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FY 2022 Annual Report (3)Financial Statements and Federal Single Audit Report City of Port Orchard For the period January 1, 2021 through December 31, 2022 Published September 18, 2023 Report No. 1033273 • Scan to see another great way we're helping advance • #GoodGovernment Office of the Washington State Auditor Pat McCarthy September 18, 2023 Mayor and City Council City of Port Orchard Port Orchard, Washington Report on Financial Statements and Federal Single Audit Please find attached our report on the City of Port Orchard's financial statements and compliance with federal laws and regulations. We are issuing this report in order to provide information on the City's financial activities and condition. Sincerely, Pat McCarthy, State Auditor Olympia, WA Americans with Disabilities In accordance with the Americans with Disabilities Act, we will make this document available in alternative formats. For more information, please contact our Office at (564) 999-0950, TDD Relay at (800) 833-6388, or email our webmaster at webmasterksao.wa.gov. Insurance Building, P.O. Box 40021 • Olympia, Washington 98504-0021 • (564) 999-0950 • Pat. McCarthy@sao.wa.gov Schedule of Findings and Questioned Costs................................................................................... 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..................................................................................................... 6 Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance in Accordance With the Uniform Guidance ........................... 9 Independent Auditor's Report on the Financial Statements.......................................................... 13 FinancialSection........................................................................................................................... 17 About the State Auditor's Office................................................................................................... 61 Office of the Washington State Auditor sao.wa.gov Page 3 City of Port Orchard January 1, 2022 through December 31, 2022 SECTION I — SUMMARY OF AUDITOR'S RESULTS The results of our audit of the City of Port Orchard are summarized below in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Financial Statements We issued an unmodified opinion on the fair presentation of the City's financial statements in accordance with its regulatory basis of accounting. Separately, we issued an adverse opinion on the fair presentation with regard to accounting principles generally accepted in the United States of America (GAAP) because the financial statements are prepared using a basis of accounting other than GAAP. Internal Control over Financial Reporting: • Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over financial reporting that we consider to be significant deficiencies. • Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses. We noted no instances of noncompliance that were material to the financial statements of the City. Federal Awards Internal Control over Major Programs: • Significant Deficiencies: We reported no deficiencies in the design or operation of internal control over major federal programs that we consider to be significant deficiencies. • Material Weaknesses: We identified no deficiencies that we consider to be material weaknesses. We issued an unmodified opinion on the City's compliance with requirements applicable to each of its major federal programs. We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a). Office of the Washington State Auditor sao.wa.gov Page 4 Identification of Major Federal Programs The following programs were selected as major programs in our audit of compliance in accordance with the Uniform Guidance. ALN Program or Cluster Title 20.205 Highway Planning and Construction Cluster — Highway Planning and Construction 21.027 COVID-19 — Coronavirus State and Local Fiscal Recovery Funds The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by the Uniform Guidance, was $750,000. The City did not qualify as a low -risk auditee under the Uniform Guidance. SECTION II — FINANCIAL STATEMENT FINDINGS None reported. SECTION III — FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None reported. Office of the Washington State Auditor sao.wa.gov Page 5 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 City of Port Orchard January 1, 2021 through December 31, 2022 Mayor and City Council City of Port Orchard Port Orchard, Washington We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the City of Port Orchard, as of and for the years ended December 31, 2022 and 2021, and the related notes to the financial statements, which collectively comprise the City's financial statements, and have issued our report thereon dated September 11, 2023. We issued an unmodified opinion on the fair presentation of the City's financial statements in accordance with its regulatory basis of accounting. We issued an adverse opinion on the fair presentation with regard to accounting principles generally accepted in the United States of America (GAAP) because the financial statements are prepared by the City using accounting practices prescribed by state law and the State Auditor's Budgeting, Accounting and Reporting System (BARS) manual described in Note 1, which is a basis of accounting other than GAAP. The effects on the financial statements of the variances between the basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audits of the financial statements, we considered the City'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 the City's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Office of the Washington State Auditor sao.wa.gov Page 6 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 above and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. REPORT ON COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the City'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. However, this Office of the Washington State Auditor sao.wa.gov Page 7 report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. Pat McCarthy, State Auditor Olympia, WA September 11, 2023 Office of the Washington State Auditor sao.wa.gov Page 8 Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance in Accordance with the Uniform Guidance City of Port Orchard January 1, 2022 through December 31, 2022 Mayor and City Council City of Port Orchard Port Orchard, Washington REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM Opinion on Each Major Federal Program We have audited the compliance of the City of Port Orchard, with the types of compliance requirements identified as subject to audit in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of the City's major federal programs for the year ended December 31, 2022. The City's major federal programs are identified in the auditor's results section of the accompanying Schedule of Findings and Questioned Costs. In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2022. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GARS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) are further described in the Auditor's Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City 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 opinion on Office of the Washington State Auditor sao.wa.gov Page 9 compliance for each major federal program. Our audit does not provide a legal determination on the City's compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules and provisions of contracts or grant agreements applicable to the City's federal programs. Auditor's Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City's compliance based on our audit. 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, Government Auditing Standards and the Uniform Guidance will always detect a material noncompliance when it exists. The risk of not detecting a material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material, if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgement made by a reasonable user of the report on compliance about the City's compliance with the requirements of each major federal program as a whole. Performing an audit in accordance with GAAS, Government Auditing Standards and the Uniform Guidance includes the following responsibilities: • Exercise professional judgment and maintain professional skepticism throughout the audit; • Identify and assess the risks of material noncompliance, 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 City's compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances; • Obtain an understanding of the City's internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over compliance. Accordingly, no such opinion is expressed; and Office of the Washington State Auditor sao.wa.gov Page 10 • We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. REPORT ON INTERNAL CONTROL OVER COMPLIANCE A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. Our consideration of internal control over compliance was for the limited purpose described in the Auditor's Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other Office of the Washington State Auditor sao.wa.gov Page 11 purpose. However, this report is a matter of public record and its distribution is not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. Pat McCarthy, State Auditor Olympia, WA September 11, 2023 Office of the Washington State Auditor sao.wa.gov Page 12 Report on the Audit of the Financial Statements City of Port Orchard January 1, 2021 through December 31, 2022 Mayor and City Council City of Port Orchard Port Orchard, Washington REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS Unmodified and Adverse Opinions We have audited the financial statements of the City of Port Orchard, as of and for the years ended December 31, 2022 and 2021, and the related notes to the financial statements, as listed in the financial section of our report. Unmodified Opinion on the Regulatory Basis of Accounting (BARS Manual) As described in Note 1, the City has prepared these financial statements to meet the financial reporting requirements of state law and accounting practices prescribed by the State Auditor's Budgeting, Accounting and Reporting System (BARS) Manual. Those accounting practices differ from accounting principles generally accepted in the United States of America (GAAP). The differences in these accounting practices are also described in Note 1. In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the cash and investments of the City of Port Orchard, and its changes in cash and investments, for the years ended December 31, 2022 and 2021, on the basis of accounting described in Note 1. Adverse Opinion on U.S. GAAP The financial statements referred to above were not intended to, and in our opinion, they do not, present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the City of Port Orchard, as of December 31, 2022 and 2021, or the changes in financial position or cash flows thereof for the years then ended, because of the significance of the matter discussed below. Office of the Washington State Auditor sao.wa.gov Page 13 Basis for Unmodified and Adverse Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GARS) and Government Auditing Standards. 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 the City, 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 unmodified and adverse opinions. Matter Giving Rise to Adverse Opinion on U.S. GAAP Auditing standards issued by the American Institute of Certified Public Accountants (AICPA) require auditors to formally acknowledge when governments do not prepare their financial statements, intended for general use, in accordance with GAAP. As described in Note 1 of the financial statements, the financial statements are prepared by the City in accordance with state law using accounting practices prescribed by the BARS Manual, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the regulatory basis of accounting and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material and pervasive. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of state law and the BARS Manual described in Note 1. This includes determining that the basis of accounting is acceptable for the presentation of the financial statements in the circumstances. Management is also responsible for 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 twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements 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 Office of the Washington State Auditor sao.wa.gov Page 14 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. Performing an audit in accordance with GAAS and Government Auditing Standards includes the following responsibilities: • Exercise professional judgment and maintain professional skepticism throughout the audit; • Identify and assess the risks 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 the City'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 the City's ability to continue as a going concern for a reasonable period of time; and • 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. Supplementary Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Schedules of Liabilities are also presented for purposes of additional analysis, as required by the prescribed BARS manual. These schedules are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and Office of the Washington State Auditor sao.wa.gov Page 15 certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the 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 September 11, 2023 on our consideration of the City's internal control over financial reporting and on the tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control over financial reporting and compliance. Pat McCarthy, State Auditor Olympia, WA September 11, 2023 Office of the Washington State Auditor sao.wa.gov Page 16 FINANCIAL SECTION M City of Port Orchard January 1, 2021 through December 31, 2022 FINANCIAL STATEMENTS Fund Resources and Uses Arising from Cash Transactions — 2022 Fund Resources and Uses Arising from Cash Transactions — 2021 Fiduciary Fund Resources and Uses Arising from Cash Transactions — 2022 Fiduciary Fund Resources and Uses Arising from Cash Transactions — 2021 Notes to Financial Statements — 2022 Notes to Financial Statements — 2021 SUPPLEMENTARY AND OTHER INFORMATION Schedule of Liabilities — 2022 Schedule of Liabilities — 2021 Schedule of Expenditures of Federal Awards — 2022 Notes to the Schedule of Expenditures of Federal Awards — 2022 Office of the Washington State Auditor sao.wa.gov Page 17 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2022 Total for All 104 Special Funds 001 Current 103 Criminal Investigative (Memo Only) Expense Justice Unit Beginning Cash and Investments 308 Beginning Cash and Investments 56,779,316 15,221,791 557,810 97,982 388 / 588 Net Adjustments - - - - Revenues 310 Taxes 16,152,772 13,689,105 356,574 - 320 Licenses and Permits 1,612,661 1,551,061 - - 330 Intergovernmental Revenues 4,371,756 2,641,277 77,364 - 340 Charges for Goods and Services 21,758,773 1,213,108 - - 350 Fines and Penalties 219,357 115,942 - - 360 Miscellaneous Revenues 1,259,610 443,582 10,795 1,224 Total Revenues: 45,374,929 19,654,075 444,733 1,224 Expenditures 510 General Government 3,619,662 3,258,862 - - 520 Public Safety 5,921,891 5,566,762 354,818 311 530 Utilities 8,992,790 - - - 540 Transportation 3,471,829 2,800,536 - - 550 Natural/Economic Environment 1,340,398 1,227,119 - - 560 Social Services 52,983 52,983 - - 570 Culture and Recreation 1,601,495 1,601,495 - - Total Expenditures: 25,001,048 14,507,757 354,818 311 Excess (Deficiency) Revenues over Expenditures: 20,373,881 5,146,318 89,915 913 Other Increases in Fund Resources 391-393, 596 Debt Proceeds 521,660 - - - 397 Transfers -In 3,581,808 - - - 385 Special or Extraordinary Items - - - - 381, 382, 389, Other Resources 1,036,323 27,023 - - 395, 398 Total Other Increases in Fund Resources: 5,139,791 27,023 - - Other Decreases in Fund Resources 594-595 Capital Expenditures 5,682,773 167,839 - - 591-593, 599 Debt Service 938,066 36,724 - - 597 Transfers -Out 3,581,808 325,085 - - 585 Special or Extraordinary Items - - - - 581, 582, 589 Other Uses 962,329 33,571 - - Total Other Decreases in Fund Resources: 11,164,976 563,219 - - Increase (Decrease) in Cash and Investments: 14,348,696 4,610,122 89,915 913 Ending Cash and Investments 50821 Nonspendable - - - - 50831 Restricted 11,580,518 158,637 647,725 85,895 50841 Committed 65,507 65,507 - - 50851 Assigned 42,645,386 2,771,168 - 13,000 50891 Unassigned 16,836,601 16,836,601 - - Total Ending Cash and Investments 71,128,012 19,831,913 647,725 98,895 The accompanying notes are an integral part of this statement. Page 18 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2022 206 Bond 107 Community 108 Paths & 111 Impact Redemption Events Trails Mitigation Fee Fund Beginning Cash and Investments 308 Beginning Cash and Investments 268,042 12,305 3,320,400 - 388 / 588 Net Adjustments - - - - Revenues 310 Taxes 161,191 - - - 320 Licenses and Permits - - - - 330 Intergovernmental Revenues - 1,258 - - 340 Charges for Goods and Services - - 2,523,629 - 350 Fines and Penalties - - - - 360 Miscellaneous Revenues 5,826 221 71,970 - Total Revenues: 167,017 1,479 2,595,599 - Expenditures 510 General Government - - 360,800 - 520 Public Safety - - - - 530 Utilities - - - - 540 Transportation - - 103,640 - 550 Natural/Economic Environment 113,279 - - - 560 Social Services - - - - 570 Culture and Recreation - - - - Total Expenditures: 113,279 - 464,440 - Excess (Deficiency) Revenues over Expenditures: 53,738 1,479 2,131,159 - Otherincreasesin Fund Resources 391-393, 596 Debt Proceeds - - - - 397 Transfers -In - - - 298,111 385 Special or Extraordinary Items - - - - 381, 382, 389, Other Resources - - - - 395, 398 Total Other Increases in Fund Resources: - - - 298,111 Other Decreases in Fund Resources 594-595 Capital Expenditures - - - - 591-593, 599 Debt Service - - - 298,111 597 Transfers -Out - - 147,004 - 585 Special or Extraordinary Items - - - - 581, 582, 589 Other Uses - - - - Total Other Decreases in Fund Resources: - - 147,004 298,111 Increase (Decrease) in Cash and Investments: 53,738 1,479 1,984,155 - Ending Cash and Investments 50821 Nonspendable - - - - 50831 Restricted 321,780 13,784 5,304,555 - 50841 Committed - - - - 50851 Assigned - - - - 50891 Unassigned - - - - Total Ending Cash and Investments 321,780 13,784 5,304,555 - The accompanying notes are an integral part of this statement. Page 19 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2022 302 Capital 304 Street 309 Real Estate 411 Water Construction Capital Projects Excise Tax Operating Beginning Cash and Investments 308 Beginning Cash and Investments 220,154 1,720,886 5,297,021 10,690,998 388 / 588 Net Adjustments - - - - Revenues 310 Taxes - - 1,945,902 - 320 Licenses and Permits - - - - 330 Intergovernmental Revenues - 1,607,887 - - 340 Charges for Goods and Services - - - 5,176,045 350 Fines and Penalties - - - 37,681 360 Miscellaneous Revenues 28,204 28,342 49,503 284,191 Total Revenues: 28,204 1,636,229 1,995,405 5,497,917 Expenditures 510 General Government - - - - 520 Public Safety - - - - 530 Utilities - - - 3,216,412 540 Transportation - - - - 550 Natural/Economic Environment - - - - 560 Social Services - - - - 570 Culture and Recreation - - - - Total Expenditures: - - - 3,216,412 Excess (Deficiency) Revenues over Expenditures: 28,204 1,636,229 1,995,405 2,281,505 Other Increases in Fund Resources 391-393, 596 Debt Proceeds - - - 268,507 397 Transfers -In 490,710 2,792,987 - - 385 Special or Extraordinary Items - - - - 381, 382, 389, Other Resources - - - 12,000 395,398 Total Other Increases in Fund Resources: 490,710 2,792,987 - 280,507 Other Decreases in Fund Resources 594-595 Capital Expenditures 191,437 3,851,051 - 455,816 591-593, 599 Debt Service - - - 425,560 597 Transfers -Out - - 3,109,719 - 585 Special or Extraordinary Items - - - - 581, 582, 589 Other Uses - - - 8,000 Total Other Decreases in Fund Resources: 191,437 3,851,051 3,109,719 889,376 Increase (Decrease) in Cash and Investments: 327,477 578,165 (1,114,314) 1,672,636 Ending Cash and Investments 50821 Nonspendable - - - - 50831 Restricted - 865,435 4,182,707 - 50841 Committed - - - - 50851 Assigned 547,631 1,433,616 - 12,363,634 50891 Unassigned - - - - Total Ending Cash and Investments 547,631 2,299,051 4,182,707 12,363,634 The accompanying notes are an integral part of this statement. Page 20 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2022 500 Equipment 421 Storm 431 Sewer Rental and Drainage Utility Operating Revolving Beginning Cash and Investments 308 Beginning Cash and Investments 2,553,731 13,201,272 3,616,924 388 / 588 Net Adjustments - - - Revenues 310 Taxes - - - 320 Licenses and Permits 61,600 - - 330 Intergovernmental Revenues 43,970 - - 340 Charges for Goods and Services 1,826,711 9,881,464 1,137,816 350 Fines and Penalties 18,483 47,251 - 360 Miscellaneous Revenues 44,948 235,281 55,523 Total Revenues: 1,995,712 10,163,996 1,193,339 Expenditures 510 General Government - - - 520 Public Safety - - - 530 Utilities 1,812,710 3,963,668 - 540 Transportation - - 567,653 550 Natural/Economic Environment - - - 560 Social Services - - - 570 Culture and Recreation - - - Total Expenditures: 1,812,710 3,963,668 567,653 Excess (Deficiency) Revenues over Expenditures: 183,002 6,200,328 625,686 Other Increases in Fund Resources 391-393, 596 Debt Proceeds - 253,153 - 397 Transfers -In - - - 385 Special or Extraordinary Items - - - 381, 382, 389, Other Resources - 925,445 71,855 395,398 Total Other Increases in Fund Resources: - 1,178,598 71,855 Other Decreases in Fund Resources 594-595 Capital Expenditures 12,618 679,664 324,348 591-593, 599 Debt Service 177,294 342 35 597 Transfers -Out - - - 585 Special or Extraordinary Items - - - 581, 582, 589 Other Uses - 920,758 - Total Other Decreases in Fund Resources: 189,912 1,600,764 324,383 Increase (Decrease) in Cash and Investments: (6,910) 5,778,162 373,158 Ending Cash and Investments 50821 Nonspendable - - - 50831 Restricted - - - 50841 Committed - - - 50851 Assigned 2,546,821 18,979,434 3,990,082 50891 Unassigned - - - Total Ending Cash and Investments 2,546,821 18,979,434 3,990,082 The accompanying notes are an integral part of this statement. Page 21 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2021 Total for All 104 Special Funds 001 Current 103 Criminal Investigative (Memo Only) Expense Justice Unit Beginning Cash and Investments 308 Beginning Cash and Investments 38,113,801 10,565,839 377,608 97,797 388 / 588 Net Adjustments - - - - Revenues 310 Taxes 14,883,092 12,393,472 317,167 - 320 Licenses and Permits 1,173,090 1,119,314 - - 330 Intergovernmental Revenues 5,386,233 2,495,256 69,833 - 340 Charges for Goods and Services 21,923,039 857,858 - - 350 Fines and Penalties 165,889 150,382 - 263 360 Miscellaneous Revenues 650,325 270,587 498 283 Total Revenues: 44,181,668 17,286,869 387,498 546 Expenditures 510 General Government 3,091,417 3,091,417 - - 520 Public Safety 5,113,604 4,905,947 207,296 361 530 Utilities 8,350,642 - - - 540 Transportation 2,209,331 1,728,149 - - 550 Natural/Economic Environment 1,383,547 1,315,997 - - 560 Social Services 52,017 52,017 - - 570 Culture and Recreation 1,060,326 1,060,326 - - Total Expenditures: 21,260,884 12,153,853 207,296 361 Excess (Deficiency) Revenues over Expenditures: 22,920,784 5,133,016 180,202 185 Other Increases in Fund Resources 391-393, 596 Debt Proceeds 1,529,865 - - - 397 Transfers -In 2,098,255 - - - 385 Special or Extraordinary Items - - - - 381, 382, 389, Other Resources 1,048,179 92,560 - - 395, 398 Total Other Increases in Fund Resources: 4,676,299 92,560 - - Other Decreases in Fund Resources 594-595 Capital Expenditures 4,962,485 191,493 - - 591-593, 599 Debt Service 895,769 - - - 597 Transfers -Out 2,098,255 333,989 - - 585 Special or Extraordinary Items - - - - 581, 582, 589 Other Uses 975,059 44,138 - - Total Other Decreases in Fund Resources: 8,931,568 569,620 - - Increase (Decrease) in Cash and Investments: 18,665,515 4,655,956 180,202 185 Ending Cash and Investments 50821 Nonspendable - - - - 50831 Restricted 11,317,959 1,542,933 557,810 85,215 50841 Committed 59,222 59,222 - - 50851 Assigned 33,855,802 2,073,303 - 12,767 50891 Unassigned 11,546,333 11,546,333 - - Total Ending Cash and Investments 56,779,316 15,221,791 557,810 97,982 The accompanying notes are an integral part of this statement. Page 22 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2021 206 Bond 107 Community 108 Paths & 111 Impact Redemption Events Trails Mitigation Fee Fund Beginning Cash and Investments 308 Beginning Cash and Investments 212,002 11,096 2,311,466 - 388 / 588 Net Adjustments - - - - Revenues 310 Taxes 123,333 - - - 320 Licenses and Permits - - - - 330 Intergovernmental Revenues - 1,196 - - 340 Charges for Goods and Services - - 1,480,654 - 350 Fines and Penalties - - - - 360 Miscellaneous Revenues 257 11 6,220 - Total Revenues: 123,590 1,207 1,486,874 - Expenditures 510 General Government - - - - 520 Public Safety - - - - 530 Utilities - - - - 540 Transportation - - 101,257 - 550 Natural/Economic Environment 67,550 - - - 560 Social Services - - - - 570 Culture and Recreation - - - - Total Expenditures: 67,550 - 101,257 - Excess (Deficiency) Revenues over Expenditures: 56,040 1,207 1,385,617 - Otherincreasesin Fund Resources 391-393, 596 Debt Proceeds - - - - 397 Transfers -In - - - 299,751 385 Special or Extraordinary Items - - - - 381, 382, 389, Other Resources - - - - 395, 398 Total Other Increases in Fund Resources: - - - 299,751 Other Decreases in Fund Resources 594-595 Capital Expenditures - - - - 591-593, 599 Debt Service - - - 299,751 597 Transfers -Out - - 376,683 - 585 Special or Extraordinary Items - - - - 581, 582, 589 Other Uses - - - - Total Other Decreases in Fund Resources: - - 376,683 299,751 Increase (Decrease) in Cash and Investments: 56,040 1,207 1,008,934 - Ending Cash and Investments 50821 Nonspendable - - - - 50831 Restricted 268,042 12,305 3,320,400 - 50841 Committed - - - - 50851 Assigned - - - - 50891 Unassigned - - - - Total Ending Cash and Investments 268,042 12,305 3,320,400 - The accompanying notes are an integral part of this statement. Page 23 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2021 302 Capital 304 Street 309 Real Estate 411 Water Construction Capital Projects Excise Tax Operating Beginning Cash and Investments 308 Beginning Cash and Investments 238,707 1,732,515 3,266,592 4,779,078 388 / 588 Net Adjustments - - - - Revenues 310 Taxes - - 2,049,120 - 320 Licenses and Permits - - - - 330 Intergovernmental Revenues 2,211,280 485,762 - 26,501 340 Charges for Goods and Services - - - 7,563,583 350 Fines and Penalties - - - 380 360 Miscellaneous Revenues 203 236,016 14,228 86,756 Total Revenues: 2,211,483 721,778 2,063,348 7,677,220 Expenditures 510 General Government - - - - 520 Public Safety - - - - 530 Utilities - - - 2,393,882 540 Transportation - - - - 550 Natural/Economic Environment - - - - 560 Social Services - - - - 570 Culture and Recreation - - - - Total Expenditures: - - - 2,393,882 Excess (Deficiency) Revenues over Expenditures: 2,211,483 721,778 2,063,348 5,283,338 Other Increases in Fund Resources 391-393, 596 Debt Proceeds - - - 1,529,865 397 Transfers -In 670,051 449,893 677,331 1,229 385 Special or Extraordinary Items - - - - 381, 382, 389, Other Resources - - - 10,000 395,398 Total Other Increases in Fund Resources: 670,051 449,893 677,331 1,541,094 Other Decreases in Fund Resources 594-595 Capital Expenditures 2,900,087 505,969 - 488,824 591-593, 599 Debt Service - - - 418,088 597 Transfers -Out - 677,331 710,252 - 585 Special or Extraordinary Items - - - - 581, 582, 589 Other Uses - - - 5,600 Total Other Decreases in Fund Resources: 2,900,087 1,183,300 710,252 912,512 Increase (Decrease) in Cash and Investments: (18,553) (11,629) 2,030,427 5,911,920 Ending Cash and Investments 50821 Nonspendable - - - - 50831 Restricted - 234,233 5,297,021 - 50841 Committed - - - - 50851 Assigned 220,154 1,486,653 - 10,690,998 50891 Unassigned - - - - Total Ending Cash and Investments 220,154 1,720,886 5,297,021 10,690,998 The accompanying notes are an integral part of this statement. Page 24 City of Port Orchard Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2021 500 Equipment 421 Storm 431 Sewer Rental and Drainage Utility Operating Revolving Beginning Cash and Investments 308 Beginning Cash and Investments 2,311,214 8,716,657 3,493,230 388 / 588 Net Adjustments - - - Revenues 310 Taxes - - - 320 Licenses and Permits 53,776 - - 330 Intergovernmental Revenues 96,405 - - 340 Charges for Goods and Services 1,786,634 9,561,714 672,596 350 Fines and Penalties 3,434 11,430 - 360 Miscellaneous Revenues 2,948 26,310 6,008 Total Revenues: 1,943,197 9,599,454 678,604 Expenditures 510 General Government - - - 520 Public Safety - - - 530 Utilities 1,493,168 4,463,592 - 540 Transportation - - 379,925 550 Natural/Economic Environment - - - 560 Social Services - - - 570 Culture and Recreation - - - Total Expenditures: 1,493,168 4,463,592 379,925 Excess (Deficiency) Revenues over Expenditures: 450,029 5,135,862 298,679 Other Increases in Fund Resources 391-393, 596 Debt Proceeds - - - 397 Transfers -In - - - 385 Special or Extraordinary Items - - - 381, 382, 389, Other Resources - 930,728 14,891 395,398 Total Other Increases in Fund Resources: - 930,728 14,891 Other Decreases in Fund Resources 594-595 Capital Expenditures 29,582 656,654 189,876 591-593, 599 Debt Service 177,930 - - 597 Transfers -Out - - - 585 Special or Extraordinary Items - - - 581, 582, 589 Other Uses - 925,321 - Total Other Decreases in Fund Resources: 207,512 1,581,975 189,876 Increase (Decrease) in Cash and Investments: 242,517 4,484,615 123,694 Ending Cash and Investments 50821 Nonspendable - - - 50831 Restricted - - - 50841 Committed - - - 50851 Assigned 2,553,731 13,201,272 3,616,924 50891 Unassigned - - - Total Ending Cash and Investments 2,553,731 13,201,272 3,616,924 The accompanying notes are an integral part of this statement. Page 25 City of Port Orchard Fiduciary Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2022 Custodial 308 Beginning Cash and Investments 76 388 & 588 Net Adjustments - 310-390 Additions 99,099 510-590 Deductions 99,094 Net Increase (Decrease) in Cash and 5 Investments: 508 Ending Cash and Investments 81 The accompanying notes are an integral part of this statement. Page 26 City of Port Orchard Fiduciary Fund Resources and Uses Arising from Cash Transactions For the Year Ended December 31, 2021 Custodial 308 Beginning Cash and Investments 34 388 & 588 Net Adjustments - 310-390 Additions 126,728 510-590 Deductions 126,686 Net Increase (Decrease) in Cash and 42 Investments: 508 Ending Cash and Investments 76 The accompanying notes are an integral part of this statement. Page 27 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2022 Note 1-Summary of Significant Accounting Policies The City of Port Orchard was incorporated on September 1, 1890 and operates under the laws of the state of Washington applicable to a city. The City is a general-purpose local government and provides public safety, street improvement, park and recreation, and general administrative services. In addition, the City owns and operates a water, sewer, and storm drainage system. The City reports financial activity in accordance with the Cash Basis Budgeting, Accounting and Reporting System (BARS) Manual prescribed by the State Auditor's Office under the authority of Washington State law, Chapter 43.09 RCW. This manual prescribes a financial reporting framework that differs from generally accepted accounting principles (GAAP) in the following manner: • Financial transactions are recognized on a cash basis of accounting as described below. • Component units are required to be disclosed, but are not included in the financial statements. • Government -wide statements, as defined in GAAP, are not presented. • All funds are presented, rather than a focus on major funds. • The Schedule of Liabilities is required to be presented with the financial statements as supplementary information. • Supplementary information required by GAAP is not presented. • Ending balances for proprietary and fiduciary funds are presented using classifications that are different from the ending net position classifications in GAAP. A. Fund Accounting Financial transactions of the government are reported in individual funds. Each fund uses a separate set of self -balancing accounts that comprises its cash and investments, revenues and expenditures. The government's resources are allocated to and accounted for in individual funds depending on their intended purpose. Each fund is reported as a separate column in the financial statements, except for fiduciary funds, which are presented by fund types. The total column is presented as "memo only" because any interfund activities are not eliminated. The following fund types are used: GOVERNMENTAL FUND TYPES: General Fund This fund is the primary operating fund of the government. It accounts for all financial resources except those required or elected to be accounted for in another fund. Page 28 Special Revenue Funds These funds account for specific revenue sources that are restricted or committed to expenditures for specified purposes of the government. Debt Service Funds These funds account for the financial resources that are restricted, committed, or assigned to expenditures for principal, interest and related costs on general long-term debt. Capital Projects Funds These funds account for financial resources which are restricted, committed, or assigned for the acquisition or construction of capital facilities or other capital assets. PROPRIETARY FUND TYPES: Enterprise Funds These funds account for operations that provide goods or services to the general public and are supported primarily through user charges. Internal Service Funds These funds account for operations that provide goods or services to other departments or funds of the government on a cost reimbursement basis. FIDUCIARY FUND TYPES: Fiduciary funds account for assets held by the government in a trustee capacity or as a custodian on behalf of others. Custodial Funds These funds are used to account assets that the government holds on behalf of others in a custodial capacity. B. Basis of Accounting and Measurement Focus Financial statements are prepared using the cash basis of accounting and measurement focus. Revenues are recognized when cash is received and expenditures are recognized when paid. In accordance with state law the City also recognizes expenditures paid during twenty days after the close of the fiscal year for claims incurred during the previous period. Page 29 C. Cash and Investments See Note 3- Deposits and Investments. D. Capital Assets Capital assets are assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one year. Capital assets and inventory are recorded as capital expenditures when purchased. E. Comaensated Absences Vacation leave may be accumulated up to 320 hours at year end and up to 240 hours is payable upon separation or retirement. Sick leave may be accumulated up to 960 hours at year end and for all employees except LEOFF II employees upon separation or retirement employees do not receive payment for unused sick leave. LEOFF II employees' (excluding management) sick leave may be accumulated up to 1040 hours and up to 400 hours is payable upon separation or retirement to the employee's respective medical health retirement/voluntary employee's beneficiary association account (HRA/VEBA). LEOFF II employees' (excluding management) vacation leave may be accumulated up to 320 hours and up to 240 hours is payable in cash upon separation or retirement while the remaining 80 hours are payable to the employee's respective medical health retirement/voluntary employee's beneficiary association account (HRA/VEBA). LEOFF II employees (excluding management) earn 120 hours holiday leave annually and may carry over 96 hours at year end. Holiday leave is payable upon separation or retirement up to 96 hours. Payments are recognized as expenditures when paid. F. Long -Term Debt See Note 5- Long-term Debt. G. Restricted and Committed Portion of Ending Cash and Investments Beginning and Ending Cash and Investments are reported as restricted or committed when it is subject to restrictions on use imposed by external parties or due to internal commitments established by ordinance. When expenditures that meet restrictions are incurred, the City intends to use the most restricted resources first. Restrictions and commitments of Ending Cash and Investments consist of $11,646,025. Page 30 Cash & Investments Purpose Amount Restricted Affordable Housing $ 98,745 Restricted 2021 Legislative Law Enforcement Funding $ 36,735 Restricted Vessel Registration Fees $ 6,984 Restricted Opoid Settlement $ 16,173 Restricted Criminal Justice $ 647,725 Restricted Law Enforcement Investigations $ 85,895 Restricted Tourism $ 321,780 Restricted Paths & Trails $ 13,784 Restricted Capital Projects $ 4,182,707 Restricted Parks Projects $ 808,518 Restricted Transportation Projects $ 3,472,431 Restricted McCormick Woods Transportation Projects $ 691,644 Restricted Old Clifton/Anderson Hill Intersection Improvements $ 331,962 Restricted Transportation Improvement Board- Grant Received in Advance $ 657,337 Restricted Blueberry/Bethel Roundabout $ 208,098 Committed Recreational Programs, Activities, or Capital Projects $ 65,507 Total $ 11,646,025 Note 2 — Budget Compliance A. Budgets The City of Port Orchard adopts biennial appropriated budgets for all funds. These budgets are appropriated at the fund level. The budget constitutes the legal authority for expenditures at that level. Biennial appropriations for these funds lapse at the end of biennial period. Biennial appropriated budgets are adopted on the same basis of accounting as used for financial reporting. Page 31 The appropriated and actual expenditures for the legally adopted budgets were as follow: Fund 2021-2022 Final Appropriated Biennial Budget 2021 Actual Expenditures 2022 Actual Expenditures Variance Fund: 001 - Current Expense $ 37,014,740 $ 11,789,196 $ 14,320,281 $ 10,905,263 Fund: 002 - City Street Fund $ 7,356,591 $ 1,856,980 $ 2,852,495 $ 2,647,116 Fund: 003 - Stabilization Fund $ 2,693,687 $ - $ - $ 2,693,687 Fund: 103- Criminal Justice $ 869,508 $ 207,296 $ 354,818 $ 307,393 Fund: 104- Special Investigative Unit $ 105,797 $ 361 $ 311 $ 105,125 Fund: 107- Community Events $ 412,002 $ 67,550 $ 113,279 $ 231,173 Fund: 108 - Paths & Trails $ 13,096 $ - $ - $ 13,096 Fund: 209 - Real Estate Excise Tax $ 7,801,992 $ 710,252 $ 3,109,719 $ 3,982,021 Fund: 111- Impact Mitigation Fee $ 5,006,467 $ 477,940 $ 611,444 $ 3,917,083 Fund: 206 - Bond Redemption Fund $ 598,200 $ 299,751 $ 298,111 $ 338 Fund: 302 - Capital Construction $ 6,801,707 $ 2,900,087 $ 191,437 $ 3,710,183 Fund: 304 - Street Capital Projects $ 11,664,198 $ 1,183,300 $ 3,851,051 $ 6,629,847 Fund: 412 - Water Operating $ 9,694,063 $ 3,186,080 $ 3,778,359 $ 2,729,624 Fund: 412 - Water Stabilization $ 950,216 $ - $ - $ 950,216 Fund: 413 - Water Capital $ 6,734,754 $ 474,741 $ 684,096 $ 5,575,917 Fund: 414 - Water Debt Service $ 1,190,250 $ 431,088 $ 597,148 $ 162,014 Fund: 421 - Storm Drainage Utility $ 5,658,120 $ 1,859,529 $ 2,690,922 $ 1,107,669 Fund: 422 - Storm Drainage Stabilization $ 533,931 $ - $ - $ 533,931 Fund: 423 - Storm Drainage Capital Facil $ 599,113 $ 5,200 $ 2,500 $ 591,413 Fund: 424 - Storm Drainage Debt Service $ 355,300 $ 177,930 $ 177,047 $ 324 Fund: 431- Sewer Operating $ 13,711,301 $ 4,700,064 $ 4,412,655 $ 4,598,583 Fund: 432 - Sewer Stabilization $ 1,422,016 $ - $ - $ 1,422,016 Fund: 433 - Sewer Capital $ 23,387,228 $ 893,545 $ 944,275 $ 21,549,408 Fund: 434 - Sewer Debt Service $ 550,000 $ - $ - $ 550,000 Fund: 500 - Equipment Rental and Revolving $ 5,271,030 $ 569,803 $ 892,036 $ 3,809,191 Fund: 632 - Wastewater Treatment Facil Fee $ 7,931,914 $ 1,125,321 $ 1,120,758 $ 5,685,835 Fund 109 Real Estate Excise Tax (above) is reported on the financial statements as Fund 309 Real Estate Excise Tax. Due to a change in accounting principles the Wastewater Treatment Facility Fee Fund 632 is reported as part of the Sewer Utility on the Financial Statements. Budgeted amounts are authorized to be transferred between departments within any fund; however, any revisions that alter the total expenditures of a fund, or that affect the number of authorized employee positions, salary ranges, hours, or other conditions of employment must be approved by the City's legislative body. Page 32 Note 3—Deposits and Investments Investments are reported at amortized cost. Deposits and investments by type at December 31, 2022 are as follows: Investment held by city City's Own as an agency for other Type of Investment Investments local governments Total Cash on Deposit $ 1,303,045 $ 81 $ 1,303,126 Washington State Local Government Investment Pool (LGIP) $ 46,886,144 $ 46,886,144 Kitsap County Investment Pool (KCIP) $ 22,938,823 $ 22,938,823 Total $ 71,128,012 $ 81 $ 71,128,093 It is the City's policy to invest all temporary cash surpluses. The interest on these investments is prorated to the various funds. Investments in the State Local Government Investment Pool (LGIP) The city is a voluntary participant in the Local Government Investment Pool, an external investment pool operated by the Washington State Treasurer. The pool is not rated and not registered with the SEC. Rather, oversight is provided by the State Finance Committee in accordance with Chapter 43.250 RCW. Investments in the LGIP are reported at amortized cost, which is the same as the value of the pool per share. The LGIP does not impose any restrictions on participant withdrawals. The Office of the State Treasurer prepares a stand-alone financial report for the pool. A copy of the report is available from the Office of the State Treasurer, PO Box 40200, Olympia, Washington 98504-0200, online at www.tre.wa.gov. Investments in Kitsap County Investment Pool The city is an involuntary participant in the Kitsap County Investment Pool, an external investment pool operated by the County Treasurer. The pool is not rated or registered with the SEC. Rather, oversight is provided by the County Finance Committee in accordance with RCW 36.48.070. The city reports its investment in the pool at amortized cost, which is the same as the value of the pool per share. The KCIP does not impose liquidity fees or redemption gates on participant withdrawals. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in event of a failure of a depository financial institution, the city would not be able to recover deposits or would not be able to recover collateral Page 33 securities that are in possession of an outside party. The city's deposits and certificates of deposit are mostly covered by federal depository insurance (FDIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). All investments are insured, registered or held by the city or its agent in the government's name. Compensating Balances The amounts reported as cash and cash equivalents also include compensating balances maintained with certain banks in lieu of payments for services rendered. The average compensating balance maintained during 2022 was approximately $3,217,335. Note 4 - Property Tax The county treasurer acts as an agent to collect property tax levied in the county for all taxing authorities. Collections are distributed at the end of each month. Property tax revenues are recognized when cash is received by the City. Delinquent taxes are considered fully collectible because a lien affixes to the property after tax is levied. The City's regular levy for the year 2022 was $1.27119 per $1,000 on an assessed valuation of $2,503,880,075 for a total regular levy of $3,182,909. Note 5 — Long -Term Debt Debt Service The accompanying Schedule of Liabilities provides more details of the outstanding debt and liabilities of the City and summarizes the City's debt transactions for year ended December 31, 2022. Page 34 The debt service requirements for general obligation bonds, notes payable, and intergovernmental loans are as follows: Due Date Principal Amount Interest Amount Total Amount 2023 783,044 163,832 946,875 2024 785,404 150,844 936,247 2025 795,695 137,745 933,440 2026 805,994 124,430 930,424 2027 811,301 110,898 922,199 2028-2032 4,089,964 345,608 4,435,573 2033-2037 1,758,455 77,533 1,835,987 2038-2043 53,295 266 53,561 Grand Total 9,883,152 1,111,155 10,994,307 The city has entered into agreements for the following loans in 2021 & 2022 with no activity to report for Fiscal Year 2022: Contract Number Description Project Interest Rate Maturity Payment Due Date Total Loan Amount 088-21 Public Works Board 390 Zone Low Pressure Boaster Station 0.94% 6/1/2041 $ 650,000 089-21 Public Works Board Melcher Pump Station Rehabilitation 0.94% 6/1/2041 $ 500,000 090-21 Public Works Board Sewer Lift Station 0.94% 6/1/2041 $ 800,000 068-21 Department of Ecology Marina Pump Station 2.60% 6/30/2054 $ 13,000,000 058-22 Drinking Water State Revolving Fund Loan Well No. 11 Development, Treatment & Booster Pump 1.75% 10/1/2046 $ 8,080,000 Note 6 — Leases During the year ended 2022, the city adopted guidance for the presentation and disclosure of leases, as required by the BARS manual. This requirement resulted in the addition of a lease liability reported on the Schedule of Liabilities. These liabilities are included on the Schedule 9- schedule of Long-term Liabilities. The city leases land from the State for $19,370.90 per year under a lease agreement that is for 12 years. The lease began June of 2012 and will end June of 2024 that cannot be cancelled. The city leases a storage building from the State for $939 per month under a lease agreement that is for 3 years. The lease began April of 2022 and will end March of 2025 and can be cancelled with 90 days' notice. Th city leases four copiers from Pacific Office Automation for $534 per month under a five year lease agreement that began August 2018 and will end August 2023 and cannot be cancelled. Page 35 Th city leases phones from G12 Communications for $304 per month under a four year lease agreement that began March 2021 and ends March 2025, it can be cancelled with thirty days' notice and severe penalties. The total amount paid for leases in 2022 was $37,760. As of December 31, 2022, the future lease payments are as follows: Due Date Total Amount 2023 38,278 2024 15,515 2025 3,597 Grand Total 57,390 Note 7 — OPEB Plans The LEOFF I Retiree Medical Plan is a closed, single -employer, defined -benefit OPEB plan administered by the City as required by RCW 41.26. The plan pays for 100% of eligible retirees' healthcare costs on a pay-as-you-go basis. As of December 31, 2022, the plan had four members, all retirees. As of December 31, 2022, the city's total OPEB liability was $1,963,074 as calculated using the alternative measurement method. For the year ended December 31, 2022 the City paid $37,993 in benefits. Note 8 — Pension Plans A. State Sponsored Pension Plans Substantially all City's full-time and qualifying part-time employees participate in the following statewide retirement systems administered by the Washington State Department of Retirement Systems (DRS), under cost -sharing, multiple -employer public employee defined benefit and defined contribution retirement plans: Public Employees' Retirement System (PERS) and Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF). The State Legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. The Department of Retirement Systems, a department within the primary government of the State of Washington, issues a publicly available Comprehensive Annual Financial Report (ACFR) that includes financial statements and required supplementary information for each plan. The DRS ACFR may be downloaded from the DRS website at www.drs.wa.gov. Page 36 At June 30, 2022, the City's proportionate share of the collective net pension liabilities (assets) was as follows: Employer Contributions Allocation % Liability (Asset) PERS 1 $ 206,490 0.033693% $ 938,137 PERS 2/3 $ 351,257 0.043723% $ (1,621,590) LEOFF 1 $ - 0.007147% $ (205,020) LEOFF 2 $ 109,786 0.053029% $ (1,441,168) Only the net pension liabilities are reported on the schedule 09. LEOFF Plan 1 The City also participates in LEOFF Plan 1. The LEOFF Plan 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. Starting on July 1, 2000, employers and employees contribute zero percent. LEOFF Plan 2 The City also participates in the LEOFF Plan 2. The Legislature, by means of a special funding arrangement, appropriates money from the state general fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. Note 9 — Risk Management The City of Port Orchard is a member of the Association of Washington Cities Risk Management Service Agency (AWC RMSA). Chapter 48.62 RCW authorizes the governing body of any one or more governmental entities to form together into or join a pool or organization for the joint purchasing of insurance, and/or joint self -insuring, and/or joint hiring or contracting for risk management services to the same extent that they may individually purchase insurance, self -insure, or hire or contract for risk management services. An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter 39.34 RCW, the Interlocal Cooperation Act. The AWC RMSA was formed on January 1, 1989, when 32 municipalities in the State of Washington joined by signing an Interlocal Governmental Agreement to pool their self -insured losses and jointly purchase insurance and administrative services. As of December 31, 2022, 106 entities participate in the AWC RMSA pool. The AWC RMSA allows members to establish a program of joint insurance and provides risk management services to all members. All coverages, with the exception of pollution liability, are Page 37 on an occurrence basis. The AWC RMSA provides all risk property, comprehensive crime, general liability, automobile liability, police liability, public officials' liability, employee fidelity and faithful performance, pollution liability, cyber liability, and equipment breakdown insurance coverage. Equipment breakdown is included with the property insurance carrier. Pollution, and cyber liability coverages are stand-alone policies, which the AWC RMSA procures for its members. The AWC RMSA allows members with airports to group purchase airport liability coverage, and members with drones to group purchase property and liability coverage. Members pay an annual assessment to the AWC RMSA. The AWC RMSA is responsible for payment of all covered causes of loss against the jurisdiction above the stated retention. All members in the AWC RMSA have $15 million in both per occurrence and aggregate liability limits. For the first $1 million in liability limits, AWC RMSA is self -insured for its Self -Insured Retention (SIR) of $500,000, per occurrence, and is reinsured by National League of Cities Mutual Insurance Company (NLC MIC) for the additional $500,000. The $9 million in excess liability coverage limits is provided through an excess liability policy purchased from National League of Cities Mutual Insurance Company (NLC MIC). The $5 million in excess liability coverage limits above the first layer of excess coverage is purchased from Hallmark Specialty Insurance Company. Since AWC RMSA is a cooperative program, there is joint liability among the participating members. The reinsurance coverage is purchased through NLC MIC and excess property coverage is purchased through AIG Specialty Insurance Company and CHUBB. In 2022, AWC RMSA carried a retention of $200,000, NLC MIC reinsures up to $3 million, AIG Specialty Insurance Company provides excess insurance up to $50 million, and CHUBB provides the remaining limits up to a total of $250 million. All commercial policies have been purchased through the pool's Broker of Record, Aon. Members contract to remain in the AWC RMSA pool for a minimum of one year and must give a one-year notice before terminating participation. Even after termination, a member is still responsible for contributions to the Pool for any unresolved, unreported, and in -process claims for the period they were signatory to the Interlocal Governmental Agreement. The AWC RMSA establishes a loss fund for both reported and unreported insured events, which includes estimates of both future payments of losses and related claim adjustment expenses. In accordance with WAC 200.100.02023, the AWC RMSA is governed by a board of directors, which is comprised of elected officials of participating members. Note 10. Joint Ventures In 1983, the City of Port Orchard and West Sound Utility District (previously the Karcher Creek Sewer District) amended an intergovernmental agreement relating to the construction and Page 38 management of the secondary wastewater treatment facility. In April of 2014 the City and District signed an interlocal agreement for the management and operation of the joint wastewater treatment facility for an additional term of 25 years. This joint venture establishes a Sewer Advisory Committee (SAC) consisting of three representatives from each entity who prepare and monitor the Facility's budget. The District and the City share 50% ownership in the facility's total assets. The Utility District is responsible for the daily operation of the facility. The participants pay their share of the expenses based on their portion of flow into the facility. The City and the District pay the joint venture an amount determined during the budget process to cover maintenance, operation, capital improvements and debt monthly. The current cost sharing is 47.92% City and 52.08% District and in 2022 the city paid $1,579,482. The City was the lead agency on the wastewater treatment plant expansion project, and is the signatory on two Public Works Trust Fund Loans for the Facility's expansion. In 2004, the city guaranteed two Public Works Trust Funds loans of the South Kitsap Water Reclamation Facility, a legally separate entity. In the event that the South Kitsap Water Reclamation Facility is unable to make a payment, City of Port Orchard will be required to meet the obligation. The total amount of outstanding debt subject of this guarantee at year end was $720,000. Revenues of the facility are used to make debt service payments on the two loans. Annually, the facility makes a payment to the City to cover the debt service on these loans. The SAC recommended and the City Council and the District Commissioners approved using a portion of Wastewater Treatment Facility Fees collected by each jurisdiction to help make the annual debt payments. This cost sharing formula is 50% and in 2022 each entity paid $200,000. Note 11. Significant Commitments or Obligations 580 Zone Reservoir: At the year-end the city had a commitment for a development agreement C003-07 Amendment 1, adopted in 2019 with McCormick Communities, LLC. The agreement allows for a reimbursement for construction of the 580 Zone Reservoir for a total of $2,789,915. The reimbursement is paid from the Water Capital Facility Fees collected by the city from development within the Western Service Area pursuant to the reimbursement agreement. The reimbursement amount is set and fixed at $1,000 per applicable connection of Water Capital Facility Charge Fees collected in the area by the city. In 2022, the city paid $172,000. As of December 31, 2022; the amount outstanding is $2,604,915. Note: The reimbursement amount is fixed at $1,000. Glenwood Connector Roadway: At the year-end the city had a commitment for a development agreement C035-21 with McCormick Land Company. The agreement allows for a reimbursement for construction of the Glenwood Connector Roadway and the Old Clifton/Feigley intersection for a total of $2,200,296.37. The reimbursement is paid from the Transportation Impact Fees collected by the city from development within the McCormick Urban Village pursuant to the development Page 39 agreement. For 2021 the reimbursement amount was established at $720.80 as of February 2021. Per the agreement was subsequently adjusted per CPI-U in March 2021 to a value of $733.05. From March 1, 2021 thru Feb 28,2022 the value for reimbursement was $733.05. Per the agreement the reimbursement amount was adjusted per CPI-U in March 2022 to a value of $766.77. In 2022, the city paid $103,640.04. As of December 31, 2022, the amount outstanding is $1,337,342.61. Note: The reimbursement amount is annually adjusted per CPI-U effective March 1 each year. Old Clifton Road/Campus Parkway Roundabout: At the year-end the city had a commitment for a development agreement C035-21 with McCormick Communities, LLC. The agreement allows for a credit for construction of the Old Clifton Rd/Campus Pkwy Roundabout Transportation Impact Fee (TIF) Study 1.5C and McCormick Woods Drive Intersection TIF 2.08 and for a total up to $3.2 million or $1,600,000 for each project. The total credit amount will be established upon project acceptance and final certified cost if less than the total $3.2 million. The credit is given at the time Transportation Impact Fees are collected by the city from development. The Transportation Fee credit amount was established at $1,000 as of February 2021. The credit, per agreement was subsequently adjusted per CPI-U in March 2021 to a value of $1,017. From March 1, 2021 thru Feb 28,2022 the value for credit was $1,017. Per the agreement the credit amount was adjusted per CPI-U in March 2022 to a value of $1,063.78. In 2022, the city provided a total credit amount of $144,849.04. As of December 31, 2022, the amount of credit available is $1,455,151. Note: The credit amount is annually adjusted per CPI-U effective March 1 each year. Planned Park Property: At the year-end the city had a commitment for a development agreement C076-21 with Sidney Road (Haven) Apartments, LLC. The Developer may transfer the Planned Park Property to the City in exchange for Park Impact Fee credit up to a total of $126,144 or certified costs if less than the identified max. The credit is given at the time park impact fees are collected by the city from the development if the Park property is deeded over to the City. As of December 31, 2022 no credit has been provided. McCormick Communities, LLC (Water Credit): As of March 14, 2022, the city had a commitment for a development agreement C048-22 with McCormick Communities, LLC. The agreement allows for a max credit amount of $11,840,625 for certified construction cost if less than the max for the following five Water Capital Improvement Projects: 1. CIP No. 09 Well 12 Development, Treatment, and Booster Pump Station ($7 mil) 2. CIP No. 13 390 to 580 Zone Booster Station 2nd Lift (Glenwood) ($725,000) 3. CIP No. 14 390 to 580 Zone Transmission Main (to Glenwood PS) ($515,624) 4. CIP No. 15 580 to 660 Zone Booster Station ($750,000) 5. CIP No. 16 660 Zone Storage ($2,850,000) Page 40 The total credit amount will be established upon project acceptance and final certified cost if less than the total $11,840,625. The credit is given at the time water capital facility fees are collected by the city from the builders. The water capital facility fee credit amount was established at $5,920 as of March 1, 2022 and adjusted to $6,517.92 as of October 1, 2022 per the agreement and POMC. In 2022, the city provided credit in the amount of $538,181.28 against CIP No.16 660 Zone Storage of $2,850,000 leaving a total credit balance for this project of $2,311,818.72. Note: The credit amount is annually adjusted per CPI-U effective October 1 each year per POMC 13.04.065 Sidney Rd(S)-Haven Townhomes: As of May 10, 2022, the city had a commitment for a development agreement C070-22 with Haven Townhomes LLC. The agreement allows for a credit for construction of the Sidney Rd (S) Widening Transportation Impact Fee (TIF) Study 2.05 for the west side of the street improvement for a total up to $315,949 or up to the full anticipate TIF's to be paid if certified costs are larger than expected. The credit is given at the time Transportation Impact Fees are charged by the city for this development. As of December 31, 2022 no credit has been provided. McCormick Communities, LLC (Park Impact Fee Credit): As of September 26, 2022, the city had a commitment for a development agreement C 110-22 with McCormick Communities, LLC for park improvements as identified below. The agreement allows for a max credit amount of $5,320,285, to be limited to the total park impact fees due on the Project, the estimated cost for the Park Improvements Projects or the actual costs incurred by McCormick (determined by the final certified construction cost) whatever amount is less. 1. Prior McCormick Payment C002-10 ($643,743) 2. McCormick Village Park Phase 3 ($1,250,000) 3. St. Andrew's Multi -Modal Trail (in McCormick Woods) ($979,012) 4. McCormick West Multi -Modal Trail Phase 1 ($1,468,518) 5. McCormick West Multi -Modal Trail Phase 2 ($979,012) The city provided a credit amount of $643,743 to reflect the prior payment and contract with McCormick Communities. In 2022, the city provided credit in the amount of $22,088 leaving a total credit balance for this project of $621,655. Note: The maximum park impact fee credit per dwelling unit is fixed at $2,008 and will not be adjusted per the agreement. Page 41 Note 12. Contingencies & Liabilities Blake Decision. In February 2021, the Washington State Supreme Court issued an opinion in State of Washington v. Blake, declaring that RCW 69.50.4013, Washington's simple possession of a controlled substance statute violates the due process clause of the state and federal constitution. Individuals convicted under that statute beginning in 1971 may be eligible to have their convictions vacated and/or be resentenced. All penalties, fines and restitution (Legal Financial Obligations "LFO") imposed in connection with simple possess convictions must be refunded. At this time the City does not have the information necessary to make an estimate of any potential liability. It is the city's position that this liability is the responsibility of the State. The State has thus far provided funding sufficient for the City to process vacations and refund LFOs. Page 42 CITY OF PORT ORCHARD Notes to Financial Statements For the Year Ended December 31, 2021 Note 1-Summary of Significant Accounting Policies The City of Port Orchard was incorporated on September 1, 1890 and operates under the laws of the state of Washington applicable to a city. The City is a general-purpose local government and provides public safety, street improvement, park and recreation, and general administrative services. In addition, the City owns and operates a water, sewer, and storm drainage system. The City reports financial activity in accordance with the Cash Basis Budgeting, Accounting and Reporting System (BARS) Manual prescribed by the State Auditor's Office under the authority of Washington State law, Chapter 43.09 RCW. This manual prescribes a financial reporting framework that differs from generally accepted accounting principles (GAAP) in the following manner: • Financial transactions are recognized on a cash basis of accounting as described below. • Component units are required to be disclosed, but are not included in the financial statements. • Government -wide statements, as defined in GAAP, are not presented. • All funds are presented, rather than a focus on major funds. • The Schedule of Liabilities is required to be presented with the financial statements as supplementary information. • Supplementary information required by GAAP is not presented. • Ending balances for proprietary and fiduciary funds are presented using classifications that are different from the ending net position classifications in GAAP. A. Fund Accounting Financial transactions of the government are reported in individual funds. Each fund uses a separate set of self -balancing accounts that comprises its cash and investments, revenues and expenditures. The government's resources are allocated to and accounted for in individual funds depending on their intended purpose. Each fund is reported as a separate column in the financial statements, except for fiduciary funds, which are presented by fund types. The total column is presented as "memo only" because any interfund activities are not eliminated. The following fund types are used: GOVERNMENTAL FUND TYPES: General Fund This fund is the primary operating fund of the government. It accounts for all financial resources except those required or elected to be accounted for in another fund. Page 43 Special Revenue Funds These funds account for specific revenue sources that are restricted or committed to expenditures for specified purposes of the government. Debt Service Funds These funds account for the financial resources that are restricted, committed, or assigned to expenditures for principal, interest and related costs on general long-term debt. Capital Projects Funds These funds account for financial resources which are restricted, committed, or assigned for the acquisition or construction of capital facilities or other capital assets. PROPRIETARY FUND TYPES: Enterprise Funds These funds account for operations that provide goods or services to the general public and are supported primarily through user charges. Internal Service Funds These funds account for operations that provide goods or services to other departments or funds of the government on a cost reimbursement basis. FIDUCIARY FUND TYPES: Fiduciary funds account for assets held by the government in a trustee capacity or as a custodian on behalf of others. Custodial Funds These funds are used to account assets that the government holds on behalf of others in a custodial capacity. B. Basis of Accounting and Measurement Focus Financial statements are prepared using the cash basis of accounting and measurement focus. Revenues are recognized when cash is received and expenditures are recognized when paid. In accordance with state law the City also recognizes expenditures paid during twenty days after the close of the fiscal year for claims incurred during the previous period. Page 44 C. Cash and Investments See Note 3- Deposits and Investments. D. Capital Assets Capital assets are assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one year. Capital assets and inventory are recorded as capital expenditures when purchased. E. Comaensated Absences Vacation leave may be accumulated up to 240 hours at year end and is payable upon separation or retirement. Sick leave may be accumulated up to 960 hours at year end and for all employees except LEOFF II employees upon separation or retirement employees do not receive payment for unused sick leave. LEOFF II employees' (excluding management) sick leave may be accumulated up to 1040 hours and up to 400 hours is payable upon separation or retirement to the employee's respective medical health retirement/voluntary employee's beneficiary association account (HRA/VEBA). LEOFF II employees' (excluding management) vacation leave may be accumulated up to 320 hours and up to 240 hours is payable upon separation or retirement. LEOFF II employees (excluding management) earn 120 hours holiday leave annually and may carry over 96 hours at year end. Holiday leave is payable upon separation or retirement up to 96 hours. Payments are recognized as expenditures when paid. F. Long -Term Debt See Note 5- Long-term Debt. G. Restricted and Committed Portion of Ending Cash and Investments Beginning and Ending Cash and Investments are reported as restricted or committed when it is subject to restrictions on use imposed by external parties or due to internal commitments established by ordinance. When expenditures that meet restrictions are incurred, the City intends to use the most restricted resources first. Restrictions and commitments of Ending Cash and Investments consist of $11,377,181. Page 45 Cash & Investments Purpose Amount Restricted Affordable Housing $ 88,670 Restricted 2021 Legislative Law Enforcement Funding $ 43,724 Restricted American Rescue Plan Act (ARPA) $ 1,410,539 Restricted Criminal Justice $ 557,810 Restricted Law Enforcement Investigations $ 85,215 Restricted Tourism $ 268,042 Restricted Paths & Trails $ 12,305 Restricted Capital Projects $ 5,297,021 Restricted Parks Projects $ 472,322 Restricted Transportation Projects $ 1,731,882 Restricted McCormick Woods Transportation Projects $ 788,899 Restricted Old Clifton/Anderson Hill Intersection Improvements $ 327,297 Restricted Blueberry/Bethel Roundabout $ 234,233 Committed Recreational Programs, Activities, or Capital Projects $ 59,222 Total $11,377,181.00 Note 2 — Budget Compliance A. Budgets The City of Port Orchard adopts biennial appropriated budgets for all funds. These budgets are appropriated at the fund level. The budget constitutes the legal authority for expenditures at that level. Biennial appropriations for these funds lapse at the end of biennial period. Biennial appropriated budgets are adopted on the same basis of accounting as used for financial reporting. Page 46 The appropriated and actual expenditures for the legally adopted budgets were as follow: Fund 2021-2022 Final Appropriated Biennial Budget 2021 Actual Expenditures Variance Fund: 001 - Current Expense $ 35,529,201 $ 11,789,196 $ 23,740,005 Fund: 002 - City Street Fund $ 7,601,171 $ 1,856,980 $ 5,744,191 Fund: 003 - Stabilization Fund $ 2,693,687 $ - $ 2,693,687 Fund: 103 - Criminal Justice $ 869,508 $ 207,296 $ 662,212 Fund: 104 - Special Investigative Unit $ 105,797 $ 361 $ 105,436 Fund: 107 - Community Events $ 412,002 $ 67,550 $ 344,452 Fund: 108 - Paths & Trails $ 13,096 $ - $ 13,096 Fund: 109 - Real Estate Excise Tax $ 6,193,992 $ 710,252 $ 5,483,740 Fund: 111 - Impact Mitigation Fee $ 4,306,467 $ 477,940 $ 3,828,527 Fund: 206 - Bond Redemption Fund $ 598,200 $ 299,751 $ 298,449 Fund: 302 - Capital Construction $ 5,881,707 $ 2,900,087 $ 2,981,620 Fund: 304 - Street Capital Projects $ 7,903,848 $ 1,183,300 $ 6,720,548 Fund: 411 - Water Operating $ 9,694,063 $ 3,186,080 $ 6,507,983 Fund: 412 - Water Stabilization $ 950,216 $ - $ 950,216 Fund: 413 - Water Capital $ 6,519,754 $ 474,741 $ 6,045,013 Fund: 414 - Water Debt Service $ 840,250 $ 431,088 $ 409,162 Fund: 421 - Storm Drainage Utility $ 5,352,120 $ 1,859,529 $ 3,492,591 Fund: 422 - Storm Drainage Stabilization $ 533,931 $ - $ 533,931 Fund: 423 - Storm Drainage Capital Facil $ 99,113 $ 5,200 $ 93,913 Fund: 424 - Storm Drainage Debt Service $ 355,300 $ 177,930 $ 177,370 Fund: 431 - Sewer Operating $ 13,711,301 $ 4,700,064 $ 9,011,237 Fund: 432 - Sewer Stabilization $ 1,422,016 $ - $ 1,422,016 Fund: 433 - Sewer Capital $ 21,976,689 $ 893,545 $ 21,083,144 Fund: 434 - Sewer Debt Service $ 550,000 $ - $ 550,000 Fund: 500 - Equipment Rental and Revolving $ 5,271,030 $ 569,803 $ 4,701,227 Fund 109 Real Estate Excise Tax (above) is reported on the financial statements as Fund 309 Real Estate Excise Tax. Due to a change in accounting principles the Wastewater Treatment Facility Fee Fund 632 was previously considered a Fiduciary Fund therefore was not budgeted and included in the table above. However, it is reported as part of the Sewer Utility on the Financial Statements and when included does not exceed the Sewer Utility Budget. Budgeted amounts are authorized to be transferred between departments within any fund; however, any revisions that alter the total expenditures of a fund, or that affect the number of authorized employee positions, salary ranges, hours, or other conditions of employment must be approved by the City's legislative body. Page 47 Note 3—Deposits and Investments Investments are reported at amortized cost. Deposits and investments by type at December 31, 2021 are as follows: Investment held by city as an agency for City's Own other local Type of Investment Investments governments Total Cash on Deposit $ 1,488,493 $ 76 $ 1,488,569 Washington State Local Government Investment Pool (LGIP) $ 35,691,642 $ 35,691,642 Kitsap County Investment Pool (KCIP) $ 19,599,181 $ 19,599,181 Total $ 56,779,316 $ 76 $ 56,779,392 It is the City's policy to invest all temporary cash surpluses. The interest on these investments is prorated to the various funds. Investments in the State Local Government Investment Pool (LGIP) The city is a voluntary participant in the Local Government Investment Pool, an external investment pool operated by the Washington State Treasurer. The pool is not rated and not registered with the SEC. Rather, oversight is provided by the State Finance Committee in accordance with Chapter 43.250 RCW. Investments in the LGIP are reported at amortized cost, which is the same as the value of the pool per share. The LGIP does not impose any restrictions on participant withdrawals. The Office of the State Treasurer prepares a stand-alone financial report for the pool. A copy of the report is available from the Office of the State Treasurer, PO Box 40200, Olympia, Washington 98504-0200, online at www.tre.wa.gov. Investments in Kitsap County Investment Pool The city is an involuntary participant in the Kitsap County Investment Pool, an external investment pool operated by the County Treasurer. The pool is not rated or registered with the SEC. Rather, oversight is provided by the County Finance Committee in accordance with RCW 36.48.070. The city reports its investment in the pool at amortized cost, which is the same as the value of the pool per share. The KCIP does not impose liquidity fees or redemption gates on participant withdrawals. Page 48 Custodial Credit Risk Custodial credit risk for deposits is the risk that, in event of a failure of a depository financial institution, the city would not be able to recover deposits or would not be able to recover collateral securities that are in possession of an outside party. The city's deposits and certificates of deposit are mostly covered by federal depository insurance (FDIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). All investments are insured, registered or held by the city or its agent in the government's name. Compensating Balances The amounts reported as cash and cash equivalents also include compensating balances maintained with certain banks in lieu of payments for services rendered. The average compensating balance maintained during 2021 was approximately $2,864,456. Note 4 - Property Tax The county treasurer acts as an agent to collect property tax levied in the county for all taxing authorities. Collections are distributed at the end of each month. Property tax revenues are recognized when cash is received by the City. Delinquent taxes are considered fully collectible because a lien affixes to the property after tax is levied. The City's regular levy for the year 2021 was $1.360162 per $1,000 on an assessed valuation of $2,236,031,476 for a total regular levy of $3,041,366. Note 5 — Long -Term Debt Debt Service The accompanying Schedule of Liabilities provides more details of the outstanding debt and liabilities of the City and summarizes the City's debt transactions for year ended December 31, 2021. Page 49 The debt service requirements for general obligation bonds, notes payable, and intergovernmental loans are as follows: Due Date Principal Interest Amount Total Amount Amount 2022 725,669 176,537 902,206 2023 735,947 163,765 899,712 2024 741,232 150,778 892,009 2025 751,524 137,678 889,202 2026 761,823 124,363 886,186 2027-2031 3,888,307 415,557 4,303,863 2032-2036 2,148,243 112,860 2,261,102 2037 332,517 4,892 337,409 Grand Total 10,085,260 1,286,430 11,371,690 The city has entered into agreements for the following loans in 2021 with no activity to report for Fiscal Year 2021: Contract Number Description Project Interest Rate Maturity Payment Due Date Total Loan Amount 085-21 Public Works Board Pottery Lift Station Repairs 0.94% 6/1/2041 $ 500,000 088-21 Public Works Board 390 Zone Low Pressure Booster Station 0.94% 6/1/2041 $ 650,000 089-21 Public Works Board Melcher Pump Station Rehabilitation 0.94% 6/1/2041 $ 500,000 090-21 Public Works Board Sewer Lift Station 1 0.94% 1 6/1/2041 1 $ 800,000 068-21 Department of Ecology Marina Pump Station 1 2.60% 1 6/30/2054 1 $13,000,000 Note 6 — OPEB Plans The LEOFF I Retiree Medical Plan is a closed, single -employer, defined -benefit OPEB plan administered by the City as required by RCW 41.26. The plan pays for 100% of eligible retirees' healthcare costs on a pay-as-you-go basis. As of December 31, 2021, the plan had four members, all retirees. As of December 31, 2021, the city's total OPEB liability was $2,247,894 as calculated using the alternative measurement method. For the year ended December 31, 2021 the City paid $34,176 in benefits. Page 50 Note 7 — Pension Plans A. State Sponsored Pension Plans Substantially all City's full-time and qualifying part-time employees participate in the following statewide retirement systems administered by the Washington State Department of Retirement Systems (DRS), under cost -sharing, multiple -employer public employee defined benefit and defined contribution retirement plans: Public Employees' Retirement System (PERS) and Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF). The State Legislature establishes, and amends, laws pertaining to the creation and administration of all public retirement systems. The Department of Retirement Systems, a department within the primary government of the State of Washington, issues a publicly available Comprehensive Annual Financial Report (ACFR) that includes financial statements and required supplementary information for each plan. The DRS ACFR may be obtained by writing to: Department of Retirement Systems Communications Unit P.O. Box 48380 Olympia, WA 98540-8380 Also, the DRS ACFR may be downloaded from the DRS website at www.drs.wa.gov. At June 30, 2021, the City's proportionate share of the collective net pension liabilities (assets) was as follows: Employer Contributions Allocation % Liability (Asset) PERS 1 $ 235,173 0.031572% $ 385,568 PERS 2/3 $ 381,564 0.040280% $ (4,012,536) LEOFF 1 $ - 0.006956% $ (238,282) LEOFF 2 $ 103,646 0.051994% $ (3,020,027) The net pension liabilities are reported on the schedule 09. LEOFF Plan 1 The City also participates in LEOFF Plan 1. The LEOFF Plan 1 is fully funded and no further employer contributions have been required since June 2000. If the plan becomes underfunded, funding of the remaining liability will require new legislation. Starting on July 1, 2000, employers and employees contribute zero percent. Page 51 LEOFF Plan 2 The City also participates in the LEOFF Plan 2. The Legislature, by means of a special funding arrangement, appropriates money from the state general fund to supplement the current service liability and fund the prior service costs of Plan 2 in accordance with the recommendations of the Pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not mandated by the state constitution and could be changed by statute. Note 8 — Risk Management The City of Port Orchard is a member of the Association of Washington Cities Risk Management Service Agency (AWC RMSA). Chapter 48.62 RCW authorizes the governing body of any one or more governmental entities to form together into or join a pool or organization for the joint purchasing of insurance, and/or joint self -insuring, and/or joint hiring or contracting for risk management services to the same extent that they may individually purchase insurance, self -insure, or hire or contract for risk management services. An agreement to form a pooling arrangement was made pursuant to the provisions of Chapter 39.34 RCW, the Interlocal Cooperation Act. The AWC RMSA was formed on January 1, 1989, when 32 municipalities in the State of Washington joined by signing an Interlocal Governmental Agreement to pool their self -insured losses and jointly purchase insurance and administrative services. As of December 31, 2021, 105 entities participate in the AWC RMSA pool. The AWC RMSA allows members to establish a program of joint insurance and provides risk management services to all members. All coverages, with the exception of pollution liability, are on an occurrence basis. The AWC RMSA provides all risk property, comprehensive crime, general liability, automobile liability, police liability, public officials' liability, employee fidelity and faithful performance, pollution liability, cyber liability, and equipment breakdown insurance coverage. Equipment breakdown is included with the property insurance carrier. Pollution, and cyber liability coverages are stand-alone policies, which the AWC RMSA procures for its members. The AWC RMSA allows members with airports to group purchase airport liability coverage, and members with drones to group purchase property and liability coverage. Members pay an annual assessment to the AWC RMSA. The AWC RMSA is responsible for payment of all covered causes of loss against the jurisdiction above the stated retention. All members in the AWC RMSA have $15 million in both per occurrence and aggregate liability limits. For the first $1 million in liability limits, AWC RMSA is self -insured for its Self -Insured Retention (SIR) of $250,000, per occurrence, and is reinsured by National League of Cities Mutual Insurance Company (NLC MIC) for the additional $750,000. The $9 million in excess liability coverage limits is provided through an excess liability policy purchased from Argonaut Insurance Company. The $5 million in excess liability coverage limits above the first layer of excess coverage is purchased from Hallmark Specialty Insurance Company. Since AWC RMSA is a cooperative program, there is joint liability among the participating members. The reinsurance Page 52 coverage is purchased through NLC MIC and excess property coverage is purchased through AIG Specialty Insurance Company, and CHUBB in 2021, AWC RMSA carried a retention of $200,000, NLC MIC reinsures up to $3 million, AIG Specialty Insurance Company provides excess insurance up to $50 million, and CHUBB provides limits up to $250 million. All commercial policies have been purchased through the Pool's Broker of Record, Aon. Members contract to remain in the AWC RMSA pool for a minimum of one year and must give a one-year notice before terminating participation. Even after termination, a member is still responsible for contributions to the Pool for any unresolved, unreported, and in -process claims for the period they were signatory to the Interlocal Governmental Agreement. The AWC RMSA establishes a loss fund for both reported and unreported insured events, which includes estimates of both future payments of losses and related claim adjustment expenses. In accordance with WAC 200.100.02023, the AWC RMSA is governed by a board of directors, which is comprised of elected officials of participating members. Note 9. Joint Ventures In 1983, the City of Port Orchard and West Sound Utility District (previously the Karcher Creek Sewer District) amended an intergovernmental agreement relating to the construction and management of the secondary wastewater treatment facility. In April of 2014 the City and District signed an interlocal agreement for the management and operation of the joint wastewater treatment facility for an additional term of 25 years. This joint venture establishes a Sewer Advisory Committee (SAC) consisting of three representatives from each entity who prepare and monitor the Facility's budget. The District and the City share 50% ownership in the facility's total assets. The Utility District is responsible for the daily operation of the facility. The participants pay their share of the expenses based on their portion of flow into the facility. The City and the District pay the joint venture an amount determined during the budget process to cover maintenance, operation, capital improvements and debt monthly. The current cost sharing is 49.23% City and 50.77% District and in 2021 the city paid $1,641,522. The City was the lead agency on the wastewater treatment plant expansion project, and is the signatory on two Public Works Trust Fund Loans for the Facility's expansion. In 2004, the city guaranteed two Public Works Trust Funds loans of the South Kitsap Water Reclamation Facility, a legally separate entity. In the event that the South Kitsap Water Reclamation Facility is unable to make a payment, City of Port Orchard will be required to meet the obligation. The total amount of outstanding debt subject of this guarantee at year end was $1,632,595. Revenues of the facility are used to make debt service payments on the two loans. Annually, the facility makes a payment to the City to cover the debt service on these loans. The SAC recommended and the City Council and the District Commissioners approved using a portion of Wastewater Treatment Facility Fees Page 53 collected by each jurisdiction to help make the annual debt payments. This cost sharing formula is 50% and in 2021 each entity paid $200,000. Note 10. Significant Commitments or Obligations 580 Zone Reservoir: At the year-end the city had a commitment for a development agreement C003-07 Amendment 1, adopted in 2019 with McCormick Communities, LLC. The agreement allows for a reimbursement for construction of the 580 Zone Reservoir for a total of $2,789,915. The reimbursement is paid from the Water Capital Facility Fees collected by the city from development within the Western Service Area pursuant to the reimbursement agreement. The reimbursement amount is set and fixed at $1,000 per applicable connection of Water Capital Facility Charge Fees collected in the area by the city. In 2021, the city paid $13,000. The amount outstanding as of December 31, 2021 is $2,776,915. Note: The reimbursement amount is fixed at $1,000. Glenwood Connector Roadway: At the year-end the city had a commitment for a development agreement C035-21 with McCormick Land Company. The agreement allows for a reimbursement for construction of the Glenwood Connector Roadway and the Old Clifton/Feigley intersection for a total of $2,200,296.37. The reimbursement is paid from the Transportation Impact Fees collected by the city from development within the McCormick Urban Village pursuant to the development agreement. For 2021 the reimbursement amount was established at $720.80 as of February 2021. Per the agreement was subsequently adjusted per CPI-U in March 2021 to a value of $733.05. In 2021, the city paid $101,257. The amount outstanding as of December 31, 2021 is $1,440,982.69. Note: The reimbursement amount is annually adjusted per CPI-U effective March 1 each year. Old Clifton Road/Campus Parkway Roundabout: At the year-end the city had a commitment for a development agreement C035-21 with McCormick Communities, LLC. The agreement allows for a credit for construction of the Old Clifton Rd/Campus Pkwy Roundabout Transportation Impact Fee (TIF) Study 1.5C and McCormick Woods Drive Intersection TIF 2.08 and for a total up to $3.2 million or $1,600,000 for each project. The total credit amount will be established upon project acceptance and final certified cost if less than the total $3.2 million. The credit is given at the time Transportation Impact Fees are collected by the city from development. The Transportation Fee credit amount was established at $1,000 as of February 2021. The credit, per agreement was subsequently adjusted per CPI-U in March 2021 to a value of $1,017. In 2021, the city credited $81,360. Note: The credit amount is annually adjusted per CPI-U effective March 1 each year. North Sidney Lift Station: At the year-end the city had a commitment for a development agreement C063-21 with Sidney Road (Haven) Apartments, LLC. The agreement allows for a Page 54 sewer general facility fee credit for construction of the North Sidney Lift Station Sewer CIP 6-5C for an estimated total up to $1,750,000. The credit is given at the time sewer general facility fee are collected by the city from development. Sidney Road South Widening: At the year-end the city had a commitment for a development agreement C076-21 with Sidney Road (Haven) Apartments, LLC. The agreement allows for a credit for construction of the Sidney Rd (S) Widening Transportation Impact Fee Study 2.05 for the east side of the street improvement for a total up to $469,800 or certified costs if less than the identified max. The credit is given at the time Transportation Impact Fees are charged by the city for this development. Planned Park Property: At the year-end the city had a commitment for a development agreement C076-21 with Sidney Road (Haven) Apartments, LLC. The Developer may transfer the Planned Park Property to the City in exchange for Park Impact Fee credit up to a total of $126,144 or certified costs if less than the identified max. The credit is given at the time park impact fees are collected by the city from the development if the Park property is deeded over to the City. Note 11. Subsequent Events • As of April 26, 2022, agreement C058-22 with Department of Health for a Drinking Water State Revolving Fund Loan was approved by council. The loan will be used for the construction of Well No. 11 Development, Treatment, and Booster pump. It is a $8,080,000 loan with a 20 year term and a 1.75% interest rate. • As of March 14, 2022, the city had a commitment for a development agreement C048-22 with McCormick Communities, LLC. The agreement allows for a max credit amount of $11,840,625 for certified construction cost if less than the max for the following five Water Capital Improvement Projects: 1. CIP No. 09 Well 12 Development, Treatment, and Booster Pump Station ($7 mil) 2. CIP No. 13 390 to 580 Zone Booster Station 2nd Lift (Glenwood) ($725,000) 3. CIP No. 14 390 to 580 Zone Transmission Main (to Glenwood PS) ($515,624) 4. CIP No. 15 580 to 660 Zone Booster Station ($750,000) 5. CIP No. 16 660 Zone Storage ($2,850,000) The total credit amount will be established upon project acceptance and final certified cost if less than the total $11,840,625. The credit is given at the time water capital facility fees are collected by the city from the builders. The water capital facility fee credit amount was established at $5,920* as of March 2022. Note: The credit amount is annually adjusted per CPI-U effective October 1 each year per POMC 13.04.065 Page 55 • As of May 10, 2022, the city had a commitment for a development agreement C070-22 with Haven Townhomes LLC. The agreement allows for a credit for construction of the Sidney Rd (S) Widening Transportation Impact Fee (TIF) Study 2.05 for the west side of the street improvement for a total up to $315,949 or up to the full anticipate TIF's to be paid if certified costs are larger than expected. The credit is given at the time Transportation Impact Fees are charged by the city for this development. Note 12. COVID-19 Pandemic In February 2020, the Governor of the state of Washington declared a state of emergency in response to the spread of COVID-19. Precautionary measures to slow the spread of the virus continued throughout 2021. These measures included limitations on business operations, public events, gatherings, travel, and in -person interactions. The city took extra measures to keep employees working by embracing technology to comply with the restrictions of the Governor's Order and Proclamations. The city followed the Governor's Proclamations regarding the utility system including suspension of penalties on delinquent accounts and other collection processes which led to higher -than -normal delinquencies. The city received $1,410,539 in American Rescue Plan Act (ARPA) funding which will support the city's continued efforts to monitor and mitigate financial impacts of the pandemic at the city. As a result of the various efforts by the management team of the city, potential negative financial impacts continue to be monitored and mitigated. The length of time these measures will continue to be in place, and the full extent of the direct or indirect financial impact on the city is unknown at this time. Page 56 City of Port Orchard Schedule of Liabilities For the Year Ended December 31, 2022 Beginning ID. No. Description Due Date Balance Additions Reductions Ending Balance General Obligation Debt/Liabilities 251.11 G O Debt 12/1/2032 Total General Obligation Debt/Liabilities: Revenue and Other (non G.O.) Debt/Liabilities 259.12 Compensated Absences 263.62 Notes Payable 12/31/2043 264.30 Pension Liabilities 263.57 Building Lease 3/31/2025 263.57 Copiers & Phone Equipment Lease 3/23/2025 263.57 Property Lease 6/3/2024 263.82 Drinking Water State Revolving Fund 10/1/2038 Loan 263.82 Drinking Water State Revolving Fund 10/1/2031 Loan 263.84 Public Works Board 6/1/2041 263.82 Water Quality Loan 1/2/2037 264.40 OPEB Liabilities Total Revenue and Other (non G.O.) Debt/Liabilities: Total Liabilities: 4,480,000 - 365,000 4,115,000 4,480,000 - 365,000 4,115,000 740,713 72,886 - 813,599 25,875 - 22,950 2,925 385,568 552,569 - 938,137 - 34,828 8,451 26,377 21,580 - 9,938 11,642 38,742 - 19,371 19,371 5,189,647 - 324,353 4,865,294 177,084 268,507 - 445,591 - 253,153 - 253,153 212,654 - 11,465 201,189 2,247,894 - 284,820 1,963,074 9,039,757 1,181,943 681,348 9,540,352 1,181,943 1,046,348 13,655, 352 13, 519,757 Page 57 City of Port Orchard Schedule of Liabilities For the Year Ended December 31, 2021 Beginning ID. No. Description Due Date Balance Additions Reductions Ending Balance General Obligation Debt/Liabilities 251.11 G O Debt 12/1/2032 Total General Obligation Debt/Liabilities: Revenue and Other (non G.O.) Debt/Liabilities 259.12 Compensated Absences 263.62 Notes Payable 12/31/2043 264.30 Pension Liabilities 263.82 Drinking Water State Revolving Fund 10/1/2038 Loan 263.82 Drinking Water State Revolving Fund 10/1/2031 Loan 263.82 Water Quality Loan 1/2/2037 264.40 OPEB Liabilities Total Revenue and Other (non G.O.) Debt/Liabilities: Total Liabilities: 4,840,000 - 360,000 4,480,000 4,840,000 - 360,000 4,480,000 783,182 - 42,469 740,713 36,900 - 11,025 25,875 1,567,067 - 1,181,499 385,568 4,151,218 1,362,782 324,353 5,189,647 - 177,084 - 177,084 223,847 - 11,193 212,654 2,195,157 52,737 - 2,247,894 8,957,371 1,592,603 1,570,539 8,979,435 1,592,603 1,930,539 13,459,435 13,797,371 Page 58 O O co M 00 CD N N M M O Y r Lr O O N O O H N (14 00 00 00 N Y L) 1 00 rl- i CO O G co co O Q N li O O M Cl) M CD co N i° cm Cl) CO a 3� o o 0 3 N N co 00 0 Q LL LON L w U') Cp L w U) 3� O o M 3 U CDm Q 7 U Q 3 LO w O J C m Z U cc w 00 Y ° O N m O F-C> (n o i N Q Z d = L y 0 U ) Z _O .: ++ = LO O 'a = f� N N a N w N m O O ` Z V O CN 0 = N t O O = m C E p U ° m a �` W ~ ¢ -j m U c m Y e �a o m R 3 ¢ `� U z co Im 0 O a) m E F- c c s (n CO 2 2L�LL LL w a C .T N ._ co C p = J i ' i ¢ w (0 a) � Ew L a cc L ° a'¢Uw O�i cn CID LL dU •U m. o a) mco OOZw o U))o 0007C7 = 2U UU¢ly mQ O 00Q m LL i n3 v U OQ Z = co y O co 0 o U) ' n = c }¢Z (D U5 = U 'a ¢ wZ w Q.u) E aria QZ�z Co ~Zpw> o c°^ > a w2 w� o ���U Q d �Q=�w 0-J a) tm _ ¢ZOw �p—O °¢ Ja ��� QUO.° E F-:00 C 2 H o Q W w C�cnz ms +� �awwz c CDQ<z Q z0 a`°i LL y ur w zzap2 a) ¢Z)0 F- a -jF-02 m QCl) a�F- 2� F-Z) �z2 m Q°Q�Of a c9 �2w¢¢ �.L 3 w—z¢ ° ¢¢ Uw¢ U)0 co W W W o o 0LL10 W W o W es= c?Ow m U 000Z)0Ucn 2 LLQ�00 0 H � 020� M M LO co M 00 O N 00 N M N 0 (") 0 T d C d a x W a) 3 Q L Q1 M a) LL R O H Q) a) co U co 4— O i N N m co 0 c m E 0 U U N a) Page 59 CITY OF PORT ORCHARD Notes to Schedule of Expenditures of Federal Awards January 1, 2022 through December 31, 2022 NOTE 1. Basis of Accounting This Schedule is prepared on the same basis of accounting as the City's financial statements. The City uses the cash basis of accounting, in accordance with the Cash Basis Budgeting, Accounting and Reporting System (BARS) Manual prescribed by the State Auditor's Office under the authority of Washington State law, Chapter 43.09 RCW. NOTE 2. — Federal De Minimis Indirect Cost Rate The City has not elected to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. NOTE 3. Program Costs The amounts shown as current year expenditures represent only the federal grant portion of the program costs. Entire program costs including the City's portion are more than shown. Such expenditures are recognized following, as applicable, either the cost principles in the OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, or the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administration Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Page 60 The State Auditor's Office is established in the Washington State Constitution and is part of the executive branch of state government. The State Auditor is elected by the people of Washington and serves four-year terms. We work with state agencies, local governments and the public to achieve our vision of increasing trust in government by helping governments work better and deliver higher value. In fulfilling our mission to provide citizens with independent and transparent examinations of how state and local governments use public funds, we hold ourselves to those same standards by continually improving our audit quality and operational efficiency, and by developing highly engaged and committed employees. As an agency, the State Auditor's Office has the independence necessary to objectively perform audits, attestation engagements and investigations. Our work is designed to comply with professional standards as well as to satisfy the requirements of federal, state and local laws. The Office also has an extensive quality control program and undergoes regular external peer review to ensure our work meets the highest possible standards of accuracy, objectivity and clarity. Our audits look at financial information and compliance with federal, state and local laws for all local governments, including schools, and all state agencies, including institutions of higher education. In addition, we conduct performance audits and cybersecurity audits of state agencies and local governments, as well as state whistleblower, fraud and citizen hotline investigations. The results of our work are available to everyone through the more than 2,000 reports we publish each year on our website, www.sao.wa.gov. Additionally, we share regular news and other information via an email subscription service and social media channels. We take our role as partners in accountability seriously. The Office provides training and technical assistance to governments both directly and through partnerships with other governmental support organizations. Stay connected at sao.wa.gov • Find your audit team • Request public records • Search BARS Manuals (GAAP and cash), and find reporting templates • Learn about our training workshops and on -demand videos • Discover which governments serve — enter an address on our map • Explore public financial data with the Financial Intelhizence Tool Other ways to stay in touch • Main telephone: (564) 999-0950 • Toll -free Citizen Hotline: (866) 902-3900 • Email: webmasterk sao.wa. gov Office of the Washington State Auditor sao.wa.gov Page 61