective basis. REQUIRED SUPPLEMENTARY INFORMATION 4/30/2023*4/30/2022*4/30/2021*4/30/2020*4/30/2019*4/30/2018*4/30/2017*4/30/2016* TOTAL PENSION LIABILITY Service Cost 763,605$ 728,190$ 805,614$ 781,612$ 740,595$ 707,796$ 704,466$ 652,882$ Interest on Total Pension Liability 3,290,347 3,102,945 2,967,915 2,796,732 2,641,076 2,542,116 2,419,748 2,286,008 Differences Between Expected and Actual Experience (452,379) 979,789 680,117 594,214 381,201 646,124 (98,080) 86,269 Changes of Assumptions - - (475,311) - 1,199,530 (1,124,675) (136,959) 44,481 Benefit Payments, Including Refunds of Member Contributions (2,279,953) (2,207,589) (1,946,703) (1,700,114) (1,543,189) (1,393,390) (1,384,293) (1,144,016) Net Change in Total Pension Liability 1,321,620$ 2,603,335$ 2,031,632$ 2,472,444$ 3,419,213$ 1,377,971$ 1,504,882$ 1,925,624$ Total Pension Liability - Beginning 46,142,272 43,538,937 41,507,305 39,034,861 35,615,648 34,237,677 32,732,795 30,807,171 Total Pension Liability - Ending 47,463,892$ 46,142,272$ 43,538,937$ 41,507,305$ 39,034,861$ 35,615,648$ 34,237,677$ 32,732,795$ PLAN FIDUCIARY NET POSITION Contributions - Employer 903,892$ 1,068,306$ 1,137,523$ 787,631$ 918,212$ 915,963$ 844,878$ 801,851$ Contributions - Member 375,925 385,024 361,437 344,894 340,841 328,547 366,710 277,350 Net Investment Income (6,083,896) 7,088,187 5,164,342 5,817,683 (1,672,533) 4,871,136 1,840,322 133,288 Benefit Payments, Including Refunds of Member Contributions (2,279,953) (2,207,589) (1,946,703) (1,700,114) (1,543,189) (1,393,390) (1,384,293) (1,144,016) Administrative Expenses (788,906) (35,322) 131,829 196,150 493,832 (352,231) 293,436 (161,598) Net Change in Plan Fiduciary Net Position (7,872,938)$ 6,298,606$ 4,848,428$ 5,446,244$ (1,462,837)$ 4,370,025$ 1,961,053$ (93,125)$ Plan Net Position - Beginning 48,058,412 41,759,806 36,911,378 31,465,134 32,927,971 28,557,946 26,596,893 26,690,018 Plan Net Position - Ending 40,185,474$ 48,058,412$ 41,759,806$ 36,911,378$ 31,465,134$ 32,927,971$ 28,557,946$ 26,596,893$ City's Net Pension Liability 7,278,418$ (1,916,140)$ 1,779,131$ 4,595,927$ 7,569,727$ 2,687,677$ 5,679,731$ 6,135,902$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 84.67%104.15%95.91%88.93%80.61%92.45%83.41%81.25% Covered Payroll 8,353,902$ 7,995,414$ 8,031,924$ 7,718,418$ 7,538,685$ 7,241,274$ 6,362,027$ 6,163,340$ Employer's Net Pension Liability as a Percentage of Covered Payroll 87.13%-23.97%22.15%59.54%100.41%37.12%89.28%99.55% * This information presented is based on the actuarial valuation performed as of the December 31 year end prior to the fiscal year end listed above. This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those years for which information is available. CITY OF MCHENRY, ILLINOIS ILLINOIS MUNICIPAL RETIREMENT FUND SCHEDULE OF CHANGES IN THE EMPLOYER'S NET PENSION LIABILITY AND RELATED RATIOS APRIL 30, 2023 Page 52 See Accompanying Independent Auditor's Report 4/30/2023*4/30/2022*4/30/2021*4/30/2020*4/30/2019*4/30/2018*4/30/2017* Actuarially-Determined Contribution 903,892$ 978,639$ 983,107$ 796,541$ 918,212$ 908,056$ 844,877$ Contributions in Relation to Actuarially-Determined Contribution 903,892 1,068,306 1,137,523 787,631 918,212 915,963 844,878 Contribution Deficiency/(Excess)-$ (89,667)$ (154,416)$ 8,910$ -$ (7,907)$ (1)$ Covered Payroll 8,499,251$ 7,213,419$ 7,135,984$ 7,780,883$ 7,594,095$ 7,469,026$ 6,362,027$ Contributions as a Percentage of Covered Payroll 10.63%14.81%15.94%10.12%12.09%12.26%13.28% Notes to Schedule: Actuarially determined contribution rates are calculated as of December 31 each year, which are 12 months prior to the beginning of the fiscal year in which contributions are reported. Remaining Amortization Period: 21-year closed period Price Inflation: 2.25%, approximate; No explicit price inflation assumption is used in this valuation. Retirement Age: Experience-based table of rates that are specific to the type of eligibility condition; last updated for the 2020 valuation pursuant to an experience study of the period 2017 to 2019. Actuarial Cost Method: Aggregate Entry Age Normal Amortization Method: Level percentage of payroll, closed Asset Valuation Method: 5-year smoothed market; 20% corridor Wage Growth: 2.75% CITY OF MCHENRY, ILLINOIS ILLINOIS MUNICIPAL RETIREMENT FUND SCHEDULE OF EMPLOYER CONTRIBUTION APRIL 30, 2023 Actuarial Method and Assumptions Used on the Calculation of the 2022 Contribution Rate * Salary Increases: 2.85% to 13.75%, including inflation Investment Rate of Return: 7.25% Mortality:For non-disabled retirees,the Pub-2010,Amount-Weighted,below-median income,General,Retiree,Male (adjusted 106%)and Female (adjusted 105%)tables,and future mortality improvements projected using scale MP- retirees,the Pub-2010,Amount-Weighted,below-median income,General,Disabled Retiree,Male and Female (both unadjusted)tables,and future mortality improvements projected using scale MP-2020.For active members,the P Weighted, below-median income, General, Employee, Male and Female (both unadjusted) tables, and future mortality improvements projected using scale MP-2020. *Based on Valuation Assumptions used in the December 31, 2020 actuarial valuation; note two year lag between valuation and rate setting. This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those years for which information is available. Page 53 See Accompanying Independent Auditor's Report 4/30/2023 4/30/2022 4/30/2021 4/30/2020 4/30/2019 4/30/2018 4/30/2017 4/30/2016 4/30/2015 TOTAL PENSION LIABILITY Service Cost 1,133,068$ 1,104,977$ 1,106,282$ 1,020,016$ 964,573$ 969,843$ 906,395$ 948,282$ 876,654$ Interest 3,939,393 3,739,492 3,687,359 3,400,174 3,244,523 3,100,186 3,130,927 2,940,204 2,804,198 Changes in Benefit Terms (53,189) - - 267,927 - - - - - Differences Between Expected and Actual Experience 226,460 (1,660,449) (143,994) 953,997 165,685 (13,601) (1,315,850) (531,862) (300,710) Changes in Assumptions - - - 1,039,838 - - (1,259,209) 4,137,023 391,028 Benefit Payments, Including Refunds of Member Contributions (2,285,556) (2,428,688) (2,441,099) (2,225,355) (2,077,032) (1,911,914) (1,890,931) (2,046,745) (1,868,756) Net Change in Total Pension Liability 2,960,176$ 755,332$ 2,208,548$ 4,456,597$ 2,297,749$ 2,144,514$ (428,668)$ 5,446,902$ 1,902,414$ Total Pension Liability - Beginning 57,107,066 56,351,734 54,143,186 49,686,589 47,388,840 45,244,326 45,672,994 40,226,092 38,323,678 Total Pension Liability - Ending 60,067,242$ 57,107,066$ 56,351,734$ 54,143,186$ 49,686,589$ 47,388,840$ 45,244,326$ 45,672,994$ 40,226,092$ PLAN FIDUCIARY NET POSITION Contributions - Employer 621,970$ 655,318$ 26,150,315$ 2,077,704$ 2,017,300$ 1,868,798$ 1,521,914$ 1,386,205$ 1,295,101$ Contributions - Member 491,717 467,800 469,279 500,202 427,378 409,415 397,515 513,111 381,363 Contributions - Other - 27,092 435,068 - 1,221 - - - - Net Investment Income 276,331 (3,752,680) 9,474,445 249,889 1,454,043 2,225,784 2,041,694 (228,847) 1,101,915 Benefit Payments, Including Refunds of Member Contributions (2,285,556) (2,428,688) (2,441,099) (2,225,355) (2,077,032) (1,911,914) (1,890,931) (2,046,745) (1,868,756) Administrative Expenses (23,984) (49,007) (25,668) (100,204) (17,813) (18,717) (41,164) (29,539) (36,845) Net Change in Plan Fiduciary Net Position (919,522)$ (5,080,165)$ 34,062,340$ 502,236$ 1,805,097$ 2,573,366$ 2,029,028$ (405,815)$ 872,778$ Plan Net Position - Beginning 56,638,040 61,718,205 27,655,865 27,153,629 25,348,532 22,775,166 20,746,138 21,151,953 20,279,175 Plan Net Position - Ending 55,718,518$ 56,638,040$ 61,718,205$ 27,655,865$ 27,153,629$ 25,348,532$ 22,775,166$ 20,746,138$ 21,151,953$ City's Net Pension Liability 4,348,724$ 469,026$ (5,366,471)$ 26,487,321$ 22,532,960$ 22,040,308$ 22,469,160$ 24,926,856$ 19,074,139$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 92.76%99.18%109.52%51.08%54.65%53.49%50.34%45.42%52.58% Covered-Employee Payroll 4,959,035$ 4,717,332$ 4,686,805$ 4,444,767$ 4,224,124$ 4,204,784$ 4,082,315$ 3,880,748$ 3,791,467$ Employer's Net Pension Liability as a Percentage of Covered-Employee Payroll 87.69%9.94%-114.50%595.92%533.44%524.17%550.40%642.32%503.08% 2023 2022 2021 2020 2019 2018 2017 2016 2015 Annual Money-Weighted Rate of Return, Net of Investment Expenses -1.63%4.26%32.11%-0.48%5.73%9.60%5.60%-1.53%5.41% *For the year ended April 30, 2023, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was not available due to the transition of all investments into the consolidated police pension fund. This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those years for which information is available. CITY OF MCHENRY, ILLINOIS POLICE PENSION PLAN SCHEDULE OF CHANGES IN THE EMPLOYER'S NET PENSION LIABILITY AND RELATED RATIOS APRIL 30, 2023 Page 54 See Accompanying Independent Auditor's Report 4/30/2023 4/30/2022 4/30/2021 4/30/2020 4/30/2019 4/30/2018 4/30/2017 4/30/2016 4/30/2015 Actuarially-Determined Contribution 625,600$ 2,576,006$ 2,231,742$ 2,082,421$ 2,019,703$ 1,874,219$ 1,524,244$ 1,387,374$ 1,295,577$ Contributions in Relation to Actuarially-Determined Contribution 621,970 655,318 26,150,315 2,077,704 2,017,300 1,868,798 1,521,914 1,386,205 1,295,101 Contribution Deficiency/(Excess)3,630$ 1,920,688$ (23,918,573)$ 4,717$ 2,403$ 5,421$ 2,330$ 1,169$ 476$ Covered-Employee Payroll 4,959,035$ 4,717,332$ 4,686,805$ 4,422,539$ 4,324,167$ 4,291,809$ 4,082,315$ 3,880,748$ 3,791,467$ Contributions as a Percentage of Covered-Employee Payroll 12.54%13.89%557.96%46.98%46.65%43.54%37.28%35.72%34.16% Notes to Schedule: Mortality Rates: Pub-2010 Adjusted for plan Status, Demographics, and Illinois Public Pension Data, as described Price Inflation: 2.25% CITY OF MCHENRY, ILLINOIS POLICE PENSION PLAN SCHEDULE OF EMPLOYER CONTRIBUTION LAST TEN FISCAL YEARS Salary Increases: 3.75% to 10.02% This schedule is presented to illustrate the requirement to show information for ten years. However, until a full ten-year trend is compiled, information is presented for those years for which information is available. Actuarial Method and Assumptions Used on the Calculation of the 2022 Contribution Rate * Actuarial Cost Method: Entry age normal Amortization Method: Level percentage of payroll, closed Termination Rates: 100% of L&A 2020 Illinois Police Termination Rates Disability Rates: 100% of L&A 2020 Illinois Police Disability Rates *Based on Valuation Assumptions used in the May 1, 2021 actuarial valuation for the December 2021 tax levy, if applicable Investment Rate of Return: 7.00% Retirement Rates: 100% of L&A 2020 Illinois Police Retirement Rates Capped at Age 65 Equivalent Single Amortization Period: 100% funded over 15 years Asset Valuation Method: 5-year smoothed fair value Wage Growth: 3.00% Page 55 See Accompanying Independent Auditor's Report 4/30/2023 4/30/2022 4/30/2021 4/30/2020 4/30/2019 TOTAL OPEB LIABILITY Service Cost 31,957$ 38,558$ 38,278$ 36,378$ 32,964$ Interest 50,394 103,035 165,119 171,790 209,775 Changes in Benefit Terms - (3,356,991) - - - Differences Between Expected and Actual Experience (120,341) 393,032 (646,027) - (1,070,724) Benefit Payments (127,036) (174,427) (214,301) (162,019) (167,232) Changes in Assumptions (41,468) (1,390,894) 473,546 513,575 417,482 Other Changes - - - (91,626) 147,912 Net Change in Total OPEB Liability (206,494)$ (4,387,687)$ (183,385)$ 468,098$ (429,823)$ Total OPEB Liability - Beginning 1,329,743 5,717,430 5,900,815 5,432,717 5,862,540 Total OPEB Liability - Ending 1,123,249$ 1,329,743$ 5,717,430$ 5,900,815$ 5,432,717$ Covered-Employee Payroll 10,588,482$ 9,802,365$ 9,342,565$ 8,796,233$ *8,796,233$ Employer's Net OPEB Liability as a Percentage of Covered-Valuation Payroll 10.61%13.57%61.20%67.08%61.76% Notes to Schedule: The following are the discount rates used in each period:4.14%3.98%1.83%3.21%3.21% CITY OF MCHENRY OTHER POST-EMPLOYMENT BENEFIT SCHEDULE OF CHANGES IN THE EMPLOYER'S TOTAL OPEB LIABILITY AND RELATED RATIOS APRIL 30, 2023 No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. This schedule is presented to illustrate the requirement to show information for ten years.However,until a full ten-year trend is compiled,information is presented for those years for which information is available. Changes of Assumptions. Changes of assumptions and other inputs reflect the effects of changes in the discount rate of each period. There is no actuarially-determined contribution (ADC)or employer contribution in relation to the ADC as the total OPEB liabilities are currently an unfunded obligation. * - Covered-Employee Payroll is the same as the prior year due to the valuation being a rollforward instead of a new valuation. Page 56 See Accompanying Independent Auditor's Report Actual Original Final Amounts REVENUES Local Taxes Property Tax 5,037,941$ 5,037,941$ 4,975,755$ Intergovernmental State Sales Tax 12,490,464 12,490,464 13,346,454 State Income Tax 3,589,961 3,589,961 4,384,429 State Replacement Tax 80,000 80,000 246,433 State Pull Tab/Games Tax 850 850 1,312 Inter Track Wagering Tax 25,000 25,000 39,296 State Telecommunications Tax 200,000 200,000 198,361 Cannabis Use Tax 35,000 35,000 42,240 Federal Grants - - 1,841,293 Other Local Sources Hotel/Motel Tax 170,000 170,000 243,574 Franchise Fees 380,000 380,000 379,078 Licenses and Permits 1,142,500 1,142,500 1,247,056 Fines and Forfeitures 402,000 402,000 451,894 Charges for Services 1,268,789 1,268,789 1,423,862 Interest 2,500 2,500 454,024 Local Grants - - 46,113 Miscellaneous Rent 18,000 18,000 14,489 Royalties 175,000 175,000 175,000 Donations - - 13,348 Annexation Fees 50,000 50,000 - Reimbursements 1,925,394 1,925,394 2,554,441 Other Miscellaneous 75,100 75,100 255,656 Total Revenues 27,068,499$ 27,068,499$ 32,334,108$ EXPENDITURES Current General Office Administration 1,241,669$ 1,284,379$ 1,149,942$ Elected Officials 99,310 99,310 70,055 Community Development 1,319,951 1,515,236 1,262,634 Finance Department 1,533,380 1,618,380 1,750,399 Human Resources 309,057 309,057 294,344 Economic Development 405,510 415,510 370,197 4,908,877$ 5,241,872$ 4,897,571$ Public Safety Police Commission 6,953$ 6,953$ 4,584$ Police Department 9,682,259 9,785,259 9,766,599 Dispatch Center 2,447,519 2,447,519 2,614,829 12,136,731$ 12,239,731$ 12,386,012$ Public Works Administration 506,812$ 506,812$ 490,904$ Street Department 3,857,382 3,857,382 3,699,050 4,364,194$ 4,364,194$ 4,189,954$ Parks and Recreation Parks and Recreation 2,721,821$ 2,721,821$ 2,847,744$ 2,721,821$ 2,721,821$ 2,847,744$ Budgeted Amounts CITY OF MCHENRY, ILLINOIS FOR THE YEAR ENDED APRIL 30, 2023 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Page 57 See Accompanying Independent Auditor's Report Actual Original Final Amounts Budgeted Amounts CITY OF MCHENRY, ILLINOIS FOR THE YEAR ENDED APRIL 30, 2023 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL EXPENDITURES (Continued) Capital Outlay General Office Administration 1,708,500$ 2,668,500$ 2,106,275$ Public Safety Police Department 24,950 24,950 243,617 Public Works Street Department - - 12,876 Parks and Recreation Parks and Recreation 24,000 24,000 20,818 1,757,450$ 2,717,450$ 2,383,586$ Debt Service Principal 459,250$ 459,250$ 296,769$ Interest and Fees 34,100 34,100 29,800 493,350$ 493,350$ 326,569$ Total Expenditures 26,382,423$ 27,778,418$ 27,031,436$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES 686,076$ (709,919)$ 5,302,672$ OTHER FINANCING SOURCES/(USES) Transfers (2,095,250)$ (2,095,250)$ (2,018,294)$ Sale of City Property 10,000 10,000 13,200 (2,085,250)$ (2,085,250)$ (2,005,094)$ NET CHANGE IN FUND BALANCE (1,399,174)$ (2,795,169)$ 3,297,578$ FUND BALANCE - MAY 1, 2022 17,117,629 FUND BALANCE ADJUSTMENT (Note 9)(861,324) FUND BALANCE - APRIL 30, 2023 19,553,883$ Page 58 See Accompanying Independent Auditor's Report Page 59 CITY OF MCHENRY, ILLINOIS NOTES TO REQUIRED SUPPLEMENTARY INFORMATION APRIL 30, 2023 NOTE 1 - BUDGET Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual budgets are adopted for all funds except custodial funds. All annual budgets lapse at fiscal year-end. Budgeted expenditures are controlled at the departmental level with the City Administrator’s oversight. All transfers and any revision that changes the total expenditures not contemplated of any fund must be approved by the City Council. All budget amendments must be approved by the City Council. The budget was approved on April 18, 2022 and was amended fourteen times during the fiscal year with the final amendment occurring on February 21, 2023. NOTE 2 - EXCESS OF EXPENDITURES OVER BUDGET For the year ended April 30, 2023, the fund presented as Required Supplementary Information did not have expenditures that exceeded the budget. SUPPLEMENTAL FINANCIAL INFORMATION Civil Revolving Total General Annexation Alarm Board Band Defense Loan Tourism General Fund Fund Fund Fund Fund Fund Fund Fund ASSETS Cash and Cash Equivalents 12,318,405$ 1,079,641$ 1,094,298$ 9,440$ 12,388$ 290,060$ 143,941$ 14,948,173$ Investments 2,013,579 20,292 - 1,588 - 3,691 16,578 2,055,728 Prepaid Items 173,819 - - - - - - 173,819 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 395,007 6,450 31,691 - - 8,580 2,000 443,728 Accounts Receivable - Unbilled 104,201 - 38,421 - - - 15,689 158,311 Property Taxes 5,017,348 - - - - - - 5,017,348 Accrued Interest 2,394 343 - 27 - 77 280 3,121 Due from Other Governmental Units 3,176,525 - - - - - - 3,176,525 Cable Franchise Fee Receivable 122,912 - - - - - - 122,912 Inventory 184,569 - - - - - - 184,569 TOTAL ASSETS 23,508,759$ 1,106,726$ 1,164,410$ 11,055$ 12,388$ 302,408$ 178,488$ 26,284,234$ LIABILITIES Accounts Payable and Accrued Expenditures 1,185,987$ -$ 57,523$ 15$ 4,240$ -$ 16,938$ 1,264,703$ Due to Other Funds 133,401 - - - - - - 133,401 Unearned Revenue 314,899 - - - - - - 314,899 TOTAL LIABILITIES 1,634,287$ -$ 57,523$ 15$ 4,240$ -$ 16,938$ 1,713,003$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes 5,017,348$ -$ -$ -$ -$ -$ -$ 5,017,348$ TOTAL DEFERRED INFLOWS OF RESOURCES 5,017,348$ -$ -$ -$ -$ -$ -$ 5,017,348$ FUND BALANCES Nonspendable 173,819$ -$ -$ -$ -$ -$ -$ 173,819$ Assigned for: Alarm - - 1,106,887 - - - - 1,106,887 Tourism - - - - - - 161,550 161,550 Band - - - 11,040 - - - 11,040 Capital Projects 6,943,522 1,106,726 - - - - - 8,050,248 Revolving Loan - - - - - 302,408 - 302,408 Civil Defense - - - - 8,148 - - 8,148 Unassigned 9,739,783 - - - - - - 9,739,783 TOTAL FUND BALANCES 16,857,124$ 1,106,726$ 1,106,887$ 11,040$ 8,148$ 302,408$ 161,550$ 19,553,883$ TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 23,508,759$ 1,106,726$ 1,164,410$ 11,055$ 12,388$ 302,408$ 178,488$ 26,284,234$ CITY OF MCHENRY, ILLINOIS COMBINING BALANCE SHEET - GENERAL FUND APRIL 30, 2023 Page 60 See Accompanying Independent Auditor's Report Alarm Civil Revolving Total Annexation Board Band Defense Loan Tourism General General Fund Fund Fund Fund Fund Fund Fund Fund REVENUES Local Taxes Property Tax 4,975,755$ -$ -$ -$ -$ -$ -$ 4,975,755$ Intergovernmental State Sales Tax 13,346,454 - - - - - - 13,346,454 State Income Tax 4,384,429 - - - - - - 4,384,429 State Replacement Tax 246,433 - - - - - - 246,433 State Pull Tab/Games Tax 1,312 - - - - - - 1,312 Inter Track Wagering Tax 39,296 - - - - - - 39,296 State Telecommunications Tax 198,361 - - - - - - 198,361 Cannabis Use Tax 42,240 - - - - - - 42,240 Federal Grants 1,841,293 - - - - - - 1,841,293 Other Local Sources Hotel/Motel Tax 44,057 - - - - - 199,517 243,574 Franchise Fees 379,078 - - - - - - 379,078 Licenses and Permits 1,247,056 - - - - - - 1,247,056 Fines and Forfeitures 451,894 - - - - - - 451,894 Charges for Services 1,194,120 - 229,742 - - - - 1,423,862 Interest 439,622 3,549 6,329 55 42 1,022 3,405 454,024 Local Grants 46,113 - - - - - - 46,113 Miscellaneous Rent 14,489 - - - - - - 14,489 Royalties - 175,000 - - - - - 175,000 Donations 13,348 - - - - - - 13,348 Reimbursements 2,554,441 - - - - - - 2,554,441 Other Miscellaneous 182,154 - - - - - 73,502 255,656 Total Revenues 31,641,945$ 178,549$ 236,071$ 55$ 42$ 1,022$ 276,424$ 32,334,108$ EXPENDITURES Current General Office Administration 1,060,342$ -$ -$ -$ -$ -$ 89,600$ 1,149,942$ Elected Officials 70,055 - - - - - - 70,055 Community Development 1,262,634 - - - - - - 1,262,634 Finance Department 1,750,399 - - - - - - 1,750,399 Human Resources 294,344 - - - - - - 294,344 Economic Development 370,197 - - - - - - 370,197 4,807,971$ -$ -$ -$ -$ -$ 89,600$ 4,897,571$ Public Safety Police Commission 4,584$ -$ -$ -$ -$ -$ -$ 4,584$ Police Department 9,645,650 - 114,964 - 5,985 - - 9,766,599 Dispatch Center 2,614,829 - - - - - - 2,614,829 12,265,063$ -$ 114,964$ -$ 5,985$ -$ -$ 12,386,012$ Public Works Administration 490,904$ -$ -$ -$ -$ -$ -$ 490,904$ Street Department 3,699,050 - - - - - - 3,699,050 4,189,954$ -$ -$ -$ -$ -$ -$ 4,189,954$ CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GENERAL FUND FOR THE YEAR ENDED APRIL 30, 2023 Page 61 See Accompanying Independent Auditor's Report Alarm Civil Revolving Total Annexation Board Band Defense Loan Tourism General General Fund Fund Fund Fund Fund Fund Fund Fund CITY OF MCHENRY, ILLINOIS FUND FINANCIAL STATEMENTS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GENERAL FUND FOR THE YEAR ENDED APRIL 30, 2023 EXPENDITURES (Continued) Current (Continued) Parks and Recreation Parks and Recreation 2,833,436$ -$ -$ 14,308$ -$ -$ -$ 2,847,744$ 2,833,436$ -$ -$ 14,308$ -$ -$ -$ 2,847,744$ Capital Outlay General Office Administration 2,106,275$ -$ -$ -$ -$ -$ -$ 2,106,275$ Public Safety Police Department 243,617 - - - - - - 243,617 Public Works Street Department 12,876 - - - - - - 12,876 Parks and Recreation Parks and Recreation 20,818 - - - - - - 20,818 2,383,586$ -$ -$ -$ -$ -$ -$ 2,383,586$ Debt Service Principal 233,555$ -$ -$ -$ -$ -$ 63,214$ 296,769$ Interest and Fees 25,794 - - - - - 4,006 29,800 259,349$ -$ -$ -$ -$ -$ 67,220$ 326,569$ Total Expenditures 26,739,359$ -$ 114,964$ 14,308$ 5,985$ -$ 156,820$ 27,031,436$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES 4,902,586$ 178,549$ 121,107$ (14,253)$ (5,943)$ 1,022$ 119,604$ 5,302,672$ OTHER FINANCING SOURCES/(USES) Transfers (1,900,294)$ (35,000)$ -$ 12,000$ 4,000$ -$ (99,000)$ (2,018,294)$ Sale of City Property 13,200 - - - - - - 13,200 (1,887,094)$ (35,000)$ -$ 12,000$ 4,000$ -$ (99,000)$ (2,005,094)$ NET CHANGE IN FUND BALANCE 3,015,492$ 143,549$ 121,107$ (2,253)$ (1,943)$ 1,022$ 20,604$ 3,297,578$ FUND BALANCE - MAY 1, 2022 14,702,956 963,177 985,780 13,293 10,091 301,386 140,946 17,117,629 FUND BALANCE ADJUSTMENT (Note 9)(861,324) - - - - - - (861,324) FUND BALANCE - APRIL 30, 2023 16,857,124$ 1,106,726$ 1,106,887$ 11,040$ 8,148$ 302,408$ 161,550$ 19,553,883$ Page 62 See Accompanying Independent Auditor's Report Special Special Capital Asset Municipal Service Service Total Recreation Capital Maintenance and Capital Debt Motor Motor Developer Area #4 -Area #6 -Other Pageant Audit Center Improvements Replacement Equipment Service Fuel Tax Fuel Tax Donations TIF Lakewood Huntersville Governmental Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Funds ASSETS Cash and Cash Equivalents 1,954$ -$ -$ -$ 788,018$ 29,851$ -$ 2,277,633$ 84,412$ 1,040,810$ 417,170$ -$ -$ 4,639,848$ Deposit with Paying Agent - - - - - - 32,240 - - - - - - 32,240 Investments - 503 379,019 1,026,299 - 23,786 16,405 - - 64,204 - 404 - 1,510,620 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed - - - - - - - - - 5,400 23,117 - - 28,517 Accounts Receivable - Unbilled - - 3,915 - 77,803 - - - 32,835 - - - - 114,553 Property Taxes - 26,430 - - - - - - - - 816,081 15,580 - 858,091 Accrued Interest - 9 6,408 1,696 - 402 277 - - 1,085 - 7 - 9,884 Due from Other Governmental Units - - - 8,351 - - - 141,223 - 2,702 - - - 152,276 Grants Receivable - - - - - - - - - - 178,164 - - 178,164 TOTAL ASSETS 1,954$ 26,942$ 389,342$ 1,036,346$ 865,821$ 54,039$ 48,922$ 2,418,856$ 117,247$ 1,114,201$ 1,434,532$ 15,991$ -$ 7,524,193$ LIABILITIES Accounts Payable and Accrued Expenditures -$ -$ 16,376$ -$ -$ 22,613$ 318$ 260$ -$ 141,153$ 386,450$ -$ -$ 567,170$ Overdrafts - 536 260,833 781,040 - - 40,993 - - - - 382 179,115 1,262,899 Due to Other Governmental Units - - - - - - - - - 49,041 - - - 49,041 Due to Other Funds - - - - - - - - - - - - - Unearned Revenue - Fees - - - - - - - - 2,400 - - - 2,400 TOTAL LIABILITIES -$ 536$ 277,209$ 781,040$ -$ 22,613$ 41,311$ 260$ -$ 192,594$ 386,450$ 382$ 179,115$ 1,881,510$ DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes -$ 26,430$ -$ -$ -$ -$ -$ -$ -$ -$ 816,081$ 15,580$ -$ 858,091$ TOTAL DEFERRED INFLOWS OF RESOURCES -$ 26,430$ -$ -$ -$ -$ -$ -$ -$ -$ 816,081$ 15,580$ -$ 858,091$ FUND BALANCES Restricted for: Capital Projects -$ -$ -$ -$ -$ -$ -$ -$ -$ 195,936$ -$ -$ -$ 195,936$ Special Service Areas - - - - - - - - - - - 29 - 29 Tax Increment Financing - - - - - - - - - - 232,001 - - 232,001 Highways and Streets - - - - - - - 1,491,755 117,190 - - - - 1,608,945 Assigned for: Highways and Streets - - - - - - - 926,841 57 - - - - 926,898 Capital Projects - - - 255,306 865,821 31,426 - - - 725,671 - - - 1,878,224 Parks and Recreation 1,954 - 112,133 - - - - - - - - - - 114,087 Debt Service - - - - - - 7,611 - - - - - - 7,611 Unassigned - (24) - - - - - - - - - - (179,115) (179,139) TOTAL FUND BALANCES 1,954$ (24)$ 112,133$ 255,306$ 865,821$ 31,426$ 7,611$ 2,418,596$ 117,247$ 921,607$ 232,001$ 29$ (179,115)$ 4,784,592$ TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 1,954$ 26,942$ 389,342$ 1,036,346$ 865,821$ 54,039$ 48,922$ 2,418,856$ 117,247$ 1,114,201$ 1,434,532$ 15,991$ -$ 7,524,193$ CITY OF MCHENRY, ILLINOIS COMBINING BALANCE SHEET OTHER GOVERNMENTAL FUNDS APRIL 30, 2023 Page 63 See Accompanying Independent Auditor's Report Special Special Capital Asset Municipal Service Service Total Recreation Capital Maintenance and Capital Debt Motor Motor Developer Area #4 -Area #6 -Other Pageant Audit Center Improvements Replacement Equipment Service Fuel Tax Fuel Tax Donations TIF Lakewood Huntersville Governmental Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Funds REVENUES Local Taxes Property Tax -$ 26,275$ -$ -$ -$ -$ -$ -$ -$ -$ 694,137$ 15,581$ -$ 735,993$ Intergovernmental State Motor Fuel Tax - - - - - - - 1,139,143 364,598 - - - - 1,503,741 State Grants - - - - - - - 296,480 - - 178,164 - - 474,644 Other Local Sources Electric Use Tax - - - - 1,043,524 - - - - - - - - 1,043,524 Charges for Services - 29,700 508,011 - - - - - - - - - - 537,711 Interest 7 22 9,325 2,362 1,610 507 1,384 55,730 57 13,368 2,622 26 - 87,020 Miscellaneous Rent - - 22,800 - - - - - - 36,438 - - - 59,238 Donations - - - - - - - - - 245,725 20,000 - - 265,725 Reimbursements - - - 39,037 - - - - - - 65,388 - - 104,425 Other Miscellaneous - - - 14,071 - - - - - 44,995 - - - 59,066 7$ 55,997$ 540,136$ 55,470$ 1,045,134$ 507$ 1,384$ 1,491,353$ 364,655$ 340,526$ 960,311$ 15,607$ -$ 4,871,087$ EXPENDITURES Current General Office -$ 51,825$ -$ -$ -$ -$ -$ -$ -$ -$ 111,362$ -$ -$ 163,187$ Public Works - - - - - - - 182 - - - - - 182 Parks and Recreation - - 606,912 - - - - - - 123,506 - - - 730,418 Capital Outlay - - - 665,857 179,313 121,346 - 2,152,726 300,000 796,702 1,384,839 - - 5,600,783 Debt Service Principal - - - - - - 1,675,000 - - - - - - 1,675,000 Interest and Fees - - - - - - 675,768 - - - - - - 675,768 -$ 51,825$ 606,912$ 665,857$ 179,313$ 121,346$ 2,350,768$ 2,152,908$ 300,000$ 920,208$ 1,496,201$ -$ -$ 8,845,338$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES 7$ 4,172$ (66,776)$ (610,387)$ 865,821$ (120,839)$ (2,349,384)$ (661,555)$ 64,655$ (579,682)$ (535,890)$ 15,607$ -$ (3,974,251)$ OTHER FINANCING SOURCES/(USES) Transfers - - 79,829 (151,900) - 151,900 2,351,425 - - - (225,735) (15,347) - 2,190,172 NET CHANGE IN FUND BALANCES 7$ 4,172$ 13,053$ (762,287)$ 865,821$ 31,061$ 2,041$ (661,555)$ 64,655$ (579,682)$ (761,625)$ 260$ -$ (1,784,079)$ FUND BALANCES - MAY 1, 2022 1,947 (4,196) 99,080 1,017,593 - 365 5,570 3,080,151 52,592 1,501,289 993,626 (231) (179,115) 6,568,671 FUND BALANCES - APRIL 30, 2023 1,954$ (24)$ 112,133$ 255,306$ 865,821$ 31,426$ 7,611$ 2,418,596$ 117,247$ 921,607$ 232,001$ 29$ (179,115)$ 4,784,592$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OTHER GOVERNMENTAL FUNDS FOR THE YEAR ENDED APRIL 30, 2023 Page 64 See Accompanying Independent Auditor's Report Capital Utility Marina Total Water/Sewer Development Improvements Operations Water and Fund Fund Fund Fund Sewer Funds ASSETS Current Assets Cash and Cash Equivalents 6,371,420$ 274,469$ -$ 390,061$ 7,035,950$ Investments 430,403 4,246,277 1,860,537 100,032 6,637,249 Prepaid Items 42,118 - - - 42,118 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 48,211 - - - 48,211 Accounts Receivable - Unbilled 1,333,209 - - - 1,333,209 Accrued Interest 2,823 2,506 7,824 1,034 14,187 Due from Other Governmental Units 97,714 - - - 97,714 Due from Other Funds 92 129,674 - - 129,766 8,325,990$ 4,652,926$ 1,868,361$ 491,127$ 15,338,404$ Non-Current Assets Right-of-Use Lease Receivable 504,581$ -$ -$ -$ 504,581$ Capital Assets Land 2,208,117 - - - 2,208,117 Buildings 2,736,098 - - - 2,736,098 Systems and Equipment 112,701,173 - - - 112,701,173 Vehicles 1,679,661 - - - 1,679,661 Construction in Progress 63,716 - 29,228 - 92,944 Less: Accumulated Depreciation (42,364,333) - - - (42,364,333) 77,529,013$ -$ 29,228$ -$ 77,558,241$ TOTAL ASSETS 85,855,003$ 4,652,926$ 1,897,589$ 491,127$ 92,896,645$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF 1,054,909$ -$ -$ -$ 1,054,909$ OPEB Expense/Revenue 270,205 - - - 270,205 TOTAL DEFERRED OUTFLOWS OF RESOURCES 1,325,114$ -$ -$ -$ 1,325,114$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses 205,032$ -$ 19,938$ 13,805$ 238,775$ Overdraft - - 2,136,476 - 2,136,476 Security Deposits Held - 3,000 - - 3,000 Accrued Interest 242,629 - - - 242,629 Compensated Absences - Current 99,183 - - - 99,183 IEPA Loan Payable - Current 1,561,149 - - - 1,561,149 Bonds Payable - Current 441,517 - - - 441,517 2,549,510$ 3,000$ 2,156,414$ 13,805$ 4,722,729$ Non-Current Liabilities IMRF Net Pension Liability 1,769,693$ -$ -$ -$ 1,769,693$ Total OPEB Liability 174,609 - - - 174,609 IEPA Loan Payable (Net of Current Portion Shown Above)25,181,722 - - - 25,181,722 Bonds Payable (Net of Current Portion Shown Above)3,464,292 - - - 3,464,292 30,590,316$ -$ -$ -$ 30,590,316$ TOTAL LIABILITIES 33,139,826$ 3,000$ 2,156,414$ 13,805$ 35,313,045$ DEFERRED INFLOWS OF RESOURCES Pension Revenue/Expense - IMRF 120,253$ -$ -$ -$ 120,253$ OPEB Revenue/Expense 431,045 - - - 431,045 Unavailable Revenue - Right-of-Use Leases - Lessor 545,559 - - - 545,559 TOTAL DEFERRED INFLOWS OF RESOURCES 1,096,857$ -$ -$ -$ 1,096,857$ NET POSITION Net Investment in Capital Assets 46,368,081$ -$ 9,290$ -$ 46,377,371$ Unrestricted/(Deficit)6,575,353 4,649,926 (268,115) 477,322 11,434,486 TOTAL NET POSITION 52,943,434$ 4,649,926$ (258,825)$ 477,322$ 57,811,857$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF NET POSITION WATER AND SEWER FUNDS APRIL 30, 2023 Page 65 See Accompanying Independent Auditor's Report Capital Utility Marina Total Water/Sewer Development Improvements Operations Water and Fund Fund Fund Fund Sewer Funds OPERATING REVENUES Charges for Services Customer Fees 5,330,765$ 381,285$ -$ -$ 5,712,050$ Capital Fees 1,055,565 - - - 1,055,565 Debt Service Fees 2,346,224 - - - 2,346,224 Penalties 134,143 - - - 134,143 Water Meter Sales 20,650 - - - 20,650 Other 29,922 - - - 29,922 8,917,269$ 381,285$ -$ -$ 9,298,554$ OPERATING EXPENSES Water Department Personnel Salaries 432,534$ -$ -$ -$ 432,534$ Miscellaneous Personnel Expenses 233,500 - - - 233,500 Other Operating Expenses 839,138 - 10,118 - 849,256 Depreciation 647,212 - - - 647,212 Sewer Department Personnel Salaries 790,937 - - - 790,937 Miscellaneous Personnel Expenses 515,086 - - - 515,086 Other Operating Expenses 1,432,186 - - 42,121 1,474,307 Depreciation 2,157,391 - - - 2,157,391 Utility Work Department Personnel Salaries 640,079 - - - 640,079 Miscellaneous Personnel Expenses 427,624 - - - 427,624 Other Operating Expenses 54,417 - - - 54,417 8,170,104$ -$ 10,118$ 42,121$ 8,222,343$ OPERATING INCOME/(LOSS)747,165$ 381,285$ (10,118)$ (42,121)$ 1,076,211$ NON-OPERATING REVENUE/(EXPENSE) Interest Income 104,291$ 21,577$ 9,747$ 1,049$ 136,664$ Unrealized Gain/Loss - 25,188 27,252 - 52,440 Rental Income 25,697 - - 57,113 82,810 Interest and Fees (747,851) - - - (747,851) Amortization 46,517 - - - 46,517 Gain/(Loss) on Sale of Fixed Asset 6,000 - - - 6,000 (565,346)$ 46,765$ 36,999$ 58,162$ (423,420)$ INCOME/(LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 181,819$ 428,050$ 26,881$ 16,041$ 652,791$ TRANSFERS (TO)/FROM OTHER FUNDS (110,269) (145,000) 160,347 - (94,922) CHANGE IN NET POSITION 71,550$ 283,050$ 187,228$ 16,041$ 557,869$ NET POSITION - MAY 1, 2022 52,871,884 4,366,876 (446,053) 461,281 57,253,988 NET POSITION - APRIL 30, 2023 52,943,434$ 4,649,926$ (258,825)$ 477,322$ 57,811,857$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION WATER AND SEWER FUNDS FOR THE YEAR ENDED APRIL 30, 2023 Page 66 See Accompanying Independent Auditor's Report Employee Risk Information Total Insurance Management Technology Internal Service Fund Fund Fund Funds ASSETS Current Assets Cash and Cash Equivalents -$ -$ 458,658$ 458,658$ Investments - - 8,295 8,295 Prepaid Items 81,376 - 11,014 92,390 Receivables (Net of Allowance for Estimated Uncollectible Amounts) Accounts Receivable - Billed 299 - - 299 Accounts Receivable - Unbilled - 8,238 - 8,238 Accrued Interest - - 140 140 81,675$ 8,238$ 478,107$ 568,020$ Non-Current Assets Capital Assets Systems and Equipment -$ -$ 716,613$ 716,613$ Less: Accumulated Depreciation - - (547,155) (547,155) -$ -$ 169,458$ 169,458$ TOTAL ASSETS 81,675$ 8,238$ 647,565$ 737,478$ DEFERRED OUTFLOWS OF RESOURCES Pension Expense/Revenue - IMRF -$ -$ 122,761$ 122,761$ OPEB Expense/Revenue - - 31,444 31,444 TOTAL DEFERRED OUTFLOWS OF RESOURCES -$ -$ 154,205$ 154,205$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses 115$ 2,877$ 34,392$ 37,384$ Overdrafts 89,079 31,550 - 120,629 Due to Other Funds 1,273 - - 1,273 Unearned Revenue 82,488 - - 82,488 Compensated Absences - - 7,993 7,993 172,955$ 34,427$ 42,385$ 249,767$ Non-Current Liabilities IMRF Net Pension Liability -$ -$ 214,432$ 214,432$ Total OPEB Liability - - 14,992 14,992 -$ -$ 229,424$ 229,424$ TOTAL LIABILITIES 172,955$ 34,427$ 271,809$ 479,191$ DEFERRED INFLOWS OF RESOURCES Pension Revenue/Expense - IMRF -$ -$ 13,994$ 13,994$ OPEB Revenue/Expense - - 50,161 50,161 DEFERRED INFLOWS OF RESOURCES -$ -$ 64,155$ 64,155$ NET POSITION Net Investment in Capital Assets -$ -$ 163,592$ 163,592$ Unrestricted/(Deficit)(91,280) (26,189) 302,214 184,745 TOTAL NET POSITION (91,280)$ (26,189)$ 465,806$ 348,337$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF NET POSITION INTERNAL SERVICE FUNDS APRIL 30, 2023 Page 67 See Accompanying Independent Auditor's Report Employee Risk Information Total Insurance Management Technology Internal Service Fund Fund Fund Funds OPERATING REVENUES Charges for Services 3,561,716$ 918,502$ 1,075,588$ 5,555,806$ 3,561,716$ 918,502$ 1,075,588$ 5,555,806$ OPERATING EXPENSES Personnel Salaries -$ -$ 221,138$ 221,138$ Miscellaneous Personnel Expenses 3,560,759 - 126,073 3,686,832 Other Operating Expenses 856 955,986 607,022 1,563,864 Depreciation - - 52,939 52,939 3,561,615$ 955,986$ 1,007,172$ 5,524,773$ OPERATING INCOME/(LOSS)101$ (37,484)$ 68,416$ 31,033$ NON-OPERATING REVENUE/(EXPENSE) Interest Income 2,360 33 1,297 3,690 INCOME/(LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 2,461$ (37,451)$ 69,713$ 34,723$ CAPITAL CONTRIBUTIONS - - - - TRANSFERS (TO)/FROM OTHER FUNDS - (76,956) - (76,956) CHANGE IN NET POSITION 2,461$ (114,407)$ 69,713$ (42,233)$ NET POSITION - MAY 1, 2022 (93,741) 88,218 396,093 390,570 NET POSITION - APRIL 30, 2023 (91,280)$ (26,189)$ 465,806$ 348,337$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION INTERNAL SERVICE FUNDS FOR THE YEAR ENDED APRIL 30, 2023 Page 68 See Accompanying Independent Auditor's Report Retained Developmental Personnel Total Escrow Escrow Custodial Fund Fund Funds ASSETS Current Assets Cash and Cash Equivalents 6,855$ 35,509$ 42,364$ Accounts Receivable (Net of Allowance for Estimated Uncollectible Amounts)- 13,938 13,938 TOTAL ASSETS 6,855$ 49,447$ 56,302$ LIABILITIES Current Liabilities Accounts Payable and Accrued Expenses -$ 243$ 243$ TOTAL LIABILITIES -$ 243$ 243$ NET POSITION Restricted for Developers, Property Owners, and Others 6,855$ 49,204$ 56,059$ TOTAL NET POSITION 6,855$ 49,204$ 56,059$ CITY OF MCHENRY, ILLINOIS COMBINING SCHEDULE OF NET POSITION CUSTODIAL FUNDS APRIL 30, 2023 Page 69 See Accompanying Independent Auditor's Report Developmental Retained Total Escrow Personnel Escrow Custodial Funds Funds Funds ADDITIONS Contributions Developers, Property Owners, and Others -$ 34,573$ 34,573$ Total Contributions -$ 34,573$ 34,573$ Investment Income Interest and Dividends 24$ -$ 24$ Net Investment Income 24$ -$ 24$ TOTAL ADDITIONS 24$ 34,573$ 34,597$ DEDUCTIONS Engineering and Legal Fees -$ 34,573$ 34,573$ TOTAL DEDUCTIONS -$ 34,573$ 34,573$ NET INCREASE/(DECREASE)24$ -$ 24$ NET POSITION - MAY 1, 2022 6,831 49,204 56,035 NET POSITION - APRIL 30, 2023 6,855$ 49,204$ 56,059$ CITY OF MCHENRY, ILLINOIS CUSTODIAL FUNDS YEAR ENDED APRIL 30, 2023 COMBINING SCHEDULE OF CHANGES IN FIDUCIARY NET POSITION Page 70 See Accompanying Independent Auditor's Report Actual Original Final Amounts REVENUES Local Taxes Property Tax 720,000$ 720,000$ 694,137$ Intergovernmental State Grants 200,000 200,000 178,164 Other Local Sources Interest - - 2,622 Miscellaneous Donations - - 20,000 Reimbursements 355,000 355,000 65,388 Total Revenues 1,275,000$ 1,275,000$ 960,311$ EXPENDITURES Current General Office 50,000$ 50,000$ 111,362$ Capital Outlay 2,145,000$ 2,151,440$ 1,384,839$ Total Expenditures 2,195,000$ 2,201,440$ 1,496,201$ EXCESS OR (DEFICIENCY) OF REVENUES OVER EXPENDITURES (920,000)$ (926,440)$ (535,890)$ OTHER FINANCING SOURCES/(USES) Transfers (225,735) (225,735) (225,735) NET CHANGE IN FUND BALANCE (1,145,735)$ (1,152,175)$ (761,625)$ FUND BALANCE - MAY 1, 2022 993,626 FUND BALANCE - APRIL 30, 2023 232,001$ Budgeted Amounts CITY OF MCHENRY, ILLINOIS FOR THE YEAR ENDED APRIL 30, 2023 SPECIAL REVENUE FUND - TAX INCREMENT FINANCING FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL Page 71 See Accompanying Independent Auditor's Report