comprehensive annual financial report for the fiscal year ... · combining balance sheet –...

CITY OF LANCASTER, SOUTH CAROLINA

Comprehensive Annual Financial Report

For the Fiscal Year Ended June 30, 2018

Prepared by:

FINANCE DIRECTOR

Dana PinkertFinance Director


TABLE OF CONTENTS

June 30, 2018

Exhibit Page

INTRODUCTORY SECTION

Letter of Transmittal viii – xii

Listing of Principal Officials xiii

Organizational Chart xiv

FINANCIAL SECTION

Independent Auditor’s Report 1-3

Management’s Discussion and Analysis 4-14

Basic Financial Statements:

Government-wide Statements:

Statement of Net Position A 16

Statement of Activities B 17

Fund Financial Statements:

Balance Sheet – Governmental Funds C 18

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position C 19

Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds D 20

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities D 21

Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund E 22

Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual – Hospitality Tax Fund F 23

Statement of Fund Net Position – Proprietary Funds G 24

Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds H 25


TABLE OF CONTENTS (CONTINUED)

June 30, 2018

Schedule PageFINANCIAL SECTION (CONTINUED)

Statement of Cash Flows - Proprietary Funds I 26

Statement of Fiduciary Net Position – Fiduciary Funds J 27

Notes to the Basic Financial Statements 28-74

REQUIRED SUPPLEMENTARY FINANCIAL INFORMATION

Schedule of the Proportionate Share of the Net Pension Liability – South Carolina Retirement System 1 76 Schedule of Contributions – South Carolina Retirement System 2 77

Schedule of the Proportionate Share of the Net Pension Liability – Police Officers Retirement System 3 78

Schedule of Contributions – Police Officers Retirement System 4 79

Schedule of Changes in the Total OPEB Liability and Related Ratios 5 80

Schedule of Contributions to OPEB 6 81

COMBINING AND INDIVIDUAL FUND STATEMENT SECTION

Governmental Funds:

General Fund:

Comparative Balance Sheets 7 84

Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 8 85-90

Hospitality Tax Fund:


Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual 10 92

Nonmajor Governmental Funds:

Combining Balance Sheet – Nonmajor Governmental Funds 11 93



June 30, 2018

Schedule PageFINANCIAL SECTION (CONTINUED)

COMBINING AND INDIVIDUAL FUND STATEMENT SECTION (CONTINUED)

Nonmajor Governmental Funds (continued):

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds 12 94

E911:


Comparative Statements of Revenues, Expenditures, and Changes in Fund Balance 14 96

Southside Project:


Comparative Statements of Revenues, Expenditures, and Changes in Fund Balance 16 98

Enterprise Funds:

Gross Revenue Fund: Comparative Balance Sheets 17 100

Schedule of Revenues and Expenditures - Budget and Actual (Non-GAAP) 18 101-104

Comparative Statement of Cash Flows 19 105

Solid Waste Fund:


Schedule of Revenues and Expenditures – Budget and Actual (Non-GAAP) 21 107-109

Comparative Statement of Cash Flows 22 110

Fiduciary Fund Type - Agency Fund:

Comparative Statement of Fiduciary Net Position 23 112

Statement of Changes in Fiduciary Assets and Liabilities 24 113



June 30, 2018

Schedule PageOTHER FINANCIAL INFORMATION SECTION

Schedule of Debt Coverage 25 115

Analysis of Victims’ Services 26 116

Schedule of Victims’ Fines, Assessments and Fees Collected 27 117

STATISTICAL SECTION – UNAUDITED

Financial Trends Information Net Position by Component, Last Ten Fiscal Years 28 119

Changes in Net Position, Last Ten Fiscal Years 29 120-121

Fund Balances, Governmental Funds – Last Ten Fiscal Years 30 122

Changes in Fund Balances, Governmental Funds – Last Ten Fiscal Years 31 123

Revenue Capacity Information Tax Revenues by Source, Governmental Funds – Last Ten Fiscal Years 32 124

Assessed Value and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years 33 125

Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years 34 126

Principal Property Taxpayers – Current and Ten Years Ago 35 127

Real Property Tax Levies and Collections 36 128

Debt Capacity Information Ratios of Outstanding Debt by Type – Last Ten Fiscal Years 37 129

Ratios of General Direct Debt Outstanding – Last Ten Fiscal Years 38 130

Direct and Overlapping Governmental Activities Debt 39 131

Legal Debt Margin Information – Last Ten Fiscal Years 40 132

Pledged Revenue Coverage – Last Ten Fiscal Years 41 133



June 30, 2018

Schedule PageSTATISTICAL SECTION – UNAUDITED (continued)

Demographic and Economic Information Demographic and Economic Statistics – Last Ten Fiscal Years 42 134

Principal Employers – Current and Ten Years Ago 43 135

Schedule of Operating Information Full-Time Equivalent (FTE) City Government Employees by Function/Program - Last Ten Fiscal Years 44 136

Operating Indicators by Function – Last Ten Fiscal Years 45 137

Capital Asset Statistics by Function – Last Ten Fiscal Years 46 138

COMPLIANCE SECTION

Schedule of Expenditures of Federal Awards 140

Notes to the Schedule of Expenditures of Federal Awards 141

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 142-143

Independent Auditor’s Report on Compliance for Each Major Federal Program Report on Internal Control over Compliance as Required by the Uniform Guidance 144-145

Schedule of Findings and Questioned Costs 146

Summary of Prior Audit Findings 147

Corrective Action Plan 148


INTRODUCTORY SECTION

CITY HALL 216 SOUTH CATAWBA STREET P.O. BOX 1149 LANCASTER, S.C. 29721-1149 803-286-8414www.lancastercitysc.com

February 19, 2019

To the Honorable Mayor, Members of the City Council, and Citizens of the City of Lancaster:

State law requires that all general-purpose local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the City of Lancaster (the “City”) for the fiscal year ended June 30, 2018.

This report consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City’s financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls have been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material aspects.

The City of Lancaster’s financial statements have been audited by Blair, Bohle´ & Whitsitt, CPA’s, PLLC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2018, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the City’s financial statements for the fiscal year ended June 30, 2018, are fairly presented in conformity with GAAP. The independent auditor’s report is presented as the first component of the financial section of this report.

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GAAP requires that management provide narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors.

Profile of the Government

The City of Lancaster was founded by settlers from Lancaster, Pennsylvania and was originally known as Barnettsville when the first courthouse was erected in 1795. In 1802, an application was made for a charter for the village of Lancaster. A court dispute over the original plat was not resolved until 1824. In December 1830, by Act of the South Carolina Legislature, the Town of Lancaster was incorporated. The Town of Lancaster was re-charted in 1898 and as the City of Lancaster in 1967.

The City operates under the council form of government. Policy making and legislative authority are vested in a governing council consisting of the mayor and six other members. The governing council is responsible, among other things, for passing ordinances, adopting the budget, appointing committees, and hiring the City Administrator. The City Administrator is responsible for carrying out the policies and ordinances of the City Council, for overseeing the day-to-day operations of the City, and other duties as assigned by City Council. The council is elected on a non-partisan basis. The mayor is elected at large and council members are elected by district and serve four-year staggered terms.

The City provides a full range of services including: police and fire protection, the construction and maintenance of streets and other infrastructure; parks and leisure/cultural activities; sanitation services; water and sewer services; and building, inspection, planning and zoning services.

The annual budget serves as the foundation for the City’s financial planning and control. All departments of the City are required to submit requests for appropriation to the City Administrator in the spring of each year. The City Administrator and Finance Director use these requests as the beginning point in the development of a proposed budget. The City Administrator then presents this proposed budget to City Council for review. The council is required to hold a public hearing on the proposed budget and to adopt a final budget no later than June 30th, the close of the City’s fiscal year. The appropriated budget is prepared by fund and department. Budgetary control (that is the level at which expenditures cannot legally exceed the appropriated amount) is maintained by the City Administrator at the object class level and may be amended as necessary during the fiscal year. City Council is informed of budgetary expenditures in relation to appropriations monthly in the form of a budget to actual revenue and expenditure report which is posted to the City’s website upon review by council.

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Factors Affecting Financial Condition

Local economy. The City of Lancaster’s and Lancaster County’s industrial base has changed from textiles to a diverse array of industries and a number of global corporations. The County’s unemployment rate continues to decrease from a recession high of 18.3% in 2009 to a current 3.9% as of June 30, 2018. A decrease of .9% from the 4.8% June 2017 unemployment rate. The City of Lancaster and Lancaster County work closely together to bring jobs to the area for citizens of the City.

Long-term financial planning. The City of Lancaster through the years has made significant investment in infrastructure, especially in water and sewer, to provide the necessary capacity for the City to be able to recruit new industries and businesses to the area. The City also has used long-term financial planning to position itself to weather all types of financial conditions without adversely affecting the services provided to its citizens. The City is continually evaluates its long range financial planning tools, such as the capital improvement plan (CIP), for ways to better use these tools in conjunction with long range strategic planning to maintain and improve both the City’s strong financial position and the level of services provided to its citizens.

Cash management policies and practices. Cash available for investing during the year was invested in interest-bearing public funds bank accounts and the State of South Carolina Local Government Investment Pool. The South Carolina Local Government Investment Pool is a pool of funds belonging to participating local governments which is managed by the State Treasurer in obligations of the United States and its agencies and repurchase agreements collateralized by securities of the U.S. Government or its agencies.

The investment goal of the City is to maintain adequate cash reserves to meet current obligations and to invest in those legal securities that maximize earning and protect principal. While the current market climate has increased the earnings the City is receiving from its investments, the City will continue to monitor performance of its investment strategies to confirm acceptable earnings levels while still providing adequate cash flow and protecting principal while staying in compliance with the guidelines of the South Carolina Code of Laws, Section 6-5-10.

Risk management. Risk management activities are coordinated and managed within the Human Resources Department; specifically by the Risk Safety Manager. Risk management efforts of the departments are designed to minimize the loss of the City’s human, physical, and financial resources through appropriate planning, training, case management, and the provision of adequate insurance coverage.

The City maintains its insurance for tort liability, property, automobile, fleet, machinery, and crime with the South Carolina Municipal Insurance and Risk Financing Fund (SCMIRF). Workers’ compensation is maintained through the South Carolina Municipal Insurance Trust (SCMIT) fund. Both SCMIRF and SCMIT funds are self-insured pools with other municipalities of South Carolina. These programs are sponsored by and coordinated through the Municipal Association of South Carolina (MASC).

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Pension and other post-employment benefits. All full-time and part-time employees of the City participate in one of two defined benefit pension plans, administered by the State of South Carolina. The South Carolina Retirement System (SCRS) and the Police Officer’s Retirement System (PORS), both of which are cost sharing multiple-employer public employee retirement plans. The SCRS and PORS offer retirement and disability benefits, cost of living adjustments on an ad-hoc basis, life insurance benefits and survivor benefits. The plans’ provisions are established under Title 9 of the SC Code of Laws. Both employees and the City are required to contribute to the SCRS and PORS at rates established under the authority of Title 9 of the SC Code of Laws. The City’s contributions are actuarially determined, but are communicated to and paid by the City as a percentage of the employee’s annual earnings. The City has reported using Government Accounting Standards Board (GASB) Statement Nos. 68 and 71 for the fiscal year ending June 30, 2018 as they relate to the accounting and financial reporting for pensions. These statements require the City to record and include its proportionate share of the net pension liability of both the SCRS and PORS retirement plans in the City’s financial statements. The net pension liability recorded for SCRS was $9,121,479 and for PORS was $5,114,377. The City also recognized pension expense for the fiscal year June 30, 2018, of $793,588 for SCRS and $461,352 for PORS.

The City also provides post-employment health and dental care benefits for retirees that meet certain service requirements. Beginning in the fiscal year ended June 30, 2018, the City implemented GASB Statement No. 75 which requires an actuarial calculation of the annual cost for other post-employment benefits (OPEB) and the outstanding obligations and commitments related to OPEB. As discussed in the notes to the financial statements, with a the City’s total OPEB liability for future retiree health costs is $1,279,771 with the OPEB plan’s the fiduciary net position of $538,852 a corresponding liability is recorded in the financial statements of $740,919. Additional information on the City’s pension arrangements can be found in the notes to the financial statements.

Awards and Acknowledgements

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Lancaster for its comprehensive annual financial report in the past. The City’s comprehensive annual financial report for the fiscal year ended June 30, 2017 was submitted for consideration however, we have not yet received notification of the result. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

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CITY OF LANCASTER, SOUTH CAROINA

LISTING OF PRINCIPAL OFFICIALS

JUNE 30, 2018

Mayor and City CouncilT. Alston DeVenny, Mayor

Kenneth Hood, Councilman, District 1

Gonzie Mackey, Councilman, District 2

Linda G. Blackmon, Councilwoman, District 3

Tamara Green Garris, Councilwoman, District 4

Hazel Taylor, Councilwoman, District 5

Sara Eddins, Councilwoman, District 6

City ManagementSteven “Flip” Hutfles, City Administrator

Department HeadsLouis Streeter, Director Dana Pinkert, Director Scott Grant, Chief

Building and Zoning Finance Police Department

Angela Roberson, Director Justin McLellan, Chief Donald Ledford, Director

Human Resources Fire Department Wastewater Systems

Marty Cauthen, Director Cammie Heath, Administrator Rendell Mingo, Director

Sanitation & Maintenance Operations Municipal Court Public Works

Jarvis Driggers, Director

Information Technology

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FINANCIAL SECTION

Independent Auditor’s Report

Honorable Mayor and City CouncilCity of Lancaster, South Carolina

Report on the Financial StatementsWe have audited the accompanying financial statements of the governmental activities, the business-typeactivities, each major fund, and the aggregate remaining fund information of the City of Lancaster, SouthCarolina, as of and for the year ended June 30, 2018, and the related notes to the financial statements,which collectively comprise the City’s basic financial statements as listed in the table of contents.

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

Auditor’s ResponsibilityOur responsibility is to express opinions on these financial statements based on our audit. We conducted ouraudit in accordance with auditing standards generally accepted in the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgment, including the assessmentof the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the entity’s preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internalcontrol. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of significant accounting estimates made by management,as well as evaluating the overall presentation of the financial statements.

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

OpinionsIn our opinion, the financial statements referred to above present fairly, in all material respects, therespective financial position of the governmental activities, the business-type activities, each major fund, andthe aggregate remaining fund information of the City of Lancaster, South Carolina, as of June 30, 2018, andthe respective changes in financial position and, where applicable, cash flows, thereof and the respectivebudgetary comparisons for the General Fund and Hospitality Tax Fund for the year then ended inaccordance with accounting principles generally accepted in the United States of America.Change in Accounting PrincipleAs discussed in Note II.D in the notes to the financial statements, in the year ended June 30, 2018, the Cityadopted the provisions of Governmental Accounting Standards Board (“GASB”) No. 75, Accounting andFinancial Reporting for Postemployment Benefits Other Than Pensions. Our opinion is not modified withrespect to this matter.

Other MattersRequired Supplementary InformationAccounting principles generally accepted in the United States of America require that the management’sdiscussion and analysis on pages 4 through 14, the South Carolina Retirement System’s Schedule of theProportionate Share of the Net Pension Liability and Contributions, on pages 76-77, the South CarolinaPolice Officers Retirement System’s Schedule of the Proportionate Share of Net Pension Liability andContributions on pages 78-79, the Schedule of Changes in the Total OPEB Liability and Related Ratios onpage 80, and the Schedule of Contributions to OPEB on page 81, be presented to supplement the basicfinancial statements. Such information, although not a part of the basic financial statements, is required bythe Governmental Accounting Standards Board, who considers it to be an essential part of financial reportingfor placing the basic financial statements in an appropriate operational, economic, or historical context. Wehave applied certain limited procedures to the required supplementary information in accordance withauditing standards generally accepted in the United States of America, which consisted of inquiries ofmanagement about the methods of preparing the information and comparing the information for consistencywith management’s responses to our inquiries, the basic financial statements, and other knowledge weobtained during our audit of the basic financial statements. We do not express an opinion or provide anyassurance on the information because the limited procedures do not provide us with sufficient evidence toexpress an opinion or provide any assurance.Supplementary and Other InformationOur audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprise the basic financial statements of the City of Lancaster. The introductory section, combining andindividual fund financial statement section, the other financial information section, and the statistical section,and the schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal RegulationsPart 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for FederalAwards, as listed in the table of contents, are presented for purposes of additional analysis and are not arequired part of the basic financial statements.The combining and individual fund financial statement section, the other financial information section, andthe schedule of federal expenditures of federal awards are the responsibility of management and werederived from and relates directly to the underlying accounting and other records used to prepare the basicfinancial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements and certain additional procedures, including comparing and reconciling suchinformation directly to the underlying accounting and other records used to prepare the basic financialstatements or to the basic financial statements themselves, and other additional procedures in accordancewith auditing standards generally accepted in the United States of America. In our opinion, the combining,and individual fund financial statement section, the other financial information section, and the schedule ofexpenditures of federal awards are fairly stated, in all material respects, in relation to the basic financialstatements as a whole.

The introductory and statistical sections have not been subjected to the auditing procedures applied in theaudit of the basic financial statements and, accordingly, we do not express an opinion or provide anyassurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 19,2019 on our consideration of the City of Lancaster’s internal control over financial reporting and on our testsof its compliance with certain provisions of laws, regulations, contracts, and grant agreements and othermatters. The purpose of the report is to describe the scope of our testing of internal control over financialreporting and compliance and the results of that testing, and not to provide an opinion on internal controlover financial reporting or on compliance. That report is an integral part of an audit performed in accordancewith Government Auditing Standards in considering City of Lancaster’s internal control over financialreporting and compliance.

Charlotte, North Carolina

February 19, 2019

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Management’s Discussion and Analysis

As management of the City of Lancaster, we offer readers of the City of Lancaster’s financialstatements this narrative overview and analysis of the financial activities of the City of Lancasterfor the fiscal year ended June 30, 2018. We encourage readers to read the information presentedhere in conjunction with additional information that we have furnished in the City’s financialstatements, which follow this narrative.

Financial Highlights

· The assets and deferred outflows of resources of the City of Lancaster exceeded itsliabilities and deferred inflows of resources at the close of the fiscal year by $42,632,726(net position).

· The government’s total net position increased by $6,277,304, primarily due to capitalpurchases associated with the City’s EPA Consent Order compliance and other capitalpurchases in the General, Gross Revenue and Solid Waste funds. The increase waspartially offset by the impact of the implementation of Governmental Accounting StandardsBoard (“GASB”) Statement No. 75 related to Other Postemployment Benefits (“OPEB “)costs.

· For business-type activities, revenue was in excess of expense by $5,355,174 comparedto $1,525,724 at June 30, 2017.

· As of the close of the current fiscal year, the City of Lancaster’s governmental fundsreported combined ending fund balances of $11,093,906, with a change of $2,210,482 infund balance primarily due to a $2,051,069 increase in the General Fund fund balance.Approximately 27.3% of this total amount, or $3,033,825, is nonspendable, restricted, orcommitted.

· At the end of the current fiscal year, unassigned fund balance for the General Fund was$8,060,081 or 70.4% of total budgeted General Fund expenditures ($11,441,820) for theupcoming fiscal year.

· The City of Lancaster’s total debt increased by $1,327,004 during the current fiscal year.

Overview of the Financial Statements

This discussion and analysis is intended to serve as an introduction to City of Lancaster’s basicfinancial statements. The City’s basic financial statements consist of three components; 1)government-wide financial statements, 2) fund financial statements, and 3) notes to the financialstatements (see Figure 1). The basic financial statements present two different views of the Citythrough the use of government-wide statements and fund financial statements. In addition to thebasic financial statements, this report contains other supplemental information that will enhancethe reader’s understanding of the financial condition of the City of Lancaster.

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Required Components of Annual Financial ReportFigure 1

Basic Financial Statements

The first two statements (Exhibits A and B) in the basic financial statements are the Government-wide Financial Statements. They provide both short and long-term information about the City’sfinancial status.

The next statements (Exhibits C through I) are the Fund Financial Statements. Thesestatements focus on the activities of the individual parts of the City’s government. Thesestatements provide more detail than the government-wide statements. There are three parts tothe Fund Financial Statements: 1) the governmental funds statements; 2) the budgetarycomparison statements; and 3) the proprietary fund statements.

The next section of the basic financial statements is the notes. The notes to the financial statementsexplain in detail some of the data contained in the statements. After the notes, supplementaryinformation is provided to show details about the City’s individual funds. Budgetary informationrequired by the General Statutes also can be found in this part of the statements.

Management’s

Discussion and

Analysis

Basic

Financial

Statements

Government-wide

Financial

Statements

Fund

Financial

Statements

Notes to the

Financial

Statements

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Government-wide Financial Statements

The government-wide financial statements are designed to provide the reader with a broadoverview of the City’s finances, similar in format to a financial statement of a private-sectorbusiness. The government-wide statements provide short and long-term information about theCity’s financial status as a whole.

The two government-wide statements report the City’s net position and how it has changed. Netposition is the difference between the City’s total assets and deferred outflows of resources andtotal liabilities and deferred inflows of resources. Measuring net position is one way to gauge theCity’s financial condition.

The government-wide statements are divided into three categories: 1) governmental activities;2) business-type activities; and 3) component units. The governmental activities include most ofthe City’s basic services such as public safety, parks and recreation, and general administration.Property taxes and state and federal grant funds finance most of these activities. The business-type activities are those that the City charges customers to provide. These include water andsewer as well as waste disposal services offered by the City of Lancaster. The City has nocomponent units.

The government-wide financial statements are on Exhibits A and B of this report.

Fund Financial Statements

The fund financial statements provide a more detailed look at the City’s most significant activities.A fund is a grouping of related accounts that is used to maintain control over resources that havebeen segregated for specific activities or objectives. The City of Lancaster, like all othergovernmental entities in South Carolina, uses fund accounting to ensure and reflect compliance(or non-compliance) with finance-related legal requirements, such as the General Statutes or theCity’s budget ordinance. All of the funds of the City of Lancaster can be divided into twocategories: governmental funds and proprietary funds.

Governmental Funds – Governmental funds are used to account for those functions reported asgovernmental activities in the government-wide financial statements. Most of the City’s basicservices are accounted for in governmental funds. These funds focus on how assets can readilybe converted into cash flow in and out, and what monies are left at year-end that will be availablefor spending in the next year. Governmental funds are reported using an accounting methodcalled modified accrual accounting which provides a short-term spending focus. As a result, thegovernmental fund financial statements give the reader a detailed short-term view that helps himor her determine if there are more or less financial resources available to finance the City’sprograms. The relationship between government activities (reported in the Statement of NetPosition and the Statement of Activities) and governmental funds is described in a reconciliationthat is a part of the fund financial statements.

The City of Lancaster adopts an annual budget for its General Fund, as required by the GeneralStatutes. The budget is a legally adopted document that incorporates input from the citizens ofthe City, the management of the City, and the decisions of the Council about which services toprovide and how to pay for them. It also authorizes the City to obtain funds from identified sourcesto finance these current period activities. The budgetary statement provided for the General Funddemonstrates how well the City complied with the budget ordinance and whether or not the Citysucceeded in providing the services as planned when the budget was adopted. The budgetarycomparison statement uses the budgetary basis of accounting and is presented using the sameformat, language, and classifications as the legal budget document. The statement shows four

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columns: 1) the original budget as adopted by City Council; 2) the final budget as amended byCity Council; 3) the actual resources, charges to appropriations, and ending balances in theGeneral Fund; and 4) the difference or variance between the final budget and the actual resourcesand charges.

Proprietary Funds – City of Lancaster has two different kinds of proprietary funds. EnterpriseFunds are used to report the same functions presented as business-type activities in thegovernment-wide financial statements. City of Lancaster uses enterprise funds to account for itswater and sewer activity and for its waste disposal operations. These funds are the same asthose functions shown in the business-type activities in the Statement of Net Position and theStatement of Activities.

Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit ofparties outside the government. The City of Lancaster has one fiduciary fund, which is an agencyfund.

Notes to the Financial Statements – The notes provide additional information that is essentialto a full understanding of the data provided in the government-wide and fund financial statements.The notes to the financial statements are on pages 28 - 74 of this report.

Other Information – In addition to the basic financial statements and accompanying notes, thisreport includes certain supplementary information providing additional detail regarding the City ofLancaster’s various activities. This required supplementary information, financial and otherstatistical schedules, can be found on pages 76 - 138 of this report.

Government-Wide Financial Analysis

The City of Lancaster’s Net Position

2018 2017 2018 2017 2018 2017Current and other assets 14,092,758$ 12,412,403$ 6,855,553$ 4,169,995$ 20,948,311$ 16,582,398$Capital assets 13,364,434 14,266,193 31,926,561 27,202,068 45,290,995 41,468,261

Total assets 27,457,192 26,678,596 38,782,114 31,372,063 66,239,306 58,050,659

Deferred outf low s of resources 2,419,728 2,355,428 - - 2,419,728 2,355,428

Long-term liabilities outstanding 15,544,674 15,231,047 4,458,978 4,908,081 20,003,652 20,139,128Other liabilities 1,415,235 1,191,598 3,758,742 1,254,763 5,173,977 2,446,361

Total liabilities 16,959,909 16,422,645 8,217,720 6,162,844 25,177,629 22,585,489

Deferred inflow s of resources 848,678 332,038 - - 848,678 332,038

Net position:Net investment in capital assets 12,916,897 15,440,991 24,665,863 21,509,883 37,582,760 36,950,874Restricted 900,821 747,055 2,623,715 1,441,869 3,524,536 2,188,924Unrestricted (1,749,385) (3,908,705) 3,274,815 2,257,467 1,525,430 (1,651,238) Total net position 12,068,333$ 12,279,341$ 30,564,393$ 25,209,219$ 42,632,726$ 37,488,560$

Governmental Activities Business-Type Activities Total

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As noted earlier, net position may serve over time as one useful indicator of a government’sfinancial condition. The assets and deferred outflows of resources of the City of Lancasterexceeded liabilities and deferred inflows of resources by $42,632,726 as of June 30, 2018. TheCity’s net position increased by $6,277,304 for the fiscal year ended June 30, 2018. The increasein net position is primarily the result of the City having to address capital costs associated with itscompliance with an EPA order of consent. These assets are not available for future spending.Although the City of Lancaster’s net investment in its capital assets is reported net of theoutstanding related debt, the resources needed to repay that debt must be provided by othersources, since the capital assets cannot be used to liquidate these liabilities. An additional portionof the City of Lancaster’s net position, $3,524,536, represents resources that are subject toexternal restrictions on how they may be used. The remaining balance of $1,525,430 isunrestricted.

Several particular aspects of the City’s financial operations influenced the total unrestrictedgovernmental net position:

· In the General Fund, revenues exceeded Expenditures revenues by $2,051,069. Thisoccurred due to the higher than expected collections in tax, business license andmiscellaneous/reimbursement revenues, and less than expected expenditures forpersonnel and community service grants.

· In the Hospitality Fund, revenues exceeded expenditures by $161,682 – which whenadded to the $2,269 expenditures over revenues in the Southside Fund and E911 Fund –resulted in excess revenues over expenditures for the other governmental fundsamounting to $159,413. Revenues exceeded expenditures due to better than estimatedcollections in hospitality tax revenue for the year.

· In the Gross Revenue Fund, revenue exceeded expense by $862,260 before transfers.Several large capital projects associated with the City’s EPA Consent Order started in thefiscal year which resulted in net position being shifted from unrestricted to the invested incapital assets classification. Also, funds in the amount of $4,138,210 in the form of capitalgrants were received to help offset costs associated with the City’s EPA Consent Order.

· In the Solid Waste Fund, revenue exceeded expense by $354,704. The increase in netposition was the result of higher than expected collections in garbage fees, containers andtransfer station revenues.

9

City of Lancaster Changes in Net position

Governmental Activities. Governmental activities increased the City’s net position by $922,130thereby contributing to the overall increase in net position for the City of Lancaster. This increasewas due to better than expected tax and business license collections for the fiscal year.

Business-Type Activities: Business-type activities increased the City of Lancaster’s net positionby $5,355,174. Key elements of this increase are as follows:

· The Gross Revenue Fund yielded $5,000,470 of the increase in business-type activity netposition. This was attributable to operating revenues exceeding operating expenses by$919,076; capital grants contributions of $4,138,210; and non-operating revenue(expense) totaling ($56,816).

Business-type

Activities

2018 2017 2018 2017 2018 2017

Revenues:

Program revenues:

Charges for services 518,962$ 510,124$ 9,266,922$ 8,773,625$ 9,785,884$ 9,283,749$

Operating grants and contributions 33,144 111,603 - - 33,144 111,603

Capital grants and co ntribut ions - 21,925 4,138,210 490,540 4,138,210 512,465

General revenues:

Property taxes 5,803,156 5,766,751 - - 5,803,156 5,766,751

Other taxes 5,166,607 4,986,977 - - 5,166,607 4,986,977

Other 646,758 528,840 175,024 123,723 821,782 652,563

Total revenues 12,168,627 11,926,220 13,580,156 9,387,888 25,748,783 21,314,108

Expenses:

General government 4,487,906 5,041,327 - - 4,487,906 5,041,327

Public safety 5,054,358 5,028,021 - - 5,054,358 5,028,021

Public Works 1,144,103 1,207,223 - - 1,144,103 1,207,223

Planning 250,374 260,213 - - 250,374 260,213

Parks and Playgrounds 150,326 191,871 - - 150,326 191,871

Community Service 150,249 106,049 - - 150,249 106,049

Interest and fees 9,181 13,621 - - 9,181 13,621

Water and sewer - - 5,908,516 5,746,927 5,908,516 5,746,927

So lid Waste - - 2,316,466 2,115,237 2,316,466 2,115,237

Total expenses 11,246,497 11,848,325 8,224,982 7,862,164 19,471,479 19,710,489

Transfers - - - - - -

Change in net position 922,130 77,895 5,355,174 1,525,724 6,277,304 1,603,619

Net position, July 1, as originally reported 12,279,341 12,201,446 25,209,219 23,683,495 37,488,560 35,884,941

Restatement - GASB # 75 (1,133,138) - - - (1,133,138) -

Net position, July 1, as restated 11,146,203 12,201,446 25,209,219 23,683,495 36,355,422 35,884,941

Net position, June 30 12,068,333$ 12,279,341$ 30,564,393$ 25,209,219$ 42,632,726$ 37,488,560$

Governmental

Activities Total

10

· The Solid Waste Fund increased overall change in business-type activity net position by$354,704. This increase in net position is the result of operating expenses exceedingoperating revenues by $309,559 and other income (expense) totaling $45,145.

Financial Analysis of the City’s Funds

As noted earlier, the City of Lancaster uses fund accounting to ensure and demonstratecompliance with finance-related legal requirements.

Governmental Funds. The focus of the City of Lancaster’s governmental funds is to provideinformation on near-term inflows, outflows, and balances of usable resources. Such informationis useful in assessing the City of Lancaster’s financing requirements. Specifically, fund balanceavailable for appropriation can be a useful measure of a government’s net resources available forspending at the end of the fiscal year.

The General Fund is the chief operating fund of the City of Lancaster. At the end of the currentfiscal year, unassigned fund balance of the General Fund was $8,060,081 while total fund balancewas $11,093,906. The Governing Body of the City of Lancaster has determined that the Cityshould maintain an unassigned fund balance of 40% to 60% of budgeted general fundexpenditures in case of unforeseen needs or opportunities, in addition to meeting the cash flowneeds of the City. As a measure of the General Fund’s liquidity, it may be useful to compare bothunassigned fund balance and total fund balance to total fund expenditures. Unassigned fundbalance represents 86.9% of total General Fund expenditures, while total fund balance represents110.5% of that same amount.

At June 30, 2018, the governmental funds of City of Lancaster reported a combined fund balanceof $11,093,906 a 24.9% increase over last year ($8,883,424).

Fund Budgetary Highlights: During the fiscal year, the City revised the budget on two (2)occasions. Generally, budget amendments fall into one of three categories: 1) amendmentsmade to adjust the estimates that are used to prepare the original budget ordinance once moreprecise information is available; 2) amendments made to recognize new funding amounts fromexternal sources, such as federal and state grants; and 3) increases in appropriations thatbecome necessary to maintain services. The following lists FY 17-18 budget amendments.

Ord No Eff Date BudgetImpact Comment - Primary Reasons for Change

O18-02 02-13-18 $89,219 To fund additional cost for professional services and capital expendituresfor police cruisers; and to fund addition cost for the transfer stationlawsuit and new debt service.

O18-04 04-10-18 $79,990 To fund additional costs for overtime and unexpected equipment andvehicles repairs.

In addition to the budget ordinances above, the operating budgets for the City’s operating fundswere amended once throughout the year with the authority given to the City Administrator by CityCouncil. These amendments were within funds and did not increase the overall budget of anyfund.

11

Some of the significant differences in the General Fund between budgeted amounts and actualamounts for FY 17-18 were as follows

· Actual revenue for local property taxes, including fees in lieu of taxes exceeded budgetedamounts by 225,532 due to better than anticipated collections.

· Actual revenue for privilege licenses exceeded budgeted amounts by $378,188 due tobetter than anticipated collections.

· Actual revenue for local option sales tax exceeded budgeted amounts by $188,778 dueto better than anticipated collections.

· Police personnel services were $301,241 less than anticipated due to staffing shortage atthe police department.

· General government expense was $367,845 less than anticipated due to lower thananticipated health, workers compensation and liability insurances.

Proprietary Funds. The City of Lancaster’s proprietary funds provide the same type ofinformation found in the government-wide statements but in more detail. Unrestricted net positionof the Gross Revenue Fund at the end of the fiscal year amounted to $1,660,008, and those forthe Solid Waste Fund amounted to $1,614,807. The total growth in net position for both fundswas $5,000,470 and $354,704, respectively. Other factors concerning the finances of these twofunds have already been addressed in the discussion of the City of Lancaster’s business-typeactivities.

Capital Asset and Debt Administration

Capital assets. The City of Lancaster’s investment in capital assets for its governmental andbusiness–type activities as of June 30, 2018, totals $37,582,760 (net of accumulated depreciationand related debt). These assets include buildings, roads and sidewalks, land, machinery andequipment, park facilities, and vehicles.

Major capital asset transactions during the year include the following additions (there were nosignificant demolitions or disposals):

· Capital asset additions for the City’s governmental activities amounted to $224,184including infrastructure improvements of $20,700; building improvements of $50,274; andvehicles and equipment of $153,210.

· Capital asset additions for business-type activities amounted to $6,416,238 including$5,783,098 for construction in progress additions and $633,140 for equipment additions.The large increase in construction in progress is attributable to costs associated with EPAConsent Order compliance in three of the City’s sewer basins.

12

City of Lancaster’s Capital Assets

Additional information on the City’s capital assets can be found in note II-A-3 of the Basic FinancialStatements.

Long-term Debt. As of June 30, 2018, the City of Lancaster had no bonded debt outstanding.The remainder of the City’s debt represents bonds secured solely by State Revolving Fund Loansor capital lease obligations.

City of Lancaster’s Outstanding DebtRevenue Bonds and State Revolving Loans

During the past fiscal year, the City's total debt increased by 1,387,054 (21.9%).

The City maintained a Standard and Poor’s rating of AA- on its last outstanding general obligationbonds. The City of Lancaster currently has no outstanding general obligation bonds or ratedpublically held debt. Additional information regarding the City of Lancaster’s long-term debt canbe found in note II-B-4 of the Basic Financial Statements.

Economic and Other Factors

The City of Lancaster (County Seat of Lancaster County) is located in northern South Carolinasome 32 miles south of Charlotte, NC. Population estimates for 2017 put the city’s population at8,976 (some 9.7% of Lancaster County’s estimated population of 92,550). The city’s 5.9 squaremiles amounts to roughly 1% of the county’s 555 square mile area. The city was named after the

Governmental Business-typeActivities Activities Total

2018 2017 2018 2017 2018 2017

Capital lease obligations 447,537$ 628,996$ 1,528,434$ 1,436,066$ 1,975,971$ 2,065,062$

Revolving loans - - 5,732,265 4,256,120 5,732,265 4,256,120

Total 447,537$ 628,996$ 7,260,699$ 5,692,186$ 7,708,236$ 6,321,182$

2018 2017 2018 2017 2018 2017

Land 4,029,253$ 4,029,253$ 366,054$ 366,054$ 4,395,307$ 4,395,307$Buildings,systemsand improvements 4,736,270 4,968,588 21,969,361 22,555,151 26,705,631 27,523,739Machinery andequipment 1,424,539 1,863,825 1,264,467 1,193,812 2,689,006 3,057,637Infrastructure 3,143,168 3,404,527 - - 3,143,168 3,404,527Construction inprogress 31,204 - 8,326,679 3,087,051 8,357,883 3,087,051

Total 13,364,434$ 14,266,193$ 31,926,561$ 27,202,068$ 45,290,995$ 41,468,261$

TotalBusiness-type

ActivitiesGovernmental

Activities

13

House of Lancaster – one of two branches of The House of Plantagenet – involved in the 15thcentury War of The Roses – hence the city’s nickname “Red Rose City”.

During the summer of 2016 Duracell announced the closing of the Lancaster plant within threeyears. The plant employed 405 workers, accounted for over 6% of the City’s General Fundrevenues in the form of FILOT, and paid approximately $150,000 to the Gross Revenue Fund inwater and sewer revenues. The City continues to look for ways to offset the negative economicimpact of the closing of the Duracell; primarily through continued attrition reduction in force andre-allocating expenditures to the appropriate corresponding functions.

Top Ten Largest Lancaster Vicinity Employers(Source: Lancaster County Economic Development Corp)

Employer Description # of EmployeesRed Ventures Headquarters/Internet marketing 2,380Lancaster County School District County school system 1,767Lancaster County County government 960Springs Memorial Hospital Hospital 750Movement Mortgage Call Center/Mortgage retailer 725Cardinal Health Healthcare 625Continental Tire Headquarters/Tire manufacturing 546Duracell Batteries manufacturing 405Founders Federal Credit Union Headquarters/Financial services 360Oceana Gold/Haile Gold Mine Mining 327

Lancaster County’s unemployment rate at June 2018 was 3.9%, down by .9 percentage pointsfrom the June 2017 rate of 4.8%. This compares to statewide rates of 3.6% and a national rateof 4.0% for June 2018.

The following chart reflects the City of Lancaster retail businesses and sales from 2008 through2017. (Source: SC Department of Revenue Annual Sales Reports)

Year Number of Businesses Retail Sales % Incr/Decr2008 294 $392,376,037 3.67%2009 321 $370,836,792 (5.49%)2010 417 $405,078,218 9.20%2011 467 $410,870,492 1.41%2012 467 $398,551,627 (3.00%)2013 467 $384,935,753 (3.42%)2014 469 $423,737,672 10.08%2015 427 $483,380,622 12.34%2016 431 $484,931,932 0.32%2017 476 $531,297,936 9.56%

14

Budget Highlights for the Fiscal Year Ending June 30, 2018

Governmental Activities: Given the improving economic conditions, a property tax increase of2.1 mills was approved for FY 1718 as a path to maintain the City’s fund balance reserves. Inaddition, operating expense was scrutinized in ways to continue service levels at expected levelsbut at the same time to find savings. No cost of living adjustment or merit raises was madeavailable for city employees. Although not material, some new positions were created and gradeincreases and salary equalization adjustments were made

Business – Type Activities: Water and sewer rates and fees were adjusted for FY 1718 to helpbuild city reserves in the gross revenue fund to meet future debt service obligations, to pay forcosts related to the three sewer basins under an EPA Consent and fund future capital projects.Outside city customer minimum rates for water and sewer service were increased $1.00 each fora total increase of $2.00 per month. Minimum water rates for a 2nd meter (irrigation water) saw anincrease to equal regular water rates; $10.58 and $14.53 per month for inside and outside citycustomers respectively. A $2.00 infrastructure fee was implemented to fund future capital projectsand water and sewer line re-inspection fees were increased, hauled wastewater rates increasedby $3.00 per thousand gallons and water and sewer line re-inspection fees were increased by$40.00.

A 2% fuel surcharge for bulk containers was added to the solid waste rate structure and roll offcontainers rates were increased by $2.00 in FY 1718.

Requests for Information

This report is designed to provide an overview of the City’s finances for those with an interest inthis area. Questions concerning any of the information found in this report or requests foradditional information should be directed to the Director of Finance, City of Lancaster, PO Box1149, Lancaster, SC 29721 or [email protected]. Information about the City ofLancaster is also available on the City’s website at https://www.lancastercitysc.com/finance/


BASIC FINANCIAL STATEMENTS

Exhibit A

CITY OF LANCASTER, SOUTH CAROLINAStatement of Net PositionJune 30, 2018

Business TotalGovernmental Type Primary

Activities Activities GovernmentAssetsCurrent assets:

Cash and cash equivalents 9,225,329$ 2,482,972$ 11,708,301$Accounts receivable

Taxes, net 721,359 - 721,359Internal balances 551,814 (551,814) -Mortgages 728,361 - 728,361Water and Sewer - 590,150 590,150Garbage and Trash - 112,673 112,673Roll-off containers - 25,032 25,032Intergovernmental 290,663 - 290,663Other 394,608 1,117,062 1,511,670

Inventory 20,150 191,598 211,748Cash and cash equivalents - committed assets 1,329,693 - 1,329,693Cash and cash equivalents - restricted assets 830,781 2,887,880 3,718,661

Total current assets 14,092,758 6,855,553 20,948,311

Non-current assets:Capital assets:

Nondepreciable 4,060,457 8,692,733 12,753,190Depreciable, net of accumulated depreciation 9,303,977 23,233,828 32,537,805

Total non-current assets 13,364,434 31,926,561 45,290,995Total assets 27,457,192 38,782,114 66,239,306

Deferred outflows of resourcesPension deferrals 2,392,359 - 2,392,359Other postemployment benefits deferrals 27,369 - 27,369

Total deferred outflows of resources 2,419,728 - 2,419,728

LiabilitiesCurrent liabilities:

Accounts payable and accrued expenses 1,168,889$ 542,741$ 1,711,630$Customer deposits - 264,165 264,165Current portion of long-term liabilities 246,346 2,951,836 3,198,182

Total current liabilities 1,415,235 3,758,742 5,173,977

Long-term liabilities:Due in more than one year 15,544,674 4,458,978 20,003,652

Total liabilities 16,959,909 8,217,720 25,177,629

Deferred inflows of resourcesPension deferrals 848,678 - 848,678

Net positionNet investment in capital assets 12,916,897 24,665,863 37,582,760Restricted for: Drug fund 120,996 - 120,996 Tourism 709,785 - 709,785 Southside Housing 33,131 - 33,131 E911 36,909 - 36,909 Debt service - 2,623,715 2,623,715Unrestricted (1,749,385) 3,274,815 1,525,430

Total net position 12,068,333$ 30,564,393$ 42,632,726$

See notes to basic financial statements.16

Exhibit B


Year ended June 30, 2018

Net (Expense) Revenue andProgram Revenues Changes in Net Position

Operating Capital Primary GovernmentCharges for Grants and Grants and Governmental Business-type

Functions/Programs Expenses Services Contributions Contributions Activities Activities TotalPrimary government:

Governmental activities:General administration 4,487,906$ 238,850$ 33,144$ -$ (4,215,912)$ -$ (4,215,912)$Public safety 5,054,358 192,449 - - (4,861,909) - (4,861,909)Public works 1,144,103 - - - (1,144,103) - (1,144,103)Code enforcement 250,374 87,663 - - (162,711) - (162,711)Parks and playgrounds 150,326 - - - (150,326) - (150,326)Community service 150,249 - - - (150,249) - (150,249)Interest and fees 9,181 - - - (9,181) - (9,181)

Total governmental activities 11,246,497 518,962 33,144 - (10,694,391) - (10,694,391)

Business-type activities:Water and Sewer 5,908,516 6,649,998 - 4,138,210 - 4,879,692 4,879,692Solid Waste 2,316,466 2,616,924 - - - 300,458 300,458

Total business-type activities 8,224,982 9,266,922 - 4,138,210 - 5,180,150 5,180,150

Total primary government 19,471,479$ 9,785,884$ 33,144$ 4,138,210$ (10,694,391) 5,180,150 (5,514,241)

General revenues:Ad valorem taxes 5,803,156 - 5,803,156

Other taxes, licenses, and fees: Property tax 430,896 - 430,896 Sales tax 1,618,753 - 1,618,753 Business licenses 2,331,888 - 2,331,888 Franchise fees 785,070 - 785,070

Unrestricted intergovernmental 324,728 - 324,728Unrestricted investment earnings 82,310 62,110 144,420Miscellaneous 239,720 112,914 352,634

Total general revenues 11,616,521 175,024 11,791,545 Change in net position 922,130 5,355,174 6,277,304

Net position - beginning 12,279,341 25,209,219 37,488,560 Cumulative change in accounting principle - GASB #75 (1,133,138) - (1,133,138)Net position - beginning of year, as restated 11,146,203 25,209,219 36,355,422Net position - ending 12,068,333$ 30,564,393$ 42,632,726$

STATEMENT OF ACTIVITIES


Exhibit CPage 1 of 2


Balance SheetGovernmental FundsJune 30, 2018

Other TotalHospitality Governmental Governmental

General Tax Funds FundsAssets

Cash and cash equivalents 9,170,110$ 350$ 54,869$ 9,225,329$Receivables:

Taxes, net 721,359 - - 721,359Intergovernmental 290,663 - - 290,663Mortgages 720,000 - 8,361 728,361Taxes - other 306,717 81,081 - 387,798Other - - 6,810 6,810Due from other funds 558,951 - - 558,951

Committed assets - cash and cash equivalents 1,329,693 - - 1,329,693Restricted assets - cash and cash equivalents 120,996 709,785 - 830,781Inventory 20,150 - - 20,150

Total assets 13,238,639$ 791,216$ 70,040$ 14,099,895$

LiabilitiesAccounts payable and accrued expenses 1,167,135$ 1,755$ -$ 1,168,890$Compensated absences payable 60,387 731 - 61,118Due to other funds - 7,137 - 7,137

Total liabilities 1,227,522 9,623 - 1,237,145

Deferred inflows of resourcesTax rollback 338,758 - - 338,758Property taxes 637,573 - - 637,573Vehicle tax 61,432 - - 61,432Lot clearing fees 11,081 - - 11,081Installment sale 720,000 - - 720,000

Total deferred inflows of resources 1,768,844 - - 1,768,844

Fund balancesNonspendable:

Inventory 20,150 - - 20,150Restricted:

Drug fund 120,996 - - 120,996Hospitality tax - 781,593 - 781,593E911 - - 36,909 36,909Southside Housing - - 33,131 33,131

Committed:Downtown development 1,165,016 - - 1,165,016Economic development 50,030 - - 50,030

Assigned:Main street project 5,000 - - 5,000Subsequent year's expenditures 821,000 - - 821,000

Unassigned 8,060,081 - - 8,060,081Total fund balances 10,242,273 781,593 70,040 11,093,906

Total liabilities, deferred inflows of resourcesand fund balances 13,238,639$ 791,216$ 70,040$ 14,099,895$


Exhibit CPage 2 of 2CITY OF LANCASTER, SOUTH CAROLINA

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net PositionJune 30, 2018

Total fund balance, governmental funds 11,093,906$

27,620,228$Accumulated depreciation (14,255,794) 13,364,434

(14,235,856)

2,392,359

27,369

(740,919)

1,768,844

Capitalized leases (447,537)Compensated absences payable (305,590) (753,127)

(848,678)

Rounding 1

Net position of governmental activities 12,068,333$

Pension related deferrals

Net pension plan liabilities

Amounts reported for governmental activities in the statement of netposition are different because:

Capital assets used in governmental activities are not financialresources and therefore not reported in the funds.

Gross capital assets at historical cost

Liabilities for earned revenues considered deferred inflows of resources infund statements.

Long-term liabilities used in governmental activities are not financialuses and therefore are not reported in the funds.

Net other postemployment benefits liability

Contributions to the pension plans in the current fiscal year aredeferred outflows of resources on the Statement of Net Position

Contributions for other post employment benefits in the current fiscalyear are deferred outflows of resources on the Statement of NetPosition


Exhibit DPage 1 of 2


Statement of Revenues, Expenditures and Changes in Fund BalancesGovernmental FundsYear ended June 30, 2018

Other TotalHospitality Governmental Governmental

General Tax Funds FundsRevenues

Taxes 6,270,124$ 917,479$ -$ 7,187,603$Fines, fees, licenses and permits 4,082,534 - - 4,082,534Intergovernmental 513,115 - - 513,115Charges for services 104,114 95,616 - 199,730Grants 10,000 - - 10,000Interest 81,643 344 324 82,311Other 250,568 12,296 41,208 304,072

Total revenues 11,312,098 1,025,735 41,532 12,379,365

ExpendituresCurrent:

General administration 3,175,889 864,053 - 4,039,942Public safety 4,303,554 - 43,801 4,347,355Public works 848,827 - - 848,827Code enforcement 238,011 - - 238,011Parks and playgrounds 129,444 - - 129,444Community service 150,480 - - 150,480

Capital outlay 224,184 - - 224,184Debt service:

Principal 181,459 - - 181,459Interest and fees 9,181 - - 9,181

Total expenditures 9,261,029 864,053 43,801 10,168,883

Net change in fund balances 2,051,069 161,682 (2,269) 2,210,482

Fund balance - beginning 8,191,204 619,911 72,309 8,883,424

Fund balance - ending 10,242,273$ 781,593$ 70,040$ 11,093,906$


Exhibit DPage 2 of 2CITY OF LANCASTER, SOUTH CAROLINA

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balancesof Governmental Funds to the Statement of ActivitiesYear ended June 30, 2018

Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds 2,210,482$

Capital outlay expenditures which were capitalized 224,184$Depreciation expense for governmental assets (1,125,943) (901,759)

845,559

27,369

Lot clearing fees (2,088)Tax rollback (565,379)Property taxes 399,717Vehicle taxes 7,011 (160,739)

(50,000)

Principal payments on long-term debt 181,459

Compensated absences 10,516Pension expense (1,244,292)Net increase in OPEB expense 3,537 (1,230,239)

(2)

Change in net position of governmental activities 922,130$

Governmental funds report capital outlays as expenditures. However, in theStatement of Activities the cost of those assets is allocated over theirestimated useful lives and reported as depreciation expense. This is theamount by which capital outlays exceeded depreciation expense in the currentperiod.

Revenues in the statement of activities that do not provide current financialresources are not reported as revenues in the funds.

The repayment of the principal of long-term debt consumes the currentfinancial resources of governmental funds. The transaction, however, has anyeffect on net position. This amount is the net effect of these differences in thetreatment of long-term debt and related items.

Rounding

Some expenses reported in the statement of activities do not require the useof current financial resources and, therefore, are reported as expenditures inthe governmental funds.

Collections on installment sales are recognized as revenue in the governmentfund financial statements. However, this transaction has no effect on thestatement of activities.

Contributions to the pension plans in the current fiscal year are not includedon the Statement of Activities

Contributions to the OPEB plan in the current fiscal year are not included onthe Statement of Activities


Exhibit E


Statement of Revenues, Expenditures and Changes in Fund BalancesBudget and Actual - General FundYear ended June 30, 2018

VarianceWith Final Budget

Original Final PositiveBudget Budget Actual (Negative)

RevenuesTaxes 6,013,000$ 6,013,000$ 6,270,124$ 257,124$Fines, fees, licenses and permits 3,618,000 3,618,000 4,082,534 464,534Intergovernmental 644,366 644,366 513,115 (131,251)Charges for services 110,000 110,000 104,114 (5,886)Grants - - 10,000 10,000Interest 30,000 30,000 81,643 51,643Other 90,000 90,000 250,568 160,568

Total revenues 10,505,366 10,505,366 11,312,098 806,732


General administration 3,942,072 3,918,921 3,175,889 743,032Public safety 4,851,215 4,895,057 4,303,554 591,503Public works 873,971 895,322 848,827 46,495Code enforcement 310,296 315,715 238,011 77,704Parks and playgrounds 215,200 215,200 129,444 85,756Community service 227,550 228,750 150,480 78,270

Capital outlay 339,500 314,858 224,184 90,674Debt service:

Principal 181,460 181,460 181,459 1Interest and fees 10,630 10,630 9,181 1,449

Total expenditures 10,951,894 10,975,913 9,261,029 1,714,884Excess (deficiency) of revenues

over expenditures (446,528) (470,547) 2,051,069 2,521,616

Other financing sourcesFund balance appropriated 446,528 470,547 - (470,547)

Total other financing sources 446,528 470,547 - (470,547)

Net change in fund balances -$ -$ 2,051,069 2,051,069$

Fund balance - beginning 8,191,204

Fund balance - ending 10,242,273$


Exhibit F


Statement of Revenues, Expenditures and Changes in Fund BalancesBudget and Actual - Hospitality Tax FundYear ended June 30, 2018

VarianceOriginal Final PositiveBudget Budget Actual (Negative)

RevenuesTaxes 775,000$ 775,000$ 917,479$ 142,479$Charges for services 110,000 110,000 95,616 (14,384)Interest 500 500 344 (156)Miscellaneous 10,000 10,000 12,296 2,296

Total revenues 995,500 995,500 1,025,735 30,235


General administration 1,079,138 1,079,138 864,053 215,085Total expenditures 1,079,138 1,079,138 864,053 215,085

Excess of revenues over(under) expenditures (83,638) (83,638) 161,682 245,320

Other financing sourcesFund balance appropriated 83,638 83,638 - (83,638)

Total other financing sources 83,638 83,638 - (83,638)

Net change in fund balances -$ -$ 161,682 161,682$

Fund balance - beginning 419,911

Fund balance - ending 581,593$


Exhibit GCITY OF LANCASTER, SOUTH CAROLINA

STATEMENT OF FUND NET POSITIONPROPRIETARY FUNDSJune 30, 2018

Gross SolidRevenue Waste Total

ASSETSCurrent assets

Cash and cash equivalents 955,318$ 1,527,654$ 2,482,972$Receivables:

Water and sewer 590,150 - 590,150Garbage and trash - 112,673 112,673Roll-off containers - 25,032 25,032Other 941,844 175,218 1,117,062

Due from Gross Revenue Fund - 3,130 3,130Due from Hospitality Tax Fund 107 - 107Inventory 191,598 - 191,598Restricted assets:

Customer deposits 264,165 - 264,165Bond depreciation account 1,581,567 - 1,581,567Bond contingency account 397,349 - 397,349Bond debt service and reserve account 644,799 - 644,799 Total restricted assets 2,887,880 - 2,887,880Total current assets 5,566,897 1,843,707 7,410,604

Noncurrent assetsCapital assets (net, where applicable, of accumulated depreciation) 29,981,666 1,944,895 31,926,561

Total noncurrent assets 29,981,666 1,944,895 31,926,561Total assets 35,548,563 3,788,602 39,337,165

LiabilitiesCurrent liabilities

Accounts payable and accrued expenses 512,871 29,870 542,741Compensated absences payable 14,700 10,319 25,019Current portion of long-term debt 553,904 - 553,904Capital leases payable - current 270,824 161,684 432,508Customer deposits 264,165 - 264,165Due to General Fund 414,808 137,113 551,921Due to Solid Waste Fund 3,130 - 3,130

Total current liabilities 2,034,402 338,986 2,373,388

Long-term liabilitiesCompensated absences payable 73,499 51,598 125,097Revenue bonds and notes payable 5,178,361 - 5,178,361Capital leases payable - long-term 684,460 411,466 1,095,926

Total long-term liabilities 5,936,320 463,064 6,399,384Total liabilities 7,970,722 802,050 8,772,772

Net positionNet investment in capital assets 23,294,118 1,371,745 24,665,863Restricted for debt payments 2,623,715 - 2,623,715Unrestricted 1,660,008 1,614,807 3,274,815

Total net position 27,577,841$ 2,986,552$ 30,564,393$

Major Enterprise Funds


Exhibit HCITY OF LANCASTER, SOUTH CAROLINA

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITIONPROPRIETARY FUNDSYear ended June 30, 2018


Operating revenuesWater and sewer charges 6,352,764$ -$ 6,352,764$Water penalties 254,904 - 254,904Tap fees 42,330 - 42,330Garbage fees - 1,308,720 1,308,720Roll-off containers - 164,484 164,484Transfer station - 1,086,295 1,086,295Other 66,986 57,496 124,482

Total operating revenues 6,716,984 2,616,995 9,333,979

Operating expensesPublic works administration 356,597 - 356,597Residential garbage - 339,453 339,453Commercial garbage - 281,557 281,557Recycling - 117,300 117,300Transfer station - 660,203 660,203Water service 1,386,551 - 1,386,551Utility billing 197,163 - 197,163Wastewater treatment 981,330 - 981,330Wastewater collection 732,216 - 732,216General expense 653,738 376,229 1,029,967Vehicle maintenance 48,224 96,448 144,672Information technology 45,234 27,574 72,808Building and grounds maintenance 53,776 50,006 103,782

Total operating expenses 5,797,908 2,307,436 8,105,344

Operating income 919,076 309,559 1,228,635

Nonoperating revenue (expense)Interest income 52,063 10,047 62,110Interest expense (110,608) (9,030) (119,638)Insurance proceeds 1,729 44,128 45,857Gain on sale of fixed assets - - -

Total other income (expense) (56,816) 45,145 (11,671)

Income before capital grants 862,260 354,704 1,216,964

Capital grants 4,138,210 - 4,138,210

Change in net position 5,000,470$ 354,704$ 5,355,174$

Major Enterprise Funds


Exhibit ICITY OF LANCASTER, SOUTH CAROLINA

STATEMENT OF CASH FLOWSPROPRIETARY FUNDSYear ended June 30, 2018


Operating activitiesCash received from customers 5,912,460$ 2,560,188$ 8,472,648$Cash paid to employees (1,380,886) (882,848) (2,263,734)Cash paid to suppliers (2,520,648) (1,043,645) (3,564,293)

Net cash provided by operating activities 2,010,926 633,695 2,644,621

Noncapital financing activitiesDue from other funds - (4,336) (4,336)Due to other funds (61,380) 85,725 24,345Customer deposits 20,359 - 20,359

Net cash provided by noncapitalfinancing activities (41,021) 81,389 40,368

Capital and related financing activitiesInsurance proceeds and other 1,731 44,129 45,860Acquisition of capital assets (5,860,066) (133,172) (5,993,238)Principal paid on capital leases (251,577) (89,055) (340,632)Principal paid on bond and note maturities (495,260) - (495,260)Interest and bond fees (110,608) (9,030) (119,638)

Net cash used in capital andrelated financing activities (606,164) (187,128) (793,292)

Investing activitiesInterest on investments 52,063 10,047 62,110

Net cash provided by investing activities 52,063 10,047 62,110

Net increase in cash and cashequivalents/investments 1,415,804 538,003 1,953,807

Cash and cash equivalents/investmentsBeginning of year 2,427,394 989,651 3,417,045

End of year 3,843,198$ 1,527,654$ 5,370,852$

Reconciliation of operating income to net cashprovided by operating activitiesOperating income 919,076$ 309,559$ 1,228,635$Adjustments to reconcile operating income

to net cash provided by operatingactivities:Depreciation and amortization 1,343,079 358,666 1,701,745Change in assets and liabilities:

Accounts receivable (804,524) (56,807) (861,331)Inventory 109,569 - 109,569Accounts payable and accrued expenses 445,912 18,103 464,015Compensated absences (2,186) 4,174 1,988

Total adjustments 1,091,850 324,136 1,415,986Net cash provided by operating activities 2,010,926$ 633,695$ 2,644,621$

Reconciliation to statement of net positionUnrestricted cash and cash equivalents 955,318$ 1,527,654$ 2,482,972$Restricted cash and cash equivalents 2,887,880 - 2,887,880

3,843,198$ 1,527,654$ 5,370,852$

Noncash capital activity:Purchase of fixed assets with capital lease -$ 433,000$ 433,000$

MAJOR ENTERPRISE FUNDS


Exhibit J


Statement of Fiduciary Net PositionFiduciary FundsJune 30, 2018

AgencyFunds

AssetsCash and temporary investments 32,332$

Total assets 32,332$

LiabilitiesDue to firemen's association 32,332$

Total liabilities 32,332$



Notes to the Basic Financial StatementsJune 30, 2018

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I. Summary of Significant Accounting Policies

The accounting policies of the City of Lancaster (“City”) conform with accounting principles generallyaccepted in the United States of America (GAAP) as applied to governments. The following is asummary of the more significant accounting policies:

A. Reporting Entity

The City of Lancaster is a municipal corporation of the State of South Carolina located in LancasterCounty, and as such possesses all the general powers granted by the Constitution and laws ofSouth Carolina to municipal corporations. The City has no component units.

B. Basis of Presentation – Basis of Accounting

Basis of Presentation

Government-wide Financial Statements: The statement of net position and the statement ofactivities display information about the City. These statements include the financial activities of theoverall government, except for fiduciary activities. Eliminations have been made to minimize thedouble counting of internal activities. These statements distinguish between the governmental andbusiness-type activities of the City. Governmental activities generally are financed through taxes,intergovernmental revenues, and other non-exchange transactions. Business-type activities arefinanced in whole or in part by fees charged to external parties.

The statement of activities presents a comparison between direct expenses and program revenuesfor the different business-type activities of the City and for each function of the City’s governmentalactivities. Direct expenses are those that are specifically associated with a program or functionand, therefore, are clearly identifiable to a particular function. Indirect expense allocations thathave been made in the funds have been reversed for the statement of activities. Programrevenues include (a) fees and charges paid by the recipients of goods or services offered by theprograms and (b) grants and contributions that are restricted to meeting the operational or capitalrequirements of a particular program. Revenues that are not classified as program revenues,including all taxes, are presented as general revenues.

Fund Financial Statements: The fund financial statements provide information about the City’sfunds, including its fiduciary funds. Separate statements for each fund category – governmental,proprietary, and fiduciary – are presented. The emphasis of fund financial statements is on majorgovernmental and enterprise funds, each displayed in a separate column. All remaininggovernmental funds are aggregated and reported as nonmajor funds.

Proprietary fund operating revenues, such as charges for services, result from exchangetransactions associated with the principal activity of the fund. Exchange transactions are those inwhich each party receives and gives up essentially equal values. Nonoperating revenues, such assubsidies and investment earnings, result from non-exchange transactions or ancillary activities.



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I. Summary of Significant Accounting Policies (continued)

B. Basis of Presentation – Basis of Accounting (continued)

The City reports the following major governmental funds:

General Fund – The General Fund, the general operating fund of the City, includes theassets, liabilities, revenues and expenditures relating to the general administration and thetraditional services provided by the City, and accounts for all financial resources except thosethat are required to be accounted for in another fund. The primary revenue sources are advalorem taxes, grants and various other taxes and licenses. The primary expenditures arefor public safety, street maintenance and construction.

Hospitality Tax Fund – This fund was established to preserve the general health, safety, andwelfare of the general public and to promote the tourism industry within the City of Lancaster.The primary revenues are a 2% hospitality tax imposed by the City on prepared food andticket sales from the City’s Performing Arts Series. The primary expenditures are for eventpromotion and execution as well as expenditures for the Performing Arts Series performancecontracts.

The City reports the following nonmajor governmental funds:

Southside Project Fund – This fund is used to account for the sale of low-income housing.

E911 Fund – This fund accounts for fees levied through telephone bills to support theemergency 911 system. Funds are restricted for improvements and expansion of the City’semergency 911 system.

The City reports the following major enterprise funds:

Gross Revenue Fund - The Gross Revenue Fund was established to account for the financialposition and results of operations relating to the water and sewer service to the residentialand industrial users of the City’s system. The City’s water and sewer infrastructure extendsbeyond its corporate limits.

Solid Waste Fund - The Solid Waste Fund was established to account for the financialposition and results of operations relating to solid waste collection services to the residentialand industrial users.



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The City reports the following fiduciary funds:

Agency Funds - The Agency Fund is custodial in nature and does not present results ofoperations or have a measurement focus. Agency funds are accounted for using the accrualbasis of accounting. This fund is used to account for assets that the government holds forothers in an agency capacity. The City utilizes the following agency fund:

Firemen’s Fund - This fund is used to account for financial resources derived primarilyfrom the firemen’s share of insurance proceeds remitted by the State of South Carolinato the City firemen and expended for their benefit.

Measurement Focus, Basis of Accounting

In accordance with South Carolina General Statutes, all funds of the City are maintained during theyear using the modified accrual basis of accounting.

Government-wide, Proprietary, and Fiduciary Fund Financial Statements. The government-wide,proprietary, and fiduciary fund financial statements are reported using the economic resourcesmeasurement focus, except for the agency funds which have no measurement focus. Thegovernment-wide, proprietary fund and fiduciary fund financial statements are reported using theaccrual basis of accounting. Revenues are recorded when earned and expenses are recorded atthe time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the City gives (or receives) value without directly receiving (orgiving) equal value in exchange, include property taxes, grants, entitlements, and donations. On anaccrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes arelevied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in whichall eligibility requirements have been satisfied.

Amounts reported as program revenues include 1) charges to customers or applicants for goods,services, or privileges provided, 2) operating grants and contributions, and 3) capital grants andcontributions, including special assessments. Internally dedicated resources are reported asgeneral revenues rather than as program revenues. Likewise, general revenues include all taxes.

Proprietary funds distinguish operating revenues and expenses from nonoperating items.Operating revenues and expenses generally result from providing services and producing anddelivering goods in connection with a proprietary fund’s principal ongoing operations. The principaloperating revenues of the City enterprise funds are charges to customers for sales and services.Operating expenses for enterprise funds include the cost of sales and services, administrativeexpenses, and depreciation on capital assets. All revenues and expenses not meeting thisdefinition are reported as nonoperating revenues and expenses.



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Measurement Focus, Basis of Accounting (continued)

Governmental Fund Financial Statements. Governmental funds are reported using the currentfinancial resources measurement focus and the modified accrual basis of accounting. Under thismethod, revenues are recognized when measurable and available. Expenditures are recordedwhen the related fund liability is incurred, except for principal and interest on general long-termdebt, claims and judgments, and compensated absences, which are recognized as expenditures tothe extent they have matured. General capital asset acquisitions are reported as expenditures ingovernmental funds. Proceeds of general long-term debt and acquisitions under capital leases arereported as other financing sources. The City considers all revenues available if they are collectedwithin 60 days after year-end. At June 30, taxes receivable that are materially past due are notconsidered to be an available resource to finance the operations of the current year.

Sales taxes collected and held by the State at year-end on behalf of the City, intergovernmentalrevenues, and sales and services are not susceptible to accrual because generally they are notmeasurable until received in cash. Expenditure-driven grants are recognized as revenue when thequalifying expenditures have been incurred and all other grant requirements have been satisfied.

Under the terms of grant agreements, the City funds certain programs by a combination of specificcost-reimbursement grants, categorical block grants, and general revenues. Thus, when programexpenses are incurred, there are both restricted and unrestricted net position available to financethe program. It is the City’s policy to first apply cost-reimbursement grant resources to suchprograms, followed by categorical block grants, and then by general revenues.

When both restricted and unrestricted resources are available for use, it is the City’s policy to userestricted resources first, then unrestricted resources as they are needed.

C. Budgets

The City follows these procedures in establishing the budgetary data reflected in the financialstatements:

Approximately 60 days prior to June 30, the City Administrator submits to City Council a proposeddetailed, line-item operating budget for the General, Hospitality Tax, Gross Revenue, and SolidWaste Funds for fiscal year commencing July 1. The operating budget includes proposedexpenditures and the means of financing them by function and activity.

A public hearing is conducted to obtain citizen comments on the proposed budget, which is laterlegally adopted through the passage of an appropriation ordinance by City Council. The legal levelof budgetary control is at the object class level.

Budgetary line item revisions within a fund in an amount in excess of $5,000 per instance must beapproved by City Council. All revisions for capital improvement items or which would increase ordecrease the adopted budget's individual fund balances must be approved by City Council.



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C. Budgets (continued)

The City prepares all of its budgets on the modified accrual basis. This basis differs fromaccounting principles generally accepted in the United States of America for the Gross RevenueFund and the Solid Waste Fund. All annual appropriations lapse at fiscal year-end.

The combined statement of Revenues, Expenditures and Changes in Fund Balances – Budget andActual, as presented excludes all data of the Special Revenue Funds and the Capital Project Fundas required when an annual budget has not been legally adopted.

D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Fund Equity

1. Cash and Cash Equivalents

Cash and cash equivalents include amounts in demand deposits, certificates of deposits anddeposits with the State Treasurer’s investment pool with maturities of three (3) months or less.

Investments are shown at fair value except for U.S. Treasury and agency obligations that havea remaining maturity at the time of purchase of one year or less which are recorded atamortized cost which approximates fair value.

The City pools money from several funds to facilitate disbursement and investment and tomaximize investment income. Therefore, all cash and investments are essentially demanddeposits and are considered cash and cash equivalents.

2. Property Taxes Receivable

The City of Lancaster assesses and levies property taxes in accordance with applicable laws ofthe State of South Carolina. Real property and personal property of every description ownedand used in the City, except that which is exempt from taxation under the Constitution and Lawsof the State, is subject to taxation. An annual ordinance establishing the millage rate associatedwith the levy is adopted each year as a part of the budget adoption process. Lancaster Countyprints the tax notices and collects both real and personal taxes and remits them to the Citymonthly.

The City of Lancaster residents have adopted a local option sales tax, whereby, an additional1% sales tax is charged for the purpose of reducing real and personal property taxes. The Cityreduces the millage rate used in assessing property taxes such that property taxes are reducedin an amount of at least 71% of the local option sales tax collected as required by the State ofSouth Carolina.

Real property and all personal property other than vehicles are assessed for property taxpurposes on January 1 of each year. All taxable property is assessed in proportion to its valueon that date. The basis for value of taxable property within the City is taken from the records ofthe Lancaster County Auditor. The assessment for City tax purposes is the same as that leviedby the County Auditor. Tax notices are mailed around October 1 of each year. The taxes are



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D. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Fund Equity (continued)

2. Property Taxes Receivable (continued)

due by January 15. A 3% penalty is added January 16 and another 10% is added February 2 ifstill unpaid. On March 15, if tax bills are still unpaid, an additional 2% penalty is added. At thistime all unpaid taxes go into execution and are turned over to the delinquent tax collector forcollection.

New vehicle property taxes are assessed and levied within 120 days of the registration date ofthe vehicle and payment is due upon receipt of the property tax notice. Other vehicle propertytaxes are assessed and levied in the month the vehicle is scheduled for license renewal with theSouth Carolina Department of Motor Vehicles and payment is due before the end of the monthof the scheduled renewal.

South Carolina law allows a county to negotiate with a company for a Fee-in-lieu of PropertyTaxes (“FILOT”) agreement if total capital investment is $2.5 million or greater. By law, thecompany has five years to meet the minimum investment threshold, and the county can offer anadditional five-year extension to complete the project. The company may include both real andpersonal property under the FILOT agreement. However, property that has been on the tax rollsin the state previously, including existing buildings, is not eligible for the FILOT. (This restrictionis waived for companies investing an additional $45 million or more in new investment.). TheFILOT may result in substantial benefits for a company. Lancaster County had the followingFILOT agreements in effect for the year ended June 30, 2018 and their impact on the City is asfollows:

Company City Tax Abated City FILOTGillette 169,573$ 464,965$Lancaster Telephone 14,122 51,770Nutramax 11,297 8,747Springmaid FCU 279,576 94,540TST-Metso Paper 131,753 7,454Valmet 10,775 32,343

3. Allowance for Doubtful Accounts

All receivables that historically experience uncollectible accounts are shown net of an allowancefor doubtful accounts. This amount is estimated by analyzing the percentage of receivableswritten off in prior years and applying that percentage to current balances.

4. Interfund Receivables/Payables

During the course of operations, numerous transactions occur between individual funds forgoods provided or services rendered. These receivables and payables are classified as “duefrom other funds” or “due to other funds” on the fund financial statements and internal balanceson the government-wide financial statements.



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5. Inventory

Inventories held by the General and Gross Revenue Funds are valued at the lower of cost,using the first-in/first-out (FIFO) method, or market. Inventory shown in the General Fundconsists of expendable supplies held for consumption. In the fund financial statements(General Fund), the amount thereof has been recorded for information purposes only as anasset, offset by a reservation of fund balance in an equal amount. The cost value of suchinventory has been recorded as an expenditure as the items are consumed by the respectivedepartments. The inventory asset amount is not available for appropriation.

6. Restricted Assets

Certain resources which have been set aside for the repayment of revenue bonds are classifiedas restricted assets on the balance sheet because their use is limited by applicable bondcovenants. The revenue bond debt service fund was established to provide for the ratablepayment of the principal and interest on all bonds as they fall due to ensure the timely paymentof principal and interest and to provide for the redemption of bonds prior to their maturity. Theamount of net position restricted for this purpose was $2,623,715 at June 30, 2018, all of whichis in the Gross Revenue Fund of the City.

Additional resources have been restricted for governmental activities related to tourism andvictims’ services. Their use is limited by the applicable laws of the State of South Carolina. AtJune 30, 2018, $709,785 was restricted in the Hospitality Tax Fund for tourism.

7. Capital Assets

The City's general and proprietary fund capital assets (having a cost in excess of $5,000) arerecorded at original cost. Donated capital assets received before June 30, 2015 are recorded atthe estimated fair value (if in excess of $5,000) at the time of donation. Donated capital assetsreceived after June 30, 2015 are recorded at their acquisition value.

Capital assets of the City are depreciated by applying the straight-line method to the followinguseful lives:

Buildings 40 yearsInfrastructure 10-40 yearsWater and sewer distribution system 40 yearsFence and paving 15 yearsEquipment 3-10 yearsVehicles 5-7 years



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7. Capital Assets (continued)

The cost of normal maintenance and repairs that do not add to the value of the asset ormaterially extend assets’ lives are not capitalized.

The City capitalizes net interest costs and interest earned as part of the cost of constructingvarious water and sewer projects when material.

8. Compensated Absences

The City of Lancaster has a liability to its employees for accumulated vacation leave. The fundfinancial statements of the General Fund have recorded as an expenditure and fund liability, theamount of accumulated vacation leave of its employees that is expected to be liquidated withexpendable available resources. Amounts that are not expected to be liquidated withexpendable available financial resources are reported in the government-wide financialstatements as a liability. The Gross Revenue and Solid Waste Funds have recorded anexpense and liability for accumulated vacation leave of its employees.

9. Deferred Outflows/Inflows of Resources

In addition to assets, the statement of financial position will sometimes report a separate sectionfor deferred outflows of resources. This separate financial statement element, DeferredOutflows of Resources, represents a consumption of net position that applies to a future periodand so will not be recognized as an expense or expenditures until then. The City had two itemsthat met this criterion – contributions made to the pension plan in the 2018 fiscal year andcontributions made to other postemployment benefits in the 2018 fiscal year. In addition toliabilities, the statement of financial position will sometimes report a separate section fordeferred inflows of resources. This separate financial statement element, Deferred Inflows ofResources, represents an acquisition of net position that applies to a future period and so willnot be recognized as revenue until then. The City has six items that meet the criterion for thiscategory – lot clearing fees, vehicle taxes, real property taxes, tax rollback, deferrals of pensionexpense that result from GASB Statement 68 and an installment sale.

10. Long-Term Obligations

In the government-wide financial statements and in the proprietary fund types in the fundfinancial statements, long-term debt and other long-term obligations are reported as liabilities inthe applicable governmental activities, business-type activities, or proprietary fund typestatement of net position. Bond issuance costs, except for prepaid insurance costs, areexpensed in the reporting period in which they are incurred. Prepaid insurance costs areexpensed over the life of the debt.



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10. Long-Term Obligations (continued)

In the fund financial statements, governmental fund types recognize bond premiums anddiscounts, as well as bond issuance costs, during the current period. The face amount of debtissued is reported as other financing sources. Premiums received on debt issuances arereported as other financing sources, while discounts on debt issuances are reported as otherfinancing uses. Issuance costs, whether or not withheld from the actual debt proceedsreceived, are reported as debt service expenditures.

11. Net Position/Fund Balances

Net Position

Net position in government-wide and proprietary fund financial statements are classified asnet investment in capital assets; restricted; and unrestricted. Restricted net positionrepresents constraints on resources that are either externally imposed by creditors,grantors, contributors, or laws or regulations of other governments or imposed by lawthrough state statute.

Fund Balances

In the governmental fund financial statements, fund balance is composed of fiveclassifications designed to disclose the hierarchy of constraints placed on how fundbalance can be spent. Some portions of fund balance are limited in how they can be usedand some can be used however the government decides, therefore the five classificationsof fund balance.

The governmental fund types classify fund balances as follows:

Nonspendable Fund Balance

There are differences between fund balance and liquidity in governmental funds becausesome assets reported in the governmental funds inherently cannot be spent. Thisclassification of fund balance includes amounts that cannot be spent because they areeither (a) assets that will never be converted into cash such as prepaid expenses andinventory or (b) resources that must be maintained intact based on legal or contractualrequirements such as principal of an endowment or the capital of a revolving loan fund.The City of Lancaster has the following nonspendable fund balances recorded in itsfinancial statements:

Inventory - portion of fund balance that is not an available resource because itrepresents the year-end balance of ending inventories, which are not spendableresources.



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11. Net Position/Fund Balances (continued)

Restricted Fund Balance

This classification includes resources that are limited in how they can be spent due toexternally enforceable legal restrictions. Restricted fund balance includes assets restrictedby (a) other governments through laws and regulations; (b) grantors or contributors throughagreements; (c) creditors through debt covenants or other contracts; or (d) enablinglegislation that limits how a revenue can be used. The City of Lancaster has the followingrestricted fund balances recorded in its financial statements:

Drug Fund – portion of fund balance that can only be used per the laws andregulations established by the laws of the State of South Carolina.

Hospitality Tax – portion of fund balance that can only be used for purposesestablished by Section 6-1-730 of the State of South Carolina Code of Laws, 1976,as amended.

Southside Housing – portion of fund balance that can only be used for the purpose ofrefurbishing or replacing housing for the City’s low income community throughpotentially forgivable loans. The use of the funds is dictated by federal grantagreements signed by the City when the funds were acquired.

E911 Fund – portion of fund balance that can only be used for improvements andexpansion of the City’s emergency 911 system in accordance with Section 23-47-40of the State of South Carolina Code of Laws, 1976, as amended.

Victims’ Services – portion of fund balance that can only be used for notification andassistance to victims of crime as established by laws of the State of South Carolina.The City of Lancaster has currently has $0 of available fund balance as of June 30,2018 to provide victims’ services.

Committed Fund Balance

This classification of fund balance includes resources that can be used only for the specificpurposes determined by a formal action of the government’s highest level of decision-making authority. The City Council is the highest level of decision-making authority for thegovernment that can, by adoption of an ordinance prior to the end of the fiscal year, commitfund balance. Once adopted, the limitation imposed by the ordinance remains in placeuntil a similar action is taken (the adoption of another ordinance) to remove or revise thelimitation. The City of Lancaster has the following committed fund balances recorded in itsfinancial statements:

Downtown Development – portion of fund balance committed through formal actionof City Council for the improvement and redevelopment of the historic downtownarea. Any use of these resources must be approved by City Council.



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Committed Fund Balance (continued)

Economic Development – portion of fund balance committed through formal action ofCity Council to encourage economic development in the City. Any use of theseresources must be approved by City Council.

Assigned Fund Balance

The portion classification of fund balance includes resources that the government hasintentions for its use, but the resources are not externally restricted or committed throughformal action of the Lancaster City Council. The City of Lancaster has the followingassigned fund balance recorded in its financial statements:

Main Street Project – portion of fund balance assigned to support projects on MainStreet.

Subsequent Year’s Expenditures – $821,000 of fund balance assigned to fundconstruction.

Unassigned Fund Balance

The portion of fund balance that has not been reported as nonspendable, restricted,committed, or assigned is reported in unassigned fund balance.

The City of Lancaster has a revenue spending policy that provides guidance for programswith multiple revenue sources. The Finance Director will use resources in the followinghierarchy: bond proceeds, federal funds, state funds, local non-city funds, city funds. Forpurpose of fund balance classifications, expenditures are to be spent from restricted fundsfirst, followed in order by committed fund balance, assigned fund balance, and unassignedfund balance.

The City of Lancaster has also adopted a minimum unassigned fund balance policy for theGeneral Fund. The purpose of the Fund Balance Reserve Policy (“Policy”) of the City ofLancaster is to establish guidelines for the use and limits on reserve levels for the City’sGeneral Fund. This policy also sets forth the standards for setting reserve levels and isconsidered to be responsive to the recommended practices of the Government FinanceOfficers Association (GFOA) regarding the appropriate level of reserves in the GeneralFund.

An unassigned fund balance range is established for the General Fund. The percentagerange set for this fund is based on predictability of revenues, volatility of expenditures, andliquidity requirements of the fund.



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Unassigned Fund Balance (continued)

The proposed range as established by this Policy will be reviewed periodically by theFinance Director to ensure their continued relevance and appropriateness in light of theactual experience of the General Fund, and in accordance with any future reserve needsthat may arise.

The unassigned fund balance range for the General Fund shall not be less than 40% andnot more than 60% of the total budgeted expenditures of the General Fund budget.

If it is determined there is a surplus (an amount in excess of the upper limit of theunassigned fund balance range), the funds are to be appropriated upon approval of CityCouncil for the following purposes:

1. One-time capital needs. Since a surplus does not represent a recurring source ofrevenue it should not be used to fund a recurring expenditure; however, if a one-time capital expenditure has been identified, but not already funded through anappropriation, the surplus may be appropriated for this use.

2. Reduction or avoidance of debt. If there is short-term debt within the fund thesurplus may be applied to reduce or eliminate the debt if financial analysis provesthis to be advantageous to the City. If borrowing is scheduled, the surplus may beused to reduce the principal amount the City needs to obtain if financial analysisproves this to be advantageous to the City.

3. Tax, fee, or rate stabilization. Surplus funds may be designated for stabilization inorder to avoid raising taxes, fees, or rates related to the fund in subsequent years.

4. Eliminate unfunded liabilities related to the City’s Other Post-Employment Benefits(OPEB). Any surplus may be transferred to reduce the unfunded liability in theOther Post-Employment Benefits Trust Fund or any other fund initiated by the City toprovide post-employment benefits.

If it is determined there is a shortfall (an amount below the lower limit of the unassignedfund balance range), the unassigned fund balance is to be rebuilt through the followingmechanisms in order of priority:

1. Impose millage in order to maintain the minimum percentage of reserve funds asstated in this policy pursuant to the exception to the millage cap restrictions asstated in Section 6-1-320(D) of the South Carolina Code of Laws, 1976, asamended. Section 6-1-320(D) states that the restriction contained in Section 6-1-320 does not affect millage that is used to maintain a reserve account.



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Unassigned fund balance (continued)

2. An appropriation during the next annual budget process of at least 20% of the shortfall inthe unassigned fund balance until the lower end of the limit has been reached. If this isfinancially unfeasible, a written plan shall be forwarded by the City Administrator to CityCouncil for approval in order to restore the unassigned fund balance to an amount withinthe range within a reasonable time frame. This plan may require reduction of services,reduction of workforce, increases in fees or rates or some combination thereof.

Annually, after completion of the City’s Comprehensive Annual Financial Statement, the FinanceDirector shall prepare a Fund Balance Level Status Report as part of the City’s annual budgetprocess to be approved by the City Administrator. At least every five (5) years, City Council willbe required to affirm or revise the Policy including the percentage range established by thecategory described herein.

12. Reclassifications

For comparability, the 2017 figures have been reclassified, where appropriate, to conform withthe financial statement presentation used in 2018.

13. Management Estimates

The preparation of financial statements in accordance with accounting principles generallyaccepted in the United States of America requires the City’s management to make estimatesand assumptions. The estimates and assumptions affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date of the basic financialstatements and the reported amounts of revenues and expenses during the reported period.Actual results could differ from those estimates.



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14. Pensions and Other Postemployment BenefitsIn government-wide financial statements, pensions and other postemployment benefits (OPEB)are required to be recognized and disclosed using the accrual basis of accounting, regardless ofthe amounts recognized as pension and OPEB expenditures on the modified accrual basis ofaccounting. The City recognizes net pension and net OPEB liabilities for each plan for which itparticipates, which represents the excess of the total pension and OPEB liabilities over thefiduciary net position of the qualified plan, or the City’s proportionate share thereof in the case ofa cost-sharing multiple-employer plan, measured as of the City’s fiscal year-end. Changes inthe net pension and OPEB liabilities during the period are recorded as pension and OPEBexpense, or as deferred outflows or inflows of resources depending on the nature of thechange, in the period incurred. Those changes in net pension and OPEB liabilities that arerecorded as deferred outflows or inflows of resources that arise from change in actuarialassumptions or other inputs and the differences between expected or actual experience areamortized over the weighted average remaining service life of all participants I the respectivequalified plan and recorded as a component of pension and OPEB expense beginning with theperiod in which they are incurred. Any projected earnings on qualified pension and OPEB planinvestments are recognized as a component of pension and OPEB expense. Differencesbetween projected and actual investment earnings are reported as deferred outflows or inflowsof resources and amortized as a component of pension and OPEB expense on a closed basisover a multi-year period beginning with the period in which the difference occurred.

II. Detail Notes on All Funds

A. Assets

1. Deposits and Investments

At year-end the carrying amount of the City’s cash deposits was $5,603,927 and the bankbalance was $6,100,897. Of the bank balance, $750,000 was covered by federal depositoryinsurance and $5,350,897 was covered by collateral held by the pledging financial institutionsin the City’s name.

At June 30, 2018, the City had the following investments and maturities.

Investment Type Fair Value Maturity RatingState Treasurer's Investment Pool 11,185,060$ N/A Unrated Total Investments 11,185,060$

Interest Rate Risk. The City does not have a formal investment policy that limits investmentmaturities as a means of managing its exposure to fair value losses arising from increasinginterest rates.



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II. Detail Notes on All Funds

A. Assets

2. Deposits and Investments (continued)

Credit Risk. State statutes authorize the City to invest in obligations of the United States andagencies thereof; general obligations of the State of South Carolina or any of its political units;savings and loan associations to the extent that the same are insured by an agency of theFederal government; certificates of deposit where the certificates are collaterally secured bysecurities of the type described above; or deposit accounts with banking institutions. Statutesalso allow the State Treasurer to assist local governments in investing funds. The City is underno contractual agreements which restrict investment alternatives or violate legal provisions.

Custodial Credit Risk. For an investment, custodial credit risk is the risk that in the event of thefailure of the counterparty, the City will not be able to recover the value of its investments orcollateral securities that are in the possession of an outside party. The City has noinvestments for which the securities are held by the counterparty, or by its trust department butnot in the City’s name.

Concentration of Credit Risk. The City places no limit on the amount that the City may invest inany one issuer.

The City’s cash and investments are presented on the financial statements as follows:

Cash and investmentsPrimary government $ 11,708,301Fiduciary funds 32,332

Restricted and committed assets 5,048,354

Total $ 16,788,987



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II. Detail Notes on All Funds (continued)

A. Assets (continued)

2. Receivables – Allowance for Doubtful Accounts

At June 30, 2018, the City’s receivable balances (unrestricted and restricted accountsreceivable and taxes receivable in the accompanying statement) were as follows:

General FundHospitalityTax Fund

GrossRevenue

FundSolid Waste

FundNonmajor

Funds TotalAdjustments to

Full-AccrualReceivables:

Taxes 815,410$ -$ -$ -$ -$ 815,410$ -$Intergovernmental 290,663 - - - - 290,663 -Grants - - - - - - -Mortgages 720,000 - - - 142,224 862,224 -Water and sewer - - 590,150 - - 590,150 -Garbage and trash - - - 112,673 - 112,673 -Roll-off containers - - - 27,868 - 27,868 -Other 493,163 81,081 941,844 175,218 6,810 1,698,116 -

Gross receivables 2,319,236 81,081 1,531,994 315,759 149,034 4,397,104 -Less: allowance for uncollectibles 280,497 - - 2,836 133,863 417,196 -

Net total receivables 2,038,739$ 81,081$ 1,531,994$ 312,923$ 15,171$ 3,979,908$ -$

Fund Financial StatementsGovernment - wide Financial Statements



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3. Capital Assets

Capital asset activity for the governmental activities for the year ended June 30, 2018 was asfollows:

Depreciation was charged to functions/programs of the primary government as follows:

General administration 373,213$ Public safety 595,590 Public works 133,273 Code Enforcement 2,985 Parks and playgrounds 20,882

Total depreciation expense 1,125,943$

BeginningBalances Increases Decreases Transfers

EndingBalances

Governmental activities:Capital assets not being depreciated:

Land 4,029,253$ -$ -$ -$ 4,029,253$Construction in progress - 31,204 - - 31,204

Total capital assets not being depreciated 4,029,253 31,204 - - 4,060,457Capital assets being depreciated:

Buildings and improvements 8,000,183 19,071 - - 8,019,254Machinery and Equipment 8,591,861 153,209 - - 8,745,070Infrastructure 6,774,748 20,700 - - 6,795,448

Total capital assets being depreciated 23,366,792 192,980 - - 23,559,772Less accumulated depreciation for:

Buildings and improvements 3,031,595 251,389 - - 3,282,984Machinery and Equipment 6,728,036 592,495 - - 7,320,531Infrastructure 3,370,221 282,059 - - 3,652,280Total accumulated depreciation 13,129,852 1,125,943$ -$ -$ 14,255,795

Total capital assets being depreciated, net 10,236,940 9,303,977Governmental activity capital assets, net 14,266,193$ 13,364,434$



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Capital asset activity for the business-type activities for the year ended June 30, 2018 wasas follows:

BeginningBalances Increases Decreases Transfers

EndingBalances

Business-type activities:Gross RevenueCapital assets not being depreciated:

Land 366,054$ -$ -$ -$ 366,054$Construction in progress 3,045,462 5,712,400 - (463,272) 8,294,590

Total capital assets not being depreciated 3,411,516 5,712,400 - (463,272) 8,660,644Capital assets being depreciated:

Buildings 2,258,963 - - 463,272 2,722,235Equipment 5,685,679 132,897 - - 5,818,576Water and Sewer System 41,628,945 14,769 - - 41,643,714

Total capital assets being depreciated 49,573,587 147,666 - 463,272 50,184,525Less accumulated depreciation for:

Building and building improvements 1,068,096 48,908 - - 1,117,004Equipment 5,301,980 298,597 - - 5,600,577Water and Sewer System 21,150,348 995,574 - - 22,145,922

Total accumulated depreciation 27,520,424 1,343,079$ -$ -$ 28,863,503Total capital assets being depreciated, net 22,053,163 21,321,022

Gross Revenue capital assets, net 25,464,679 29,981,666

Solid WasteCapital assets not being depreciated:

Construction in progress 41,589$ 70,698$ -$ (80,198)$ 32,089$Capital assets being depreciated:

Buildings 126,528 - - - 126,528Equipment 4,141,699 461,660 - 80,198 4,683,557Infrastructure 1,305,850 33,814 - - 1,339,664

Total capital assets being depreciated 5,574,077 495,474 - 80,198 6,149,749Less accumulated depreciation for:

Buildings 126,528 - - - 126,528Equipment 3,331,586 305,503 - - 3,637,089Infrastructure 420,163 53,163 - - 473,326

Total accumulated depreciation 3,878,277 358,666$ -$ -$ 4,236,943Total capital assets being depreciated, net 1,695,800 1,912,806

Solid Waste capital assets, net 1,737,389 1,944,895Business-type activities capital assets, net 27,202,068$ 31,926,561$



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Construction commitments

The government has active construction projects in the Gross Revenue Fund as of June 30,2018. At year-end, the government’s commitments with contractors are as follows:

Project Spent-to-date Remaining CommitmentErwin Farms Sewer Rehab Design 1,392,501$ 797,099$Poovey Farms Sewer 643,074 124,451Poovey Farms, King Circle and W. Arch Street 495,419 1,843,380 Total 2,530,994$ 2,764,930$

B. Liabilities

1. Accounts Payable and Accrued Liabilities

Payables at June 30, 2018, were as follows:

General FundHospitality Tax

Fund

OtherGovernmental

FundsGross Revenue

FundSolidWaste Total

Payables:Accounts and vouchers 703,905$ -$ -$ 457,139$ -$ 1,161,044$Accrued payroll and related liabilities 346,775 1,755 - 32,732 19,052 400,314Accrued interest payable 1,949 - - 23,000 6,918 31,867Other 114,506 - - - 3,900 118,406

Total accounts payable and accrued liabilities 1,167,135$ 1,755$ -$ 512,871$ 29,870$ 1,711,631$

Fund Financial StatementsGovernmental-wide Financial Statements



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B. Liabilities

2. Capital Leases

The City has entered into several lease agreements for financing the construction andacquisition of capital assets. These lease agreements qualify as capital leases for accountingpurposes since titles transfer at the end of the lease terms. Therefore, certain leases havebeen recorded at the present value of the future minimum lease payments and as a result,building and equipment and the related liability is included in the government-wide financialstatements in the governmental activities column. Capital leases are also included in theproprietary fund financial statements and the business-type activities column of thegovernment-wide financial statements as equipment and a liability for the Gross RevenueFund and Solid Waste Fund as of the date of their inception.

At June 30, 2018, the City leased buildings, infrastructure, vehicles, and equipment valued at:Accumulated Net Book

Classes of Property Cost Depreciation ValueBuildings 180,505$ 103,038$ 77,467$Infrastructure 2,943,975 840,259 2,103,716Equipment 922,755 238,876 683,879Vehicles 786,081 236,558 549,523 Total 4,833,316$ 1,418,731$ 3,414,585$

Amortization of leased buildings, infrastructure, vehicles and equipment under capital assets isincluded with depreciation expense.

For the City, the future minimum lease payments as of June 30, 2018 were as follows:

Fiscal YearEnding June 30 Principal Interest Principal Interest

2019 185,228$ 7,406$ 432,508$ 43,735$2020 189,104 4,098 417,323 30,4692021 68,197 1,428 419,938 16,2362022 5,008 50 168,897 4,0712023 - - 89,768 1,688

447,537$ 12,982$ 1,528,434$ 96,199$

Governmental Activities Business - Type Activities



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B. Liabilities (continued)

3. State Revolving Loans

The City’s state revolving loans at June 30, 2018 are comprised of the following:

2000 State Revolving Loan – On August 8, 2000 the City received a StateWater Pollution Control Revolving Loan from the State of South CarolinaBudget and Control Board of $1,319,160 for sewer line rehabilitation andwastewater treatment plant improvements. The project was completed in2002 and only $1,299,879 of loan funds was used. The loan originally hadan interest rate of 3.5%. On December 7, 2011, the interest rate wasreduced to 2.25% and is payable in quarterly payments of $21,328,including principal and interest, and matures in October 2021. 286,367

2003 State Revolving Loan – On December 17, 2002, the City received aSewer Line Rehabilitation Revolving Loan of $952,151 for the secondphase of the sewer line rehabilitation and wastewater treatment plantimprovements. The loan originally had an interest rate of 3.75%. OnDecember 7, 2011, the interest rate was lowered to 2.25% and is payablein quarterly payments of $15,575, including principal and interest, andmatures in October 2023. 321,439

2007 State Revolving Loan – On March 6, 2007, the City received a StateWater Pollution Control Revolving Loan from the State of South CarolinaBudget and Control Board of $6,253,919 for the wastewater treatmentplant upgrade and expansion. The loan has an interest rate of 1% and ispayable in quarterly payments of $86,349, including principal and interest,and matures in March 2028.

2016 State Revolving Loan – On August 16, 2016, the City receivedapproval for a State Water Pollution Control Revolving Loan from the Stateof South Carolina Budget and Control Board of $3,612,367 for the upgradeof expansion of the Erwin Farms wastewater treatment plant. The loanhas an interest rate of 1% and is payable in quarterly payments of $34,881,including principal and interest, and matures January 1, 2028. ThroughJune 30, 2018, the City has drawn down $1,971,406 of the loan proceedsand expects to draw the remaining amount as the construction project iscompleted during the year ended June 30, 2019.

3,204,841

1,919,618

Total State Revolving LoansLess amount representing current portionLong-term portion

5,732,265 553,904$ 5,178,361



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3. State Revolving Loans (continued)

On July 14, 2017, the City received conditional approval for a South Carolina Water QualityRevolving Fund Authority Loan with a principal amount of $2,540,599. This loan will be used to paythe rehabilitation costs of the City’s West Arch Street Sewer Rehabilitation – Basin and PooveyFarms Sewer Rehabilitation – Basin 23 projects. The interest rate on the loan will be 1.00% for thefirst 20 years of the loan and 1.5% for the last 10 years of the loan. The first payment will be dueMarch 1, 2019. No draws have been requested from this loan as of June 30, 2018.

Annual debt service requirements to maturity for this debt is as follows:

Principal Interest553,904$ 49,535$561,173 78,628568,554 71,359533,272 63,979496,652 56,605

2,315,360 202,696703,350 116,745

5,732,265$ 639,547$2028-2032

20212022

Business-type ActivitiesFiscal Year EndingJune 30

2023-2027

201820192020

4. Long-term Obligation Activity

The following is a summary of changes in the City’s long-term obligations as of June 30, 2018:

For governmental activities, compensated absences payable are liquidated by the General Fund.

CurrentBalance Balance Portion ofJuly 1, June 30, Long-term2017 Additions Payments 2018 Liabilities

Governmental Activities:Capitalized leases 628,996$ -$ 181,459$ 447,537$ 185,228$Net pension plan liability 14,306,977 (71,121) - 14,235,856 -Net OPEB liability 744,456 3,537 740,919 -Compensated absences 354,089 87,910 75,291 366,708 61,118

Total governmental activities 16,034,518$ 20,326$ 256,750$ 15,791,020$ 246,346$

Business-type Activities:Capitalized leases 1,436,066$ 433,000$ 340,632$ 1,528,434$ 432,508$Refunding bond and State

Revolving loans 4,256,119 1,971,406 495,260 5,732,265 553,904Compensated absences 148,128 27,343 25,355 150,116 25,019

Total business-type activities 5,840,313$ 2,431,749$ 861,247$ 7,410,815$ 1,011,431$



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4. Long-term Obligation Activity (continued)

The total interest incurred for the year ended June 30, 2018 was $141,678. Of this amount,$3,967 was capitalized as a component of the cost of capital assets constructed during the year.

5. Computation of Legal Debt Limitation

The City’s general obligation debt is limited by law to 8% of the total assessed value of all taxablereal and personal property within the City limits. The latest projected assessed value as of June30, 2018 was $31,960,755. The computation of legal debt limits is as follows:

General obligation debt limitation ($31,960,755 x 8%) $2,556,761

General obligation debt at June 30, 2018 -

Excess of debt limit over general obligation debt $2,556,761

6. Employee Retirement Systems

Plan DescriptionThe City is a participating employer in two statewide, cost sharing, multiple-employer definedbenefit pension plans administered by the Retirement Division of the South Carolina PublicEmployee Benefit Authority (PEBA): the South Carolina Retirement System (SCRS) and theSouth Carolina Police Officers Retirement System (PORS). PEBA has an 11-member Board ofDirectors, appointed by the Governor and General Assembly leadership, which serves as co-trustee and co-fiduciary of the systems and the trust funds. By law, the State FiscalAccountability Authority, which consists of five elected officials, also reviews certain PEBABoard decisions regarding the funding of the Systems and serves as a co-trustee of theSystems in conducting that review. PEBA issues a Comprehensive Annual Financial Report(CAFR) containing financial statements and required supplementary information for the SouthCarolina Retirement Systems’ Pension Trust Funds. The CAFR is publicly available on theRetirement Benefits’ link on PEBA’s website at www.peba.sc.gov, or a copy may be obtained bysubmitting a request to PEBA, 202 Arbor Lake Drive, Columbia, SC 29223. PEBA is considereda division of the primary government of the state of South Carolina and therefore, retirementtrust fund financial information is also included in the comprehensive annual financial report ofthe state.

The South Carolina Retirement System (SCRS), a cost–sharing multiple-employer definedbenefit pension plan, was established effective July 1, 1945, pursuant to the provisions ofSection 9-1-20 of the South Carolina Code of Laws for the purpose of providing retirementallowances and other benefits for employees of the state, its public school districts, and politicalsubdivisions.



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6. Employee Retirement Systems (continued)

Plan Description (continued)

The South Carolina Police Officers Retirement System (PORS), a cost–sharing multiple-employer defined benefit pension plan, was established effective July 1, 1962, pursuant to theprovisions of Section 9-11-20 of the South Carolina Code of Laws for the purpose of providingretirement allowances and other benefits for police officers and firemen of the state and itspolitical subdivisions.

MembershipMembership requirements are prescribed in Title 9 of the South Carolina Code of Laws. A briefsummary of the requirements under each system is presented below.

· SCRS - Generally, all employees of covered employers are required to participate in andcontribute to the system as a condition of employment. This plan covers general employeesand teachers and individuals newly elected to the South Carolina General Assemblybeginning with the November 2012 general election. An employee member of the system withan effective date of membership prior to July 1, 2012, is a Class Two member. An employeemember of the system with an effective date of membership on or after July 1, 2012, is aClass Three member.

· PORS - To be eligible for PORS membership, an employee must be required by the terms ofhis employment, by election or appointment, to preserve public order, protect life andproperty, and detect crimes in the state; to prevent and control property destruction by fire; orto serve as a peace officer employed by the Department of Corrections, the Department ofJuvenile Justice, or the Department of Mental Health. Probate judges and coroners may electmembership in PORS. Magistrates are required to participate in PORS for service as amagistrate. PORS members, other than magistrates and probate judges, must also earn atleast $2,000 per year and devote at least 1,600 hours per year to this work, unless exemptedby statute. An employee member of the system with an effective date of membership prior toJuly 1, 2012, is a Class Two member. An employee member of the system with an effectivedate of membership on or after July 1, 2012, is a Class Three member.

BenefitsBenefit terms are prescribed in Title 9 of the South Carolina Code of Laws. PEBA does not havethe authority to establish or amend benefit terms without a legislative change in the code oflaws. Key elements of the benefit calculation include the benefit multiplier, years of service, andaverage final compensation. A brief summary of benefit terms for each system is presentedbelow.



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Benefits (continued)

· SCRS - A Class Two member who has separated from service with at least five or moreyears of earned service is eligible for a monthly pension at age 65 or with 28 years creditedservice regardless of age. A member may elect early retirement with reduced pensionbenefits payable at age 55 with 25 years of service credit. A Class Three member who hasseparated from service with at least eight or more years of earned service is eligible for amonthly pension upon satisfying the Rule of 90 requirement that the total of the member’s ageand the member’s creditable service equals at least 90 years. Both Class Two and ClassThree members are eligible to receive a reduced deferred annuity at age 60 if they satisfy thefive- or eight-year earned service requirement, respectively. An incidental death benefit is alsoavailable to beneficiaries of active and retired members of employers who participate in thedeath benefit program.

The annual retirement allowance of eligible retirees or their surviving annuitants is increasedby the lesser of one percent or five hundred dollars every July 1. Only those annuitants inreceipt of a benefit on July 1 of the preceding year are eligible to receive the increase.Members who retire under the early retirement provisions at age 55 with 25 years of serviceare not eligible for the benefit adjustment until the second July 1 after reaching age 60 or thesecond July 1 after the date they would have had 28 years of service credit had they notretired.

· PORS - A Class Two member who has separated from service with at least five or moreyears of earned service is eligible for a monthly pension at age 55 or with 25 years of serviceregardless of age. A Class Three member who has separated from service with at least eightor more years of earned service is eligible for a monthly pension at age 55 or with 27 years ofservice regardless of age. Both Class Two and Class Three members are eligible to receive adeferred annuity at age 55 with five or eight years of earned service, respectively. Anincidental death benefit is also available to beneficiaries of active and retired members ofemployers who participate in the death benefit program. Accidental death benefits are alsoprovided upon the death of an active member working for a covered employer whose deathwas a natural and proximate result of an injury incurred while in the performance of duty.

The retirement allowance of eligible retirees or their surviving annuitants is increased by thelesser of one percent or five hundred dollars every July 1. Only those annuitants in receipt ofa benefit on July 1 of the preceding year are eligible to receive the increase.



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ContributionsContributions are prescribed in Title 9 of the South Carolina Code of Laws. The PEBA Boardmay increase the SCRS and PORS employer and employee contribution rates on the basis ofthe actuarial valuations, but any such increase may not result in a differential between theemployee and employer contribution rate that exceeds 2.9 percent of earnable compensation forSCRS and 5 percent for PORS. An increase in the contribution rates adopted by the board maynot provide for an increase of more than one-half of one percent in any one year. If thescheduled employee and employer contributions provided in statute or the rates last adopted bythe board are insufficient to maintain a thirty year amortization schedule of the unfundedliabilities of the plans, the board shall increase the contribution rates in equal percentageamounts for the employer and employee as necessary to maintain the thirty-year amortizationperiod; and, this increase is not limited to one-half of one percent per year.

If the most recent annual actuarial valuation of the Systems for funding purposes shows a ratioof the actuarial value of system assets to the actuarial accrued liability of the system (the fundedratio) that is equal to or greater than ninety percent, then the board, effective on the followingJuly first, may decrease the then current contribution rates upon making a finding that thedecrease will not result in a funded ratio of less than ninety percent. Any decrease incontribution rates must maintain the 2.9 and 5 percent differentials between the SCRS andPORS employer and employee contribution rates respectively. If contribution rates aredecreased pursuant to this provision, and the most recent annual actuarial valuation of thesystem shows a funded ratio of less than ninety percent, then effective on the following Julyfirst, and annually thereafter as necessary, the board shall increase the then current contributionrates until a subsequent annual actuarial valuation of the system shows a funded ratio that isequal to or greater than 90 percent.

The Retirement System Funding and Administration Act of 2017 increases employercontribution rates to 13.56 percent for SCRS and 16.24 percent for PORS, effective July 1,2017. It also removes the 2.9 percent and 5 percent differential and increases and establishesa ceiling on employee contribution rates at 9 percent and 9.75 percent for SCRS and PORSrespectively. The employer contribution rates will continue to increase annually by 1 percentthrough July 1, 2022. The legislation’s ultimate scheduled employer rate is 18.56 percent forSCRS and 21.24 percent for PORS. The amortization period is scheduled to be reduced oneyear for each of the next 10 years to a twenty year amortization schedule. The recent pensionreform legislation also changes the long term funded ratio requirement from ninety to eighty-five.



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Contributions (continued)As noted earlier, both employees and the City are required to contribute to the Plans at ratesestablished and as amended by the PEBA. The City’s contributions are actuarially determinedbut are communicated to and paid by the City as a percentage of the employees’ annual eligiblecompensation.

Required employee contribution rates for fiscal year 2017-2018 are as follows:

SCRSEmployee Class Two 9.00% of earnable compensationEmployee Class Three 9.00% of earnable compensation

PORSEmployee Class Two 9.75% of earnable compensationEmployee Class Three 9.75% of earnable compensation

Required employer contributions for fiscal year 2017-2018 are as follows:

SCRSEmployee Class Two 13.41% of earnable compensationEmployee Class Three 13.41% of earnable compensationEmployer Incidental Death Benefit 0.15% of earnable compensation

PORSEmployee Class Two 15.84% of earnable compensationEmployee Class Three 15.84% of earnable compensationEmployer Incidental Death Benefit .20% of earnable compensationEmployer Accidental Death Program .20% of earnable compensation



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Contributions (continued)









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Contributions (continued)

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and DeferredInflows of Resources Related to Pensions

At June 30, 2018, the City reported liabilities totaling $9,121,479 and $5,114,377 for its-proportionate share of the net pension liability (NPL) of SCRS and PORS, respectively. The netpension liability is calculated separately for each system and represents that particular system’stotal pension liability determined in accordance with GASB No. 67 less that System’s fiduciarynet position. The net pension liabilities were determined by actuarial valuations as of July 1,2016. The total pension liability was then rolled forward to the measurement date of June 30,2017 utilizing updated procedures incorporating the actuarial assumptions. The City’sproportion of the net pension liabilities for each plan was based on a projection of the City’s









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Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and DeferredInflows of Resources Related to Pensions (continued)

long-term share of future payroll covered by each pension plan relative to the projected futurepayroll covered by each pension plan of all participating employers in SCRS and PORS,respectively, actuarially determined. At June 30, 2017, the City’s proportion was .040519% and.018669% for SCRS and PORS, respectively. At June 30, 2016, the City’s proportion was.042483% and .20630% for SCRS and PORS, respectively.

For the year ended June 30, 2018, the City recognized pension expense of $793,588 and$461,352 for SCRS and PORS, respectively. At June 30, 2018, the City reported deferredoutflows of resources and deferred inflows of resources related to pension from the followingsources:

DeferredOutflows ofResources

DeferredInflows of

Resources


DeferredInflows of

ResourcesDifferences betweenexpected and actualexperience 35,608$ -$ 45,606$ -$Net difference betweenprojected and actualearnings on pension planinvestments 254,629 - 182,247 -Changes in assumptions 533,965 - 485,401 -Change in proportionalshare 9,344 421,565 - 427,113City contributionssubsequent to themeasurement date 479,457 - 366,102 - Total 1,313,003$ 421,565$ 1,079,356$ 427,113$

SCRS PORS



58





$479,457 and $366,102 reported as deferred outflows of resources related to pensions resultingfrom City contributions subsequent to the measurement date will be recognized as a decreaseof the net pension liability in the year ended June 30, 2019 for SCRS and PORS, respectively.Other amounts reported as deferred outflows of resources and deferred inflows of resources willbe recognized as pension expense as follows:

SCRS PORSYear ended June 30:

2019 106,483$ 80,516$2020 246,748 184,0172021 109,724 112,7922022 (50,974) (91,184)2023 -

Thereafter - -

Actuarial Assumptions and MethodsActuarial valuations involve estimates of the reported amounts and assumptions about theprobability of occurrence of events far into the future. Examples include assumptions aboutfuture employment, mortality, and future salary increases. Amounts determined during thevaluation process are subject to continual revision as actual results are compared with pastexpectations and new estimates are made about the future. South Carolina state statuterequires that an actuarial experience study be completed at least once in each five-year period.An experience report on the Systems was most recently issued as of July 1, 2015.

The June 30, 2017, total pension liability (TPL), net pension liability (NPL), and sensitivityinformation shown in this report were determined by a consulting actuary, Gabriel, Roeder,Smith and Company (GRS) and are based on an actuarial valuation performed as of July 1,2016. The total pension liability was rolled-forward from the valuation date to the plans’ fiscalyear end, June 30, 2017, using generally accepted actuarial principles. The Retirement SystemFunding and Administration Act of 2017 was signed into law April 25, 2017, and included aprovision to reduce the assumed rate of return from 7.50% to 7.25% effective July 1, 2017. As aresult of this legislation, GRS made an adjustment to the calculation of the roll-forward totalpension liability for this assumption change as of the measurement date of June 30, 2017.



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The following table provides a summary of the actuarial assumptions and methods used tocalculate the TPL as of June 30, 2017.

SCRS PORSActuarial cost method Entry Age Normal Entry Age NormalAcutarial assumptions:

Investment rate of return 7.25% 7.25%Projected salary increases 3.0% to 12.5% (varies

by service)3.5% to 9.5% (varies

by service)Includes inflation at 2.25% 2.25%Benefit adjustments lesser of 1% or $500 lesser of 1% or $500



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The post-retiree mortality assumption is dependent upon the member’s job category andgender. The base mortality assumptions, the 2016 Public Retirees of South Carolina Mortalitytable (2016 PRSC), was developed using the Systems’ mortality experience. These base ratesare adjusted for future improvement in mortality using published Scale AA projected from theyear 2016.

Assumptions used in the determination of the June 30, 2017, TPL are as follows.

The long-term expected rate of return on pension plan investments was based upon 30 yearcapital market assumptions. The long-term expected rate of returns represent assumptionsdeveloped using an arithmetic building block approach primarily based on consensusexpectations and market based inputs. Expected returns are net of investment fees.

The expected returns, along with the expected inflation rate, form the basis for the target assetallocation adopted at the beginning of the 2017 fiscal year. The long-term expected rate ofreturn is produced by weighting the expected future real rates of return by the target allocationpercentage and by adding expected inflation and is summarized in the table on the followingpage. For actuarial purposes, the 7.25 percent assumed annual investment rate of return usedin the calculation of the TPL includes a 5.00 percent real rate of return and a 2.25 percentinflation component.

Former Job Class Males Females

Educators and Judges 2016 PRSC Malesmultiplied by 92%

2016 PRSC Femalesmultiplied by 98%

General Employees andMembers of the GeneralAssumbly

2016 PRSC Malesmultiplied by 100%


Public Safety andFirefighters

2016 PRSC Malesmultiplied by 125%




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Asset ClassTarget Asset

Allocation

ExpectedArithmetic RealRate of Return

Long TermExpected

Portfolio RealRate of Return

Global Equity 45.0%Global Public Equity 31.0% 6.72% 2.08%Private Equity 9.0% 9.60% 0.86%Equity Options Strategies 5.0% 5.91% 0.30%

Real Assets 8.0%Real Estate 5.0% 4.32% 0.22%Commodities 2.0% 6.33% 0.13%Infrastructure 1.0% 6.26% 0.06%

Opportunistic 17.0%GTAA/Risk Parity 10.0% 4.16% 0.42%Hedge Funds (non-PA) 4.0% 3.82% 0.15%Other Opportunisitic Strategies 3.0% 4.16% 0.12%

Diversified Credit 18.0%Mixed Credit 6.0% 3.92% 0.24%Emerging Markets Debt 5.0% 5.01% 0.25%Private Debt 7.0% 4.37% 0.31%

Conservative Fixed Income 12.0%Core Fixed Income 10.0% 1.60% 0.16%Cash and Short Duration (Net) 2.0% 0.92% 0.02%

Total Expected Real Return 100.0% 5.32%Inflation for Actuarial Purposes 2.25%Total Expected Nominal Return 7.57%



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Discount RateThe discount rate used to measure the TPL was 7.25 percent. The projection of cash flowsused to determine the discount rate assumed that contributions from participating employers inSCRS and PORS will be made based on the actuarially determined rates based on provisions inthe South Carolina Code of Laws. Based on those assumptions, the System’s fiduciary netposition was projected to be available to make all the projected future benefit payments ofcurrent plan members. Therefore, the long-term expected rate of return on pension planinvestments was applied to all periods of projected benefit payments to determine the TPL.

Sensitivity AnalysisThe following presents the City’s proportionate share of the net pension liability calculated usingthe discount rate of 7.25 percent, as well as what the City’s proportionate share of the netpension asset or net pension liability would be if it were calculated using a discount rate that isone percentage point lower (6.25 percent) or one percentage point higher (8.25 percent) thanthe current rate:

Pension Plan Fiduciary Net PositionDetailed information regarding the fiduciary net position of the plans administered by PEBA isavailable in the Systems’ audited financial statements for the fiscal year ended June 30, 2017(including the unmodified audit opinion on the financial statements). Additional actuarialinformation is available in the accounting and financial reporting actuarial valuation as of June30, 2017. Copies are publicly available on PEBA’s Retirement Benefits’ website atwww.retirement.sc.gov, or a copy may be obtained by submitting a request to PEBA, PO Box11960, Columbia, SC 29211-1960.

System1.00% Decrease

(6.25%)Current Discount Rate

(7.25%)1.00% Increase

(8.25%)SCRS 11,756,333$ 9,121,479$ 7,522,741$PORS 6,905,382 5,114,377 3,703,626



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7. Other Post Employment Benefits Plan (OPEB)

Plan Description

The City's defined benefit postemployment healthcare plan (the Plan) provides medicalinsurance to eligible retirees under the Medicare eligible age of 65. Employees become eligiblewhen the employee qualifies for retirement benefits under the SCRS or PORS and has at least14 years of service with the City. The Plan is approved each year by City Council; thecontribution requirements of the City and plan members are established and amended byCouncil. These contributions are neither guaranteed nor mandatory. Council has retained theright to unilaterally modify its payments toward retiree health care benefits.

The Plan is affiliated with the South Carolina Other Retirement Benefits Employer Trust (SCORBET), an agent multiple-employer irrevocable trust administered by the MunicipalAssociation of South Carolina. Each participating employer is responsible for determining theappropriate amount of contributions to remit to the Trust. SC ORBET issues a publicly availablefinancial report that includes audited financial statements and required supplementaryinformation for the Plan. A copy of the report may be obtained by writing to: Chief FinancialOfficer for Risk Management Services, Municipal Association of SC, P.O. Box 12109, Columbia,South Carolina 29211.

Plan MembershipAs of January 1, 2017, the last actuarial valuation, there were 176 covered participants; 23members are retirees and dependents receiving benefits and 153 are active participants.

Funding Policy

Eligible retired employees and their spouses are eligible for health care coverage. The premiumfor retirees and spouses, if applicable, is based on the length of service with the City and thedate of their retirement. Retirees who retired prior to June 30, 2009 and active employees whoretire on or before January 1, 2010 with at least 10 years of service with the City as of theirretirement date or who retire after January 1, 2010 with at least 25 years of service with the Citywill receive a monthly premium subsidy of $200 from the City and will pay the differencebetween the City’s subsidy and the rate effective for active employees and spouses enrolled inthe Plan. Employees who retire after January 1, 2010 who have between 14 and 25 years ofservice to the City will receive a monthly premium subsidy of $200 from the City and will pay thedifference between the City’s subsidy and 1.25 times the rate effective for active employees andspouses enrolled in the Plan. All other eligible retirees may participate in the Plan at a premiumequal to 1.5 times the rate effective for active employees and spouses enrolled in the Plan.



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7. Other Post Employment Benefits Plan (OPEB) (continued)

Actuarial Methods and Assumptions

Actuarial valuations of the OPEB Plan involve estimates of the reported amounts andassumptions about the probability of occurrence of events far into the future. Examples includeassumptions about future employment, mortality, inflation, healthcare cost trend rates, andfuture salary changes. Amounts determined regarding the net OPEB liability are subject tocontinual revision as actual results are compared with past expectations and new estimates aremade about the future.

Projections of benefits for financial reporting purposes are based on the substantive OPEB Plan(the plan as understood by the employer and its members) and include the types of benefitsprovided at the time of each valuation and the historical pattern of sharing of benefit costsbetween the employer and plan members to that point. The actuarial methods and assumptionsused include techniques that are designed to reduce the effects of short-term volatility inactuarial accrued liabilities and the actuarial value of assets, consistent with the long-termperspective of the calculations.

The following table provides a summary of the significant actuarial assumptions and methodsused in the latest actuarial valuation for the OPEB Plan.

Actuarial Valuation Date January 1, 2017Actuarial Cost Method Entry Age NormalAmortization Method Level Percentage of Payroll, OpenAmortization Period 30 yearsAsset Valuation Method 5 Years Smoothed MarketActuarial Assumptions:

Inflation 2.25%Investment Rate of Return 4.75%

Healthcare Cost Trend RatePre-Medicare - 7.50% for 2017 decreasing to an ultimaterate of 5.00% for 2023, Medicare - 5.50% for 2016decreasing to an ultimate rate of 5.00% by 2020

Salary Increases SCRS - 3.00%; PORS - 3.50%

Coverage Elections90% of eligible retirees will elect coverage and 30% ofthose will elect to cover their spouse

Active Participation/Marriage 100% of all active employees are assumed to be married,with female spouses being 3 years younger than males



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Actuarial Methods and Assumptions (continued)

Mortality Table

Healthy SCRS and PORS - 2016 Public Retirees ofSouth Carolina Mortality Table; Disabled SCRS andPORS - RP-2014 Mortality Table for Employees with a95% multiplier for both males and females

The demographic actuarial assumptions for retirement, disability incidence, withdrawal, andsalary increases used in the January 1, 2017 valuation were based on the results of an actuarialexperience study adopted by SCRS and PORS.

The remaining actuarial assumptions (e.g., initial per capita costs, health care cost trends, rateof plan participation, rates of plan election, etc.) used in the January 1, 2017 valuation werebased on a review of recent plan experience done concurrently with the January 1, 2017valuation.

Long-term Expected Rate of Return

The long-term expected rate of return on OPEB Plan investments is based upon 35 year capitalmarket assumptions, as well as current consensus expectations and market based inputs. Thelong-term expected rate of returns represent assumptions developed using an arithmeticbuilding block approach and are presented net of investment fees. There are no municipalbond rate assumptions used in deriving the discount rate, and the discount rate forecast periodextends for 50 years. The expected returns, along with the expected inflation rate, form thebasis for the target asset allocation for the beginning of the 2017 fiscal year. The long-termexpected rate of return is produced by weighting the expected future real rates of return by thetarget allocation percentage and adding expected inflation.

Several factors should be considered in evaluating the long-term rate of return assumption,including long-term historical data, estimates inherent in current market data, and a log-normaldistribution analysis in which best-estimate ranges of expected future real rates of return(expected return, net of investment expense and inflation) are developed by the investmentconsultant for each major asset class. These ranges should be combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the targetasset allocation percentage and adding expected inflation. The capital market assumptionsdeveloped by the investment consultant may cover a shorter nvestment horizon and may not beuseful in setting the long-term rate of return for funding OPEB plans which are likely to cover alonger timeframe. The assumption is intended to be a long-term assumption and is notexpected to change absent a significant change in the asset allocation, a change in the inflationassumption, or a fundamental change in the market that alters expected returns in future years.



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Long-term Expected Rate of Return (continued)

As of the most recent adoption of the current long-term rate of return by the Plan, the targetasset allocation for each major asset class, as provided by the Plan, are summarized in thefollowing table:

Target Allocation

Fixed Income 94.3%Equity Funds 0.0%Cash and Cash Equivalents 5.7%

100.0%

Asset Class

OPEB Liabilities, OPEB Expense, and Deferred Outflows/Inflows of Resources Relatedto OPEB

The City’s net OPEB liability as of June 30, 2018 was measured as of December 31, 2017and the total OPEB liability used to calculate the net OPEB liability was determined by anactuarial valuation as of January 1, 2017 that was projected forward to the measurementdate of December 31, 2017.



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OPEB Liabilities, OPEB Expense, and Deferred Outflows/Inflows of Resources Related toOPEB (continued)

Total OPEBLiability

(a)

OPEB PlanFiduciary Net

Position(b)

Net OPEBLiability (Asset)

(a) - (b)

1,267,716$ 523,260$ 744,456$

Changes for the year:

Service cost 38,322 - 38,322

Interest 57,885 - 57,885

Difference between expected and actual experience 15,164 - 15,164

Contributions - employer - 114,316 (114,316)

Net investment income - 14,807 (14,807)

Benefit payments (99,316) (99,316) -

Administrative expense - (14,215) 14,215

Net changes 12,055 15,592 (3,537)

1,279,771$ 538,852$ 740,919$

Balances as of June 30, 2017 (measurement date of December31, 2016)

Balances as of June 30, 2018 (measurement date of December31, 2017)

For the year ended June 30, 2018, the City recognized OPEB expense of approximately$916,000. At June 30, 2018, the City reported deferred outflows of resources (deferred OPEBcharges) related to OPEB from the following sources:

Description


DeferredInflows ofResources

Differences between expected and actual experience 13,569$Employer contributions subsequent to the measurement date 13,800

27,369$ -$



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OPEB Liabilities, OPEB Expense, and Deferred Outflows/Inflows of Resources Related toOPEB (continued)

Approximately $14,000 that was reported as deferred outflows of resources related to the City’scontributions subsequent to the measurement date to the OPEB Plan. This amount will berecognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Otheramounts reported as deferred outflows of resources (deferred OPEB charges) related to theOPEB Plan will increase OPEB expense as follows:

Year ended June 30, Total2019 1,595$2020 1,5952021 1,5952022 1,5952023 1,595

Thereafter 5,594

13,569$

Discount Rate

The discount rate used to measure the total OPEB liability was 4.75%. The projection of cashflows used to determine the discount rate assumed that the City’s contributions will be made atrates equal to the actuarially determined contribution rates. Based on those assumptions, theOPEB plan’s fiduciary net position was projected to be available to make all projected OPEBpayments for current active and inactive employees. Therefore, the long-term expected rate ofreturn on OPEB plan investments was applied to all periods of projected benefit payments todetermine the OPEB liability.



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Sensitivity of the Net OPEB Liability to Changes in the Discount Rate

The following table presents the sensitivity of the City’s net OPEB liability to changes in thediscount rate, calculated using the discount rate of 4.75%, as well as what it would be if it werecalculated using a discount rate that is 1% point lower (3.75%) or 1% point higher (5.75%) thanthe current rate:

8. Deferred Outflows and Inflows of Resources

Deferred outflows and inflows of resources at year-end are comprised of the following:

Deferred DeferredOutflows Inflows

845,559$ -$

13,800 -Lot Clearing Fees (General Fund) - 11,081Vehicle Tax (General Fund) - 61,432Real Property Tax (General Fund) - 637,573Tax Rollback (General Fund) - 338,758Pension deferrals (General Fund) 1,546,800 848,678

13,569 -Installment sale (General Fund) - 720,000 Total 2,419,728$ 2,617,522$

Contributions to pension plans incurrent fiscal year (General Fund)Contributions to OPEB plan aftermeasurement date

OPEB deferrals (General Fund)

9. Risk Management

The City is exposed to various risks of loss related to torts; theft of, damage of, and destructionof assets; errors and omissions; injuries to employees; and natural disasters.

The City participates in the South Carolina Municipal Insurance and Risk Financing Fund(SCMIRF) to cover risk that may occur in normal operations. These risks include loss of realproperty and its contents, motor vehicles, losses due to errors and omissions, general liability,and theft and dishonesty.

1% Decrease(3.75%)

CurrentDiscount Rate

(4.75%)1% Increase

(5.75%)Net OPEB liability 872,928$ 740,919$ 624,941$



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9. Risk Management (continued)

The City participates in the South Carolina Municipal Insurance Trust (SCMIT) for the sharing ofrisk associated with workers’ compensation claims. The pooling agreement permits the pool tomake additional assessments to its members in addition to the annual premiums.

The City participates in a self-insurance medical program along with various othermunicipalities. The program is run by the State of South Carolina. This plan provides employeehealth benefits up to $1,000,000 in a lifetime maximum. All funds of the City participate in theprogram and make payments to the Program based on actuarial estimates of the amountsneeded to pay prior and current year claims and to establish a reserve for catastrophic losses.

The workers’ compensation policy provides coverage as required by statute. The automobileliability policy covers up to $1,000,000 per occurrence. The comprehensive general liabilitypolicy covers up to $1,000,000 per claim, and the crime policy covers up to $100,000 peroccurrence. The other policies essentially cover the amount of the loss. In the event a claim issettled for an amount exceeding the limits of these policies, the City would have to pay theexcess. Settled claims have not exceeded insurance coverage in any of the past three fiscalyears.

10. Interfund Balances and Activity

a. Due From/To Other Funds

The compositions of interfund balances as of June 30, 2018 are as follows:

General Gross Revenue Solid Waste HospitalityFund Fund Fund Fund Total

Receivable FundGeneral Fund -$ 414,808$ 137,113$ 7,030$ 558,951$Solid Waste Fund - 3,130 - - 3,130Gross Revenue Fund - - - 107 107

-$ 417,938$ 137,113$ 7,137$ 562,188$

Payable Fund

The interfund balances were used primarily for operating purposes. These amounts areexpected to be liquidated through normal operating activities of the individual funds.



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11. Commitments and Contingencies

The City participates in a number of federally assisted grant programs. These programs aresubject to program compliance audits by the grantor or their representatives. The amount ofprogram expenditures, which may be disallowed by the granting agencies cannot be predicted,although the City expects such amounts, if any, to be immaterial.

Various claims and lawsuits are pending against the City. In the opinion of the City’smanagement and City attorneys, the ultimate resolution of these legal matters will not have amaterial adverse effect on the City’s financial position.

During 2014, the City entered into an Order of Consent with the Environmental ProtectionAgency (EPA) wherein the EPA levied a fine of $70,800 against the City for discharges ofuntreated wastewater containing pollutants to navigable waters by the Catawba RiverWastewater Treatment Plant at locations not authorized by a National Pollutant DischargeElimination System (NPDES) permit in the current year and prior years. The unauthorizeddischarges were caused by blockages and other maintenance issues related to the wastewatertreatment system.

Under the Order, the City will develop and submit to the EPA various assessments of thewastewater collection and transmission system, plans for repairs and improvements to thewastewater collection and transmission system, and plans for monitoring the wastewatercollection and transmission system. The City estimates that the project will take up to sevenyears to complete. Management believes a reasonable estimate of the costs to meet therequirements of the Order of Consent will be between $14 million and $17 million. To date, theCity has been awarded grants totaling approximately $3.5 million and has received acommitment from the South Carolina State Revolving Loan Fund totaling $7.7 million to helpdefray the costs of the remediation. $1 million of the South Carolina State Revolving Loan Fundloan will be forgiven upon completion of the remediation project. The City anticipates it willreceive additional funding for the project as it progresses. Although substantial, the Citybelieves it has sufficient liquidity and borrowing capacity to handle the requirements of the Orderof Consent without creating an adverse effect on the City’s financial position.

On August 2, 2017, The City of Lancaster was informed by the management of the Duracellmanufacturing facility, owned by Berkshire Hathaway and located within the city limits ofLancaster, that it would be closing the doors of its plant in March 2019. This closing will have asignificant impact to the tax and utility revenues of the City in upcoming fiscal years. Althoughthe City does not expect a significant impact during the 2017-2018 fiscal year, subsequent fiscalyears will be significantly impacted. The potential overall revenue loss to the City is estimatedto be approximately $600,000 in property tax revenues and $150,000 a year in utility revenues.The closing will result in the loss of the City’s largest taxpayer and one of its largest utilitycustomers. The City has already begun planning for the decreased revenues in future fiscalyears and how to cope with the loss of revenue.



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C. Revenues, Expenditures and Expenses

1. Water Agreement – Lancaster County Water and Sewer District

The City of Lancaster entered into a Water Agreement with Lancaster County Water and SewerDistrict (LCWS) on October 11, 1994 to provide reserve water capacity. The agreement is for20 years with a renewal clause for an additional 20 years. Under this agreement fees areassessed based on a ratio of the annual water purchased by the City from LCWS and the totalwater purchased by LCWS. This ratio is multiplied by the annual debt payment LCWS incurredas a result of LCWS financing the cost of providing the additional reserve capacity to the City.The cost to the City for year ended June 30, 2018 was $633,637.

The City also entered into a Sewer Agreement with LCWS on October 11, 1994 to providetreatment and capacity of wastewater to LCWS. The agreement is for 20 years with a renewalclause for an additional 20 years. Fees are assessed in a manner similar to the wateragreement above. Revenue recognized by the City related to this agreement was $516,875 forthe year ended June 30, 2018.

D. Changes in Accounting Principles

The City adopted GASB Statement No. 75, Accounting and Financial Reporting forPostemployment Benefits Other Than Pensions (“GASB 75”) for the year ended June 30, 2018.The primary objective of this Statement is to improve accounting and financial reporting by stateand local governments for other postemployment benefits (“OPEB”). It is GASB’s intention thatGASB 75 will provide citizens and other users of the financial statements with a clearer picture ofthe size and nature of the City’s financial obligations to current and former employees for pastservices rendered.

In particular, GASB 75 requires the City to recognize a net OPEB liability, any related deferredoutflows/inflows of resources, and a more comprehensive measure of OPEB expense for the City’sOPEB plan, an agent multiple-employer defined benefit OPEB plan (“OPEB Plan”), on financialstatements prepared on the economic resources measurement focus and accrual basis ofaccounting (i.e., the Statement of Net Position) and present more extensive note disclosures.

The adoption of GASB 75 had no impact on the City’s governmental fund financial statements,which continue to report expenditures in the amount of the contributions made to the OPEB Plan.However, the adoption has resulted in the restatement of the City’s net position as of July 1, 2017for its government-wide financial statements to reflect the reporting of a net OPEB liability anddeferred outflows of resources for its OPEB Plan in accordance with the provisions of GASB 75.Net position of the City’s government-wide financial statements as of July 1, 2017 was decreasedby approximately $1,133,000, reflecting the cumulative change in accounting principle related tothe adoption of GASB 75. See Note II.B.7 for more information regarding the City’s OPEB Plan.



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D. Changes in Accounting Principles

Statement No. 81, Irrevocable Split-Interest Agreements, which was effective for the City’s yearending June 30, 2018. The primary objective of this Statement is to improve accounting andfinancial reporting by establishing recognition and measurement requirements for irrevocable split-interest agreements.1 Another objective of this Statement is to enhance the transparency anddecision-usefulness of general purpose external financial reports, and their value for assessingaccountability, by more clearly identifying resources that are available to a government. There wasno impact to the City from this pronouncement.

Statement No. 85, Omnibus 2018, which was effective for the City’s year ending June 30, 2018.The objective of this Statement is to address practice issues that have been identified duringimplementation and application of certain GASB Statements. There was no impact to the City fromthis pronouncement.

E. Pending Implementation of GASB Statements

The Governmental Accounting Standards Board (“GASB”) has issued the following statements:

Statement No. 83, Certain Asset Retirement Obligations, which is effective for the City’s year endingJune 30, 2019. The primary objective of this Statement is to enhance comparability of financialstatements among governments by establishing uniform criteria for governments to recognize andmeasure certain Asset Retirement Obligations (ARO), including obligations that may not have beenpreviously reported. The effect of implementation of the Statement on the financial statements hasnot been determined.

Statement No. 84, Fiduciary Activities, which is effective for the City’s year ending June 30, 2020.The objective of this Statement is to improve guidance regarding the identification of fiduciaryactivities for accounting and financial reporting purposes and how those activities should bereported. The effect of implementation of the Statement on the financial statements has not beendetermined.

Statement No. 86, Certain Debt Extinguishment Issues, which is effective for the City’s year endingJune 30, 2019. The primary objective of this Statement is to improve consistency in accounting andfinancial reporting for in-substance defeasance of debt by providing guidance for transactions inwhich cash and other monetary assets acquired with only existing resources – resources other thanthe proceeds of refunding debt – are place in an irrevocable trust for the sole purpose ofextinguishing debt. The effect of implementation of the Statement on the financial statements hasnot been determined.

Statement No. 87, Leases, which is effective for the City’s year ending June 30, 2021. Theobjective of this Statement is better meet the information needs of financial statement users byimproving accounting and financial reporting for leases by governments. The effect ofimplementation of the Statement on the financial statements has not been determined.



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D. Pending Implementation of GASB Statements (continued)

Statement No. 88, Certain Disclosures Related to Debt, Including Borrowings and DirectPlacements, which is effective for the City’s year ending June 30, 2019. The objective of thisStatement is to improve the information that is disclosed in notes to government financialstatements related to debt, including direct borrowings and direct placements. It also clarifies whichliabilities governments should include when disclosing information related to debt. The effect ofimplementation of the Statement on the financial statements has not been determined.

Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period,which is effective for the City’s year ending June 30, 2021. The objectives of this Statement are (1)to enhance the relevance and comparability of information about capital assets and the cost ofborrowing for a reporting period and (2) to simplify accounting for interest cost incurred before theend of a construction period. The effect of implementation of the Statement on the financialstatements has not been determined.

Statement No. 90, Majority Equity Interests, which is effective for the City’s year ending June 30,2020. The objectives of this Statement are to improve the consistency and comparability ofreporting a government’s majority equity interest in a legally separate organization and to improvethe relevance of financial statement information for certain component units. The effect ofimplementation of the Statement on the financial statements has not been determined.

The City has evaluated all events subsequent to the balance sheet date of June 30, 2018, throughFebruary 19, 2019, which is the date these financial statements were issued, and have determinedthat there are no additional subsequent events that require disclosure.

REQUIRED SUPPLEMENTARY FINANCIAL INFORMATION

Schedule 1CITY OF LANCASTER, SOUTH CAROLINA

Schedule of Proportionate Share of Net Pension LiabilitySouth Carolina Retirement SystemLast Five Fiscal Years *

2018 2017 2016 2015 2014

City of Lancaster's proportion of the net pension liability (%) 0.040519% 0.042483% 0.043884% 0.043699% 0.043699%

City of Lancaster's proportion of the net pension liability ($) 9,121,479$ 9,074,306$ 8,322,812$ 7,523,519$ 7,838,042$

City of Lancaster's covered payroll 3,888,296$ 4,113,932$ 4,110,619$ 3,984,189$ 3,665,267$

City of Lancaster's proportionate share of the net pension liability as a percentage of its covered payroll 234.59% 220.58% 202.47% 188.83% 213.85%

Plan fiduciary net position as a percentage of the total pension liability 53.30% 52.90% 57.00% 59.90% 56.39%

* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.

Year Ended June 30,

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Schedule of ContributionsSouth Carolina Retirement SystemLast Ten Fiscal Years

2018 2017 2016 2015 2014 2013 2012 2011 2010 2009Contractually required contribution 479,457$ 466,309$ 448,068$ 420,531$ 415,210$ 383,020$ 338,112$ 332,766$ 317,818$ 307,708$

Contributions in relation to the contractually required contribution 479,457 466,309 448,068 420,531 415,210 383,020 338,112 332,766 317,818 307,708

Contribution deficiency (excess) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

City of Lancaster's covered payroll 3,888,296$ 4,086,848$ 4,113,932$ 4,110,619$ 3,984,189$ 3,665,267$ 3,602,684$ 3,601,365$ 3,383,731$ 3,330,169$

Contributions as a percentage of covered-employee payroll 12.33% 11.41% 10.89% 10.23% 10.42% 10.45% 9.39% 9.24% 9.39% 9.24%

Year ended June 30,

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Schedule of Proportionate Share of Net Pension LiabilityPolice Officers' Retirement SystemLast Five Fiscal Years *

2018 2017 2016 2015 2014

City of Lancaster's proportion of the net pension liability (%) 0.018669% 0.206300% 0.207500% 0.216920% 0.216920%

City of Lancaster's proportion of the net pension liability ($) 5,114,377$ 5,232,671$ 4,522,433$ 4,152,757$ 4,496,671$

City of Lancaster's covered payroll 2,481,968$ 2,625,241$ 2,570,626$ 2,568,885$ 2,362,887$

City of Lancaster's proportionate share of the net pension liability as a percentage of its covered payroll 206.06% 199.32% 175.93% 161.66% 190.30%

Plan fiduciary net position as a percentage of the total pension liability 60.90% 60.40% 64.60% 67.50% 62.98%

* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.

Year Ended June 30,

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Schedule of ContributionsPolice Officers' Retirement SystemLast Ten Fiscal Years

2018 2017 2016 2015 2014 2013 2012 2011 2010 2009Contractually required contribution 366,102$ 347,748$ 360,330$ 334,993$ 320,924$ 281,184$ 280,427$ 279,993$ 279,998$ 273,803$

Contributions in relation to the contractually required contribution 366,102 347,748 360,330 334,993 320,924 281,184 280,427 279,993 279,998 273,803

Contribution deficiency (excess) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

City of Lancaster's covered payroll 2,481,968$ 2,512,627$ 2,625,241$ 2,570,626$ 2,568,885$ 2,362,887$ 2,467,898$ 2,695,355$ 2,533,923$ 2,570,923$

Contributions as a percentage of covered payroll 14.750% 13.840% 13.726% 13.032% 12.493% 11.900% 11.363% 10.388% 11.050% 10.650%

Year ended June 30,

79


Schedule of Changes in Net OPEB Liability and Related Ratios

Last Fiscal Year

Year EndedJune 30, 2018

Total OPEB liability:Service cost 38,322$Interest 57,885Differences between expective and actual experience 15,164Benefit payments, including refunds of member contributions (99,316)

Net change in total OPEB liability 12,055

Total OPEB liability - beginning of year 1,267,716Total OPEB liability - end of year (a) 1,279,771

OPEB plan fiduciary net position:Employer contribution 114,316Net investment income 14,807Benefit payments, including refunds of member contributions (99,316)Administrative expense (14,215)

Net change in OPEN plan fiduciary net position 15,592

OPEB plan fiduciary net position - beginning of year 523,260OPEB plan fiduciary net position - end of year (b) 538,852

Net OPEB liability (asset) - end of year (a) - (b) 740,919$

OPEB plan fiduciary net position as a percentage of the total OPEB liability 42.11%

Covered payroll 5,425,669$

Net OPEB liability as a percentage of covered payroll 13.66%

Notes to Schedule:

The amounts presented for each fiscal year were determined as of December 31 of thepreceding year (measurement date). The City adopted GASB #75 during the year endedJune 30, 2018. Information is not available for prior years.

80


Schedule of Contributions to the OPEB plan

Last Fiscal Year

Year EndedJune 30, 2018

Actuarially determined contribution 61,650$Contributions in relation to the actuarially determined contribution 114,316

Contribution deficiency (excess) (52,666)$

Covered payroll 5,425,669$

Contributions as a percentage of covered employee payroll 2.11%

Notes to schedule:

The City adoped GASB #75 during the year ended June 30, 2018. Information is not availablefor prior years.

Valuation date: January 1, 2017

Methods and suumptions used to determine contribution rates:

Actuarial cost method Entry age normalAmortization method Level percentage of payroll, openAmortization period 30 yearsAsset valuation method 5 years smoothed marketInflation 2.25%Healthcare cost trends rates Pre-medicare - 7.50% for 2017 decreasing to an ultimate

rate of 5.50% by 2023, Medicare - 5.50% for 2016decreasing to an ultimate rate of 5.00% by 2020

Salary increases SCRS - 3.0% - 7.0%; PORS - 3.5% - 9.5%Investment rate of return 4.75%, net of OPEB plan investment expenses, including

inflationCoverage elections 90% of eligible retirees will elect coverage and 30% of

those will elect to cover the spouseActive participation/marriage 100% of all active employees are assumed to be

married, with female spouses being 3 years younter thanmales

Retirement age 2016 experience study adopted for the SCRS and PORSpension plans

Mortality Healthy SCRS and PORS - 2016 Public Retirees ofSouth Carolina Mortality Table; disabled SCRS andPORS - RP-2014 Mortality Table for Employees with a95% multiplier for both males and females.

Other information:None

81

COMBINING AND INDIVIDUAL FUND STATEMENT SECTION

GOVERNMENTAL FUNDS


General FundComparative Balance Sheets

June 30, 2018 and 2017

2018 2017Assets

Cash and cash equivalents 9,170,110$ 7,068,751$Receivables:

Taxes, net 721,359 409,056Intergovernmental 290,663 281,829Mortgages 720,000 770,000Taxes - other 306,717 363,138Due from other funds 558,951 541,712

Committed assets - cash and cash equivalents 1,329,693 1,794,812Restricted assets - cash and cash equivalents 120,996 117,809Inventory 20,150 13,734

Total assets 13,238,639$ 11,360,841$

LiabilitiesAccounts payable and accrued expenses 1,167,135$ 1,131,784$Compensated absences payable 60,387 58,270

Total liabilities 1,227,522 1,190,054

Deferred inflows of resourcesTax rollback 338,758 904,137Property taxes 637,573 237,856Vehicle tax 61,432 54,421Lot clearing fees 11,081 13,169Installment sale 720,000 770,000

Total deferred inflows of resources 1,768,844 1,979,583

Fund balancesNonspendable:

Inventory 20,150 13,734Restricted:

Drug fund 120,996 117,809Committed:

Downtown development 1,165,016 1,036,014Economic development 50,030 25,000

Assigned:Main street project 5,000 5,000Subsequent year's expenditures 821,000 446,528

Unassigned 8,060,081 6,547,119Total fund balances 10,242,273 8,191,204

Total liabilities, deferred inflows of resources and fund balances 13,238,639$ 11,360,841$

84


General FundSchedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

For the Fiscal Year Ended June 30, 2018(With Comparative Actual Amounts for the Fiscal Year Ended June 30, 2017)

2017VariancePositive

Budget Actual (Negative) Actual

Revenues:Taxes:

Property taxes 2,475,000$ 2,700,532$ 225,532$ 2,854,394$Vehicle taxes 280,000 222,518 (57,482) 258,035Motor carrier taxes 60,000 57,465 (2,535) 67,237Homestead 228,000 235,043 7,043 227,839Delinquent taxes 110,000 5,237 (104,763) 147,303Tax penalties 30,000 30,551 551 32,893Local option sales tax 2,830,000 3,018,778 188,778 2,800,566

Total taxes 6,013,000 6,270,124 257,124 6,388,267

Fines, fees, licenses, and permits:Victim's services 20,000 13,442 (6,558) 18,854Court fines 225,000 179,007 (45,993) 251,648Duke power fees 700,000 652,382 (47,618) 659,377Certification fees 3,000 3,700 700 3,240Franchise fees 120,000 132,687 12,687 134,517Privilege licenses 1,950,000 2,328,188 378,188 2,175,554Building permits 30,000 87,663 57,663 27,630Payments in lieu of taxes 570,000 685,465 115,465 704,599

Total fines, fees, licenses, and permits 3,618,000 4,082,534 464,534 3,975,419

Intergovernmental revenues:State shared revenue 185,000 192,576 7,576 195,258Merchants inventory 70,000 71,687 1,687 71,687Accomodations tax 45,000 60,465 15,465 60,234Exemption 145,306 138,387 (6,919) 145,743County note payments 199,060 50,000 (149,060) 50,000

Total intergovermental 644,366 513,115 (131,251) 522,922

2018

Schedule 8Page 1 of 6

85




2018 2017VariancePositive


Revenues (continued):Charges for services:

Lot clearing 10,000$ 17,773$ 7,773$ 733$Fire protection contracts 30,000 34,699 4,699 34,699School guards 70,000 51,642 (18,358) 37,523See Lancaster - - - -Performing arts - - - -

Total charges for services 110,000 104,114 (5,886) 72,955

Grants - 10,000 10,000 96,353

Interest 30,000 81,643 51,643 44,245

Other revenues:Insurance proceeds 20,000 27,038 7,038 45,844Sale of assets 10,000 - (10,000) 280Police revenues 25,000 27,934 2,934 25,699Miscellaneous 10,000 163,362 153,362 93,787Donations 13,000 23,144 10,144 15,250Cemetary fees 10,000 6,600 (3,400) 6,450Planning and zoning 2,000 2,490 490 2,060

Total other 90,000 250,568 160,568 189,370

Total revenues 10,505,366 11,312,098 806,732 11,289,531

Expenditures:General administration:

Mayor and council:Personnel services 78,787 74,601 4,186 77,571Operating expenses 30,425 24,176 6,249 42,785

Total mayor and council 109,212 98,777 10,435 120,356


86

Schedule 8Page 3 of 6CITY OF LANCASTER, SOUTH CAROLINA




Budget Actual (Negative) ActualExpenditures (continued):

General administration (continued):City administrator:

Personnel services 253,445$ 228,733$ 24,712$ 234,740$Operating expenses 22,200 15,678 6,522 19,289

Total city administator 275,645 244,411 31,234 254,029

Building and grounds maintenance:Personnel services 103,316 102,038 1,278 206,922Operating expenses 28,649 27,379 1,270 34,234Capital outlay - - - -

Total building and grounds maintenance 131,965 129,417 2,548 241,156

Human resources:Personnel services 190,638 187,206 3,432 163,178Operating expenses 128,970 91,306 37,664 81,787 Total human resources 319,608 278,512 41,096 244,965

Finance:Personnel services 182,321 181,008 1,313 267,914Operating expenses 32,000 19,915 12,085 27,890 Total finance 214,321 200,923 13,398 295,804

Information technology:Personnel services 141,105 135,617 5,488 117,794Operating expenses 383,400 313,532 69,868 430,806 Total information technology 524,505 449,149 75,356 548,600

Legal services:Personnel services 19,368 15,847 3,521 22,010Operating expenses 21,200 19,690 1,510 19,031

Total legal services 40,568 35,537 5,031 41,041

General expense:Personnel services 984,700 712,281 272,419 768,036Operating expenses 1,114,150 839,038 275,112 929,721 Total general expense 2,098,850 1,551,319 547,531 1,697,757

87






General administration (continued):Administrative services:

Personnel services 176,847$ 169,127$ 7,720$ 209,476$Operating expenses 27,400 18,717 8,683 27,369

Total administrative services 204,247 187,844 16,403 236,845

Total general administration 3,918,921 3,175,889 743,032 3,680,553

Public safety:Police:

Personnel services 2,397,619 2,096,378 301,241 2,135,072Operating expenses 395,355 336,107 59,248 283,884Capital outlay 41,642 28,618 13,024 - Total police 2,834,616 2,461,103 373,513 2,418,956

Victims' services:Personnel services 20,568 20,071 497 20,584Operating expenses 4,700 4,294 406 3,070

Total victims' services 25,268 24,365 903 23,654

Law enforcement block grant:Operating expenses - - - 20,347

Judiciary:Personnel services 202,833 189,279 13,554 196,368Operating expenses 197,600 142,846 54,754 177,345

Total judiciary 400,433 332,125 68,308 373,713

Fire:Personnel services 1,491,995 1,364,982 127,013 1,275,096Operating expenses 142,745 120,979 21,766 132,285 Total fire 1,634,740 1,485,961 148,779 1,407,381

Total public safety 4,895,057 4,303,554 591,503 4,244,051


88






Expenditures (continued):Public works:

Street division:Personnel services 317,446$ 299,950$ 17,496$ 366,216$Operating expenses 452,300 429,949 22,351 429,724 Total street division 769,746 729,899 39,847 795,940

Vehicle maintenance:Personnel services 82,476 80,598 1,878 64,251Operating expenses 43,100 38,330 4,770 41,675 Total vehicle maintenance 125,576 118,928 6,648 105,926

Total public works 895,322 848,827 46,495 901,866

Code enforcement:Personnel services 250,296 190,058 60,238 190,544Operating expenses 65,419 47,953 17,466 55,836 Total code enforcement 315,715 238,011 77,704 246,380

Parks and playgrounds:Operating expenses 215,200 129,444 85,756 167,677

Community service:Other community services:

Operating expenses 155,500 86,478 69,022 27,521Total other community services 155,500 86,478 69,022 27,521

See Lancaster:Personnel services 50,150 47,616 2,534 49,770Operating expenses 23,100 16,386 6,714 28,730

Total See Lancaster 73,250 64,002 9,248 78,500

Total community service 228,750 150,480 78,270 106,021

Debt service:Principal 181,460 181,459 1 177,927Interest and fees 10,630 9,181 1,449 13,621

Total debt service 192,090 190,640 1,450 191,548


89






Capital improvements:Capital outlay 314,858$ 224,184$ 90,674$ 561,324$

Total expenditures 10,975,913 9,261,029 1,714,884 10,099,420

Excess of revenues over (under) expenditures (470,547) 2,051,069 2,521,616 1,190,111

Other financing sources (uses):Fund balance appropriated 470,547 - (470,547) -

Total other financing sources 470,547 - (470,547) -

Excess of revenues and other sources over (under) expenditures -$ 2,051,069 2,051,069$ 1,190,111

Beginning of year, July 1 8,191,204 7,001,093

End of year, June 30 10,242,273$ 8,191,204$


90

Schedule 9


Hospitality Tax FundComparative Balance Sheets

June 30, 2018 and 2017

2018 2017Assets

Cash and cash equivalents 350$ 350$Receivables:

Taxes - other 81,081 74,083Restricted assets 709,785 556,937

Total assets 791,216$ 631,370$

Liabilities and fund balancesAccounts payable and accrued expenses 1,755$ 806$Compensated absences payable 731 745Due to other funds 7,137 9,907

Total liabilities 9,623 11,458

Fund balances:Restricted 781,593 619,911

Total fund balances 781,593 619,911

Total liabilities and fund balances 791,216$ 631,369$

91

Schedule 10


Hospitality Tax FundSchedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual


2017Variance

Original Final PositiveBudget Budget Actual (Negative) Actual

RevenuesTaxes 765,000$ 775,000$ 917,479$ 142,479$ 880,049$Charges for services 130,000 110,000 95,616 (14,384) 99,222Interest 350 500 344 (156) 247Miscellaneous 10,000 10,000 12,296 2,296 14,093

Total revenues 905,350 995,500 1,025,735 30,235 993,611


General administration 924,731 1,079,138 864,053 215,085 918,906Capital outlay 25,450 - - - -

Total expenditures 950,181 1,079,138 864,053 215,085 918,906Excess of revenues over

(under) expenditures (44,831) (83,638) 161,682 245,320 74,705

Other financing sourcesFund balance appropriated 44,831 83,638 - (83,638) -

Total other financing sources 44,831 83,638 - (83,638) -

Net change in fund balances -$ -$ 161,682 161,682$ 74,705

Beginning of year, July 1 619,911 545,206

End of year, June 30 781,593$ 619,911$

2018

92

Schedule 11


Combining Balance SheetNonmajor Governmental Funds

Total NonmajorSouthside Governmental

E911 Project FundsAssets

Cash and cash equivalents 30,099$ 24,770$ 54,869$Receivables:

Mortgages - 8,361 8,361Other 6,810 - 6,810

Total assets 36,909$ 33,131$ 70,040$

Liabilities and fund balancesLiabilities:

Fund balancesRestricted:

E911 36,909 - 36,909Southside Housing - 33,131 33,131

Total fund balances 36,909 33,131 70,040

Total liabilities and fund balances 36,909$ 33,131$ 70,040$

June 30, 2018

93

Schedule 12


Combining Statement of Revenues, Expenditures and Changes in Fund BalancesNonmajor Governmental Funds

Year ended June 30, 2018

Total NonmajorSouthside Governmental

E911 Project FundsRevenues

Interest -$ 324$ 324$Other 41,208 - 41,208

Total revenues 41,208 324 41,532


Public safety 43,801 - 43,801Total expenditures 43,801 - 43,801

Net change in fund balances (2,593) 324 (2,269)

Fund balance - beginning 39,502 32,807 72,309

Fund balance - ending 36,909$ 33,131$ 70,040$

94

Schedule 13


E911Comparative Balance Sheets

June 30, 2018 and 2017

2018 2017Assets

Cash and cash equivalents 30,099$ 32,580$Other receivables 6,810 6,922

Total assets 36,909$ 39,502$

Liabilities and fund balanceLiabilities:

Fund balances:Restricted 36,909 39,502

Total fund balances 36,909 39,502

Total liabilities and fund balance 36,909$ 39,502$

95

Schedule 14


E911Comparative Statements of Revenues, Expenditures and Changes in Fund Balance

For the Fiscal Years Ended June 30, 2018 and 2017

2018 2017Revenues

Other 41,208$ 42,299$Total revenues 41,208 42,299


Public safety 43,801 41,732Total expenditures 43,801 41,732

Net change in fund balances (2,593) 567


End of year, June 30 36,909$ 39,502$

96

Schedule 15


Southside ProjectComparative Balance Sheets

June 30, 2018 and 2017

2018 2017Assets

Cash and cash equivalents 24,770$ 21,126$Mortgages 8,361 11,681

Total assets 33,131$ 32,807$

Liabilities and fund balancesFund balances:

Restricted 33,131 32,807Total fund balances 33,131 32,807

Total liabilities and fund balances 33,131$ 32,807$

97

Schedule 16


Southside ProjectComparative Statements of Revenues, Expenditures and Changes in Fund Balance

For the Fiscal Years Ended June 30, 2018 and 2017

2018 2017Revenues

Interest 324$ 418$Total revenues 324 418


General administration - -Total expenditures - -

Net change in fund balances 324 418


End of year, June 30 33,131$ 32,807$

98

ENTERPRISE FUNDS

Schedule 17


Gross Revenue FundComparative Balance Sheets

June 30, 2018 and 2017

2018 2017Assets

Current assetsCash and cash equivalents 955,318$ 741,719$Receivables:

Water and sewer 590,150 611,110Other 941,844 116,360

Due from Hospitality Tax Fund 107 -Inventory 191,598 301,167

Total current assets 2,679,017 1,770,356

Restricted assetsCustomer deposits 264,165 243,806Bond depreciation account 1,581,567 415,106Bond contingency account 397,349 391,483Bond debt service and reserve account 644,799 635,280

Total restricted assets 2,887,880 1,685,675

Capital assets (net, where applicable, of accumulated depreciation) 29,981,666 25,464,679Total noncurrent assets 32,869,546 27,150,354Total assets 35,548,563 28,920,710


Accounts payable and accrued expenses 512,871 66,959Compensated absences payable 14,700 15,064Current portion of long-term debt 553,904 443,472Capital leases payable - current 270,824 251,578Customer deposits 264,165 243,806Due to General Fund 414,808 473,775Due to Solid Waste Fund 3,130 5,436

Total current liabilities 2,034,402 1,500,090

Noncurrent liabilitiesCompensated absences payable 73,499 75,321Revenue bonds and notes payable 5,178,361 3,812,647Capital leases payable - long-term 684,460 955,283

Total noncurrent liabilities 5,936,320 4,843,251

Total liabilities 7,970,722 6,343,341

Net positionNet investment in capital assets 23,294,118 20,001,699Restricted for debt payments 2,623,715 1,441,869Unrestricted 1,660,008 1,133,801

Total net position 27,577,841$ 22,577,369$

100


Gross Revenue FundSchedule of Revenues and Expenditures - Budget and Actual (Non-GAAP)



Budget Actual (Negative) ActualRevenues

Water and sewer charges 6,162,000$ 6,352,764$ 190,764$ 6,270,791$Water penalties 227,500 254,904 27,404 235,587Tap fees 12,500 42,330 29,830 6,600Interest income 15,000 52,063 37,063 16,156Other 1,365,830 66,986 (1,298,844) 75,590

Total revenues 7,782,830 6,769,047 (1,013,783) 6,604,724

ExpendituresPublic works administration:

Salaries and employee benefits 142,835 138,053 4,782 116,726Clothing 800 390 410 -Vehicle maintenance 2,200 1,264 936 764Communications 183,400 153,206 30,194 157,420Utilities 60,000 55,745 4,255 58,918Special contracts 5,100 22 5,078 -Materials and supplies 7,500 4,886 2,614 5,613Miscellaneous 4,600 3,031 1,569 2,754

Total public works administration 406,435 356,597 49,838 342,195

Water service:Salaries and employee benefits 347,085 307,674 39,411 303,565Clothing 9,900 4,241 5,659 2,678Vehicle maintenance 65,000 60,460 4,540 (11,181)Communications 5,500 5,481 19 4,859Repairs and maintenance 50,000 11,645 38,355 -Special contracts 159,250 155,978 3,272 113,547Materials and supplies 202,200 199,385 2,815 175,729Miscellaneous 646,550 641,687 4,863 657,763

Total water service 1,485,485 1,386,551 98,934 1,246,960

2018


101






Utility billing:Salaries and employee benefits 147,302$ 134,609$ 12,693$ 146,634$Communications 7,500 6,462 1,038 6,964Repairs and maintenance 500 - 500 728Special contracts 57,950 51,093 6,857 51,768Materials and supplies 5,800 3,786 2,014 4,413Miscellaneous 3,350 1,213 2,137 1,255

Total utility billing 222,402 197,163 25,239 211,762

Wastewater treatment:Salaries and employee benefits 175,082 169,090 5,992 189,511Clothing 4,040 3,908 132 3,286Vehicle maintenance 13,000 11,783 1,217 13,382Communications 8,940 8,420 520 8,126Utilities 234,000 223,828 10,172 226,888Repairs and maintenance 186,450 106,340 80,110 150,499Special contracts 29,750 18,069 11,681 18,918Materials and supplies 45,450 92,090 (46,640) 28,655Miscellaneous 393,340 347,802 45,538 261,871

Total wastewater treatment 1,090,052 981,330 108,722 901,136

Wastewater collection:Salaries and employee benefits 518,967 482,040 36,927 529,859Clothing 8,000 4,422 3,578 4,985Vehicle maintenance 132,000 101,901 30,099 59,637Communications 2,550 2,435 115 2,369Repairs and maintenance 25,900 15,626 10,274 9,022Special contracts 7,450 5,398 2,052 14,689EPA Compliance 1,963,800 17,867 1,945,933 18,107Materials and supplies 101,600 99,013 2,587 97,112Miscellaneous 8,700 3,514 5,186 6,435

Total wastewater collection 2,768,967 732,216 2,036,751 742,215

2018


102






General:Communications 22,000$ 21,006$ 994$ 21,259$Insurance 233,850 230,419 3,431 245,768Repairs and maintenance 13,200 6,511 6,689 31,771Special contracts 54,300 42,134 12,166 29,837Miscellaneous 947,900 353,668 594,232 356,683

Total general 1,271,250 653,738 617,512 685,318

Vehicle maintenance:Salaries and employee benefits 58,714 48,224 10,490 52,328

Building and grounds maintenance:Salaries and employee benefits 51,563 53,776 (2,213) -

Information technology:Salaries and employee benefits 47,379 45,234 2,145 44,966

Debt service:Principal payments 1,429,342 495,238 934,104 670,782Interest 112,400 110,608 1,792 112,015

Total debt service 1,541,742 605,846 935,896 782,797

Capital outlay 10,185,563 5,860,066 4,325,497 1,736,046

Total expenditures 19,129,552 10,920,741 8,208,811 6,745,723

Excess (deficiency) of revenuesover (under) expenditures (11,346,722) (4,151,694) 7,195,028 (140,999)

Other financing sources (uses)Fund balance appropriated 364,000 - (364,000) -Loan proceeds 9,257,567 1,971,406 (7,286,161) -Capital grant income 1,725,155 4,138,210 2,413,055 490,540

Total other financing sources (uses) 11,346,722 6,109,616 (5,237,106) 490,540

Revenues and other sourcesover (under) expenditures -$ 1,957,922$ 1,957,922$ 349,541$

2018


103




2018 2017

Reconciliation from budgetary basis (modified accrual) to full accrual:Revenues and other sources over (under) expenditures 1,957,922$ 349,541$Payment of debt principal 495,238 670,782Loan proceeds (1,971,406) -Insurance proceeds and other 1,729 4,021Depreciation and amortization (1,343,079) (1,408,032)Capital outlay 5,860,066 1,736,046

Change in net position per full accrual basis - Exhibit H 5,000,470$ 1,352,358$


104

Schedule 19


Gross Revenue FundComparative Statement of Cash Flows

For the Fiscal Years Ended June 30, 2018 and 20172018 2017

Operating activitiesCash received from customers 5,912,460$ 6,407,647$Cash paid to employees (1,380,886) (1,389,820)Cash paid to suppliers (2,520,648) (2,936,094)

Net cash provided by operating activities 2,010,926 2,081,733

Noncapital financing activitiesDue to other funds (61,380) 196,955Customer deposits 20,359 3,696

Net cash used in noncapital activities (41,021) 200,651

Capital and related financing activitiesLoan proceeds 1,971,406 -Proceeds from capital grants 4,138,210 490,540Insurance proceeds 1,731 -Proceeds from sale of capital assets - 4,020Acquisition of capital assets (5,860,066) (1,736,046)Principal paid on capital leases (251,577) (233,335)Principal paid on bond and note maturities (495,260) (437,447)Interest and bond fees (110,608) (121,046)

Net cash used in capital and related financingactivities (606,164) (2,033,314)

Investing activitiesInterest on investments 52,063 16,156

Net cash provided by investing activities 52,063 16,156

Net decrease in cash and cashequivalents/investments 1,415,804 265,226

Cash and cash equivalents/investmentsBeginning of year 2,427,394 2,162,168

End of year 3,843,198$ 2,427,394$

Reconciliation of operating income to net cash providedby operating activitiesOperating income (loss) 919,076$ 962,687$Adjustments to reconcile operating income (loss) to net

cash provided by operating activities:Depreciation and amortization 1,343,079 1,408,032

Change in assets and liabilitiesAccounts receivable (804,524) (180,921)Inventory 109,569 (131,120)Accounts payable and accrued expenses 445,912 29,286Compensated absences (2,186) (6,231)

Total adjustments 1,091,850 1,119,046

Net cash provided by operating activities 2,010,926$ 2,081,733$

See notes to financial statements.105

Schedule 20


Solid Waste FundComparative Balance Sheets

June 30, 2018 and 2017

2018 2017Assets

Current assetsCash and cash equivalents 1,527,654$ 989,651$Receivables:

Garbage and trash 112,673 107,197Roll-off containers 25,032 24,997Other 175,218 123,922

Due from other funds 3,130 5,436Total current assets 1,843,707 1,251,203

Capital assets (net, where applicable, of accumulated depreciation) 1,944,895 1,737,389Total noncurrent assets 1,944,895 1,737,389

Total assets 3,788,602 2,988,592


Accounts payable and accrued expenses 29,870 11,767Compensated absences payable 10,319 9,624Capital leases payable - current 161,684 89,054Due to General Fund 137,113 58,030

Total current liabilities 338,986 168,475

Noncurrent liabilitiesCompensated absences payable 51,598 48,119Capital leases payable - long-term 411,466 140,151

Total noncurrent liabilities 463,064 188,270

Total liabilities 802,050 356,745

Net positionNet investment in capital assets 1,371,745 1,508,184Unrestricted 1,614,807 1,123,663

Total net position 2,986,552$ 2,631,847$

106


Solid Waste FundSchedule of Revenues and Expenditures - Budget and Actual (Non-GAAP)



Budget Actual (Negative) ActualRevenues

Garbage fees 1,265,000$ 1,308,720$ 43,720$ 1,239,757$Roll-off containers 115,000 164,484 49,484 150,907Recycling sales 50,000 57,425 7,425 33,307Transfer station 835,000 1,086,295 251,295 836,675Interest 6,000 10,047 4,047 5,315Other 15,000 71 (14,929) 280

Total revenues 2,286,000 2,627,042 341,042 2,266,241

ExpendituresGeneral:

Salaries and employee benefits 89,063 78,678 10,385 88,053Insurance 152,000 151,393 607 134,975Repairs and maintenance 90,000 - 90,000 -Special contracts 9,000 4,886 4,114 4,400Utilities 32,500 32,092 408 26,286Miscellaneous 105,300 99,809 5,491 96,495

Total general 477,863 366,858 111,005 350,209

Administrative:Clothing 250 156 94 276Vehicle maintenance 3,800 3,538 262 1,953Communications 5,000 3,143 1,857 3,680Special contracts 650 572 78 -Materials and supplies 2,000 1,259 741 128Miscellaneous 3,300 703 2,597 1,648

Total administrative 15,000 9,371 5,629 7,685

Vehicle maintenance:Salaries and employee benefits 114,500 96,448 18,052 104,655

Residential garbage:Salaries and employee benefits 233,749 213,091 20,658 249,450Clothing 3,500 2,340 1,160 2,810Communications 1,000 630 370 1,446Vehicle maintenance 103,250 102,845 405 139,014Special contracts - - - 550Materials and supplies 18,950 18,264 686 5,236Miscellaneous 3,650 2,283 1,367 1,574

Total residential garbage 364,099 339,453 24,646 400,080

2018


107






Recycling:Salaries and employee benefits 58,847$ 51,928$ 6,919$ 52,597$Clothing 900 326 574 452Vehicle maintenance 35,500 25,518 9,982 20,656Communications 500 24 476 783Materials and supplies 61,400 37,155 24,245 30,620Miscellaneous 4,500 2,349 2,151 1,377

Total recycling 161,647 117,300 44,347 106,485

Commerical garbage:Salaries and employee benefits 115,621 95,731 19,890 94,341Clothing 1,500 366 1,134 569Vehicle maintenance 70,000 61,638 8,362 49,818Special contracts 117,500 103,246 14,254 133,715Materials and supplies 24,500 20,576 3,924 26,722Miscellaneous 1,100 - 1,100 -

Total commercial garbage 330,221 281,557 48,664 305,165

Transfer station:Salaries and employee benefits 301,028 301,140 (112) 252,159Clothing 2,600 1,597 1,003 2,347Vehicle maintenance 323,500 310,097 13,403 206,646Communications 1,000 737 263 727Repairs and maintenance - - - 24,675Special contracts 39,000 42,003 (3,003) 6,696Materials and supplies 5,800 3,789 2,011 3,016Miscellaneous 2,000 840 1,160 615

Total transfer station 674,928 660,203 14,725 496,881

Information technology 44,800 27,574 17,226 29,829

Building and grounds maintenance:Salaries and employee benefits 53,563 50,006 3,557 -

2018


108






Debt service:Principal 89,060$ 89,054$ 6$ 87,656$Interest 3,180 9,030 (5,850) 4,574

Total debt service 92,240 98,084 (5,844) 92,230

Capital outlay 575,490 566,172 9,318 361,221

Total expenditures 2,904,351 2,613,026 291,325 2,254,440

Excess (deficiency) of revenuesover (under) expenditures (618,351) 14,016 632,367 11,801

Other financing sources (uses)Fund balance appropriated 167,351 - (167,351) -Proceeds from capital lease 451,000 433,000 (18,000) -

Total other financing uses 618,351 433,000 (185,351) -

Revenues and other sourcesover (under) expenditures -$ 447,016$ 447,016$ 11,801$

2018 2017Reconciliation from budgetary basis (modified accrual) to full accrual:

Revenues and other sources over expenditures 447,016$ 11,801$Payment of debt principal 89,054 87,656Insurance proceeds and other 44,128 22,361Proceeds from capital lease (433,000) -Depreciation and amortization (358,666) (309,675)Capital outlay 566,172 361,221

Change in net position per full accrual basis - Exhibit H 354,704$ 173,364$

2018


109


Solid Waste FundComparative Statement of Cash Flows

For the Fiscal Years Ended June 30, 2018 and 20172018 2017

Operating activitiesCash received from customers 2,560,188$ 2,253,088$Cash paid to employees (882,848) (839,347)Cash paid to suppliers (1,043,645) (959,120)

Net cash provided by operating activities 633,695 454,621

Noncapital financing activitiesDue from other funds (4,336) (4,336)Due to other funds 85,725 49,671

Net cash provided by noncapital activities 81,389 45,335

Capital and related financing activitiesInsurance proceeds and other 44,129 20,455Proceeds from sale of capital assets - 1,906Acquisition of capital assets (133,172) (361,221)Principal paid on capital leases (89,055) (87,656)Interest and bond fees (9,030) (4,574)

Net cash used in capital and related financingactivities (187,128) (431,090)

Investing activitiesInterest on investments 10,047 5,315

Net cash provided by investing activities 10,047 5,315

Net increase in cash and cash equivalents/investments 538,003 74,181

Cash and cash equivalents/investmentsBeginning of year 989,651 915,470

End of year 1,527,654$ 989,651$

Reconciliation of operating income (loss) to net cash providedby (used in) operating activitiesOperating income (loss) 309,559$ 150,263$Adjustments to reconcile operating income to net

cash provided by operating activities:Depreciation and amortization 358,666 309,675

Change in assets and liabilitiesAccounts receivable (56,807) (7,838)Accounts payable and accrued expenses 18,103 613Compensated absences 4,174 1,908

Total adjustments 324,136 304,358

Net cash provided by operating activities 633,695$ 454,621$

Noncash capital activityPurchase of fixed assets with capital lease 433,000$ -$

110

FIDUCIARY FUND

Schedule 23


Fiduciary Fund Type- Agency Fund- Firemen's Fund

Comparative Statement of Fiduciary Net PositionJune 30, 2018 and 2017

2018 2017Assets

Cash and temporary investments 32,332$ 23,313$Total assets 32,332$ 23,313$

LiabilitiesDue to firemen's association 32,332$ 23,313$

Total liabilities 32,332$ 23,313$

112

Schedule 24


Statement of Changes in Fiduciary Assets and LiabilitiesAgency Funds


July 1, 2017 Additions Deductions June 30, 2018Firemen's FundAssets

Cash and temporary investments 23,313$ 16,636$ 7,617$ 32,332$Total assets 23,313$ 16,636$ 7,617$ 32,332$

LiabilitiesDue to firemen's association 23,313$ 16,636$ 7,617$ 32,332$

Total liabilities 23,313$ 16,636$ 7,617$ 32,332$

113

OTHER FINANCIAL INFORMATION SECTION


Schedule of Debt CoverageGross Revenue Fund


Operating revenues 6,716,984$

Operating expenses (including depreciation) 5,155,379Contract with Lancaster Water and Sewer District 633,637

Total operating expenses 5,789,016

Nonoperating revenues (expenses):Interest income 52,063Interest expense and bond fees (119,500)Insurance proceeds 1,729

Total nonoperating expense (65,708)

Net income 862,260

Add:Depreciation allowance 1,343,079Interest and fees on bonds 119,500

Total additions 1,462,579

Net earnings 2,324,839$

Debt service requirements 632,533$

Debt coverage ratio 3.68

(1.2 debt coverage required by the 2003 State Revolving Loan)

115


Analysis of Victims' ServicesFor the Fiscal Year Ended June 30, 2018

Funds available for the year ended June 30, 2017 -$

Victims' percentage of assessments 13,442

Total revenues 13,442Actual expenditures (23,526)

Grant and assessment receipts under expenditures (10,084)

Funds available for the year ended June 30, 2018 (10,084)$

116

Schedule 27


Schedule of Victims' Fines, Assessments and Fees Collected


VictimAssessment

VictimSurcharge

FinesCollected

OtherRevenue Assessment Other Fees Total

Collected

July-17 740$ 494$ 5,983$ 143$ 5,890$ 1,570$ 14,820$August-17 698 450 5,393 157 5,559 1,477 13,734

September-17 917 715 7,889 285 7,305 2,310 19,421October-17 777 585 6,789 216 6,186 1,851 16,404

November-17 635 439 5,209 167 5,054 1,500 13,004December-17 466 208 3,764 148 3,709 960 9,255

January-18 815 300 7,429 226 6,478 2,671 17,919February-18 794 263 6,779 106 6,314 2,275 16,531

March-18 1,005 315 8,959 138 8,000 2,981 21,398April-18 548 267 5,036 13 4,362 1,701 11,927May-18 729 416 5,485 174 5,802 2,116 14,722

June-18 668 208 5,247 8 5,317 1,682 13,130

8,792$ 4,660$ 73,962$ 1,781$ 69,976$ 23,094$ 182,265$

Retained By City Remitted to State

117

STATISTICAL SECTION - UNAUDITED

This section of the City of Lancaster, South Carolina's comprehensive annual financialreport presents detailed trend and other information as a context for understanding whatthe information in the basic financial statements, notes to the basic financial statements,required supplementary information and other supplementary information says about theCity's overall financial health.

PagesFinancial Trends InformationThese schedules contain trend information to help the reader understand how thegovernment's financial performance and well-being have changed over time. 119 - 123

Revenue Capacity InformationThese schedules contain information to help the reader assess the City's most significantlocal revenue source, the property tax. 124 - 128

Debt Capacity InformationThese schedules present information to help the reader assess the affordability of theCity's current level of outstanding debt and the City's ability to issue additional debt in thefuture. 129 - 133

Demographic and Economic InformationThese schedules offer demographic and economic indicators to help the readerunderstand the environment within which the City's financial activities take place. 134 - 135

Operating InformationThese schedules contain service and infrastructure data to help the reader understandhow the information in the City's financial report relates to the services the City providesand the activities it performs. 136 -138


Net Position by Component,Last Ten Fiscal Years(Accrual Basis of Accounting)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Governmental activities

Net investment in capital assets 10,183,930$ 10,506,563$ 12,068,363$ 11,656,059$ 14,182,421$ 13,866,088$ 14,017,881$ 14,025,979$ 15,440,991$ 12,916,897$Restricted for drug fund - - - - - 97,188 103,533 107,104 117,809 120,996Restricted for tourism 1,144,521 1,098,480 1,278,497 1,308,988 422,789 458,230 536,320 489,899 556,937 709,785Restricted for debt service 193,522 - - - - - - - - -Restricted for Southside project - - 44,357 29,792 30,573 31,221 31,878 32,389 32,807 33,131Restricted for E911 - - - - - - 37,548 38,935 39,502 36,909Restricted for victims' services - 11,558 - - - - - 121 - -Unrestricted 7,074,358 7,895,843 7,688,851 8,836,720 8,808,039 9,684,200 (2,672,112) (2,492,991) (3,908,705) (1,749,385) 2

Total governmental activities net position 18,596,331 19,512,444 21,080,068 21,831,559 23,443,822 24,136,927 12,055,048 12,201,436 12,279,341 12,068,333

Business-type activitiesNet investment in capital assets 11,507,618$ 12,867,301$ 15,231,207$ 16,437,282$ 17,150,724$ 18,477,800$ 18,918,661$ 20,371,884$ 21,509,883$ 24,665,863$Restricted for debt service 2,017,930 2,057,211 2,081,342 1,818,267 1,916,813 1,845,139 1,847,080 1,496,751 1,441,869 2,623,715Unrestricted 3,889,012 3,870,984 2,927,098 2,691,169 2,059,948 1,458,644 1,430,175 1,814,858 2,257,467 3,274,815 1

Total business-type activities net position 17,414,560$ 18,795,496$ 20,239,647$ 20,946,718$ 21,127,485$ 21,781,583$ 22,195,916$ 23,683,493$ 25,209,219$ 30,564,393$

Primary governmentNet investment in capital assets 21,691,548$ 23,373,864$ 27,299,570$ 28,093,341$ 31,333,145$ 32,343,888$ 32,936,542$ 34,397,863$ 36,950,874$ 37,582,760$Restricted for drug fund - - - - - 97,188 103,533 107,104 117,809 120,996Restricted for tourism 1,144,521 1,098,480 1,278,497 1,308,988 422,789 458,230 536,320 489,899 556,937 709,785Restricted for Southside project - - 44,357 29,792 30,573 31,221 31,878 32,389 32,807 33,131Restricted for E911 - - - - - - 37,548 38,935 39,502 36,909Restricted for debt service 2,211,452 2,057,211 2,081,342 1,818,267 1,916,813 1,845,139 1,847,080 1,496,751 1,441,869 2,623,715Restricted for victims' services - 11,558 - - - - - 121 - -Unrestricted 10,963,370 11,772,827 10,615,949 11,527,889 10,867,987 11,142,844 (1,241,937) (678,133) (1,651,238) 1,525,430

Total primary government net position 36,010,891$ 38,313,940$ 41,319,715$ 42,778,277$ 44,571,307$ 45,918,510$ 34,250,964$ 35,884,929$ 37,488,560$ 42,632,726$

1 The unrestricted net position for business-type activities for the year ended June 30, 2013 includes a $33,632 prior period restatement due to the implementation of GASB 65. Prior years net positions reported inthis schedule do not reflect the implementation of GASB 65 requirements.

2 The unrestricted net position for governmental activites for year ended June 30, 2018 includes a $1,140,402 prior period restatement due to the implementation of GASB 75. Prior years net position reported inthis schedule do not reflect the implementation of GASB 75 requirements.

119


Changes in Net Position, Last Ten Fiscal Years(Accrual Basis of Accounting)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018ExpensesGovernmental activities

General administration 3,828,191$ 3,653,829$ 3,693,014$ 3,933,606$ 4,205,647$ 4,329,293$ 4,771,780$ 4,701,706$ 5,041,327$ 4,487,906$Public safety 4,591,769 4,482,373 4,848,268 4,587,600 4,582,568 4,938,363 4,973,382 5,057,988 5,028,021 5,054,358Public works 899,345 864,617 909,897 945,278 747,106 881,275 1,307,459 1,148,616 1,207,223 1,144,103Code enforcement 240,646 187,303 196,393 205,859 161,030 209,902 238,756 248,533 260,213 250,374Parks and playgrounds 101,470 102,767 134,555 117,349 112,629 114,672 129,114 145,027 191,871 150,326Community service 51,557 401,993 539,769 125,733 91,784 121,369 135,193 148,002 106,049 150,249Interest and fees 66,723 52,630 37,216 27,458 26,598 12,539 4,123 13,096 13,621 9,181

Total governmental activities expense 9,779,701 9,745,512 10,359,112 9,942,883 9,927,362 10,607,413 11,559,807 11,462,968 11,848,325 11,246,497Business-type activities

Water and sewer 5,755,799 5,363,105 5,445,120 5,810,577 5,686,101 6,194,613 6,571,781 5,921,348 5,746,927 5,908,516Solid waste 1,150,412 1,323,073 1,468,507 1,609,897 1,935,024 1,979,594 1,732,674 1,969,888 2,115,237 2,316,466

Total business-type activities expense 6,906,211 6,686,178 6,913,627 7,420,474 7,621,125 8,174,207 8,304,455 7,891,236 7,862,164 8,224,982Total primary government expenses 16,685,912$ 16,431,690$ 17,272,739$ 17,363,357$ 17,548,487$ 18,781,620$ 19,864,262$ 19,354,204$ 19,710,489$ 19,471,479$

Program revenuesGovernmental activities

Charges for service:General administration 90,645$ 114,932$ 135,530$ 279,244$ 285,386$ 265,841$ 293,689$ 264,170$ 211,992$ 238,850$Public safety 417,344 412,569 401,010 394,443 312,892 328,653 336,102 255,719 270,502 192,449Code enforcement 35,245 71,498 41,421 68,965 48,269 61,619 36,438 29,120 27,630 87,663Community service - 117,665 211,994 27,102 (410) - - - - -Operating grants and contributions 292,626 596,489 1,657,897 172,877 612,195 105,401 32,680 38,000 111,603 33,144Capital grants and contributions 9,795 - - - - 12,100 - 790,900 21,925 -

Total governmental activities program revenues 845,655 1,313,153 2,447,852 942,631 1,258,332 773,614 698,909 1,377,909 643,652 552,106Business-type activities

Water and sewer 6,313,111 5,787,000 5,635,995 5,596,440 5,936,167 6,284,753 6,069,645 6,516,709 6,512,979 6,649,998Solid waste 1,117,258 1,141,793 1,553,612 1,678,737 1,746,101 1,780,594 2,054,286 1,961,532 2,260,646 2,616,924Operating grants and contributions 32,801 - - - - - - - - -Capital grants and contributions - 731,674 1,135,749 391,470 - 228,949 84,488 - 490,540 4,138,210

Total business-type activities program revenues 7,463,170 7,660,467 8,325,356 7,666,647 7,682,268 8,294,296 8,208,419 8,478,241 9,264,165 13,405,132Total primary government program revenues 8,308,825$ 8,973,620$ 10,773,208$ 8,609,278$ 8,940,600$ 9,067,910$ 8,907,328$ 9,856,150$ 9,907,817$ 13,957,238$

Fiscal Year

120

Schedule 29 (continued)CITY OF LANCASTER, SOUTH CAROLINA

Changes in Net Position, Last Ten Fiscal Years(Accrual Basis of Accounting)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Net (expense)/revenueGovernmental activities (8,934,046)$ (8,432,359)$ (7,911,260)$ (9,000,252)$ (8,669,030)$ (9,833,799)$ (10,860,898)$ (10,085,059)$ (11,204,673)$ (10,694,391)$Business-type activities 556,959 974,289 1,411,729 246,173 61,143 120,089 (96,036) 587,005 1,402,001 5,180,150Total primary government net expense (8,377,087) (7,458,070) (6,499,531) (8,754,079) (8,607,887) (9,713,710) (10,956,934) (9,498,054) (9,802,672) (5,514,241)

General revenues and other changes in net positionGovernmental activities

Ad valorem taxes 4,754,054 4,897,937 5,064,683 5,410,709 5,575,802 5,691,746 5,699,301 5,817,640 5,766,751 5,803,156Other taxes and licenses 3,886,268 3,960,039 3,955,793 Property tax 359,431 375,588 387,246 397,799 412,879 440,819 430,896 Sales tax 1,233,425 1,221,374 1,270,638 1,329,261 1,458,985 1,573,470 1,618,753 Business licenses 1,547,204 1,922,319 1,916,492 2,000,306 2,053,191 2,178,794 2,331,888 Franchise fees 802,316 746,765 820,246 835,373 828,657 793,894 785,070Unrestricted intergovernmental 374,003 325,019 278,732 253,818 293,048 303,333 310,153 314,094 327,178 324,728Unrestricted investment earnings 73,893 33,068 27,032 21,070 24,424 12,579 14,205 28,279 44,910 82,310Miscellaneous 108,890 82,119 146,150 69,134 118,467 120,636 120,006 67,351 187,933 239,720Donations - 50,290 - - - - - - - -Gain (loss) on sale of capital assets 11,409 - 6,494 54,636 3,506 3,988 5,053 371 (31,181) -Transfers - - - - - - (353,249) (750,000) - -

Total governmental activities 9,208,517 9,348,472 9,478,884 9,751,743 10,281,293 10,526,904 10,358,208 10,231,447 11,282,568 11,616,521Business-type acticities

Unrestricted investment earnings 43,672 19,337 13,586 8,843 7,316 4,007 3,981 8,410 21,471 62,110Miscellaneous 349,017 387,310 11,805 384,317 105,280 519,887 109,575 94,622 95,860 112,914Gain on sale of capital assets 2,602 - 7,032 67,738 40,660 10,115 43,566 47,540 6,392 -Transfers - - - - - - 353,249 750,000 - -

Total business-type activities 395,291 406,647 32,423 460,898 153,256 534,009 510,371 900,572 123,723 175,024

Change in net positionGovernmental activities 274,471 916,113 1,567,624 751,491 1,612,263 693,105 (502,690) 146,388 77,895 922,130Business-type activities 952,250 1,380,936 1,444,152 707,071 214,399 654,098 414,335 1,487,577 1,525,724 5,355,174Total primary government 1,226,721$ 2,297,049$ 3,011,776$ 1,458,562$ 1,826,662$ 1,347,203$ (88,355)$ 1,633,965$ 1,603,619$ 6,277,304$

Fiscal Year

121


Fund Balances, Governmental FundsLast Ten Fiscal Years(Modified Accrual Basis of Accounting)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018General Fund

Nonspendable 2,999$ 59,040$ 6,276$ 4,092$ 5,639$ 5,811$ 7,747$ 15,194$ 13,734$ 20,150$Restricted 332,079 313,239 278,215 285,092 287,883 97,188 103,533 107,225 117,809 120,996Committed 390,289 497,591 621,127 1,332,732 742,059 812,830 828,552 891,951 1,061,014 1,215,046Assigned 105,000 587,770 1,082,368 374,600 708,411 1,488,749 1,124,483 741,601 451,528 826,000Unassigned 6,090,558 6,268,709 5,536,433 5,748,321 6,281,788 5,275,397 4,709,112 5,245,121 6,547,119 8,060,081

Total General Fund 6,920,925$ 7,726,349$ 7,524,419$ 7,744,837$ 8,025,780$ 7,679,975$ 6,773,427$ 7,001,092$ 8,191,204$ 10,242,273$

All Other Governmental FundsRestricted 1,365,465$ 1,223,616$ 1,298,661$ 848,645$ 453,978$ 515,835$ 653,027$ 616,530$ 692,221$ 851,633$

Total all other governmental funds 1,365,465$ 1,223,616$ 1,298,661$ 848,645$ 453,978$ 515,835$ 653,027$ 616,530$ 692,221$ 851,633$

Fiscal Year

122


Changes in Fund Balances, Governmental FundsLast Ten Fiscal Years

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Revenues

Taxes 6,132,422$ 6,127,349$ 5,894,256$ 5,871,363$ 6,196,001$ 6,332,316$ 6,461,779$ 6,835,443$ 7,268,316$ 7,187,603$Fines, fees, licenses and permits 2,966,263 3,174,474 3,287,007 3,537,736 3,629,371 3,754,106 3,799,995 3,780,820 3,975,419 4,082,534Intergovernmental 510,197 465,672 420,298 388,927 430,077 441,967 450,557 508,925 522,922 513,115Charges for services 90,760 233,296 339,284 306,143 287,467 264,407 247,203 217,003 172,177 199,730Grants 292,626 596,489 631,897 172,877 660,195 142,212 81,425 34,000 96,353 10,000Interest 73,894 33,068 27,031 21,069 24,424 12,580 14,205 28,279 44,910 82,311Other 127,872 132,409 152,644 94,021 123,973 137,061 178,776 121,791 245,762 304,072

Total revenues 10,194,034 10,762,757 10,752,417 10,392,136 11,351,508 11,084,649 11,233,940 11,526,261 12,325,859 12,379,365

ExpendituresGeneral administration 3,323,973 3,356,589 3,581,263 3,661,123 3,867,450 4,029,476 4,409,671 4,306,049 4,574,619 4,039,942Public safety 4,278,912 4,213,301 4,652,427 4,352,009 4,319,397 4,626,113 4,573,953 4,540,179 4,285,783 4,347,355Public works 837,673 815,736 839,537 862,836 648,105 737,370 1,090,126 909,222 901,866 848,827Code enforcement 237,909 183,814 191,894 201,546 163,087 204,198 232,029 234,120 246,380 238,011Parks and playgrounds 97,778 97,858 124,245 106,473 97,778 98,892 111,645 157,338 167,677 129,444Community serivce 50,050 399,636 539,976 125,597 93,040 120,610 135,505 113,507 106,021 150,480Capital outlay 597,616 637,134 582,563 1,140,041 2,099,261 1,377,973 1,678,481 417,859 566,163 224,184Debt service:

Principal 272,279 315,524 330,212 144,651 150,516 161,428 12,390 130,723 177,927 181,459Interest and fees 66,723 52,630 37,216 27,458 26,598 12,539 4,123 13,096 13,621 9,181

Total expenditures 9,762,913 10,072,222 10,879,333 10,621,734 11,465,232 11,368,599 12,247,923 10,822,093 11,040,057 10,168,883

Excess of revenues over (under)expenditures 431,121 690,535 (126,916) (229,598) (113,724) (283,950) (1,013,983) 704,168 1,285,802 2,210,482

Other financing sources (uses)Proceeds from capital lease - - - - - - 597,879 237,000 - -Transfers in - 229,087 176,246 - 402,955 104,545 104,545 209,090 - -Transfers out - (229,087) (176,246) - (402,955) (104,545) (457,794) (959,090) - -

Total other financing sources (uses) - - - - - - 244,630 (513,000) - -

Net change in fund balance 431,121$ 690,535$ (126,916)$ (229,598)$ (113,724)$ (283,950)$ (769,353)$ 191,168$ 1,285,802$ 2,210,482$

Debt service as a percentage ofnoncapital expenditures 3.70% 3.90% 3.57% 1.82% 1.89% 1.74% 0.16% 1.38% 1.83% 1.92%

Fiscal Year

123


Tax Revenues by Source, Governmental FundsLast Ten Fiscal Years(Modified Accrual Basis of Accounting)

Fiscal Year Property Tax Business License Hospitality Total

2009 3,085,104$ 1,682,141$ 718,926$ 5,486,171$2010 3,203,068 1,656,818 707,745 5,567,6312011 * 3,080,628 1,606,468 720,449 5,407,5452012 3,036,358 1,545,019 731,037 5,312,4142013 3,260,499 1,919,284 737,587 5,917,3702014 3,281,304 1,913,382 745,050 5,939,7362015 3,173,568 1,997,306 797,921 5,968,7952016 3,197,003 2,049,216 845,119 6,091,3382017 2,854,394 2,175,554 880,049 5,909,9972018 2,700,532 2,278,277 910,481 5,889,290

Change 2009-2018 (384,572)$ 596,136$ 191,555$ 403,119$

* Note: The reduction in property tax revenue for FY2010/2011 was the result of a reclassification of certain industrial property by Lancaster County to the fee-in-lieu category for the 2010 tax year.

124


Assessed Value and Estimated Market Value of Taxable PropertyLast Ten Fiscal Years

Assessed ValueEstimated Actual Estimated Actual Estimated Actual as a Percentage Total Direct

Fiscal Year Assessed Value Taxable Value Assessed Value Taxable Value Assessed Value Taxable Value of Actual Value Tax Rate2009 24,041,806$ 446,813,566$ 9,660,688$ 104,539,989$ 33,702,494$ 551,353,555$ 6.11% 143.52010 24,276,030 450,874,564 9,970,555 99,180,999 34,246,585 550,055,563 6.23% 143.52011 25,499,690 481,563,033 9,254,667 84,365,382 34,754,357 565,928,415 6.14% 143.52012 26,359,540 494,407,616 6,394,735 72,919,848 32,754,275 567,327,464 5.77% 143.52013 25,877,230 487,758,917 6,994,080 108,889,862 32,871,310 596,648,779 5.51% 149.72014 25,794,570 454,694,441 7,046,990 68,963,049 32,841,560 523,867,494 6.27% 154.72015 25,812,570 454,187,151 6,163,025 68,457,867 31,975,595 522,645,018 6.12% 156.92016 25,778,470 454,642,901 7,586,585 78,084,995 33,365,055 532,727,896 6.26% 164.42017 25,823,850 454,731,787 6,136,915 72,465,158 31,960,765 527,196,945 6.06% 176.42018 25,437,440 439,813,338 5,671,059 98,052,610 31,108,499 537,865,948 5.78% 178.2

Source: Lancaster County Auditor

Notes:Real property in Lancaster County is reassessed once every four years with a one year lag for implementation, unless there is a physical or legal change affecting theproperty. The County assesses real property at 4-6% (legal residency is 4%) of the appraised value. Personal property is assessed at 10.5% of market value, exceptrailroads (9.5%), motor homes (6%) and motor vehicles (6%). The motor vehicle assessment ratio has been declining by 0.75% each year since 2002 and stopped at6% in 2007.

Personal property assessed value decreased in fiscal year 2012 due to a large industry's personal property being reclassified by the Lancaster County Auditor to thecategory of fee in lieu of taxes (FILOT) because of the inclusion of the industry in a multi-county industrial partk by Lancaster County. This reclassification of personalproperty is the reason for the decrease in personal property assessed and market value for fiscal year 2012.

Real Property Personal Property Total

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Direct and Overlapping Property Tax RatesLast Ten Fiscal Years(rate per 1,000 of assessed value)

City Direct Lancaster USC - Lancaster County Total Direct &Fiscal Year Rate County Lancaster School District Overlapping

2009 143.50 82.20 3.30 172.00 401.002010 143.50 80.90 3.30 172.00 399.702011 143.50 83.60 3.40 175.25 405.752012 143.50 83.00 3.60 183.50 413.602013 149.70 85.10 3.80 187.00 425.602014 154.70 87.11 3.95 188.00 433.762015 156.90 89.40 4.10 192.50 442.902016 164.40 94.30 4.30 202.50 465.502017 176.40 87.60 4.30 217.50 485.802018 178.50 95.60 4.50 217.50 496.10

Source: Lancaster County Auditor

Note: The City's direct rate is approved for all operational and debt service expenditures and is not broken down in the budget ordinance by those categories.

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Principal Property Taxpayers,Current and Ten Years Ago

Taxable % of Total City Taxable % of Total CityTaxpayer Assessed Value Rank Assessed Value Assessed Value Rank Assessed Value

Lancaster Hospital Corp 4,250,960$ 1 13.66% 4,349,990$ 1 12.80%Duracell (Gillette) 1,468,136 2 4.72% 4,098,650 2 12.06%Springland Associates, LLC 1,196,560 3 3.85% 2,157,970 3 6.35%Duke Energy Corp 957,810 4 3.08% 778,170 5 2.29%Duracell Manufacturing, LLC 860,134 5 2.76%Cole WM Lancaster SC, LLC 850,190 6 2.73%Springmaid Federal Credit Union 524,112 7 1.68%TSO Quality Lancaster LP 433,904 8 1.39%HD Development of Maryland Inc. 405,130 9 1.30% 375,930 8 1.11%Time Warner Cable Southeast, LLC 353,960 10 1.14%Kanawha Insurance Company 1,165,940 4 3.43%Lancaster Telephone Company 514,900 6 1.51%Founders Federal Credit Union 415,550 7 1.22%Lancer Center LLC 36,570 9 0.11%Springland Associates, Inc. 298,610 10 0.88%

Total 11,300,896$ 36.31% 14,192,280$ 41.76%

Source: Lancaster County Treasurer's and Auditor's Office

Tax Year 2018 Tax Year 2009

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Real Property Tax Levies and CollectionsLast Ten Years

Collections inLevy Original Total Adjusted Adjusted Levy Subsequent Adjusted LevyYear Levy Adjustments Levy Amount Percentage Years Amount Percentage

2008 3,382,932$ 28,306$ 3,411,238$ 3,085,104$ 90.44% 320,914$ 3,406,018$ 99.85%2009 3,566,312 235 3,566,547 3,203,068 89.81% 355,489 3,558,557 99.78%2010 3,615,080 248,873 3,863,953 3,606,238 93.33% 248,812 3,855,050 99.77%2011 3,689,696 265,703 3,955,399 3,762,301 95.12% 178,705 3,941,006 99.64%2012 3,841,463 316,994 4,158,456 3,941,594 94.79% 199,814 4,141,408 99.59%2013 3,903,659 172,505 4,076,164 3,945,413 96.79% 112,101 4,057,514 99.54%2014 3,698,618 210,223 3,908,841 3,787,136 96.89% 99,200 3,886,336 99.42%2015 3,632,897 42,046 3,674,943 3,453,734 93.98% 196,563 3,650,297 99.33%2016 3,383,426 459,653 3,843,079 3,112,536 80.99% 695,140 3,807,676 99.08%2017 2,885,258 252,345 3,137,603 2,668,059 85.03%

Source: Lancaster County Auditor and Treasurer

Collected in the Fiscal Yearof the Levy Total Collections to Date

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Ratios of Outstanding Debt by TypeLast Ten Fiscal Years

General Obligation Utility State Total PrimaryFiscal Year Bonds (8% Limit) Capital Leases Revenue Bonds Capital Leases Revolving Fund Government Per Capita

2009 670,000$ 547,407$ 585,000$ 3,400,166$ 10,369,139$ 15,571,712$ 1,560$2010 550,000 351,882 400,000 3,093,533 9,632,477 14,027,892 1,3812011 425,000 146,752 205,000 2,767,349 8,847,667 12,391,768 1,4532012 290,000 137,101 - 2,443,222 8,028,959 10,899,282 1,2782013 150,000 126,585 - 2,102,155 7,182,369 9,561,109 1,1032014 - 115,158 - 2,084,212 6,337,178 8,536,548 9412015 - 700,647 - 1,838,723 5,522,701 8,062,071 9042016 - 806,924 - 1,757,057 4,693,566 7,257,547 8112017 - 628,996 - 1,436,066 4,256,119 6,321,181 7022018 - 447,537 - 1,528,434 5,732,265 7,708,236 1,559

Notes:1) Population data can be found in the Schedule of Demographic and Economic Statistics2) There is no personal income information for the City of Lancaster available. Therefore, percentage of personal income informaton is not provided in this schedule.

Governmental Activities Business-Type Activities

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Ratios of General Direct Debt OutstandingLast Ten Fiscal Years

Percentage ofGeneral Obligation Capitalized Total General Estimated Actual

Fiscal Year Bonds Leases Direct Debt Taxable Value Debt Per Capita

2009 670,000$ 547,407$ 1,217,407$ 0.22% 122$2010 550,000 351,882 901,882 0.16% 892011 425,000 146,752 571,752 0.10% 672012 290,000 137,101 427,101 0.07% 492013 150,000 126,585 276,585 0.05% 312014 - 115,158 115,158 0.02% 132015 - 700,647 700,647 0.13% 792016 - 806,924 806,924 0.15% 902017 - 628,996 628,996 0.20% 692018 - 447,537 447,537 0.20% 50

Notes:1) See the Schedule of Assessed Value and Estimated Market Value of Taxable Property for property value data.

2) Population data can be found in the Schedule of Demographic and Economic Statistics.

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Direct and Overlapping Governmental Activities DebtAs of June 30, 2018

Net Governmental PercentageActivities Applicable to Amount Applicable

Governmental Unit Debt Outstanding the City (1) to the City

Direct:City of Lancaster 447,537$ 100% 447,537$

Overlapping:Lancaster County 40,229,055 8.41% 3,382,206Lancaster School District 193,556,323 8.13% 15,737,910

233,785,378 19,120,116

Total direct and overlapping debt 234,232,915$ 19,567,653$

Note:(1) Percentages were determined by dividing each overlapping subdivision's assessed valuation withinthe City by its total assessed valuation. The debt outstanding includes general obligation bonds.

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Legal Debt Margin InformationLast Ten Fiscal Years

Fiscal Year Ended June 30,2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Debt limit (8% of assessed value) 2,630,174$ 2,706,705$ 2,780,349$ 2,614,522$ 2,554,134$ 2,627,325$ 2,558,048$ 2,669,204$ 2,556,861$ 2,488,680$

Total net debt applicable to limit 670,000 550,000 425,000 290,000 150,000 - - - - -

Legal debt margin 1,960,174$ 2,156,705$ 2,355,349$ 2,324,522$ 2,404,134$ 2,627,325$ 2,558,048$ 2,669,204$ 2,556,861$ 2,488,680$

Total net debt applicable to the limitas a percentage of the debt limit 25.47% 20.32% 15.29% 11.09% 5.87% 0.00% 0.00% 0.00% 0.00% 0.00%

Legal Debt Margin Calculation for Fiscal Year 2018

Assessed value 31,960,765$Debt limit (8% of assessed value) 2,556,861Debt applicable to limit -

Legal debt margin without referendum 2,556,861$

Notes:1) The legal debt limit is 8% of total assessed value2) The legal debt margin is the government's available borrowing under SC Code of Laws and is calculated by subtracting the debt applicable to the legal debt limit from the legal debt limit.

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Pledged Revenue CoverageLast Ten Fiscal Years

Operating Less: Operating Net Available DebtFiscal Year Revenues (1) Expenses (2) Revenue Service (3) Coverage

2009 6,386,670$ 4,326,277$ 2,060,393$ 1,201,505$ 1.712010 6,544,305 3,828,930 2,715,375 1,191,286 2.282011 6,793,898 3,956,834 2,837,064 1,197,787 2.372012 6,404,032 4,335,654 2,068,378 1,178,977 2.162013 6,044,372 4,196,683 1,847,689 958,695 1.932014 6,806,566 4,691,085 2,115,481 943,079 2.242015 6,175,412 5,049,926 1,125,486 896,231 1.262016 6,575,293 4,370,069 2,205,224 493,008 4.472017 6,608,745 4,217,849 2,390,896 493,008 4.852018 6,716,984 5,789,016 927,968 835,893 1.11

Notes:1) Operating revenue does not include interest.2) Operating expenses do not include interest, depreciation, or amortization expenses.3) Details to the City's outstanding debt can be found in the notes to the financial statements.

Combined Utility System Revenue Bonds

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Demographic and Economic StatisticsLast Ten Fiscal Years

City County Total County Personal County Per CountyFiscal Year Population Population Income (in thousands) (1) Capita Income (1) (2) (3) Unemployment Rate (1) (4)

2009 9,981 75,913 1,580,281$ 20,817$ 19.1%2010 10,160 77,767 1,822,945 23,441 16.3%2011 8,526 76,652 1,450,946 18,929 15.3%2012 8,667 77,908 1,504,248 19,308 13.4%2013 8,813 79,303 2,049,128 25,839 10.8%2014 9,068 80,458 1,681,492 20,899 6.6%2015 8,916 83,097 1,745,286 21,003 6.5%2016 8,952 85,842 1,861,688 21,943 6.0%2017 9,134 89,594 2,029,035 22,647 4.4%2018 8,976 92,550 3,668,045 40,941 3.9%

Source: Bureau of Census/SC Budget and Control Board Office of Research & Statistics/Bureau of Economic Analysis/ SC Department of Employment and Workforce.

(1) Some demographic information is for Lancaster County as a whole because information is not kept specific to the City of Lancaster.

(2) Statistics based on calendar year ending December 31 prior to the fiscal year ending date.

(3) Last updated November 2017

(4) SCDEW current year information is preliminary

As of December 31 prior to fiscal year ending date

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Principal EmployersCurrent and Ten Years Ago

% of Total County % of Total CountyEmployer Employees Rank Employment (2) Employees Rank Employment

Red Ventures 1,981 1 5.14%Lancaster County School District 1,800 2 4.67% 1,621 1 5.37%Movement Mortgage 800 3 1.30%Springs Memorial Hospital 642 4 1.67% 712 3 2.36%Cardinal Health 550 5 2.08% 700 4 2.32%Continental Tire 546 6 1.43% 375 8 1.24%Lancaster County (3) 500 7 1.42% 740 2 2.45%Founders Federal Credit Union 408 8 1.30%Nutramax 373 9 1.06%Oceana Gold/Haile Gold Mine 363 10 0.94%KMG America 450 5 1.49%Duracell 389 6 1.29%Wal-Mart (4) 382 7 1.27%Sharonview Federal Credit Union (4) 280 9 0.93%US Textiles Corporation (4) 274 10 0.91%

Total 7,963 21.01% 5,923 19.63%

Total County Labor Force (2) 38,541 30,192

Source: Lancaster County Economic Development Corporation and SC Department of Employment and Workforce

1) Some information estimated due to unavailability of data.2) Information is only available on county-wide level. Employer information is not kept at city level.3) Total employees includes part-time poll workers as employees.4) Some information estimated due to unavailability of data.

2017 2009

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Full-Time Equivalent (FTE) City Government Employees by Function/ProgramLast Ten Fiscal Years

Function/Program 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

General AdministrationCity Administrator 3.0 3.0 3.0 3.0 3.0 3.0 4.0 4.0 4.0 2.0Building and Grounds Maintenance 4.0 4.0 4.0 4.0 3.0 3.0 3.0 6.0 3.0 5.0Human Resources 2.0 2.0 2.0 2.0 2.0 3.0 3.0 3.0 3.0 3.0Finance 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 3.0 3.0Information Technology 0.0 0.0 0.0 0.0 2.0 2.0 2.0 3.0 3.0 3.0Legal 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0Support Services 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 0.0See Lancaster SC 0.0 3.0 3.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0Events Management 0.0 0.0 0.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0Performing Arts 0.0 0.0 0.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Public SafetyPolice 46.5 48.5 48.5 48.5 53.5 53.5 53.5 51.5 42.0 45.0Victims' Services 1.0 1.0 1.0 1.0 0.5 0.5 0.5 0.5 1.0 1.0Court Administration 6.5 6.5 6.5 7.0 7.0 7.0 7.0 7.0 5.0 4.0Fire 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 29.0

Public WorksStreet Division 7.0 7.0 6.0 6.0 6.0 8.0 8.0 8.5 6.0 7.0Vehicle Maintenance 4.0 4.0 4.0 4.0 5.0 5.0 5.0 5.0 5.0 5.0

Code EnforcementBuilding, Planning & Zoning 4.0 3.0 3.0 3.0 3.0 4.0 4.0 4.0 3.0 4.0

UtilitiesPublic Works Administration 3.0 3.0 5.0 6.0 5.0 4.0 4.0 2.0 2.0 2.0Water Service 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 9.0 8.0Utility Billing 4.0 4.0 4.0 4.0 3.0 3.0 3.0 4.0 3.0 4.0Wastewater Treatment 7.0 7.0 6.0 7.0 6.0 6.0 6.0 5.0 3.0 4.0Wastewater Collection 13.0 13.0 13.0 12.0 14.0 14.0 14.0 14.0 12.0 12.0

Solid WasteSolid Waste Administration 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.5 2.0 2.0Residential 10.0 10.0 10.0 10.0 12.0 11.0 11.0 6.0 6.0 6.0Recycling 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1.0 1.0 1.0Commercial 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 3.0 2.0Transfer Station 2.0 4.0 4.0 4.0 4.0 4.0 4.0 6.0 7.0 6.0

Total FTE Employees 164.0 170.0 170.0 171.5 179.0 181.0 182.0 182.0 160.0 162.0

Source: City Human Resources Department

Note: A full-time city employee is scheduled to work 1,966, 2,080, or 2,093 hours (including vacation and sick leave) depending on departmental requirements.

FTE Employees as of June 30,

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Operating Indicators by FunctionLast Ten Fiscal Years

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018General Administration Human Resources Employment applications processed(2) 387 537 274 215 471 361 141 286 144 387 Workers Compensation cases(2) 10 24 62 49 52 87 123 58 31 24

Information Technology (1) Issued tickets 0 0 0 0 0 0 1,733 2,767 3,560 4,901 Closed tickets 0 0 0 0 0 0 1,724 2,781 3,599 4,835

Public Safety Police Department Arrest warrants served 1,144 1,109 562 1,070 942 1,069 596 570 385 692 Traffic cases 3,266 2,630 2,975 2,775 2,280 2,261 2,395 1,413 1,757 1,192 Fraudulent check warrants served 68 1,109 15 7 28 16 9 15 9 7 Fire Department Fire responses(2) 196 167 197 164 68 86 115 198 197 199 Medical responses(2) 608 497 471 471 335 361 419 880 883 964 Other responses(2) 418 415 430 429 77 132 216 400 462 667 Judiciary Criminal Docket total cases filed 1,891 2,137 1,962 1,146 1,269 1,214 917 1,028 883 1,127 Traffic Docket total cases filed 2,874 3,034 3,061 2,523 1,993 1,517 1,759 1,412 1,710 1,987 DUI Docket total cases filed 151 112 102 95 99 83 77 65 47 65

Code Enforcement Building, Planning & Zoning Number of projects 518 474 488 537 475 543 455 490 450 1,026 Number of inspections 4,416 4,355 4,726 4,228 5,742 6,840 6,241 6,364 6,118 6,749

Utilities Utility Billing Number of utility customers 5,876 5,921 5,846 5,805 5,750 5,795 5,812 5,757 5,877 5,935 Wastewater Treatment Number of gallons treated (in millions) 849.913 932.267 952.185 847.548 791.737 852.432 782.065 874.620 754.900 909.490

Solid Waste Transfer Station Tons of household garbage disposed of 20,862 21,578 21,425 23,830 24,800 26,201 25,286 28,229 31,409 33,054

Sources: Various city departments.

Notes:(1) Information Technology became a separate department during the 2015 fiscal year.(2) Statistics are based on the calendar year ending December 31 prior to the fiscal year ending date.

Fiscal Year Ended June 30,

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Capital Asset Statistics by FunctionLast Ten Fiscal Years

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Public Safety Number of police stations 1 1 1 1 1 1 1 1 1 1 Number of fire stations 2 2 2 2 2 2 2 2 2 2

Public Works Miles of paved roads maintained 15.96 15.96 15.96 15.96 15.96 15.96 15.96 15.96 15.96 15.96

Parks & Playgrounds Number of parks 12 14 14 14 14 15 15 16 16 16

Sources: Various city departments

Fiscal Year Ended June 30,

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COMPLIANCE SECTION


Year Ended June 30, 2018

Federal/StateFederal Pass-through

Grantor/Pass-through CFDA Grantor's FederalGrantor/Program Title Number Number Expenditures

Federal Grants:U. S. Department of Housing and Urban Development

Direct:Community Development Block Grant 14.228 4-CI-15-020 716,131$Community Development Block Grant 14.228 4-CI-15-021 580,907Community Development Block Grant 14.239 4-CI-16-014 438,532

1,735,570

Total U.S. Department of Housing and Urban Development 1,735,570

U.S. Environmental Protection AgencyPassed-through the South Carolina Water Quality

Revolving Fund Authority:South Carolina Water Pollution Control Revolving

Fund 66.458 F1-16-497-17 336,236

South Carolina Water Pollution Control RevolvingFund 66.458 F1-15-497-18 990,078

Total U.S. Environmental Protection Agency 1,326,314

Total expenditures of federal awards 3,061,884$

* The accompanying notes are an integral part of this schedule.

Schedule of Expenditures of Federal Awards

140


Notes to the Schedule of Expenditures of Federal AwardsFor the Year Ended June 30, 2018

141

Note 1. Basis of Accounting

The accompanying schedule of expenditures of federal awards (SEFA) includes the federalgrant activity of the City of Lancaster, South Carolina under programs of the federal governmentfor the year ended June 30, 2018. The information in this SEFA is presented in accordancewith the requirements of Title 2 US Code of Federal Regulations Part 200, UniformAdministrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

Because the Schedule presents only a selected portion of the operations of the City ofLancaster, South Carolina, it is not intended to and does not present the financial position,changes in net assets or cash flows of the City of Lancaster, South Carolina.

Note 2. Summary of Significant Accounting Policies

Expenditures reported in the SEFA are reported on the accrual basis of accounting which isdescribed in Note 1 to the City of Lancaster, South Carolina’s financial statements. Suchexpenditures are recognized following the cost principles contained in Uniform Guidance,wherein certain types of expenditures are not allowable or are limited as to reimbursement.Pass-through entity identifying numbers are presented where available.

Note 3. Indirect Cost Rate

The City of Lancaster, South Carolina has not elected to use the 10% de minimis indirect costrate allowed under the Uniform Guidance.

142

Independent Auditors’ Report on Internal Control over Financial Reporting and onCompliance and Other Matters Based on an Audit of Financial Statements Performed in

Accordance with Government Auditing Standards


We have audited, in accordance with the auditing standards generally accepted in the UnitedStates of America and the standards applicable to financial audits contained in GovernmentAuditing Standards issued by the Comptroller General of the United States, the financialstatements of the governmental activities, the business-type activities, each major fund, and theaggregate remaining fund information of the City of Lancaster, South Carolina, as of and for theyear ended June 30, 2018, and the related notes to the financial statements, which collectivelycomprise the City of Lancaster, South Carolina’s basic financial statements, and have issuedour report thereon dated February 19, 2019.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered the City ofLancaster, South Carolina’s internal control over financial reporting (internal control) todetermine the audit procedures that are appropriate in the circumstances for the purpose ofexpressing our opinions on the financial statements, but not for the purpose of expressing anopinion on the effectiveness of the City of Lancaster, South Carolina’s internal control.Accordingly, we do not express an opinion on the effectiveness of the City of Lancaster, SouthCarolina’s internal control.

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

Our consideration of internal control was for the limited purpose described in the first paragraphof this section and was not designed to identify all deficiencies in internal control that might bematerial weaknesses or, significant deficiencies and therefore, material weaknesses may existthat have not been identified. We did identify a deficiency in internal control, described in theaccompanying schedule of findings and questioned costs as item 2018-001 that we consider tobe a material weakness.

143

Compliance and Other MattersAs part of obtaining reasonable assurance about whether the City of Lancaster, SouthCarolina’s financial statements are free from material misstatement, we performed tests of itscompliance with certain provisions of laws, regulations, contracts, and grant agreements,noncompliance with which could have a direct and material effect on the determination offinancial statement amounts. However, providing an opinion on compliance with thoseprovisions was not an objective of our audit, and accordingly, we do not express such anopinion. The results of our tests disclosed no instances of noncompliance or other matters thatare required to be reported under Government Auditing Standards.City of Lancaster, South Carolina’s Response to FindingsThe City of Lancaster, South Carolina’s response to the finding identified in our audit isdescribed in the accompanying schedule of findings and quested costs. The City of Lancaster,South Carolina’s response was not subjected to the auditing procedures applied in the audit ofthe financial statements and, accordingly, we express no opinion on it.Purpose of this ReportThe purpose of this report is solely to describe the scope of our testing of internal control andcompliance and the results of that testing, and not to provide an opinion on the effectiveness ofthe entity’s internal control or on compliance. This report is an integral part of an auditperformed in accordance with Government Auditing Standards in considering the entity’sinternal control and compliance. Accordingly, this communication is not suitable for any otherpurpose.

Charlotte, North CarolinaFebruary 19, 2019

144

Independent Auditor’s Report on Compliance for Each Major Program and on InternalControl Over Compliance Required by the Uniform Guidance


Report on Compliance for Each Major Federal ProgramWe have audited City of Lancaster, South Carolina’s (the “City”) compliance with the types ofcompliance requirements described in the OMB Compliance Supplement that could have adirect and material effect on each of the City’s major federal programs for the year ended June30, 2018. The City’s major federal programs are identified in the summary of auditor’s resultssection of the accompanying schedule of findings and questioned costs.Management’s ResponsibilityManagement is responsible for compliance with federal statutes, regulations, and the terms andconditions of its federal awards applicable to its federal programs.Auditor’s ResponsibilityOur responsibility is to express an opinion on compliance for each of the City’s major federalprograms based on our audit of the types of compliance requirements referred to above. Weconducted our audit of compliance in accordance with auditing standards generally accepted inthe United States of America; the standards applicable to financial audits contained inGovernment Auditing Standards, issued by the Comptroller General of the United States; andthe audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, UniformAdministrative Requirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance). Those standards and the Uniform Guidance require that we plan andperform the audit to obtain reasonable assurance about whether noncompliance with the typesof compliance requirements referred to above that could have a direct and material effect on amajor federal program occurred. An audit includes examining, on a test basis, evidence aboutthe City’s compliance with those requirements and performing such other procedures as weconsidered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for eachmajor federal program. However, our audit does not provide a legal determination of the City’scompliance.

Opinion on Each Major Federal ProgramIn our opinion, the City of Lancaster, South Carolina complied, in all material respects, with thetypes of compliance requirements referred to above that could have a direct and material effecton each of its major federal programs for the year ended June 30, 2018.Report on Internal Control over ComplianceManagement of the City is responsible for establishing and maintaining effective internal controlover compliance with the types of compliance requirements referred to above. In planning andperforming our audit of compliance, we considered the City’s internal control over compliance

145

with the types of requirements that could have a direct and material effect on each major federalprogram to determine the auditing procedures that are appropriate in the circumstances for thepurpose of expressing an opinion on compliance for each major federal program and to test andreport on internal control over compliance in accordance with the Uniform Guidance, but not forthe purpose of expressing an opinion on the effectiveness of internal control over compliance.Accordingly, we do not express an opinion on the effectiveness of the City’s internal control overcompliance.A deficiency in internal control over compliance exists when the design or operation of a controlover compliance does not allow management or employees, in the normal course of performingtheir assigned functions, to prevent, or detect and correct, noncompliance with a type ofcompliance requirement of a federal program on a timely basis. A material weakness in internalcontrol over compliance is a deficiency, or a combination of deficiencies, in internal control overcompliance, such that there is a reasonable possibility that material noncompliance with a typeof 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 acombination of deficiencies, in internal control over compliance with a type of compliancerequirement of a federal program that is less severe than a material weakness in internal controlover compliance, yet important enough to merit attention by those charged with governance.Our consideration of internal control over compliance was for the limited purpose described inthe first paragraph of this section and was not designed to identify all deficiencies in internalcontrol over compliance that might be material weaknesses or significant deficiencies. We didnot identify any deficiencies in internal control over compliance that we consider to be materialweaknesses. However, material weaknesses may exist that have not been identified.The purpose of this report on internal control over compliance is solely to describe the scope ofour testing of internal control over compliance and the results of that testing based on therequirements of the Uniform Guidance. Accordingly, this report is not suitable for any otherpurpose.

Charlotte, North CarolinaFebruary 19, 2019

146


Schedule of Findings and Questioned CostsFor the Year Ended June 30, 2018

Section I. Summary of Auditors’ Results

Financial Statements

Type of auditor’s report issued: Unqualified

Internal control over financial reporting:

· Material weakness(es) identified? X yes no· Significant deficiency(ies) identified that are

not considered to be material weaknesses? ____yes X none reported

Noncompliance material to financial statements noted? ____yes X no

Federal Awards

Internal control over major federal programs:· Material weakness(es) identified? ____yes X no· Significant deficiency(ies) identified that

are not considered to be materialweakness(es)? ____yes X none reported

Type of auditor’s report issued on compliance for major federal programs: Unmodified.

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a) ____yes X no

Identification of major federal programs:

CFDA Numbers Name of Federal Program or Cluster14.228

66.458

U.S. Department of Housing and Urban DevelopmentCommunity Development Block Grants

U.S. Environmental Protection Agency CapitalizationGrants for Clean Water State Revolving Funds

Dollar threshold used to distinguish between Type A and Type B Programs $__750,000

Auditee qualified as low-risk auditee? _ __yes X_ no

147


Schedule of Findings and Questioned CostsFor the Year Ended June 30, 2018

Section II – Financial Statement Findings

MATERIAL WEAKNESS

2018-001 Failure to properly accrue receivables and payables at end of year

Criteria: Receivables and payables are to be accrued at year end to properly reflect the properinclusion in the financial statements the activities during the year.

Condition: Certain receivables and payables and the related revenue and expenditures werenot properly accrued at June 30, 2018.

Effect: Receivables, payables, revenue and expenditures could be under-reported.

Cause: The City experienced turnover in the finance director position that impacted the properrecording of receivables, payables, revenue and expenditures.

Recommendation: The City train staff how to properly record receivables, payables, revenueand expenditures to avoid problems if the City experiences future staff turnover.

Views of responsible officials and planned corrective actions: The City agrees with this findingand has hired a new finance director. Additionally, staff will be trained to handle the properrecording of receivables, payables, revenue and expenditures.

Section III – Federal Award Findings and Questioned Costs

None reported.

Section IV – Summary Schedule of Prior Audit Findings

None reported.

148

Corrective Action PlanFor the Year Ended June 30, 2018

Section II – Financial Statement Findings

MATERIAL WEAKNESS

2018-001 Failure to properly accrue receivables and payables at end of year

Name of contact person: Dana Pinkert, Finance Director

Corrective Action: The City has hired Dana Pinkert as the new finance director. Staff ofthe City will be given training on how to properly accrue receivables and payables atyear end.

Proposed Completion Date: Immediately

Section III – Federal Award Findings and Questioned Costs

None reported.

Section IV – Summary Schedule of Prior Audit Findings

None reported.

comprehensive annual financial report for the fiscal year ... · combining balance sheet –...

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