Fiscal Year 2024 Audit

CITY OF EAST RIDGE, TENNESSEE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2024 INTRODUCTORY SECTION CITY OF EAST RIDGE, TENNESSEE TABLE OF CONTENTS JUNE 30, 2024 PAGE INTRODUCTORY SECTION Table of Contents i-iii City Officials iv FINANCIAL SECTION Independent Auditor’s Report 1-3 Management’s Discussion and Analysis (unaudited) 4-10 Basic Financial Statements Government-Wide Financial Statements – Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements – Balance Sheet – Governmental Funds 13-14 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 15 Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 16-17 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 18 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund 19 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Capital Projects Fund 20 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Industrial Development Fund 21 Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – American Rescue Plan Act Fund 22 Notes to Financial Statements 23-41 (Continued) i CITY OF EAST RIDGE, TENNESSEE TABLE OF CONTENTS JUNE 30, 2024 (Continued) Required Supplementary Information (unaudited) Schedule of Changes in City of East Ridge, Tennessee’s Net Pension Liability (Asset) and Related Ratios Based on Participation in the Public Employee Pension Plan of TCRS 42 Schedule of City of East Ridge, Tennessee’s Contributions Based on Participation in the Public Employee Pension Plan of TCRS 43 Notes to Pension Schedules 44 Schedule of Changes in the City of East Ridge, Tennessee’s Net OPEB Liability and Related Ratios 45 Schedule of City of East Ridge, Tennessee’s Contributions Based on Participation in the Other Post-Employment Benefit Plan 46 OTHER SUPPLEMENTARY INFORMATION Combining Financial Statements Nonmajor Governmental Funds – Combining Balance Sheet 47 Nonmajor Governmental Funds – Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances 48 Budgetary Comparison Schedules Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund 49-64 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Drug Investigation Fund 65 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – State Street Aid Fund 66 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – TML Bond Fund 67 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Grant Fund 68 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Solid Waste Collection Fund 69 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Economic Development Fund 70 (Continued) ii CITY OF EAST RIDGE, TENNESSEE TABLE OF CONTENTS JUNE 30, 2024 OTHER SUPPLEMENTARY INFORMATION (Continued) Financial Schedules Schedule of Property Tax Rates and Assessments 71 Schedule of Changes in Property Tax Receivable 72 Schedule of Debt Service Requirements – Governmental Activities 73 Schedule of Changes in Long-term Debt by Individual Issue 74 Schedule of Changes in Lease Obligations 75 Schedule of Lease Obligations, Principal, and Interest Requirements 76 COMPLIANCE SECTION Schedule of Expenditures of Federal and State Awards 77 Notes to the Schedule of Expenditures of Federal and State Awards 78 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 79-80 Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance in Accordance with the Uniform Guidance 81-83 Schedule of Findings and Questioned Costs 84-86 Schedule of Prior Year Findings 87 Management’s Corrective Action Plan 88 Summary of Prior Year Findings 89 iii CITY OF EAST RIDGE, TENNESSEE TABLE OF CONTENTS JUNE 30, 2024 Mayor Brian Williams Vice-Mayor Mike Chauncey Council Member Jacky Cagle Council Member Esther Helton Council Member Andrea Witt City Attorney Mark Litchford City Manager J Scott Miller Finance Director Diane Qualls* *Certified Municipal Finance Officer (CMFO) iv FINANCIAL SECTION INDEPENDENT AUDITOR’S REPORT To the Mayor and City Council City of East Ridge, Tennessee East Ridge, Tennessee Report on the Audit of the Financial Statements Opinions We have audited the financial statements of the governmental activities, each major fund, budgetary comparisons for the General Fund, Capital Projects Fund, Industrial Development Fund, and American Rescue Plan Act Fund, and the aggregate remaining fund information of the City of East Ridge, Tennessee (the City), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2024, and the respective changes in financial position and the respective budgetary comparisons for the General Fund, Capital Projects Fund, Industrial Development Fund, and American Rescue Plan Act Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements The City’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for 12 months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 1200 Market Street, Chattanooga, TN 37402 | T 423.756.7771 | F 423.265.8125 AN INDEPENDENT MEMBER OF THE BDO ALLIANCE USA Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards, issued by the Comptroller General of the United States, will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Governmental Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and required pension and OPEB schedules on pages 4-10 and pages 40-44, respectively, be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining financial statements, budgetary comparison schedules, financial schedules, and schedule of expenditures of federal and state awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) are presented for purposes of additional analysis and are not a required part of the basic financial statements. 2 The combining financial statements, budgetary comparison schedules, financial schedules, and schedule of expenditures of federal and state awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining financial statements, budgetary comparison schedules, financial schedules, and schedule of expenditures of federal and state awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual report. The other information comprises the introductory section but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 6, 2024, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Cleveland, Tennessee December 6, 2024 3 CITY OF EAST RIDGE, TENNESSEE MANAGEMENT'S DISCUSSION & ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, ______________________________________________________________________________ As management of the City of East Ridge, Tennessee (the City), we offer readers of the financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2024. We encourage readers to consider the information presented here. Financial Highlights • The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $33,369,004 (net position). Of this amount, $8,022,357 is invested in capital assets (net of related debt) and $644,333 is restricted for specific purposes. • The City's overall net position increased by $7,162,550 (27.33%), for the current period. • As of the close of the current fiscal year, the City's governmental funds reported combined fund balances of $27,169,423, an increase in overall fund balance of $8,778,000. Of this amount, $644,333 is restricted, $2,951,751 is committed, and $9,072,400 is assigned for specific uses. • At the end of the current fiscal year, fund balance for the general fund was $14,500,939, or 62.86% of total general fund expenditures including transfers out. This balance includes no non-spendable, restricted, or assigned funds. • The City's total outstanding long-term liabilities increased by $10,121,971, or 57.70% as detailed on pages 32 through 33 of this report. Overview of the Financial Statements This narrative overview is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves. Government-Wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to a private-sector business. Emphasis is placed on the net position of governmental activities and the change in net position. The governmental activities of the City include general government, public safety, public works, public welfare, solid waste and other city services. The statement of net position presents financial information on all of the City's assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the City's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes, etc.). The government-wide financial statements can be found on pages 11 through 12 of this report. 4 CITY OF EAST RIDGE, TENNESSEE MANAGEMENT'S DISCUSSION & ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, ______________________________________________________________________________ Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the City’s funds are considered governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in assessing the City's near-term financing requirements. Because the focus of governmental funds is narrower than that of government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the City's near-term financing decisions. Both the governmental fund balance sheet and statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains 11 governmental funds, including the general operating fund, special revenue funds, debt service funds, and a capital projects fund. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Capital Projects Fund, Industrial Development Fund, and American Rescue Plant Act Fund which are considered to be major funds. Data from the other governmental funds are combined into a single aggregated presentation and summarized under the heading "Non-major Governmental Funds" in the governmental fund presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and individual fund statements elsewhere in this report. The City adopts an annual appropriation budget for its general, special revenue, and debt service funds. A budgetary comparison schedule has been provided for these funds to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages 13 through 22 of this report. Notes to the Financial Statements. The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 23 through 39 of this report. Other Information. In addition to the basic financial statements and accompanying notes, this report presents required supplementary information concerning the City's progress in funding its obligation to provide OPEB benefits to its employees and pension related information. Required supplementary information can be found on pages 40 through 44 of this report. The combining schedules, individual budgetary schedules, and other information as required by the Tennessee Comptroller of the Treasury referred to earlier in connection with nonmajor governmental funds, are presented immediately following the required supplementary information on pensions and OPEB. These schedules can be found on pages 45 through 74 of this report. 5 CITY OF EAST RIDGE, TENNESSEE MANAGEMENT'S DISCUSSION & ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, ______________________________________________________________________________ Government-wide Overall Financial Analysis As noted earlier, net position over time may serve as a useful indicator of a government's financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $33,458,692, at the close of the June 30, 2024 fiscal year. City of East Ridge’s Net Position Governmental Activities June 30, 2024 June 30, 2023 Current and other assets $ 37,327,434 $ 32,072,436 Capital assets 34,906,442 26,728,530 Total assets 72,233,876 58,800,966 Deferred charge on refunding 93,989 100,255 Deferred pension outflows 2,430,002 2,757,441 Deferred OPEB outflows 286,543 373,878 Total deferred outflows of resources 2,810,534 3,231,574 Other liabilities 5,366,204 10,313,942 Long-term liabilities 27,665,293 17,543,322 Total liabilities 33,031,497 27,857,264 Deferred revenue – property taxes 6,703,247 6,717,379 Deferred OPEB inflows 1,601,000 1,072,000 Deferred pension inflows 339,662 179,443 Total deferred inflows of resources 8,643,909 7,968,822 Net position Net investment in capital assets 8,022,357 9,910,522 Restricted 644,333 4,841,203 Unrestricted 24,702,314 11,454,729 Total net position $ 33,369,004 $ 26,206,454 Net Position The largest portion of the City's net position (24.04%) reflects its investment in capital assets (e.g. land, buildings, equipment, vehicles, and infrastructure) less any related outstanding debt that was used to acquire those assets. The City uses these capital assets to provide a variety of services to its citizens. Consequently, these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 6 CITY OF EAST RIDGE, TENNESSEE MANAGEMENT'S DISCUSSION & ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, ______________________________________________________________________________ An additional portion of the City's net position (1.93%) represents resources that are subject to external restrictions on how they may be used. The remaining 74.03% is unrestricted and may be used to meet the government's ongoing obligations to its citizens and creditors. At the end of the current fiscal year, the City reports positive balances in all categories of net position for the government as a whole. The City's overall net position increased by $7,252,238 from the prior fiscal year, representing an 27.67% increase in the City’s net position. City of East Ridge’s Statement of Activities Governmental Activities June 30, 2024 June 30, 2023 Revenues Charges for services $ 3,386,509 $ 3,402,986 Grants & contributions 6,164,403 7,787,012 General revenues Property taxes 6,857,575 6,912,016 Local option sales tax 12,053,738 10,623,918 Other taxes 6,153,477 5,775,571 Interest 126,921 67,397 Other 19,771 631,342 Total revenues 34,762,394 35,200,242 Expenses General government 7,056,164 6,909,046 Public safety 9,804,969 9,416,296 Public works 7,210,819 9,002,506 Public welfare 465,684 695,062 Culture and recreation 2,444,689 2,172,166 Interest 617,519 488,532 Total expenses 27,599,844 28,683,608 Change in net position 7,162,550 6,516,634 Beginning net position 26,206,454 19,689,820 Ending net position $ 33,369,004 $ 26,206,454 Financial Analysis of the City's Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. 7 CITY OF EAST RIDGE, TENNESSEE MANAGEMENT'S DISCUSSION & ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, ______________________________________________________________________________ Governmental funds. The focus of the City's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, it is useful to review the various classifications of fund balance in measuring the City's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $27,169,423, a current year increase of $8,778,000. Restricted fund balance of $644,333 includes amounts legally constrained for law enforcement ($251,848), state street aid ($351,219), industrial development ($220), economic development ($3,348), grant projects ($19,143), and solid waste operations ($18,555). Funds committed for debt service total $2,951,751. Funds assigned for a particular purpose total $9,072,400. Assigned funds include funds for capital projects ($9,072,400). The remaining unassigned balance of $14,500,939 represents funds available for spending at the government's discretion. The general fund is the chief operating fund of the City. At the end of the current fiscal year, total fund balance totaled $14,500,939, and the total balance was reported as unassigned. As a measure of the general fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures and transfers out. Unassigned fund balance represents approximately 62.86% of total general fund expenditures and transfers out. It is important to consider that the City has maintained a relatively high ratio of unassigned fund balance in the general fund to operating expenditures and other financing uses, which ensures that the City is able to meet and exceed six (6) months of general fund expenditures, in accordance with sound budgeting and financial management practices. Additionally, the ratio of unrestricted funds also allows the City to meet any emergent or unanticipated needs should these arise. The fund balance of the City's general fund increased by $2,654,220. Proprietary funds. The City has no proprietary funds at this time. Budgetary Highlights Final Amended Budget and Actual Amounts. The City’s general fund operated within its final amended budget, which resulted in a positive variance of $2,765,295. Capital Asset and Debt Administration Capital Assets. The City's investment in capital assets for its governmental activities as of June 30, 2024, amounted to $34,906,442 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, plant in service, equipment and vehicles, paving, garbage containers, and infrastructure. 8 CITY OF EAST RIDGE, TENNESSEE MANAGEMENT'S DISCUSSION & ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, ______________________________________________________________________________ Major capital asset additions during the year included the purchase of multiple municipal vehicles and additional infrastructure. City of East Ridge’s Capital Assets, net Governmental Activities June 30, 2024 June 30, 2023 Land $ 1,947,177 $ 1,966,429 Construction in process 14,448,554 5,713,380 Buildings 11,393,258 11,371,718 Infrastructure 24,138,961 24,138,961 Equipment/vehicles 12,650,095 11,819,021 Right to use assets 250,849 400,849 64,828,894 55,410,358 Less accumulated depreciation 29,922,452 28,681,828 Total capital assets, net $ 34,906,442 $ 26,728,530 Additional information on the City's capital assets can be found in Note 6 on pages 31 and 32 of this report. Long-term Liabilities. At the end of the current fiscal year, the City had total liabilities outstanding of $27,665,293. All of which is backed by the full faith and credit of the government. City of East Ridge’s Long-Term Liabilities Governmental Activities June 30, 2024 June 30, 2023 General obligation bonds $ 17,215,000 $ 9,950,000 Notes payable 8,560,827 5,803,132 Lease liability 150,400 197,319 Financed purchases 188,537 - Plus: Premium 957,858 867,557 Compensated absences 592,671 725,314 Total long-term liabilities $ 27,665,293 $ 17,543,322 The City maintains ‘Aa3' rating from Moody's Investors Service for its debt. Additional information on the City's long-term liabilities can be found in Note 7 on pages 32 and 33 of this report. Economic Factors and Next Year's Budget and Rates • Camp Jordan continues to draw large crowds for sporting and other miscellaneous events, which helps bring more tourist dollars into our new retail restaurants and establishments. • Other businesses are coming to the City thanks to the Border Region incentives. 9 CITY OF EAST RIDGE, TENNESSEE MANAGEMENT'S DISCUSSION & ANALYSIS (UNAUDITED) YEAR ENDED JUNE 30, ______________________________________________________________________________ Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in such. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the City of East Ridge, 1517 Tombras Avenue, East Ridge, Tennessee 37412. 10 CITY OF EAST RIDGE, TENNESSEE STATEMENT OF NET POSITION JUNE 30, 2024 Governmental Activities ASSETS Cash and cash equivalents $ 27,297,491 Investments 591,958 Property taxes receivable 7,165,596 Grants receivable 1,077,073 Accounts receivable 1,137,939 Prepaid expenses 57,377 Capital assets: Land and other non depreciable assets 16,395,731 Capital assets, net of accumulated depreciation 18,510,711 Total assets 72,233,876 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 93,989 Deferred pension outflows 2,430,002 Deferred OPEB outflows 286,543 Total deferred outflows of resources 2,810,534 LIABILITIES Accounts payable 1,256,670 Accrued liabilities 367,770 Deferred revenue 1,451,255 OPEB obligation 1,460,000 Net pension liability 830,509 Long-term liabilities: Due within one year 2,205,310 Due in more than one year 25,459,983 Total liabilities 33,031,497 DEFERRED INFLOWS OF RESOURCES Deferred revenue - property taxes 6,703,247 Deferred OPEB inflows 1,601,000 Deferred pension inflows 339,662 Total deferred inflows of resources 8,643,909 NET POSITION Net investment in capital assets 8,022,357 Restricted: Law enforcement 251,848 State approved street aid 351,219 Industrial development 220 Economic development 3,348 Grant projects 19,143 Solid waste operations 18,555 Unrestricted 24,702,314 Total net position $ 33,369,004 The accompanying notes are an integral part of the financial statements. 11 CITY OF EAST RIDGE, TENNESSEE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2024 Program Revenues Operating Capital Total Charges for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Activities (Net) PRIMARY GOVERNMENT Governmental activities: General government $ 7,056,164 $ 313,756 $ 138,888 $ - $ (6,603,520) Public safety 9,804,969 519,227 112,104 - (9,173,638) Public works 7,210,819 1,570,400 3,154,144 2,759,267 272,992 Public welfare 465,684 - - - (465,684) Culture and recreation 2,444,689 983,126 - - (1,461,563) Interest 617,519 - - - (617,519) Total primary government $ 27,599,844 $ 3,386,509 $ 3,405,136 $ 2,759,267 (18,048,932) GENERAL REVENUES Property taxes 6,857,575 Local sales taxes 12,053,738 Local beer taxes 752,347 State shared taxes 4,386,856 Other taxes 826,063 Franchise fees 188,211 Other revenues 19,771 Interest 126,921 Total general revenue 25,211,482 Change in net position 7,162,550 NET POSITION Beginning 26,206,454 Ending $ 33,369,004 The accompanying notes are an integral part of the financial statements. 12 CITY OF EAST RIDGE, TENNESSEE BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2024 Capital Industrial General Projects Development ASSETS Cash and cash equivalents $ 13,341,177 $ 8,840,704 $ 220 Investments 591,958 - - Property taxes receivable 7,165,596 - - Grant funds receivable - 1,077,073 - Accounts receivable 979,416 - - Other assets 57,377 - - Due from other funds - - - Total assets $ 22,135,524 $ 9,917,777 $ 220 LIABILITIES Accounts payable $ 195,611 $ 613,768 $ - Accrued liabilities 206,194 - - Due to other funds - 221,847 - Deferred revenue 161,657 9,762 - Total liabilities 563,462 845,377 - DEFERRED INFLOWS OF RESOURCES Deferred revenue - property taxes 7,071,123 - - Total deferred inflows of resources 7,071,123 - - FUND BALANCES Restricted: Law enforcement - - - State approved street aid - - - Industrial development - - 220 Economic development - - - Grant projects - - - Solid waste operations - - - Committed: Debt service - - - Assigned: Capital projects - 9,072,400 - Unassigned 14,500,939 - - Total fund balances 14,500,939 9,072,400 220 Total liabilities, deferred inflows of resources, and fund balances $ 22,135,524 $ 9,917,777 $ 220 The accompanying notes are an integral part of the financial statements. 13 American Nonmajor Total Rescue Plan Governmental Governmental Act Funds Funds $ 1,606,339 $ 3,509,051 $ 27,297,491 - - 591,958 - - 7,165,596 - 1,256 1,078,329 - 157,267 1,136,683 - - 57,377 221,847 - 221,847 $ 1,828,186 $ 3,667,574 $ 37,549,281 $ 386,693 $ 60,598 $ 1,256,670 - 11,112 217,306 - - 221,847 1,441,493 - 1,612,912 1,828,186 71,710 3,308,735 - - 7,071,123 - - 7,071,123 - 251,848 251,848 - 351,219 351,219 - - 220 - 3,348 3,348 - 19,143 19,143 - 18,555 18,555 - 2,951,751 2,951,751 - - 9,072,400 - - 14,500,939 - 3,595,864 27,169,423 $ 1,828,186 $ 3,667,574 $ 37,549,281 The accompanying notes are an integral part of the financial statements. 14 CITY OF EAST RIDGE, TENNESSEE RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2024 Differences in amounts reported for governmental activities in the statement of net position on page 11: Fund balances – total governmental funds $ 27,169,423 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 34,906,442 Certain revenues will be collected after year end but are not available soon enough to pay for the current period’s expenditures and therefore are deferred or not reported in the funds. 529,533 Deferred results and contributions to pension and OPEB plans made after the measurement date are recorded as expenditures in the governmental funds but must be deferred in the statement of net position. 775,883 The net pension liability is not due and payable in the current period and therefore is not reported in the funds. (830,509) Long-term liabilities are not due and payable in the current period and are not reported in the funds. Interest on long-term debt is not accrued in governmental funds but rather is recognized as an expenditure when due. All liabilities, both due in one year and due in more than one year, are reported in the statement of net assets. This item consists of: Bonds payable $ (17,215,000) Net bond issue premiums (957,858) Deferred refunding 93,989 Notes payable (8,560,827) Lease liability (150,400) Financed purchases (188,537) Compensated absences (592,671) Accrued interest payable (150,464) (27,721,768) The City's OPEB plan has not been funded. The OPEB obligation is considered a long-term obligation and is not reported in the funds. (1,460,000) Net position of governmental activities $ 33,369,004 The accompanying notes are an integral part of the financial statements. 15 CITY OF EAST RIDGE, TENNESSEE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2024 Capital Industrial General Projects Development REVENUES Taxes $ 20,270,808 $ - $ - Licenses and permits 249,939 - - Intergovernmental 3,425,845 1,521,767 1,237,500 Charges for services 1,180,670 - - Fines and forfeitures 379,205 - - Miscellaneous 211,757 5,166 42 Total revenues 25,718,224 1,526,933 1,237,542 EXPENDITURES Current: General government 3,927,691 2,159,916 - Public safety 10,000,557 - - Public works 891,906 - - Incentive payments - - 6,427,196 Public welfare 253,231 - - Culture and recreation 1,978,603 - - Capital outlay 138,122 2,648,494 - Debt service: Principal - - - Interest and other costs - - - Total expenditures 17,190,110 4,808,410 6,427,196 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 8,528,114 (3,281,477) (5,189,654) OTHER FINANCING SOURCES (USES) Transfers from other funds - - 5,188,698 Transfers to other funds (5,878,250) (714,668) - Note proceeds - 11,365,044 - Proceeds from sale of assets 4,356 - - Total other financing sources (uses) (5,873,894) 10,650,376 5,188,698 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES 2,654,220 7,368,899 (956) FUND BALANCE Beginning 11,846,719 1,703,501 1,176 Ending $ 14,500,939 $ 9,072,400 $ 220 The accompanying notes are an integral part of the financial statements. 16 American Other Total Rescue Plan Governmental Governmental Act Funds Funds $ - $ 818,957 $ 21,089,765 - - 249,939 2,922,046 1,035,675 10,142,833 - 1,560,600 2,741,270 - 24,645 403,850 - 123,760 340,725 2,922,046 3,563,637 34,968,382 - - 6,087,607 - 13,453 10,014,010 - 4,357,560 5,249,466 - - 6,427,196 2,922,046 - 3,175,277 - - 1,978,603 - - 2,786,616 - 1,329,030 1,329,030 - 511,977 511,977 2,922,046 6,212,020 37,559,782 - (2,648,383) (2,591,400) - 7,849,045 13,037,743 - (6,444,825) (13,037,743) - - 11,365,044 - - 4,356 - 1,404,220 11,369,400 - (1,244,163) 8,778,000 - 4,840,027 18,391,423 $ - $ 3,595,864 $ 27,169,423 The accompanying notes are an integral part of the financial statements. 17 CITY OF EAST RIDGE, TENNESSEE RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2024 Differences in amounts reported for governmental activities in the statement of activities on page 12: Net change in fund balances – total governmental funds $ 8,778,000 Amounts reported for governmental activities in the statement of activities are different because: Capital outlay reported as expenditures in the governmental funds that meet the capitalization threshold are shown as capital assets in the statement of net position. 10,594,648 Depreciation expense on governmental capital assets are included in the statement of activities. (2,394,929) Net book value of disposed capital assets. (21,807) The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes the current financial resources of governmental funds. The transaction has no effect on net position. The governmental funds report the effect of premiums and discounts on bonds when debt is first issued; these amounts are deferred and amortized in the statement of activities. This amount is the net effect of these differences in the treatment of long-term debt. Principal repayments $ 1,204,185 Principal paid - Leases 46,919 Deferred refunding loss on 2021 TML Bond refunding (6,266) Change in accrued interest (22,794) Amortization (90,301) Financed purchases (188,537) Bonds issued (8,000,000) Notes issued (3,226,880) (10,283,674) Certain items reported in the statement of activities do not require the use of current financial resources and are not reported as expenditures in the governmental funds. This item consists of: Change in compensated absences 132,643 Change in net pension liability and related deferred items 77,004 Change in net OPEB liability and related deferral item 280,665 490,312 Change in net position of governmental activities $ 7,162,550 The accompanying notes are an integral part of the financial statements. 18 CITY OF EAST RIDGE, TENNESSEE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Taxes $ 21,113,898 $ 21,113,898 $ 20,270,808 $ (843,090) Licenses and permits 315,350 315,350 249,939 (65,411) Intergovernmental 3,154,183 3,454,183 3,425,845 (28,338) Charges for services 964,804 1,003,154 1,180,670 177,516 Fines and forfeitures 427,300 427,300 379,205 (48,095) Miscellaneous 101,425 151,425 211,757 60,332 Total revenue 26,076,960 26,465,310 25,718,224 (747,086) EXPENDITURES Current: General government 3,980,475 4,246,138 3,927,691 318,447 Public safety 9,659,194 10,648,494 10,000,557 647,937 Public works 994,200 1,014,200 891,906 122,294 Public welfare 306,981 312,581 253,231 59,350 Culture and recreation 1,876,644 2,127,494 1,978,603 148,891 Capital outlay - - 138,122 (138,122) Total expenditures 16,817,494 18,348,907 17,190,110 1,158,797 EXCESS OF REVENUES OVER EXPENDITURES 9,259,466 8,116,403 8,528,114 411,711 OTHER FINANCING SOURCES (USES) Transfers to other funds (9,238,091) (8,237,478) (5,878,250) 2,359,228 Proceeds from sale of assets 10,000 10,000 4,356 (5,644) Total other financing sources (uses) (9,228,091) (8,227,478) (5,873,894) 2,353,584 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ 31,375 $ (111,075) 2,654,220 $ 2,765,295 FUND BALANCE Beginning 11,846,719 Ending $ 14,500,939 The accompanying notes are an integral part of the financial statements. 19 CITY OF EAST RIDGE, TENNESSEE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CAPITAL PROJECTS FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Intergovernmental $ 3,000,000 $ 3,000,000 $ 1,521,767 $ (1,478,233) Miscellaneous 1,000,000 1,000,000 5,166 (994,834) Total revenues 4,000,000 4,000,000 1,526,933 (2,473,067) EXPENDITURES Current General government 7,725,000 7,723,917 2,159,916 5,564,001 Capital outlay 3,900,000 12,245,000 2,648,494 9,596,506 TOTAL EXPENDITURES 11,625,000 19,968,917 4,808,410 15,160,507 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (7,625,000) (15,968,917) (3,281,477) 12,687,440 OTHER FINANCING SOURCES (USES) Transfers from other funds 2,279,613 2,279,613 - (2,279,613) Transfer to other funds - - (714,668) (714,668) Note proceeds 7,000,000 15,000,000 11,365,044 (3,634,956) Total other financing sources (uses) 9,279,613 17,279,613 10,650,376 (6,629,237) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ 1,654,613 $ 1,310,696 7,368,899 $ 6,058,203 FUND BALANCE Beginning 1,703,501 Ending $ 9,072,400 The accompanying notes are an integral part of the financial statements. 20 CITY OF EAST RIDGE, TENNESSEE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL INDUSTRIAL DEVELOPMENT FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Intergovernmental $ - $ - $ 1,237,536 $ 1,237,536 Miscellaneous - - 6 6 Total revenues - - 1,237,542 1,237,542 EXPENDITURES Incentive payments - 6,427,204 6,427,196 8 Total expenditures - 6,427,204 6,427,196 8 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES - (6,427,204) (5,189,654) 1,237,550 OTHER FINANCING SOURCES (USES) Transfers from other funds - 5,011,177 5,188,698 (177,521) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ - $ (1,416,027) (956) $ 1,415,071 FUND BALANCE Beginning 1,176 Ending $ 220 The accompanying notes are an integral part of the financial statements. 21 CITY OF EAST RIDGE, TENNESSEE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL AMERICAN RESCUE PLAN ACT FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Intergovernmental $ - $ - $ 2,922,046 $ 2,922,046 Total revenues - - 2,922,046 2,922,046 EXPENDITURES Current Public welfare 4,142,192 7,284,384 2,922,046 4,362,338 TOTAL EXPENDITURES 4,142,192 7,284,384 2,922,046 4,362,338 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES $ (4,142,192) $ (7,284,384) - $ 7,284,384 FUND BALANCE Beginning - Ending $ - The accompanying notes are an integral part of the financial statements. 22 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 PAGE Note 1 Summary of Significant Accounting Policies 23 Note 2 Stewardship, Compliance and Accountability 29 Note 3 Cash Deposits and Investments 30 Note 4 Receivables 30 Note 5 Interfund Transfers and Balances 30 Note 6 Capital Assets 31 Note 7 Long-term Liabilities 32 Note 8 Employee Retirement Systems and Other Postemployment Benefit Plans 33 Note 9 Restrictions and Contingencies 40 Note 10 Risk Management and Litigation 40 Note 11 Leases 41 Note 12 Subsequent Events 41 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Reporting Entity The City of East Ridge, Tennessee (the City) was incorporated in 1954 under Tennessee law. The City is governed by the elected Mayor and four elected City Councilmen and provides services to the citizens of the City including police and fire protection, animal control, solid waste and garbage services, parks and recreation facilities, maintenance of streets and highways, and general administrative services. As required by accounting principles generally accepted in the United States of America (GAAP), the accompanying basic financial statements includes all the funds and the account groups relevant to the operations of the City. The Industrial Development Board of the City of East Ridge, Tennessee The Industrial Development Board (the Board) was formed on November 19, 1979, and serves all citizens of the government. The Board was formed to promote industry and to develop trade by attracting manufacturing, industrial, and commercial enterprises to the City. The organization is governed by a board as appointed by City Council. Debt issuance authorizations are approved by City Council, and the City is legally obligated in case there are deficiencies in debt service payments and resources are not available from any other remedies. At June 30, 2024, the Board has no long-term obligations. The Board is reported as a special revenue fund as a blended component unit. Basic Financial Statements The Basic Financial Statements consists of the following: 1) Government-wide financial statements; 2) Fund financial statements; 3) Notes to the basic financial statements. Government-wide Financial Statements The government-wide financial statements consist of the statement of net position and the statement of activities and report information on all of the nonfiduciary activities of the primary government (governmental activities). The City reports capital assets in the government-wide statement of net position and reports depreciation expense - the cost of “using up” capital assets - in the statement of activities. As a general rule, the effect of interfund activity has been eliminated from these statements. Governmental activities are normally supported by taxes and intergovernmental revenues. The governmental activities of the City include general government, public safety (police, fire, and animal control), public works, public welfare, culture and recreation, and general administrative support services. The statement of activities reports expenses and revenues in a format that focuses on the cost of each of the City’s functions, e.g., public safety, public works, etc. The expense of individual functions is compared to the revenue generated directly by the function. Direct expenses are those that are clearly identifiable with a specific function. (Continued) 23 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Government-wide Financial Statements (Continued) The types of transactions reported as program revenues for the City are reported in three specific categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Charges for services include revenues from customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function. Grants and contributions include revenues restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not included among program revenues are reported instead as general revenues. Fund Financial Statements The fund financial statements provide information about the government’s funds. Separate statements for each governmental fund are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. The City reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. The Capital Projects Fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities, city- wide repair and maintenance projects, and other capital assets. The capital projects fund excludes those types of capital related outflows financed for assets that will be held in trust for individuals, private organizations, or other governments. The Industrial Development Fund is used to account for revenues and costs associated with development ongoing withing the City. The American Rescue Plan Act Fund is used to account for the activity associated with the American Rescue Plan Act (ARPA) funds that the City has received. Additionally, the City reports the following other fund types: Special Revenue Funds: These funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. During the course of normal operations, the City has activity between funds for various purposes. Any residual balances outstanding at year end are reported as due from/to other funds. While these balances are reported in the fund financial statements, certain eliminations are made in preparation of the government-wide financial statements. Balances between the funds included in governmental activities are eliminated so that only the net amount is included in internal balances in the governmental activities’ columns. Further, certain activity occurs during the year involving transfers of resources between funds. In fund financial statements, these amounts are reported at gross amounts as transfers in/out. While reported in fund financial statements, certain eliminations are made in the preparation of the government-wide financial statements. Transfers between the funds included in governmental activities are eliminated. (Continued) 24 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenue is recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis, revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures and expenditures relating to claims and judgments are recognized only when payment is due. Property taxes, state-shared revenue, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable within the current fiscal period are considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be available only when cash is received by the City. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Budgets and Budgetary Accounting Formal budgets are adopted by the Mayor and City Council as a management control device during the year for the governmental type funds, special revenue funds, and debt service fund. The capital projects fund is subject to budgetary control on the project basis. Providing budgetary information on an annual basis does not provide meaningful information because projects extend over more than one reporting period. Expenditures may not legally exceed budgeted appropriations at the fund level. Budgetary integration is employed as a management tool during the fiscal year, and the budget is amended, as necessary, to meet changing needs. City Council approves departmental budgets. Transfers between departments and any revisions in the total appropriations must be approved by the Mayor and City Council. Unused appropriations for any of the annually budgeted funds lapse at the end of the year. Cash and Cash Equivalents For purposes of reporting cash flows, the City considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments The City follows state investment policy guidelines for types of allowable investments. (Continued) 25 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories and Prepaid Items Inventories are recorded at the lower of cost and net realizable value. The cost of such inventories is recorded as expenditures/expenses when consumed rather than purchased. Certain payments to vendors reflect costs applicable to future reporting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. Accounts Receivable With respect to the accounts receivable for solid waste collection fees, the City uses the allowance method to estimate uncollectible accounts based on a projection of balances unlikely to be collected. Individual accounts are written off only when they are determined to be uncollectible. Receivables for the solid waste collection fund are reported net of allowance of $84,180. Other receivable amounts are considered collectible in all material respects. Capital Assets Capital assets, including public domain infrastructure (e.g., roads, bridges, streetlights, traffic lights, sidewalks, and other assets that are immovable and of value only to the City) are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life greater than one year. Capital assets are recorded at historical cost. Donated capital assets are recorded at estimated fair market value at the date of donation. The cost of normal maintenance and repairs that does not add to the value of the asset or materially extend the assets’ lives is not capitalized. In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental activities), the government chose to include all such items regardless of their acquisition date or amount. The government was able to estimate the historical cost for the initial reporting of these assets through back trending (i.e., estimating the current replacement cost of the infrastructure to be capitalized and using and appropriate price- level index to deflate the cost to the acquisition year or estimated acquisition year). Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets of the City are depreciated using the straight-line method over the following estimated useful lives of the assets: Useful Life Buildings and improvements 20-50 years Infrastructure 15-50 years Vehicles 5 years Machinery and equipment 5-10 years Furniture and fixtures 7-10 years Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This represents a consumption of net position that applies to a future period(s) and will not be recognized as an outflow of resources (as either an expense or expenditure) until that period. The City reports deferred contributions on pension and OPEB plans and certain amounts related to pensions and OPEB, as detailed as (2) below. Deferred contributions for the pension and OPEB plans were made during the fiscal year but are after the measurement date of the actuarial report. These amounts will be recognized during the next measurement period. (Continued) 26 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Deferred Outflows/Inflows of Resources (Continued) In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The government has two types of items which arise under a modified accrual basis of accounting and full accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, deferred revenue, is reported in the governmental funds balance sheet and government-wide statement of net position. (1) The governmental funds and governmental activities report unavailable revenues from property taxes. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. (2) Certain amounts related to pensions and OPEB must be deferred. Differences between projected and actual earnings on pension and OPEB plan investments are deferred and amortized over five years. Changes in pension and OPEB plan assumptions are deferred and amortized over the expected remaining service lives of employees. Net Position Flow Assumption Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted net position to have been depleted before unrestricted net position is applied. Fund Balance Flow Assumptions Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted fund balance to have been depleted before using any of the components of unassigned fund balance. Further, when the components of unassigned fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Compensated Absences The City has a policy of compensated annual leave up to 33 days based on years of service. Employees hired before June 30, 2012, accumulate leave and vest to a maximum of 320 hours, the excess payable at the employee’s anniversary date. Employees hired after July 1, 2012, do not receive the excess each year but rather continue to accumulate leave hours. The liability for compensated absences of the governmental funds is recorded in the government-wide financial statements. No liability is recorded in the governmental funds because any payments, even those which would be paid in the next 12 months, if susceptible to a reasonable estimate, are expected to be liquidated with future resources. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities statement of net position. Similarly, long-term debt and other obligations of the City are recorded as liabilities in the appropriate fund. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bond issuance costs are reported as expenses when incurred. (Continued) 27 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Long-term Obligations (Continued) In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Net Position The government-wide financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted, and unrestricted. Net Investment in Capital Assets is intended to reflect the net position associated with non-liquid capital assets less outstanding capital asset related debt. Restricted Net Position represents net position that has third-party (statutory, bond covenant or granting agency) limitations on its use. Unrestricted Net Position represents net position that is not restricted for any project or other purpose. While management may have categorized and segmented portions for various purposes, the City has the unrestricted authority to revisit or alter these managerial decisions. Fund Balance Governmental funds utilize a fund balance presentation for equity. Fund balance is categorized as non-spendable, restricted, committed, assigned, or unassigned. Non-spendable Fund Balance represents amounts that cannot be spent because they are either not in spendable form (such as inventory or prepaids) or legally required to remain intact (such as notes receivable or principal of a permanent fund). Restricted Fund Balance represents amounts with external constraints placed on the use of these resources (such as debt covenants, grantors, other governments, etc.) or imposed by enabling legislation. Committed Fund Balance represents amounts that can only be used for specific purposes as pursuant to official action by City Council prior to the end of the reporting period. Committed resources cannot be used for any other purpose unless the City Council removes or changes the specified use by ordinance. Assigned Fund Balance represents amounts the City intends to use for specific purposes as expressed by the City Council or an official delegated the authority to assign amounts. This is the residual classification for all governmental funds other than the general fund. Assignment of amounts to a specific purpose as part of the annual budget ordinance may be made by resolution of the City Council. Unassigned Fund Balance represents fund balance that has not been assigned to other funds and has not been restricted, committed, or assigned to specific purposes within the general fund. (Continued) 28 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property Tax Information Property taxes are billed and collected for the City by the Hamilton County Trustee, and collections are remitted to the City monthly. Property taxes attach as an enforceable lien on the property as of January 1 and are levied for the calendar year in September. They are payable immediately and become past due March 1 of the succeeding year to avoid penalties and interest. On February 1 of the following year, the delinquent property taxes are filed with the office of the Hamilton County Clerk and Master by the Trustee’s office. Property taxes are recognized when they become available. Available includes those property taxes receivable which are expected to be collected within 60 days after year end. Property taxes levied for 2024 are recorded as receivables. No allowance has been made for uncollectible taxes; based on historical collection data, uncollectible amounts are considered immaterial. Interfund Transactions During the course of normal operations, transactions occur between individual funds for goods provided or services rendered. Short-term interfund loans are classified as “due to/from other funds.” Long-term loans between funds are classified as “loans to/from other funds.” All short-term interfund receivables and payables at year end are planned to be eliminated in the subsequent year. Pensions For purposes of measuring the net pension liability or asset, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s participation in the Public Employee Retirement Plan of the Tennessee Consolidated Retirement System (TCRS), and additions to/deductions from fiduciary net position have been determined on the same basis as they are reported by the TCRS for the Public Employee Retirement Plan. For this purpose, benefits (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms of the Public Employee Retirement Plan of TCRS. Investments are reported at fair value. Leases Right-to-use assets and lease liabilities are recognized upon the commencement of the lease term in relation to leases in which the City has acquired the right to use a leased asset. These are measured at the present value of payments expected to be made by the City during the lease term in addition to certain direct costs. The interest rate utilized to calculate the present value of lease payments is calculated annually and represents the weighted cost of debt. Reclassifications Certain amounts in the prior periods have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income. NOTE 2 – STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Compliance with Finance Related Legal and Contractual Provisions The City incurred no material violations of finance related legal and contractual provisions. 29 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 3 – CASH DEPOSITS AND INVESTMENTS Cash Deposits The City reports its cash and other investments under GASB Statement No. 40, Deposit and Investment Risk Disclosures, which is designed to improve financial reporting of deposit and investment risks. The City’s investments are carried at fair value (level 2) and consist of certificates of deposit totaling $591,958. Interest Rate Risk As a means of limiting its exposure to losses resulting from rising interest rates, the City’s usual policy is to invest in certificates of three years or less. The exposure to interest rate changes is presented using the weighted average maturity method. Its policy is to limit exposure to interest rate risk by requiring sufficient liquidity in the investment portfolio. The City’s investments experienced no significant fluctuations in fair value during the year. Custodial Credit Risk The City’s policies limit deposits and investments to those instruments allowed by applicable state laws. State statutes require that deposits with financial institutions must be collateralized by securities whose market value is equal to 105% of the value of the uninsured deposits. The deposits must be covered by the Federal Deposit Insurance Corporation or the Tennessee Bank Collateral Pool, by collateral held in the City’s agent in the City’s name, or by Federal Reserve Banks acting as third-party agents. State statutes also authorize the types of investments in which the City may participate. The City limits its investments to certificates of deposit, savings accounts and money market accounts with local banks. The City could also invest with the State of Tennessee local government pooled investment fund but has not chosen to do so. Credit Risk The City’s policies are designed to maximize its earnings, while protecting the security and providing maximum liquidity, in accordance with all applicable state laws. NOTE 4 – RECEIVABLES Receivables as of June 30, 2024, consisted of the following: Taxes Gross (Less) Receivables Grant Funds Accounts Receivables Allowance Net Governmental Funds General $ 7,165,596 $ - $ 979,416 $ 8,145,012 $ - $ 8,145,012 Capital Projects - 1,077,073 - 1,077,073 - 1,077,073 Nonmajor Governmental - 1,256 706,122 707,378 (548,855) 158,523 Total Governmental $ 7,165,596 $ 1,078,329 $ 1,685,538 $ 9,929,463 $ (548,855) $ 9,380,608 NOTE 5 – INTERFUND TRANSFERS AND BALANCES Transfers within the City are substantially for the purpose of subsidizing industrial/economic development, operating, and debt service functions. Resources are accumulated in a fund to support and simplify the administration of various projects or programs. Interfund transfers are transactions between transferring funds out of one fund to support the operations of another fund. (Continued) 30 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 5 – INTERFUND TRANSFERS AND BALANCES (Continued) Transfers to/from other funds during the year ended June 30, 2024, were as follows: Transfers In Industrial Nonmajor Development Governmental Total Transfers Out: General Fund $ 5,188,698 $ 689,552 $ 5,878,250 Capital Projects - 714,668 714,668 Nonmajor Governmental - 6,444,825 6,444,825 $ 5,188,698 $ 7,849,045 $ 13,037,743 Interfund balances result from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. The composition of the City’s interfund balances as of June 30, 2024, were as follows: Receivable Fund Payable Fund Amount American Rescue Plan Act Capital Projects $ 221,847 NOTE 6 – CAPITAL ASSETS The following is a summary of changes in capital assets and accumulated depreciation: Beginning Ending Balance Additions Retirements Balance Non-depreciable capital assets: Land $ 1,966,429 $ - $ 19,252 $ 1,947,177 Construction in process 5,713,380 8,735,174 - 14,448,554 Total non-depreciable assets 7,679,809 8,735,174 19,252 16,395,731 Depreciable capital assets: Buildings 11,371,718 21,540 - 11,393,258 Infrastructure 24,138,961 - - 24,138,961 Equipment/Vehicles 11,819,021 1,837,934 1,006,860 12,650,095 Right to use assets 400,849 - 150,000 250,849 47,730,549 1,859,474 1,156,860 48,433,163 Less accumulated depreciation: Buildings 8,485,144 223,294 - 8,708,438 Infrastructure 11,320,701 1,140,591 - 12,461,292 Equipment/Vehicles 8,684,175 980,874 1,004,305 8,660,744 Right to use assets 191,808 50,170 150,000 91,978 28,681,828 2,394,929 1,154,305 29,922,452 Total depreciable assets, net 19,048,721 (535,455) 2,555 18,510,711 Total capital assets, net $ 26,728,530 $ 8,199,719 $ 21,807 $ 34,906,442 Depreciation expense is charged to functions as follows: General $ 215,544 Public safety 910,073 Public works 598,732 Culture and recreation 670,580 Total $ 2,394,929 31 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 7 – LONG-TERM LIABILITIES In the government-wide financial statements, long-term debt and other long-term obligations relative to governmental activities are reported as liabilities of the entity. Debt reported in the government-wide financial statements is expected to be liquidated with general government resources. The debt represents amounts not expected to be paid with expendable, available resources, and bonds, notes payable, and lease liability consisted of the following as of June 30, 2024: General obligation bonds: Series 2015 for $3,085,000 with installments, plus interest at a rate of 5%, through March 2045 $ 2,670,000 Series 2021 for $8,495,000 with semi-annual interest payments between 1.75 - 4.00% beginning December 2021 and additional interest and principal due through June 2039 6,545,000 Series 2024 for $8,000,000 with annual interest payments between 4.00-5.00% and principal due through June 2044 8,000,000 $ 17,215,000 Notes: Note of $1,800,000 to Tennessee Municipal League Bond Fund, with semi-annual interest payments at 2.54% beginning May 2021 and additional interest and principal due through November 2035 $ 1,492,000 Note of $696,079 to Tennessee Municipal League Bond Fund, with semiannual interest payments at 1.65% beginning December 2021 and additional interest and principal due through December 2028 504,000 Note of $6,842,827 to Tennessee Municipal Bond Fund, with semiannual interest payments at 3.95% beginning October 2022 and additional interest and principal due through September 2042 6,564,827 $ 8,560,827 Financed purchases: Motorola Solutions Financed Purchase $ 188,537 Lease liability: On August 1, 2022, the City entered into a lease agreement with Axon Enterprises to lease equipment for 5 years with annual payments of $53,530. A discount rate of 3.30% was used in calculating the lease liability. $ 150,400 (Continued) 32 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 7 – LONG-TERM LIABILITIES (Continued) Maturities of general long-term debt are as follows: For the General year ending Financed Lease Obligation June 30, Purchases Liability Bonds Notes Total 2025 $ 77,377 $ 48,491 $ 875,000 $ 557,000 $ 1,557,868 2026 35,261 50,115 840,000 576,000 1,501,376 2027 37,024 51,794 850,000 594,000 1,532,818 2028 38,875 - 875,000 612,000 1,525,875 2029-2033 - - 4,435,000 2,947,000 7,382,000 2034-2038 - - 4,845,000 3,107,000 7,952,000 2039-2043 - - 3,525,000 167,827 3,692,827 2044-2045 - - 970,000 - 970,000 $ 188,537 $ 150,400 $ 17,215,000 $ 8,560,827 $ 26,114,764 During the year ended June 30, 2024, changes in long-term liabilities were as follows: Amount Beginning Ending Due Within Balance Additions Retirements Balance One Year Bonds payable $ 9,950,000 $ 8,000,000 $ 735,000 $ 17,215,000 $ 875,000 Notes payable 5,803,132 3,226,880 469,185 8,560,827 557,000 Lease liability 197,319 - 46,919 150,400 48,491 Financed purchases - 188,537 - 188,537 77,377 Plus: Premium 867,557 138,164 47,863 957,858 54,771 Compensated absences 725,314 - 132,643 592,671 592,671 $ 17,543,322 $ 11,553,581 $ 1,431,610 $ 27,665,293 $ 2,205,310 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS Tennessee Consolidated Retirement System General Information about the Pension Plan Plan description. Employees of East Ridge are provided a defined benefit pension plan through the Public Employee Retirement Plan, an agent multiple-employer pension plan administered by the TCRS. The TCRS was created by state statute under Tennessee Code Annotated Title 8, Chapters 34-37. The TCRS Board of Trustees is responsible for the proper operation and administration of the TCRS. The Tennessee Treasury Department, an agency in the legislative branch of state government, administers the plans of the TCRS. The TCRS issues a publicly available financial report that can be obtained at www.treasury.tn.gov/tcrs. (Continued) 33 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS (Continued) General Information about the Pension Plan (Continued) Benefits provided. Tennessee Code Annotated Title 8, Chapters 34-37 establishes the benefit terms and can be amended only by the Tennessee General Assembly. The chief legislative body may adopt the benefit terms permitted by statute. Members are eligible to retire with an unreduced benefit at age 60 with five years of service credit or after 30 years of service credit regardless of age. Benefits are determined by a formula using the member’s highest five consecutive year average compensation and the member’s years of service credit. Reduced benefits for early retirement are available at age 55 and vested. Members vest with five years of service credit. Service-related disability benefits are provided regardless of length of service. Five years of service is required for non-service- related disability eligibility. The service related and non-service-related disability benefits are determined in the same manner as a service retirement benefit but are reduced 10% and include projected service credits. A variety of death benefits are available under various eligibility criteria. Member and beneficiary annuitants are entitled to automatic cost of living adjustments (COLAs) after retirement. A COLA is granted each July for annuitants retired prior to the second of July of the previous year. The COLA is based on the change in the consumer price index (CPI) during the prior calendar year, capped at 3% and applied to the current benefit. No COLA is granted if the change in the CPI is less than one-half percent. A one percent COLA is granted if the CPI change is between one-half percent and one percent. A member who leaves employment may withdraw their employee contributions, plus any accumulated interest. Employees covered by benefit terms. As of the measurement date of June 30, 2023, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 66 Inactive employees entitled to but not yet receiving benefits 79 Active employees 137 282 Contributions. Contributions for employees are established in the statutes governing the TCRS and may only be changed by the Tennessee General Assembly. Employees contribute 5% of salary. The City makes employer contributions at the rate set by the Board of Trustees as determined by an actuarial valuation. For the year ended June 30, 2024, employer contributions for East Ridge were $811,887 based on a rate of 10.00% of covered payroll. By law, employer contributions are required to be paid. The TCRS may intercept the City’s state shared taxes if required employer contributions are not remitted. The employer’s actuarially determined contribution (ADC) and member contributions are expected to finance the costs of benefits earned by members during the year, the cost of administration, as well as an amortized portion of any unfunded liability. Net Pension Liability (Asset) The City’s net pension liability (asset) was measured as of June 30, 2023, and the total pension liability used to calculate net pension liability (asset) was determined by an actuarial valuation as of that date. Actuarial assumptions. The total pension liability as of June 30, 2023, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.25% Salary increases Graded salary ranges from 8.72 to 3.44% based on age, including inflation, averaging 4.00% Investment rate of return 6.7%, net of pension plan investment expenses, including inflation Cost-of-Living Adjustment 2.125% (Continued) 34 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS (Continued) Net Pension Liability (Asset) (Continued) Mortality rates were based on actual experience including an adjustment for some anticipated improvement. The actuarial assumptions used in the June 30, 2023, actuarial valuation were based on the results of an actuarial experience study performed for the period July 1, 2016, through June 30, 2020. The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees in conjunction with the June 30, 2020, actuarial experience study. A blend of future capital market projections and historical market returns was used in a building-block method in which a best-estimate of expected future real rates of return is developed for each major asset class. These best estimates are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation of 2.25%. The best-estimates of geometric real rates of return and the TCRS investment policy target asset allocation for each major asset class is summarized in the following table: Long-Term Expected Asset Class Real Rate of Return Target Allocation U.S. equity 4.88% 31% Developed market international equity 5.37% 14% Emerging market international equity 6.09% 4% Private equity and strategic lending 6.57% 20% U.S. fixed income 1.20% 20% Real estate 4.38% 10% Short-term securities 0.00% 1% 100% The long-term expected rate of return on pension plan investments was established by the TCRS Board of Trustees as 6.75% based on a blending of the factors described above. Discount rate. The discount rate used to measure the total pension liability was 6.75 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current rate and that contributions from the City will be made at the actuarially determined contribution rate pursuant to an actuarial valuation in accordance with the funding policy of the TCRS Board of Trustees and as required to be paid by state statute. Based on those assumptions, the pension plan’s fiduciary net position was projected to be available to make projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. (Continued) 35 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS (Continued) Changes in the Net Pension Liability (Asset) Increase (Decrease) Total Pension Plan Fiduciary Net Position Liability Net Pension Liability (Asset) (a) (b) (a) – (b) Balance as of 06/30/22 $ 26,954,183 $ 25,559,012 $ 1,395,171 Changes for the year: Service cost 674,792 - 674,792 Interest 1,823,426 - 1,823,426 Differences between expected and actual experience (280,069) - (280,069) Contributions – employer - 721,795 (721,795) Contributions – employees - 360,897 (360,897) Net investment income - 1,712,654 (1,712,654) Benefit payments, including refund of employee contributions (1,230,517) (1,230,517) - Administrative expense - (12,535) 12,535 Net changes 987,632 1,552,294 (564,662) Balance as of 06/30/23 $ 27,941,815 $ 27,111,306 $ 830,509 Sensitivity of the net pension liability (asset) to changes in the discount rate. The following presents the net pension liability (asset) of the City calculated using the discount rate of 6.75%, as well as what the net pension liability (asset) would be if it were calculated using a discount rate that is one-percentage-point lower (5.75%) or one-percentage- point higher (7.75%) than the current rate: 1% Current 1% Decrease Discount Rate Increase (5.75%) (6.75%) (7.75%) Net pension liability (asset) $ 4,748,632 $ 830,509 $ (2,395,156) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Pension expense. For the year ended June 30, 2024, the City recognized pension expense of $722,499. Deferred outflows of resources and deferred inflows of resources. For the year ended June 30, 2024, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: (Continued) 36 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS (Continued) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ 424,480 $ 339,662 Change of assumptions 983,459 - Net difference between projected and actual earnings of pension plan investments 210,176 - Employer contributions after Measurement Date but prior to fiscal year end 811,887 - Total $ 2,430,002 $ 339,662 The amount shown for “Employer contributions after Measurement Date but prior to fiscal year end” will be recognized as a reduction (increase) to net pension liability in the following measurement period. Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended June 30: 2025 $ 209,590 2026 156,055 2027 932,850 2028 26,636 2029 (46,678) $ 1,278,453 In the table shown above, positive amounts will increase pension expense while negative amounts will decrease pension expense. Payable to the Pension Plan As of June 30, 2024, the City did not report a payable for the outstanding amount of contributions to the plan. City of East Ridge Other Postemployment Benefits Plan Plan Description The City's OPEB plan is a single employer plan. Under this plan covered employees include all full-time employees with 10 or more years of service with the city and hired prior to July 1, 2012. The City Council has the authority to establish and amend benefit provisions of the Plan. Employees covered by benefit terms. As of July 1, 2023 (the valuation date) the following employees were covered by the benefit terms: Count Inactive employees or beneficiaries currently receiving benefits 8 Active employees 44 52 (Continued) 37 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS (Continued) Employer Contributions The funding policy of the plan sponsor is to contribute annually an amount sufficient to satisfy benefit payment requirements to participants. Employee Contributions None. Net OPEB Liability The employer’s net OPEB liability is reported herein as of June 30, 2024, for the employer fiscal year and reporting period of July 1, 2023, to June 30, 2024. The values shown for this fiscal year and reporting period are based on a measurement date of July 1, 2023, and the corresponding measurement period of July 1, 2022, to July 1, 2023. The measurement of the total OPEB liability is based on a valuation date of July 1, 2023. Actuarial Assumptions and Actuarial Methods The total OPEB liability in the July 1, 2023 actuarial valuation was determined using the following key actuarial assumptions, applied to all periods included in the measurement: Discount Rate: 3.86% Salary Scale: 2.50% Healthcare Cost Trend Rates: 7.00% for fiscal year end 2024, decreasing 0.25% per year to an ultimate rate of 5.00% Mortality: RP-2014 Mortality Table, fully generational with base year 2006, projected using two-dimensional mortality improvement scale MP-2021 Actuarial Cost Method: Entry Age Actuarial Cost Method Expected Return on Assets None. Discount Rate The discount rate has been set equal to 3.86% and represents the Municipal GO AA 20-year yield curve rate as of July 1, 2023. (Continued) 38 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS (Continued) Changes in the Net OPEB Liability Increase (Decrease) Total OPEB Plan Fiduciary Net OPEB Liability Net Pension Liability (Asset) (a) (b) (a) – (b) Balance as of July 1, 2023 $ 2,357,000 $ - $ 2,357,000 Changes for the year: Service cost 113,000 - 113,000 Interest 89,000 - 89,000 Differences between expected and actual experience (529,000) - (529,000) Contributions – employer - 92,000 (92,000) Benefit payments (92,000) (92,000) - Change in benefit terms (42,000) - (42,000) Other changes (436,000) - (436,000) Net changes (897,000) - (897,000) Balance as of June 30, 2024 $ 1,460,000 $ - $ 1,460,000 Sensitivity of the net OPEB liability to changes in the discount rate. The following presents the net OPEB liability/(asset) of the employer as of the measurement date calculated using the discount rate, as well as what the employer’s net OPEB liability would be if it were calculated using a discount rate that is one-percentage-point lower or one-percentage-point higher than the current rate: 1% Current 1% Decrease Discount Rate Increase Employer’s Net OPEB Liability $ 1,498,000 $ 1,460,000 $ 1,414,000 Sensitivity of the net OPEB liability to changes in the Trend rate. The following presents the net OPEB liability/(asset) of the employer as of the measurement date calculated using the trend rate, as well as what the employer’s net OPEB liability would be if it were calculated using a trend rate that is one-percentage-point lower or one-percentage-point higher than the current rate: 1% Current 1% Decrease Trend Rate Increase Employer’s Net OPEB Liability $ 1,290,000 $ 1,460,000 $ 1,654,000 OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB For the year ended June 30, 2024, under GASB 75 the employer OPEB expense is $(180,000). The Deferred Outflows of Resources and Deferred Inflows of Resources related to OPEB as of June 30, 2024 from various sources are as follows: (Continued) 39 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 8 – EMPLOYEE RETIREMENT SYSTEMS AND OTHER POSTEMPLOYMENT BENEFIT PLANS (Continued) OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued) Deferred Deferred Outflows of Inflows of Resources Resources Differences between expected and actual experience $ - $ 1,018,000 Changes of assumptions 249,000 583,000 Net difference between projected and actual earnings on OPEB plan investments - - Employer contributions after Measurement Date but prior to fiscal year end 37,543 - Total $ 286,543 $ 1,601,000 Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year ended June 30: 2025 $ (346,000) 2026 (312,000) 2027 (290,000) 2028 (247,000) 2029 (157,000) $ (1,352,000) NOTE 9 – RESTRICTIONS AND CONTINGENCIES Federal and State Grants The City has received funds from federal and state grants for specific purposes which are subject to review by the grantor agencies. Such reviews could lead to a request for reimbursement to the grantor agencies for any expenditure disallowed under the terms of the grants. Management believes that such disallowed costs, if any, would be immaterial. NOTE 10 – RISK MANAGEMENT AND LITIGATION The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City participates in the Tennessee Municipal League Risk Management Pool (TML-RMP) to provide workers’ compensation coverage and general liability and property insurance. The City, along with other participating entities, contributes annual amounts determined by TML-RMP management. As claims arise, they are submitted to and paid by TMP-RMP. The amount contributed to the plan during fiscal year 2024 was $679,597. There were no significant reductions in insurance coverage from the prior year. Settled claims have not exceeded this insurance coverage in any of the past three years. As of June 30, 2024, the City was involved in several lawsuits as defendant. Additionally, the City is exposed to several unasserted claims. Management feels that uninsured exposure if any would not be material to the financial statements. 40 CITY OF EAST RIDGE, TENNESSEE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2024 NOTE 11 – LEASES The City has recorded right to use lease assets as a result of implementing Governmental Accounting Standards Board Statement No. 87, Leases (GASB 87). The right to use assets are initially measured at an amount equal to the initial measurement of the related lease liability plus any lease payments made prior to the lease term, less lease incentives and plus ancillary charges necessary to place the lease into service. The assets are right to use assets for leased police equipment. The right to use assets are amortized on a straight-line basis over the life of the related lease. See Notes 6 and 7 for more information related to the right to use asset and lease liability. NOTE 12 – SUBSEQUENT EVENTS Management has evaluated events and transactions subsequent to the statement of net position date through December 6, 2024 (the date the financial statements were available to be issued) for potential recognition or disclosure in the financial statements. Management has not identified any items requiring recognition or disclosure. 41 REQUIRED SUPPLEMENTARY INFORMATION CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF CHANGES IN CITY OF EAST RIDGE, TENNESSEE'S NET PENSION LIABILITY (ASSET) AND RELATED RATIOS BASED ON PARTICIPATION IN THE PUBLIC EMPLOYEE PENSION PLAN OF TCRS LAST TEN FISCAL YEARS ENDING 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Total Pension Liability (Asset) Service cost $ 674,792 $ 591,986 $ 499,971 $ 486,199 $ 466,527 $ 436,698 $ 401,914 $ 387,433 $ 378,218 $ 355,419 Interest 1,823,426 1,711,781 1,609,380 1,520,358 1,472,828 1,430,710 1,366,825 1,292,399 1,246,302 1,162,743 Changes in benefit terms - - - - - - - - - - Differences between actual and expected experience (280,069) 431,285 93,894 270,034 (231,693) (280,511) 163,918 208,110 (178,441) 277,808 Change in assumptions - - 1,966,916 - - - 468,974 - - - Benefit payments, including refunds of employee contributions (1,230,517) (1,097,202) (1,104,398) (1,020,544) (1,122,949) (948,647) (904,986) (915,163) (766,168) (643,140) Net change in total pension liability 987,632 1,637,850 3,065,763 1,256,047 584,713 638,250 1,496,645 972,779 679,911 1,152,830 Total pension liability - beginning 26,954,183 25,316,333 22,250,570 20,994,523 20,409,810 19,771,560 18,274,915 17,302,136 16,622,225 15,469,395 Total pension liability - ending (a) $ 27,941,815 $ 26,954,183 $ 25,316,333 $ 22,250,570 $ 20,994,523 $ 20,409,810 $ 19,771,560 $ 18,274,915 $ 17,302,136 $ 16,622,225 Plan Fiduciary Net Position Contributions - employer $ 721,795 $ 701,710 $ 593,744 $ 583,981 $ 551,838 $ 531,711 $ 487,590 $ 414,430 $ 413,814 $ 407,430 Contributions - employee 360,897 350,857 296,873 291,992 275,919 265,857 243,796 224,017 223,684 220,711 Net investment income 1,712,654 (1,017,837) 5,485,033 1,013,806 1,432,467 1,492,501 1,847,817 427,408 487,732 2,257,625 Benefit payments, including refunds of employee contributions (1,230,517) (1,097,202) (1,104,398) (1,020,544) (1,122,949) (948,647) (904,986) (915,163) (766,168) (643,140) Administrative expense (12,535) (13,278) (11,526) (11,503) (11,475) (12,243) (10,331) (8,744) (5,714) (4,837) Net change in plan fiduciary net position 1,552,294 (1,075,750) 5,259,726 857,732 1,125,800 1,329,179 1,663,886 141,948 353,348 2,237,789 Plan fiduciary net position - beginning 25,559,012 26,634,762 21,375,036 20,517,304 19,391,504 18,062,325 16,398,439 16,256,491 15,903,143 13,665,354 Plan fiduciary net position - ending (b) $ 27,111,306 $ 25,559,012 $ 26,634,762 $ 21,375,036 $ 20,517,304 $ 19,391,504 $ 18,062,325 $ 16,398,439 $ 16,256,491 $ 15,903,143 Net pension liability (asset) - ending (a) - (b) $ 830,509 $ 1,395,171 $ (1,318,429) $ 875,534 $ 477,219 $ 1,018,306 $ 1,709,235 $ 1,876,476 $ 1,045,645 $ 719,082 Plan fiduciary net position as a percentage of total pension liability 97.03% 94.82% 105.21% 96.07% 97.73% 95.01% 91.36% 89.73% 93.96% 95.67% Covered - employee payroll $ 7,217,943 $ 7,017,097 $ 5,937,433 $ 5,839,802 $ 5,518,376 $ 5,317,111 $ 4,875,894 $ 4,480,329 $ 4,473,661 $ 4,414,199 Net pension liability (asset) as a percentage of covered payroll 11.51% 19.88% -22.21% 14.99% 8.65% 19.15% 35.05% 41.88% 23.37% 16.29% Notes to Schedule: Changes of assumptions. In 2021, amounts reported as changes of assumptions resulted from changes to the inflation rate, investment rate of return, cost-of-living adjustment, and mortality improvements. In 2017, amount reported as changes of assumptions resulted from changes to the inflation rate, investment rate of return, cost-of-living adjustment, salary growth and mortality improvements. See independent auditor's report. 42 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF CITY OF EAST RIDGE, TENNESSEE'S CONTRIBUTIONS BASED ON PARTICIPATION IN THE PUBLIC EMPLOYEE PENSION PLAN OF TCRS LAST TEN FISCAL YEARS ENDING 2024 2023 2022 2021 2020 2019 2018 2017 2016 Actuarially determined contribution $ 811,887 $ 734,179 $ 627,329 $ 530,213 $ 521,495 $ 551,838 $ 531,711 $ 451,020 $ 414,431 Contributions in relation to the actuarially determined contribution 811,887 734,179 701,710 593,744 583,981 551,838 531,711 487,590 414,431 Contribution deficiency (excess) $ - $ - $ (74,381) $ (63,531) $ (62,486) $ - $ - $ (36,570) $ - Covered-employee payroll $ 8,118,870 $ 7,341,790 $ 7,017,097 $ 5,937,440 $ 5,839,810 $ 5,518,376 $ 5,317,111 $ 4,875,894 $ 4,480,329 Contributions as a percentage covered-employee payroll 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 9.25% Note: GASB 68 requires a 10-year schedule for this data to be presented starting with the implementation of GASB 68. The information in this schedule is not required to be presented retroactively prior to the implementation date. See independent auditor's report. 43 CITY OF EAST RIDGE, TENNESSEE NOTES TO PENSION SCHEDULES LAST FISCAL YEAR ENDING JUNE 30, 2024 Valuation date: Actuarially determined contribution rates for 2024 were calculated based on the June 30, 2022, actuarial valuation. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal Amortization method Level dollar, closed (not to exceed 20 years) Remaining amortization period Varies by year Asset valuation 10-year smoothed within a 20% corridor to market value Inflation 2.25% Graded salary ranges from 8.72 to 3.44% based on age, including Salary increases inflation averaging 4.00% Investment Rate of Return 6.75%, net of investment expense, including inflation Retirement age Pattern of retirement determined by experience study Customized table based on actual experience including an adjustment for Mortality some anticipated improvement Cost of Living Adjustments 2.13% Changes of assumptions. In 2021, amounts reported as changes of assumptions resulted from changes to the inflation rate from 2.50% to 2.25%, investment rate of return from 7.25% to 6.75%, cost-of-living adjustment from 2.25% to 2.125%, and mortality was based on Scale MP-2019 and now is based on Scale MP-2020. 44 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF CHANGES IN THE CITY OF EAST RIDGE, TENNESSEE'S NET OPEB LIABILITY AND RELATED RATIOS LAST TEN FISCAL YEARS (as information becomes available) 2024 2023 2022 2021 2020 2019 2018 Total OPEB Liability (Asset) Service cost $ 113,000 $ 155,000 $ 348,000 $ 309,000 $ 233,000 $ 250,000 $ 244,000 Interest 89,000 56,000 99,000 114,000 119,000 118,000 108,000 Changes in benefit terms (42,000) (14,000) (960,000) - - - - Differences between actual and expected experience (529,000) (209,000) (565,000) (164,000) (156,000) (287,000) - Change in assumptions (436,000) (326,000) 225,000 223,000 139,000 (20,000) - Benefit payments, including refunds of employee contributions (92,000) (89,000) (143,000) (64,000) (67,000) (67,000) (102,000) Net change in total OPEB liability (897,000) (427,000) (996,000) 418,000 268,000 (6,000) 250,000 Total OPEB liability - beginning 2,357,000 2,784,000 3,780,000 3,362,000 3,094,000 3,100,000 2,850,000 Total OPEB liability - ending (a) $ 1,460,000 $ 2,357,000 $ 2,784,000 $ 3,780,000 $ 3,362,000 $ 3,094,000 $ 3,100,000 Plan Fiduciary Net Position Contributions - employer $ 92,000 $ 89,000 $ 143,000 $ 64,000 $ 67,000 $ 67,000 $ 102,000 Contributions - employee - - - - - - - Net investment income - - - - - - - Benefit payments, including refunds of employee contributions (92,000) (89,000) (143,000) (64,000) (67,000) (67,000) (102,000) Administrative expense - - - - - - - Net change in plan fiduciary net position - - - - - - - Plan fiduciary net position - beginning - - - - - - - Plan fiduciary net position - ending (b) $ - $ - $ - $ - $ - $ - $ - Net OPEB liability (asset) - ending (a) - (b) $ 1,460,000 $ 2,357,000 $ 2,784,000 $ 3,780,000 $ 3,362,000 $ 3,094,000 $ 3,100,000 Plan fiduciary net position as a percentage of total OPEB liability 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Covered - employee payroll $ 2,667,000 $ 2,989,000 $ 2,989,000 $ 5,785,000 $ 5,785,000 $ 4,665,000 $ 4,665,000 Net OPEB liability (asset) as a percentage of covered payroll 54.74% 78.86% 93.14% 65.34% 58.12% 66.32% 66.45% Notes to Schedule: None. See independent auditor's report. 45 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF CITY OF EAST RIDGE, TENNESSEE'S CONTRIBUTIONS BASED ON PARTICIPATION IN THE OTHER POST-EMPLOYMENT BENEFIT PLAN LAST TEN FISCAL YEARS (as information becomes available) 2024 2023 2022 2021 2020 2019 2018 Actuarially determined contribution $ 37,543 $ 89,000 $ 143,000 $ 64,000 $ 67,000 $ 67,000 $ 102,000 Contributions in relation to the actuarially determined contribution 37,543 89,000 143,000 64,000 67,000 67,000 102,000 Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - $ - Covered-employee payroll $ 2,667,000 $ 2,989,000 $ 2,989,000 $ 5,785,000 $ 5,785,000 $ 4,665,000 $ 4,665,000 Contributions as a percentage covered-employee payroll 1.41% 2.98% 4.78% 1.11% 1.16% 1.44% 2.19% Notes to Schedule: The employer has elected to make an annual contribution equal to the benefit payments. The employer share of net benefits is the difference between the expected benefit payments and the retiree contributions. It is sometimes referred to as “pay-as-you-go". The expected benefit payments are actuarially determined to reflect the age difference between the overall covered group and the retiree group. Actuarially determined contributions, which are based on the expected “pay-as-you-go” cost, and actual contributions are from the measurement periods ending June 30 of the year prior to the year-end of the reporting periods shown. See independent auditor's report. 46 OTHER SUPPLEMENTARY INFORMATION CITY OF EAST RIDGE, TENNESSEE NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2024 Total Special Revenue Nonmajor Drug State TML Bond Grant Solid Waste Economic Governmental Investigation Street Aid Fund Fund Collection Development Funds ASSETS Cash and cash equivalents $ 242,499 $ 355,909 $ 2,888,013 $ 17,887 $ 1,395 $ 3,348 $ 3,509,051 Grant funds receivables - - - 1,256 - - 1,256 Accounts receivables 9,349 - 63,738 - 84,180 - 157,267 Total assets $ 251,848 $ 355,909 $ 2,951,751 $ 19,143 $ 85,575 $ 3,348 $ 3,667,574 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ - $ 4,690 $ - $ - $ 55,908 $ - $ 60,598 Accrued liabilities - - - - 11,112 - 11,112 Total liabilities - 4,690 - - 67,020 - 71,710 Fund balances Restricted: Law enforcement 251,848 - - - - - 251,848 State approved street aid - 351,219 - - - - 351,219 Economic development - - - - - 3,348 3,348 Grant projects - - - 19,143 - - 19,143 Solid waste operations - - - - 18,555 - 18,555 Committed: Debt service - - 2,951,751 - - - 2,951,751 Total fund balances 251,848 351,219 2,951,751 19,143 18,555 3,348 3,595,864 Total liabilities and fund balances $ 251,848 $ 355,909 $ 2,951,751 $ 19,143 $ 85,575 $ 3,348 $ 3,667,574 See independent auditor's report. 47 CITY OF EAST RIDGE, TENNESSEE NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES YEAR ENDED JUNE 30, 2024 Total Special Revenue Nonmajor Drug State TML Bond Grant Solid Waste Economic Governmental Investigation Street Aid Fund Fund Collection Development Funds REVENUES Taxes $ - $ - $ 818,957 $ - $ - $ - $ 818,957 Intergovernmental 54,904 783,475 - 197,296 - - 1,035,675 Charges for services - - - - 1,560,600 - 1,560,600 Fines and forfeitures 24,645 - - - - - 24,645 Miscellaneous 12,070 178 111,479 1 - 32 123,760 Total revenues 91,619 783,653 930,436 197,297 1,560,600 32 3,563,637 EXPENDITURES Current: Public safety 13,453 - - - - - 13,453 Public works - 2,017,522 - 195,598 2,144,440 - 4,357,560 Debt service: Principal - - 1,329,030 - - - 1,329,030 Interest and other costs - - 511,977 - - - 511,977 Total expenditures 13,453 2,017,522 1,841,007 195,598 2,144,440 - 6,212,020 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 78,166 (1,233,869) (910,571) 1,699 (583,840) 32 (2,648,383) OTHER FINANCING SOURCES Transfers from other funds - - 1,401,000 - 187,827 6,260,218 7,849,045 Transfers to other funds - (184,607) - - - (6,260,218) (6,444,825) Total other financing sources (uses) - (184,607) 1,401,000 - 187,827 - 1,404,220 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES 78,166 (1,418,476) 490,429 1,699 (396,013) 32 (1,244,163) FUND BALANCES Beginning 173,682 1,769,695 2,461,322 17,444 414,568 3,316 4,840,027 Ending $ 251,848 $ 351,219 $ 2,951,751 $ 19,143 $ 18,555 $ 3,348 $ 3,595,864 See independent auditor's report. 48 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget TAXES Local sales tax $ 3,600,000 $ 3,600,000 $ 4,651,940 $ 1,051,940 Property taxes 7,069,000 7,069,000 6,857,575 (211,425) Business taxes 7,000 7,000 3,423 (3,577) Local beer taxes 420,000 420,000 507,191 87,191 Gross receipts taxes 9,817,898 9,817,898 8,062,468 (1,755,430) Franchise taxes 200,000 200,000 188,211 (11,789) Total taxes 21,113,898 21,113,898 20,270,808 (843,090) LICENSES AND PERMITS Building permits 200,000 200,000 110,574 (89,426) Plumbing permits 15,000 15,000 13,635 (1,365) Electrical permits 30,000 30,000 19,196 (10,804) Other permits and licenses 70,350 70,350 106,534 36,184 Total licenses and permits 315,350 315,350 249,939 (65,411) INTERGOVERNMENTAL State sales tax 2,627,122 2,627,122 2,720,350 93,228 State beer tax 10,192 10,192 9,743 (449) State telecommunications tax 500 500 416 (84) State mixed drink tax 95,000 95,000 131,846 36,846 State income and excise tax 6,000 6,000 1,721 (4,279) Interstate sales tax 5,000 5,000 4,362 (638) Sports betting 32,000 32,000 41,153 9,153 City streets and transportation 40,565 40,565 40,584 19 TVA in lieu of tax 266,004 266,004 271,886 5,882 State and other grants 71,800 371,800 203,784 (168,016) Total intergovernmental 3,154,183 3,454,183 3,425,845 (28,338) CHARGES FOR SERVICES Fire service contract 116,604 116,604 116,604 - Recreation fees 826,700 865,050 1,041,236 176,186 Mowing charges 9,800 9,800 9,800 - Other 11,700 11,700 13,030 1,330 Total charges for services 964,804 1,003,154 1,180,670 177,516 FINES AND FORFEITS City court fines and fees 427,300 427,300 379,205 (48,095) Total fines and forfeits 427,300 427,300 379,205 (48,095) (Continued) See independent auditor's report. 49 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget MISCELLANEOUS Insurance recoveries $ 50,000 $ 50,000 $ 58,234 $ 8,234 Interest 5,000 5,000 10,023 5,023 Other 46,425 96,425 143,500 47,075 Total miscellaneous 101,425 151,425 211,757 60,332 Total revenues 26,076,960 26,465,310 25,718,224 (747,086) GENERAL GOVERNMENT General Government Health insurance 85,325 85,325 38,336 46,989 Pension 3,500 3,500 1,135 2,365 Workers' compensation 250,000 275,390 275,390 - Dues and memberships 16,000 16,000 11,324 4,676 Data processing services 75,000 85,000 83,445 1,555 Insurance 700,000 836,973 806,584 30,389 Professional fees 198,075 198,075 183,960 14,115 1,327,900 1,500,263 1,400,174 100,089 (Continued) See independent auditor's report. 50 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Administration Salaries $ 620,946 $ 620,946 $ 626,066 $ (5,120) Payroll taxes 46,642 46,642 46,076 566 Health insurance 59,103 59,103 59,992 (889) Pension 60,970 60,970 55,006 5,964 Unemployment insurance 504 504 224 280 Employee training and testing 10,150 10,150 11,682 (1,532) Printing and duplicating 15,000 15,000 16,209 (1,209) Dues and memberships 2,000 2,000 1,519 481 Telephone 25,000 25,000 22,419 2,581 Public relations 9,000 9,000 10,340 (1,340) Travel 10,000 10,000 7,956 2,044 Operating supplies 126,800 141,800 116,582 25,218 Equipment operations and maintenance 7,600 7,600 6,199 1,401 Professional fees 40,000 40,000 46,257 (6,257) Other 17,500 17,500 13,225 4,275 1,051,215 1,066,215 1,039,752 26,463 City Council Salaries 40,800 40,800 40,800 - Payroll taxes 3,121 3,121 3,076 45 Health insurance 6,219 6,219 6,338 (119) Employee training and testing 4,000 4,000 3,390 610 Printing and duplicating 400 400 400 - Dues and memberships 350 350 330 20 Telephone 2,000 2,000 1,928 72 Council meeting 4,000 4,000 - 4,000 Travel 10,000 10,000 10,021 (21) Special events 25,000 25,000 10,957 14,043 Operating supplies 3,600 3,600 12,068 (8,468) 99,490 99,490 89,308 10,182 (Continued) See independent auditor's report. 51 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Municipal Court Salaries $ 184,370 $ 184,370 $ 189,744 $ (5,374) Payroll taxes 13,776 13,776 14,227 (451) Health insurance 24,718 24,718 24,012 706 Employee training and testing 650 650 - 650 Pension 8,633 8,633 9,306 (673) Unemployment insurance 168 168 77 91 Printing and duplicating 1,000 1,000 1,142 (142) Subscriptions 175 175 15 160 Telephone 2,500 2,500 2,899 (399) Travel 500 500 - 500 Operating supplies 72,650 72,650 17,620 55,030 Child restraint 15,000 15,000 18,155 (3,155) Litigation fees 60,000 60,000 70,776 (10,776) Other 11,500 11,500 16,922 (5,422) 395,640 395,640 364,895 30,745 Economic Development Professional services 50,000 76,800 129,623 (52,823) 50,000 76,800 129,623 (52,823) City Hall Complex Utilities 39,200 39,200 34,756 4,444 Operating supplies 12,775 12,775 13,187 (412) 51,975 51,975 47,943 4,032 (Continued) See independent auditor's report. 52 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Inspection Salaries $ 288,716 $ 288,716 $ 245,338 $ 43,378 Payroll taxes 20,423 20,423 18,056 2,367 Health insurance 65,160 65,160 66,045 (885) Pension 26,696 26,696 26,299 397 Unemployment insurance 336 336 149 187 Employee training and testing 4,250 4,250 470 3,780 Printing and duplicating 4,000 4,000 1,455 2,545 Dues and memberships 800 800 75 725 Telephone 6,250 6,250 3,437 2,813 Travel 3,000 3,000 335 2,665 Contract services 92,950 92,950 66,343 26,607 Operating supplies 30,500 30,500 34,672 (4,172) Equipment operations and maintenance 12,800 12,800 14,464 (1,664) Uniform 1,500 1,500 1,334 166 Other 75,000 121,000 93,955 27,045 632,381 678,381 572,427 105,954 City Garage Telephone 1,650 1,650 1,510 140 Utilities 5,300 5,300 4,925 375 Equipment operations and maintenance 2,650 8,150 8,679 (529) 9,600 15,100 15,114 (14) (Continued) See independent auditor's report. 53 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Building Maintenance Salaries $ 187,702 $ 187,702 $ 148,765 $ 38,937 Payroll taxes 13,550 13,550 11,143 2,407 Health insurance 42,072 42,072 30,222 11,850 Pension 17,712 17,712 13,463 4,249 Unemployment insurance 280 280 115 165 Printing and duplicating 200 200 - 200 Telephone 4,000 4,000 3,363 637 Utilities 9,500 9,500 6,451 3,049 Medical 100 100 349 (249) Operating supplies 23,158 23,158 32,016 (8,858) Custodial services 8,000 8,000 2,605 5,395 Equipment operations and maintenance 4,000 4,000 880 3,120 Building maintenance 40,000 40,000 14,715 25,285 Grounds maintenance 12,000 12,000 3,958 8,042 Other - - 410 (410) 362,274 362,274 268,455 93,819 TOTAL GENERAL GOVERNMENT 3,980,475 4,246,138 3,927,691 318,447 (Continued) See independent auditor's report. 54 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget DEPARTMENT OF PUBLIC SAFETY Police Salaries $ 818,487 $ 818,487 $ 690,967 $ 127,520 Payroll taxes 54,459 54,459 50,038 4,421 Health insurance 151,154 151,154 100,343 50,811 Pension 76,202 76,202 60,471 15,731 Unemployment insurance 616 616 316 300 Employee training and testing 49,500 49,500 32,339 17,161 Contract services 35,000 35,000 30,053 4,947 Printing and duplicating 4,300 4,300 4,363 (63) Dues and memberships 4,000 4,000 3,151 849 Subscriptions 100 10,100 6,789 3,311 Telephone 40,000 40,000 38,228 1,772 Utilities 18,280 18,280 19,293 (1,013) Medical 6,400 6,400 4,370 2,030 Travel 35,000 35,000 19,810 15,190 Operating supplies 47,000 47,000 39,206 7,794 Contracts with other governments 400,000 400,000 393,893 6,107 Supplies and small equipment 134,600 134,600 192,489 (57,889) Equipment operations and maintenance 526,000 526,000 421,047 104,953 Building maintenance 2,500 2,500 810 1,690 Uniforms 8,500 8,500 5,959 2,541 Insurance 10,000 10,000 13,371 (3,371) 2,422,098 2,432,098 2,127,306 304,792 Criminal Investigation Salaries 613,875 613,875 530,576 83,299 Payroll taxes 45,776 45,776 37,941 7,835 Health insurance 128,956 128,956 85,816 43,140 Pension 66,121 66,121 54,415 11,706 Unemployment insurance 560 560 252 308 Operating supplies 23,800 23,800 41,889 (18,089) 879,088 879,088 750,889 128,199 (Continued) See independent auditor's report. 55 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Patrol Salaries $ 1,909,064 $ 2,191,170 $ 2,266,259 $ (75,089) Payroll taxes 145,498 210,454 167,650 42,804 Health insurance 376,144 389,159 319,041 70,118 Pension 196,184 322,577 225,448 97,129 Unemployment insurance 1,904 1,934 1,406 528 Operating supplies 212,500 294,000 224,304 69,696 2,841,294 3,409,294 3,204,108 205,186 Fire Salaries 1,857,579 1,857,579 1,922,737 (65,158) Payroll taxes 127,855 127,855 141,742 (13,887) Health insurance 359,196 359,196 325,320 33,876 Pension 172,096 222,096 185,088 37,008 Workers' compensation 1,288 1,288 1,093 195 Employee training and testing 18,500 18,500 18,944 (444) Printing and duplicating 3,500 3,500 2,619 881 Dues and memberships 800 800 2,018 (1,218) Subscriptions 1,200 1,200 - 1,200 Telephone 21,000 21,000 23,605 (2,605) Utilities 44,000 44,000 36,058 7,942 Medical 1,400 1,400 2,193 (793) Travel 8,000 8,000 7,119 881 Rent 27,200 27,200 19,233 7,967 Operating supplies 56,100 56,100 71,684 (15,584) Contracts with other governments 338,094 338,094 317,147 20,947 Supplies and small equipment 27,000 27,000 34,760 (7,760) Equipment operations and maintenance 68,000 429,300 415,918 13,382 Building maintenance 2,500 2,500 4,309 (1,809) Uniforms 48,589 48,589 59,866 (11,277) Insurance 2,000 2,000 3,653 (1,653) 3,185,897 3,597,197 3,595,106 2,091 (Continued) See independent auditor's report. 56 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Animal Control Salaries $ 174,679 $ 174,679 $ 172,050 $ 2,629 Payroll taxes 10,899 10,899 12,907 (2,008) Health insurance 24,468 24,468 19,545 4,923 Pension 14,247 14,247 14,741 (494) Contract services 2,500 2,500 497 2,003 Workers' compensation 224 224 144 80 Employee training and testing 6,250 6,250 2,712 3,538 Printing and duplicating 1,000 1,000 - 1,000 Dues and memberships 600 600 - 600 Telephone 2,000 2,000 3,400 (1,400) Utilities 10,500 10,500 7,395 3,105 Medical 250 250 210 40 Travel 3,600 3,600 871 2,729 Operating supplies 45,000 45,000 67,323 (22,323) Equipment operations and maintenance 5,800 5,800 3,051 2,749 Building maintenance 1,800 1,800 345 1,455 Uniforms 2,000 2,000 1,242 758 Other 25,000 25,000 16,715 8,285 330,817 330,817 323,148 7,669 TOTAL DEPARTMENT OF PUBLIC SAFETY 9,659,194 10,648,494 10,000,557 647,937 (Continued) See independent auditor's report. 57 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget DEPARTMENT OF PUBLIC WORKS Traffic Control and Street Markers Salaries $ 210,251 $ 210,251 $ 205,677 $ 4,574 Payroll taxes 15,170 15,170 15,108 62 Health insurance 52,343 52,343 55,266 (2,923) Pension 19,830 19,830 18,798 1,032 Workers' compensation 168 168 112 56 Employee training and testing 2,750 2,750 - 2,750 Dues and memberships 370 370 615 (245) Telephone 2,500 2,500 3,464 (964) Utilities 4,900 4,900 5,716 (816) Medical 250 250 - 250 Travel 1,000 1,000 - 1,000 Operating supplies 23,800 33,800 24,489 9,311 Equipment operations and maintenance 11,700 21,700 9,198 12,502 Building maintenance 500 500 - 500 Uniforms 1,500 1,500 1,362 138 Other 2,100 2,100 264 1,836 349,132 369,132 340,069 29,063 (Continued) See independent auditor's report. 58 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Streets Salaries $ 288,954 $ 288,954 $ 262,547 $ 26,407 Payroll taxes 21,592 21,592 19,399 2,193 Health insurance 83,111 83,111 70,740 12,371 Pension 28,225 28,225 25,900 2,325 Workers' compensation 336 336 201 135 Employee training and testing 2,250 2,250 51 2,199 Dues and memberships - - 275 (275) Telephone 2,400 2,400 2,778 (378) Utilities 7,100 7,100 8,705 (1,605) Medical 200 200 210 (10) Professional and contract services 7,000 7,000 11,345 (4,345) Operating supplies 26,100 26,100 23,771 2,329 Equipment operations and maintenance 172,200 172,200 112,116 60,084 Building maintenance 3,000 3,000 9,922 (6,922) Uniforms 1,600 1,600 1,877 (277) Damage claims 1,000 1,000 2,000 (1,000) 645,068 645,068 551,837 93,231 TOTAL DEPARTMENT OF PUBLIC WORKS 994,200 1,014,200 891,906 122,294 (Continued) See independent auditor's report. 59 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget DEPARTMENT OF PUBLIC WELFARE Library Salaries $ 193,966 $ 193,966 $ 163,762 $ 30,204 Payroll taxes 14,532 14,532 12,230 2,302 Health insurance 29,741 29,741 15,078 14,663 Pension 10,275 10,275 9,903 372 Workers' compensation 280 280 173 107 Employee training and testing 500 500 - 500 Printing and duplicating 1,600 1,600 1,341 259 Subscriptions 1,500 1,500 1,212 288 Telephone 5,000 5,000 4,343 657 Medical 250 250 85 165 Professional and contract services 6,800 6,800 7,621 (821) Operating supplies 6,400 6,400 6,587 (187) Equipment/book operations and maintenance 25,012 30,012 26,325 3,687 Other 500 500 - 500 296,356 301,356 248,660 52,696 Museum Telephone 100 700 438 262 Contract services 525 525 270 255 625 1,225 708 517 Community Development Centers Transportation Assistance 10,000 10,000 3,863 6,137 TOTAL DEPARTMENT OF PUBLIC WELFARE 306,981 312,581 253,231 59,350 (Continued) See independent auditor's report. 60 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget CULTURE AND RECREATION Arena Salaries $ 578,823 $ 578,823 $ 538,359 $ 40,464 Payroll taxes 42,961 42,961 38,569 4,392 Health insurance 91,348 91,348 77,910 13,438 Pension 43,984 43,984 43,533 451 Workers' compensation 784 784 644 140 Employee training and testing 1,300 1,300 822 478 Printing and duplicating 700 700 85 615 Dues and subscriptions 1,500 1,500 1,135 365 Telephone 3,000 5,000 5,032 (32) Utilities 79,750 129,750 87,791 41,959 Travel 750 750 1,142 (392) Operating supplies 17,300 17,300 21,324 (4,024) Contracted services 18,000 29,000 36,433 (7,433) Equipment operations and maintenance 105,200 107,200 110,902 (3,702) Building maintenance 2,000 2,000 2,196 (196) Grounds maintenance 79,750 79,750 75,750 4,000 Uniforms 1,600 1,600 1,722 (122) Medical 600 600 770 (170) Damage claims 2,000 2,000 1,732 268 Other 1,500 1,500 873 627 1,072,850 1,137,850 1,046,724 91,126 (Continued) See independent auditor's report. 61 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Maintenance of Recreational Facilities Salaries $ 93,615 $ 93,615 $ 83,652 $ 9,963 Payroll taxes 6,403 6,403 5,337 1,066 Health insurance 18,115 18,115 12,328 5,787 Pension 8,369 8,369 8,224 145 Workers' compensation 112 112 46 66 Employee training and testing 500 500 - 500 Printing and duplicating 250 250 - 250 Dues and memberships 500 500 110 390 Telephone 4,000 4,000 3,921 79 Utilities 79,000 89,000 95,867 (6,867) Operating supplies 30,745 20,745 17,871 2,874 Contracted services 22,000 22,000 22,938 (938) Equipment operations and maintenance 11,695 21,695 17,131 4,564 Grounds maintenance - - 24 (24) Travel 250 250 - 250 Park promotions 750 750 - 750 Uniforms 1,000 1,000 308 692 Medical 150 150 - 150 Other 1,000 1,000 - 1,000 278,454 288,454 267,757 20,697 (Continued) See independent auditor's report. 62 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Community Center Salaries $ 140,377 $ 140,377 $ 127,789 $ 12,588 Payroll taxes 10,433 10,433 9,656 777 Health insurance 12,584 12,584 9,867 2,717 Pension 7,904 7,904 6,928 976 Workers' compensation 392 392 135 257 Employee training and testing 800 800 - 800 Printing and duplicating 200 200 - 200 Dues and memberships 350 350 100 250 Telephone 1,000 1,000 4,007 (3,007) Utilities 37,500 87,750 91,013 (3,263) Medical 500 500 - 500 Operating supplies 32,000 32,000 37,693 (5,693) Contracted services 5,000 5,000 7,751 (2,751) Equipment operations and maintenance 1,000 1,000 720 280 Building maintenance 1,000 1,000 1,854 (854) Grounds maintenance 1,500 1,500 2,460 (960) Travel 250 250 836 (586) Uniforms 500 500 525 (25) 253,290 303,540 301,334 2,206 McBrien School Utilities 800 800 614 186 Contracted services 600 600 360 240 1,400 1,400 974 426 (Continued) See independent auditor's report. 63 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GENERAL FUND YEAR ENDED JUNE 30, 2024 (Continued) Variance Budget Amounts with Final Original Final Actual Budget Recreational Sports Contracted services $ 5,950 $ 18,950 $ 20,121 $ (1,171) Printing and duplicating 500 500 - 500 Equipment, supplies and uniforms 99,150 130,650 125,680 4,970 Tournament fees 15,850 15,850 16,835 (985) Officials, referees and players fees 121,400 202,500 164,726 37,774 Insurance 27,800 27,800 34,452 (6,652) 270,650 396,250 361,814 34,436 TOTAL CULTURE AND RECREATION 1,876,644 2,127,494 1,978,603 148,891 CAPITAL OUTLAY Furniture and fixtures - - 6,909 (6,909) Transportation equipment 40,000 133,000 131,213 1,787 TOTAL CAPITAL OUTLAY 40,000 133,000 138,122 (5,122) TOTAL EXPENDITURES 16,857,494 18,481,907 17,190,110 1,291,797 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 9,219,466 7,983,403 8,528,114 544,711 OTHER FINANCING SOURCES (USES) Transfers to other funds (9,238,091) (8,237,478) (5,878,250) 2,359,228 Proceeds from sale of assets 10,000 10,000 4,356 (5,644) Total other financing sources (uses) (9,228,091) (8,227,478) (5,873,894) 2,353,584 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ (8,625) $ (244,075) 2,654,220 $ 2,898,295 FUND BALANCE Beginning 11,846,719 Ending $ 14,500,939 See independent auditor's report. 64 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL DRUG INVESTIGATION FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Intergovernmental $ 45,000 $ 45,000 $ 54,904 $ 9,904 Drug related fines and forfeitures 20,000 20,000 24,645 4,645 Sale of confiscated property (2,000) (2,000) 12,070 14,070 Total revenues 63,000 63,000 91,619 28,619 EXPENDITURES Current Employee training and testing 1,000 1,000 - 1,000 Office supplies 26,500 26,500 - 26,500 Uniforms 22,000 22,000 13,453 8,547 Travel 500 500 - 500 Equipment operations and maintenance 17,000 17,000 - 17,000 TOTAL EXPENDITURES 67,000 67,000 13,453 53,547 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES $ (4,000) $ (4,000) 78,166 $ 82,166 FUND BALANCE Beginning 173,682 Ending $ 251,848 See independent auditor's report. 65 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL STATE STREET AID FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Intergovernmental $ 1,445,000 $ 1,445,000 $ 783,475 $ (661,525) Interest 100 100 178 78 Total revenues 1,445,100 1,445,100 783,653 (661,447) EXPENDITURES Current Utilities 225,000 225,000 218,712 6,288 Professional services 60,000 60,000 35,691 24,309 Grant expenditures 315,711 315,711 419,720 (104,009) Road paving and maintenance 2,319,238 2,319,238 1,342,807 976,431 TOTAL EXPENDITURES 2,919,949 2,919,949 2,017,522 902,427 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,474,849) (1,474,849) (1,233,869) 240,980 OTHER FINANCING SOURCES (USES) Transfers to other funds - - (184,607) (184,607) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ (1,474,849) $ (1,474,849) (1,418,476) $ 56,373 FUND BALANCE Beginning 1,769,695 Ending $ 351,219 See independent auditor's report. 66 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL TML BOND FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Room occupancy tax $ 713,774 $ 713,774 $ 818,957 $ 105,183 Interest 1,000 1,000 111,479 110,479 Total revenues 714,774 714,774 930,436 215,662 DEBT SERVICE Principal 1,366,330 1,366,330 1,328,530 37,800 Interest 749,444 749,444 511,977 237,467 Total debt service 2,115,774 2,115,774 1,840,507 275,267 TOTAL EXPENDITURES 2,115,774 2,115,774 1,841,007 274,767 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (1,401,000) (1,401,000) (910,571) 490,429 OTHER FINANCING SOURCES (USES) Transfers from other funds 1,401,000 1,401,000 1,401,000 - EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ - $ - 490,429 $ 490,429 FUND BALANCE Beginning 2,461,322 Ending $ 2,951,751 See independent auditor's report. 67 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL GRANT FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Intergovernmental $ 202,000 $ 202,000 $ 197,296 $ (4,704) Interest - - 1 1 Total revenues 202,000 202,000 197,297 (4,703) EXPENDITURES Current Public works 210,000 213,528 195,598 17,930 TOTAL EXPENDITURES 210,000 213,528 195,598 17,930 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES $ (8,000) $ (11,528) 1,699 $ 13,227 FUND BALANCE Beginning 17,444 Ending $ 19,143 See independent auditor's report. 68 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL SOLID WASTE COLLECTION FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Charges for services $ 1,640,979 $ 1,640,979 $ 1,560,600 $ (80,379) Total revenues 1,640,979 1,640,979 1,560,600 (80,379) EXPENDITURES Current Salaries 607,289 607,289 595,920 11,369 Payroll taxes 45,148 45,148 43,687 1,461 Health insurance 122,726 122,726 124,608 (1,882) Pension 59,016 59,016 58,576 440 Unemployment insurance 840 840 479 361 Employee training and testing 1,200 1,200 625 575 Printing and duplicating 1,200 1,200 - 1,200 Dues and memberships 260 260 275 (15) Utilities 11,500 11,500 9,864 1,636 Contract services 375,000 375,000 420,926 (45,926) Operating supplies 341,800 436,800 406,029 30,771 Building and equipment maintenance 75,000 75,000 47,880 27,120 Equipment purchases - 419,000 435,571 (16,571) Total expenditures 1,640,979 2,154,979 2,144,440 10,539 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES - (514,000) (583,840) (69,840) OTHER FINANCING SOURCES (USES) Transfers from other funds - - 187,827 187,827 EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ - $ (514,000) (396,013) $ 117,987 FUND BALANCE Beginning 414,568 Ending $ 18,555 See independent auditor's report. 69 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL ECONOMIC DEVELOPMENT FUND YEAR ENDED JUNE 30, 2024 Variance Budget Amounts with Final Original Final Actual Budget REVENUES Miscellaneous $ - $ - $ 32 $ 32 Total revenues - - 32 32 EXPENDITURES Public safety - - - - Total expenditures - - - - EXCESS REVENUES OVER EXPENDITURES - - 32 32 OTHER FINANCING SOURCES (USES) Transfers from other funds 6,628,998 6,628,998 6,260,218 (368,780) Transfers to other funds (6,628,998) (6,628,998) (6,260,218) 368,780 Total other financing sources (uses) - - - - EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES $ - $ - 32 $ 32 FUND BALANCE Beginning 3,316 Ending $ 3,348 See independent auditor's report. 70 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF PROPERTY TAX RATES AND ASSESSMENTS JUNE 30, 2024 Year Tax Rate Assessment Levy 2014 1.4227 $ 329,375,343 $ 4,686,023 2015 1.4227 330,771,069 4,705,880 2016 1.4227 338,446,967 4,815,085 2017 1.3382 369,012,134 4,938,120 2018 1.3382 351,143,775 4,699,006 2019 1.3382 352,770,886 4,720,780 2020 1.3381 385,410,209 5,157,174 2021 1.2500 521,102,155 6,513,777 2022 1.2500 505,887,120 6,323,589 2023 1.2500 541,543,600 6,769,295 2024 1.2500 527,036,960 6,587,962 See independent auditor's report. 71 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF CHANGES IN PROPERTY TAX RECEIVABLE JUNE 30, 2024 Property Property Tax Tax Receivable Anticipated Abatements Receivable Tax Balance Property Property and Tax Balance Year June 30, 2023 Tax Levied Tax Levy Adjustments Collections June 30, 2024 2024 $ - $ - $ 6,587,962 $ - $ - $ 6,587,962 2023 6,769,295 - - - (6,430,772) 338,523 2022 341,119 - - - (206,688) 134,431 2021 88,253 - - - (42,439) 45,814 2020 30,528 - - - (18,315) 12,213 2019 11,626 - - - (639) 10,987 2018 1,053 - - - - 1,053 2017 8,245 - - - - 8,245 2016 6,971 - - - (145) 6,826 2015 9,568 - - - - 9,568 2014 9,974 - - - - 9,974 2013 8,717 - - - (8,717) - 2012 8,648 - - - (8,648) - $ 7,293,997 $ - $ 6,587,962 $ - $ (6,716,363) $ 7,165,596 Note: All uncollected delinquent taxes have been filed in accordance with applicable laws. See independent auditor's report. 72 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF DEBT SERVICE REQUIREMENTS GOVERNMENTAL ACTIVITIES JUNE 30, 2024 General Obligation Fire Department Bonds TML Bond Fund General Obligation Refunding Capital Outlay Note TML Bond Fund General Obligation Bonds, Financed Purchase, Series 2015 Series 2020 Bonds, Series 2021 Series 2021 Series 2022 Series 2024 Motorola Solutions 2024 Total Year Ending June 30, Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest 2025 $ 75,000 $ 131,813 $ 108,000 $ 36,525 $ 525,000 $ 156,963 $ 98,000 $ 7,508 $ 351,000 $ 256,941 $ 275,000 $ 400,000 $ 77,377 $ 7,237 $ 1,509,377 $ 996,987 2026 80,000 129,750 111,000 33,744 500,000 141,213 100,000 5,874 365,000 243,076 260,000 386,250 35,261 5,558 1,451,261 945,465 2027 80,000 125,750 114,000 30,886 500,000 126,213 101,000 4,216 379,000 228,659 270,000 373,250 37,024 3,795 1,481,024 892,769 2028 85,000 121,750 116,000 27,965 505,000 111,213 102,000 2,541 394,000 213,688 285,000 359,750 38,875 1,945 1,525,875 838,852 2029 90,000 117,500 119,000 24,981 495,000 96,063 103,000 850 410,000 198,125 300,000 345,500 - - 1,517,000 783,019 2030 95,000 113,000 122,000 21,920 445,000 76,263 - - 426,000 181,930 315,000 330,500 - - 1,403,000 723,613 2031 100,000 108,250 125,000 18,783 445,000 67,363 - - 443,000 165,103 330,000 314,750 - - 1,443,000 674,249 2032 105,000 103,250 129,000 15,558 445,000 58,463 - - 460,000 147,605 345,000 298,250 - - 1,484,000 623,126 2033 110,000 98,000 132,000 12,243 450,000 49,563 - - 478,000 129,435 365,000 281,000 - - 1,535,000 570,241 2034 115,000 92,500 135,000 8,852 450,000 40,563 - - 497,000 110,554 385,000 262,750 - - 1,582,000 515,219 2035 120,000 86,750 139,000 5,372 455,000 31,563 - - 517,000 90,922 400,000 243,500 - - 1,631,000 458,107 2036 130,000 80,750 142,000 1,803 395,000 23,600 - - 537,000 70,501 420,000 178,800 - - 1,624,000 355,454 2037 135,000 74,250 - - 425,000 16,688 - - 559,000 49,289 440,000 162,000 - - 1,559,000 302,227 2038 140,000 67,500 - - 380,000 9,250 - - 581,000 27,209 455,000 144,400 - - 1,556,000 248,359 2039 150,000 60,500 - - 130,000 2,593 - - 167,827 4,259 475,000 126,200 - - 922,827 193,552 2040 155,000 53,000 - - - - - - - - 495,000 107,200 - - 650,000 160,200 2041 165,000 45,250 - - - - - - - - 515,000 87,400 - - 680,000 132,650 2042 170,000 37,000 - - - - - - - - 535,000 66,800 - - 705,000 103,800 2043 180,000 28,500 - - - - - - - - 555,000 45,400 - - 735,000 73,900 2044 190,000 19,500 - - - - - - - - 580,000 23,925 - - 770,000 43,425 2045 200,000 10,000 - - - - - - - - - - - - 200,000 10,000 Total $ 2,670,000 $ 1,704,563 $ 1,492,000 $ 238,632 $ 6,545,000 $ 1,007,574 $ 504,000 $ 20,989 $ 6,564,827 $ 2,117,295 $ 8,000,000 $ 4,537,625 $ 188,537 $ 18,535 ######### $ 9,645,213 See independent auditor's report. 73 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF CHANGES IN LONG-TERM DEBT BY INDVIDUAL ISSUE JUNE 30, 2024 Original Issued Paid and/or Amount of Interest Date of Final Maturity Outstanding During Matured During Refunded Outstanding Description of Indebtedness Issue Rate Issue Date 7/1/2023 Period Period During Period 6/30/2024 BONDS PAYABLE Payable through TML Bond Fund General Obligation, Series 2015 $ 3,085,000 5.00% 9/1/2015 3/1/2045 $ 2,745,000 $ - $ 75,000 $ - $ 2,670,000 General Obligation Refunding Bonds, Series 2021 8,495,000 1.75 - 4.00% 6/15/2021 6/1/2039 7,205,000 - 660,000 - 6,545,000 General Obligation Bonds, Series 2024 8,000,000 4.00 - 5.00% 6/28/2024 6/1/2024 - 8,000,000 - - 8,000,000 Total bonds payable through TML bond fund $ 19,580,000 $ 9,950,000 $ 8,000,000 $ 735,000 $ - $ 17,215,000 NOTES PAYABLE Payable through TML Bond Fund TML Bond, Series 2020 $ 1,800,000 2.54% 11/10/2020 11/1/2035 $ 1,586,185 $ - $ 94,185 $ - $ 1,492,000 Fire Department Capital Outlay Note, Series 2021 696,079 1.65% 12/14/2021 12/1/2028 601,000 - 97,000 - 504,000 TML Bond, Series 2022 10,000,000 3.95% 10/14/2022 9/1/2042 3,615,947 3,226,880 278,000 - 6,564,827 Total notes payable through debt service fund $ 12,684,616 $ 5,803,132 $ 3,415,417 $ 512,980 $ - $ 8,560,827 FINANCED PURCHASES Payable through Capital Projects Fund Motorola Solutions Financed Purchase $ 188,537 5.00% 2/8/2024 2/8/2028 $ - $ 188,537 $ - $ - $ 188,537 Total financed purchases through capital projects fund $ 188,537 $ - $ 188,537 $ - $ - $ 188,537 See independent auditor's report. 74 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF CHANGES IN LEASE OBLIGATIONS JUNE 30, 2024 Original Issued Paid and/or Amount of Interest Date of Maturity Outstanding During Matured During Outstanding Description of Indebtedness Issue Rate Issue Date 7/1/2023 Period Period Remeasurements 6/30/2024 LEASES PAYABLE Axon taser lease $ 250,849 3.30% 8/1/2022 8/31/2027 $ 197,319 $ - $ 46,919 $ - $ 150,400 Total leases payable $ 250,849 $ 197,319 $ - $ 46,919 $ - $ 150,400 - governmental activities See independent auditor's report. 75 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF LEASE OBLIGATIONS, PRINCIPAL, AND INTEREST REQUIREMENTS JUNE 30, 2024 Year Ending June 30, Principal Interest Total 2025 $ 48,491 $ 5,039 $ 53,530 2026 50,115 3,414 53,529 2027 51,794 1,735 53,529 Total $ 150,400 $ 10,188 $ 160,588 See independent auditor's report. 76 COMPLIANCE SECTION CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS YEAR ENDED JUNE 30, 2024 Federal Pass-through Federal Agency/Pass-through Agency/ Assistance Entity Identifying State Grantor Program or Cluster Title Listing Number Number Expenditures FEDERAL AWARDS U.S. Department of Treasury Passed through TN Department of Revenue COVID-19 American Rescue Plan Act (ARPA) 21.027 N/A $ 2,922,045 Total U.S. Department of Treasury 2,922,045 U.S. Department of Transportation Passed through Tennessee Department of Transportation Multimodal Access Grant 20.205 N/A 1,220,060 Total U.S. Department of Transportation 1,220,060 Federal Bureau of Justice Bulletproof Vest Program 16.607 N/A 13,453 Total Federal Bureau of Justice 13,453 TOTAL FEDERAL AWARDS $ 4,155,558 STATE AWARDS Contract Number Direct Appropriation Grant N/A N/A $ 1,237,500 TOTAL STATE AWARDS 1,237,500 TOTAL FEDERAL AND STATE AWARDS $ 5,393,058 See independent auditor's report. 77 CITY OF EAST RIDGE, TENNESSEE NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS JUNE 30, 2024 ______________________________________________________________________________ NOTE 1 – BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal and State Awards (the Schedule) includes the federal and state grant activity of the City and is presented on the modified accrual basis of accounting. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance for all awards with the exception of assistance listing number 21.027, which follow criteria determined by the Department of Treasury for allowability of costs. Under these principles, certain types of expenditures are not allowable or are limited as to reimbursement. NOTE 3 – INDIRECT COST RATE The City has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. NOTE 4 – SUBRECIPIENTS Of the federal expenditures presented in the Schedule, the City has not provided any federal awards to subrecipients. 78 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Mayor and City Council City of East Ridge, Tennessee East Ridge, Tennessee We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements, and have issued our report thereon dated December 6, 2024. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for determining the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We identified certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as items 2024-001 and 2024-002 that we considered to be significant deficiencies. 1200 Market Street, Chattanooga, TN 37402 | T 423.756.7771 | F 423.265.8125 AN INDEPENDENT MEMBER OF THE BDO ALLIANCE USA Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. City of East Ridge’s Response to Findings Government Auditing Standards requires the auditor to perform limited procedures on the City’s responses to the findings identified in our audit and described in the accompanying schedule of findings and questioned costs. The City’s responses were not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the responses. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Cleveland, Tennessee December 6, 2024 80 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM GUIDANCE To the Mayor and City Council City of East Ridge, Tennessee East Ridge, Tennessee Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited the City’s compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2024. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2024. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above. 1200 Market Street, Chattanooga, TN 37402 | T 423.756.7771 | F 423.265.8125 AN INDEPENDENT MEMBER OF THE BDO ALLIANCE USA Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City’s federal programs. Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City’s compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City’s compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with GAAS, Government Auditing Standards, and the Uniform Guidance, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. • Obtain an understanding of the City’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control Over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. 82 Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Cleveland, Tennessee December 6, 2024 83 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2024 SECTION 1 – SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of auditor’s report issued: Unmodified Internal control over financial reporting: • Material weaknesses identified: ___yes x no • Significant deficiencies identified that are not considered to be material weaknesses? x yes ___none reported Noncompliance material to financial statements noted? ___yes x no Federal Awards Internal control over major programs: • Material weaknesses identified: ___yes x no • Significant deficiencies identified that are not considered to be material weaknesses? ___yes x none reported Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed under the Uniform Guidance? ___yes x no Identification of major programs: Assistance Listing Number Name of Federal Program or Cluster U.S. Department of Treasury 21.027 American Rescue Plan Act Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low-risk auditee? ___yes x no 84 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2024 SECTION II - FINANCIAL STATEMENT FINDINGS Financial Statement Findings 2024-001: Preparation of Financial Statements and Schedule of Expenditures of Federal and State Awards Type of Finding: Significant Deficiency in Internal Control over Financial Reporting Criteria: Accounting standards dictate that management is responsible for preparation of the financial statements. An audit of the financial statements of an organization requires the evaluation of the internal control system's design of controls in generating and overseeing of the financial statements to be audited. The organization must have the ability to prepare and evaluate the financial statements' format, content, and disclosures in accordance with generally accepted accounting principles and recognize any material items missing in the financial statements through the organization's control system. This is true whether the organization prepares the financial statements or not. These controls can be established or achieved by use of a third-party organization or internally, but external auditors are never considered a control element. Condition: The City currently does not prepare financial statements under generally accepted accounting principles. The external auditors prepare the statements and disclosures, and management approves and takes responsibility for the statements after they are prepared. Context: During the year under audit, we noted that there were account balances that did not agree to supporting documentation. As a result, significant audit adjustments had to be made to correct the balances. These instances would have been discovered and corrected prior to the audit had a proper review system been followed. Cause: The City believes its current reporting meets all of the City's internal needs. While management knows their responsibility for understanding and presenting the annual financial statements, they do not believe it is currently cost beneficial to design and/or strengthen controls over the accounting department’s financial reporting process. Effect: The City does not have proper controls over financial statements preparation. Repeat Finding: Yes Recommendation: We recommend the City continue to monitor the need, costs, and benefits of developing a control structure to oversee the preparation of financial statements in accordance with generally accepted accounting principles. Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding. Management has addressed their corrective action plan in a separately issued letter. (Continued) 85 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2024 2024-002: Reconciling of Account Balances Type of Finding: Significant Deficiency in Internal Control over Financial Reporting Criteria: Management is responsible for ensuring the accuracy of account balances. Condition: The City does not review all account balances for items that need to be removed or adjusted as of year-end. Context: During the year under audit, we noted that there were account balances that did not agree to supporting documentation. As a result, significant audit adjustments had to be made to correct the balances. These instances would have been discovered and corrected prior to the audit had a proper review system been followed. Cause: The City does not have proper controls in place to ensure all accounts are reconciled and accurately recorded as of year-end. Effect: Account balances can be misstated as of year-end. Repeat Finding: Yes Recommendation: We recommend that the City reviews account balances at year-end to ensure that the balances agree to the supporting schedules and that they are free of misstatements. Views of responsible officials and planned corrective actions: There is no disagreement with the audit finding. Management has addressed their corrective action plan in a separately issued letter. SECTION III - FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL PROGRAMS None noted. 86 CITY OF EAST RIDGE, TENNESSEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2024 SECTION IV - PRIOR YEAR FINDINGS See attached summary schedule of prior audit findings prepared by the City. 87