SS>E'he CR...Interest Expense (97,588) (133,249) Investment Expense (17,330) (24,499) Gain (Loss) on Disposal of Assets 62,897 292,655 137,143 Change in Net Position $ 868,480 $ 598,464

AFIN: 31-00101 PMT#: 0Zi1>5- .S40

JUL 1 2 2019 DOCID#: J~/5\ To: SS>E'he "CR

UPPER SOUTHWEST ARKANSAS REGIONAL SOLID WASTE MANAGEMENT DISTRICT

DECEMBER 31,2018 AND 2017

EXHIBIT A

EXHIBITB

EXHIBITC


AUDIT REPORT- TABLE OF CONTENTS DECEMBER 31,2018 AND 2017

Independent Auditors' Report

Balance Sheets - December 31 , 2018 and 2017

Statements of Revenues, Expenses, and Changes in Net Position -For the Years Ended December 3 1 , 2018 and 20 1 7

Statements of Cash Flows - For the Years Ended December 31,2018 and 2017

Notes to Financial Statements

Independent Accountants' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based

PAGE NO. 1 - 2

3-4

5-6

7-8

9- 16

on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standard'> 17- 18

Schedule of Findings and Responses 19-20

BANKS CPA, PLLC 204 North 27th Street. Arkadelphia. AR 71923-5309 PHONE 870-245-3975 FAX 870-246-7149

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Management Upper Southwest Arkansas regional Solid Waste Management District Nashville, Arkansas

Report on the Financial Statements

Page 1

We have audited the accompanying financial statements of the Upper Southwest Arkansas Regional Solid Waste Management District (the District) as of and for the years ended December 31, 2018 and 2017 and the related notes to the financial statements, as listed in the table of contents.

Management's Responsibility for the Financial Statements

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

Auditors' Responsibility

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

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

Member American Institute of Certified Public Accountants and Arkansas Society ofCPAs

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

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Upper Southwest Arkansas Regional Solid Waste Management District as of December 31, 2018 and 2017, and the changes in its financial position and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Other Matters

The District has not presented management's discussion and analysis that accounting principles generally accepted in the United States of America has determined is necessary to supplement, although not required to be part of, these financial statements. Our opinion on the basic financial statements is not affected by this missing information.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 27, 2019 on our consideration of the District's internal control over financial reporting and our tests of its compliance with certain provisions oflaws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance.

~cPA, PLLC--June 27, 2019


BALANCE SHEETS EXHIBIT A DECEMBER 31,2018 AND 2017 Page 3

ASSETS 2018 2017

CURRENT ASSETS Cash- Unrestricted $ 1,647,121 $ 1,603,954 Certificates of Deposit 881,047 572,326 Restricted cash and cash equivalents 886,958 467,527 Accounts receivable - Trade - net of allowance 439,774 498,404 Grants Receivable 193,911 190,309 Other Receivables 525 347 Prepaid Insurance 452222 52 598

TOTAL CURRENT ASSETS 4,094,558 3,385,465

NONCURRENT CASH AND INVESTMENTS Cash

Held for closure/post closure 2,199,905 182,027 Investments

Held for closure/post closure 1,895,378 Held for debt services 4062085 403 134

2,605,990 2,480,539 Less amount required to meet current obligations (3762861) {3762588) TOTAL NONCURRENT CASH AND INVESTMENTS 2,229,129 2,103,951

CAPITAL ASSETS, NET 6,259,003 6,298,109

OTHER ASSETS Bond issuance and related refunding costs, net 99 782 107 266 TOTAL OTHER ASSETS 99,782 107,266

TOTAL ASSETS $ 12,682,472 $ 11,894,791

See accompanying Notes to Financial Statements.


BALANCE SHEETS EXHIBIT A DECEMBER 31,2018 AND 2017 Page 4

LIABILITIES AND NET POSITION 2018 2017

CURRENT LIABILITIES Accounts payable $ 171,367 $ 189,564 Accrued expenses and other payables 66,503 50,319 Current maturities of long-term debt 2882000 2792000

TOTAL CURRENT LIABILITIES 525,870 518,883

CLOSURE/POST CLOSURE 3,397,764 3,197,550

LONG-TERM DEBT Bonds Payable- 2017 Series 2,938,000 3,217,000 Less: Current Portion of Long-term Debt {2882000) {2792000)

LONG-TERM DEBT 2,650,000 2,938,000

TOTAL LIABILITIES 6,573,634 6,654,433

NET POSITION Net Investment in Capital Assets 3,321,003 3,081' 109 Restricted

Debt Service 406,085 403,134 Closure/Post Closure Costs 2,199,905 2,077,405

Unrestricted 181 845 {321)90) TOTAL NET POSITION 6,108,838 5,240,358

TOTAL LIABILITIES AND NET POSITION $ 12,682,472 $ 11,894,791


UPPER SOUTHWEST ARKANSAS REGIONAL SOLID WASTE MANAGEMENT DISTRICT EXHIBITB

STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEARS ENDED DECEMBER 31 , 2018 AND 2017 Page 5

Waste Landfill Tire 2018 2017

OPERATING REVENUE

Fees Earned $ 3,555,517 $ 30,909 $ 3,586,426 $ 3,657,026 Recyclable Material Sales 5,134 75 ,938 81,072 74,044 Recycling & Ewaste Grants 78,952 78,952 105,464 Tire Accountability Program 778,688 778,688 Waste Tire Mgmt Grants 198,071 Tire Abatement Grants 99,800 Truck Tire Grants 46,256

TOTAL OPERATING REVENUE 3,639,603 885,535 4,525,138 4,180,661

OPERATING EXPENSES Salaries and Wages 673,422 258,487 931,909 870,834 Employee Benefits 270,556 110,994 381,550 371,408 State Tipping Fees 308,672 308,672 234,536 Accounting & Audit Fees 27,229 10,859 38,088 49,705 Bank Charges 1,008 1,008 Closure/Post Closure 200,215 200,215 189,877 Contractual Services 2,513 16,911 19,424 15 ,660 Depreciation/ Amortization 742,378 141 ,946 884,324 906,426 Leachate 81 ,175 81,175 79,347 Repairs & Maintenance 643,203 134,800 778,003 681,042 Waste Tire Disposal 55,690 55,690 85,221 Insurance - Property 38,818 13,780 52,598 50,447 Utilities 25,931 27,321 53 ,252 53,648 Compliance & Enforcement 116,441 116,441 111,931 Fees & Dues 21 ,129 1,500 22,629 2,226 Fines & Penalties 1,041 1,041 12 Office Expense 2,704 2,704 4,049 Advertising 1,893 1,893 831 Administrative Travel 6,199 6,199 6,317 Bad Debts 9,033 9,033 3,623 Legal 2 508 957 3 465 2 200

TOTAL OPERATING 3,176,068 773 ,245 3,949,313 3,719,340 EXPENSES

OPERATING INCOME 463,535 112,290 575,825 461,321


UPPER SOUTHWEST ARKANSAS REGIONAL SOLID WASTE MANAGEMENT DISTRICT EXHIBITB

STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEARS ENDED DECEMBER 31,2018 AND 2017 Page 6

2018 2017 NONOPERATING REVENUE (EXPENSES)

State Recycling & Ewaste Grants $ 299,056 258,502

Investment Income 45,620 36,389

Interest Expense (97,588) (133,249) Investment Expense (17,330) (24,499)

Gain (Loss) on Disposal of Assets 62,897 292,655 137,143

Change in Net Position $ 868,480 $ 598,464

TOTAL NET POSITION - BEGINNING OF YEAR 5,240,358 4,641,894

TOTAL NET POSITION - END OF YEAR $ 61108,838 $ 51240,358


UPPER SOUTHWEST ARKANSAS REGIONAL SOLID

WASTE MANAGEMENT DISTRICT

STATEMENTS OF CASH FLOWS EXHIBITC FOR THE YEARS ENDED DECEMBER 31,2018 AND 2017 Page 7

2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES:

Cash Received from Customers $ 3,724,114 $ 3,595,191 Grants Received - Tire Management 58,138 355,056 Grants Received - Tire Accountability Program 584,777 Grants Received- Recycling and Ewaste operating 78,952 105,464 Cash paid to Suppliers (1,434,590) (1,481,381) Cash paid to Employees and Benefits (1,305,566) (1)682023)

NET CASH PROVIDED (USED) BY OPERATING 1,705,825 1,406,307

CASH FLOWS FROM NONCAPIT AL FINANCING

Payment to Closure/Post Closure Trustee (11 0,000) (110,000)

NET CASH FLOWS FROM NONCAPITAL (11 0,000) (110,000)

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Grants Received- Recycling & Ewaste 510,179 231,795 Grants Expended - Recycling & Ewaste (149,991) (376,282)

Grants Expended - Recycling and Ewaste for operating (78,952) (105,464)

Cash Payments for the Purchase of Property (906,350) (290,096)

Cash Received from Property Disposals 165,000 Net Principal Payments on Debt and Lease Obligations (279,000) (86,187)

Interest Payments on Debt and Lease Obligations (97,588) (133,249)

NET CASH PROVIDED (USED) BY FINANCING (836,702) (759,483)

CASH FLOWS FROM INVESTING ACTIVITIES

Cash Received on Interest on Investments 17,073 10,409

Investment Expenses (2,200) (1,436) NET CASH PROVIDED (USED) BY INVESTING 14,873 8,973

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 773,996 545,797

CASH AND CASH EQUIVALENTS, BEGINNING OF 2,670,354 2,124,557 YEAR

CASH AND CASH EQUIVALENTS, END OF YEAR $ 3,444,350 $ 2,670,354


STATEMENTS OF CASH FLOWS EXHIBITC FOR THE YEARS ENDED DECEMBER 31 , 2018 AND 2017 Page 8

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

2018 2017 OPERATING INCOME $ 575,825 $ 461,321

ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:

Depreciation and Amortization 884,324 906,426

(Increase) Decrease in Accounts Receivable 58,452 (135,879)

(Increase) Decrease in Grants Receivable (3,602) (121 ,242)

(Increase) Decrease in Prepaid Expenses (7,376) 14,579

Increase (Decrease) in Accounts Payable (18, 196) 84,787

Increase (Decrease) in Accrued Liabilities 16,183 6,438

Increase (Decrease) in Closure/Post Closure Liability 200,215 189,877

TOTAL ADJUSTMENTS 1,130,000 944,986

NET CASH PROVIDED (USED) BY OPERATING $ 12705,825 $ 124062307


Note 1.


NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2018 AND 2017

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Page 9

Nature of Operations - The Upper Southwest Arkansas Regional Solid Waste Management District (the District) was incorporated in 1990 under the provisions of the State of Arkansas and operates under the guidelines of Section 5 of Arkansas Act 752 of 1991. The district was formed to operate a regional solid waste landfill and commenced operations in 1994. The District's Board of Directors consists of the county judges and the mayors of the county seats for the area it serves. The nine counties are Howard, Sevier, Little River, Pike, Polk, Hempstead, Nevada, Montgomery, and Lafayette.

Basis of Accounting and Presentation- The financial statements ofthe District have been prepared on the accrual basis of accounting using the economic resources measurement focus. Revenues, expenses, gains, losses, assets and liabilities from exchange and exchange-like transactions are recognized when the exchange transaction takes place. Operating revenues and expenses include exchange transactions. Investment income and interest on capital assets-related debt are included in nonoperating revenues and expenses. The District first applies restricted net assets when an expense or outlay is incurred for purposes for which both restricted and unrestricted net assets are available.

The District prepares its financial statements as a business-type activity in conformity with applicable pronouncements of the Governmental Accounting Standards Board (GASB) pursuant to GASB Statement No. 62.

Use of Estimates- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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.

Cash Equivalents - The District considers all liquid investments with original maturities of three months or less to be cash equivalents. At December 31,2018 and 2017, cash equivalents consisted entirely of money market accounts held by the trust departments of financial institutions.

Accounts Receivable - Accounts receivable consist of fees billed to customers for waste disposal based on the weight of the waste disposed. An allowance for uncollectible customer accounts receivable is established based on management's experience with collection history. Accounts receivable are recorded net of estimated uncollectible amounts.

Note I.



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Page 10

Risk Management - The District is exposed to various risks of loss from torts; theft of, damage to and destruction of assets; business interruption; errors and omissions; employee injuries and illnesses; natural disasters; and employee health, dental, and accident benefits. Commercial insurance and state pool coverage is purchased for claims arising from such matters other than business interruption. Settled claims have not exceeded coverage in any of the three preceding years and there has been no significant reduction in coverage in fiscal years 2018 or 20 1 7.

Capital Assets -Capital assets are recorded at cost at the date of acquisition. Depreciation is computed using the straight-line method over the estimated useful life of each asset. The following estimated useful lives are being used by the District:

Plant in service 22-23 years

Buildings 15-22 years

Machinery and equipment 5-20 years

Investments - Investments in certificate of deposits are carried at amortized cost and are included in current assets on the balance sheet.

Net Position- Net position of the District is classified in three components. Net investment in capital assets consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of borrowing used to finance the purchase or construction of those assets. Restricted are noncapital assets that must be used for a particular purpose as specified by creditors, grantors or donors external to the District, including amounts deposited with trustees as required by bond indentures, reduced by the outstanding balances of any related borrowings. Unrestricted are remaining assets less remaining liabilities that do not meet the definition of net investment in capital assets or restricted.

Income Taxes- The District is a political subdivision of the State of Arkansas and is exempt from income taxes under Section 115 of the Internal Revenue Code and a similar provision of state law.

Note 2.

Note 3.


NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31 , 2018 AND 2017

CAPITAL ASSETS

Capital assets activity for the year ended December 31 , 2018 was:

Beginning of the Year Additions DisQosals

Land $ 58,510 $ 193,724 Building 1,531 ,529 24,687 Plant in Service 5,345 ,393 Machinery and equipment 723092921 668 444 463 698

142245,353 8862855 463 698

Less: Accumulated DeQreciation Building 635 ,778 37,349 Plant in Service 3,733 ,641 295,372 Machinery and equipment 326452898 544 119 3612595

$ 8,015,318 $ 876,840 $ 361,595 New Cell

Construction 68 074 522982 CAPITAL ASSETS, NET $ 6,298,109 $ 62,997 $ 102,103

DEPOSITS AND INVESTMENTS

Page I I

End of Year $ 252,234

1,556,216

5,345,393

725142667 1426682510

673,128 4,029,013

328282422 $ 8,530,563

121 056

$ 6 259 003

Deposits- Custodial credit risk is the risk that in the event of a bank failure, a government's deposits may not be returned to it. The District's deposit policy for custodial credit risk requires compliance with the provisions of state law.

State law requires collateralization of all deposits with federal depository insurance, bonds and other obligations of the U.S. Treasury, U.S. agencies or instrumentalities or the State of Arkansas, bonds of any city, county, school district or special road district of the State of Arkansas; bonds of any state; or a surety bond having an aggregate value at least equal to the amount of the deposits.

At December 3 1, 2018 and 201 7 all of the bank balances were fully insured and/or collateralized and were not exposed to custodial credit risk.

Note 3.



DEPOSITS AND INVESTMENTS (continued)

Page 12

Investments - The District had the following investments stated here at fair value:

2018Fair 2017 Fair T:yQe Value Value

Money market mutual funds $ 71,811 $ 250,377

U.S. Treasury Notes 334,274 334,784 U.S. Treasury Bonds 1,055,410

U.S. Agency Obligations 732,223 Tennessee Valley Authority 107,745

$ 406,085 $ 2,480,539

Interest Rate Risk - The money market mutual funds are presented above as an investment with a maturity of less than one year because they are redeemable in full immediately.

Credit Risk- Credit risk is the risk that the issuer or other counter party to an investment will not fulfill its obligations.

Custodial Credit Risk- For an investment, custodial credit risk is the risk that, in the event of the failure of the counter party, the District will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party.

The District's investment policy does not specifically address credit risk or custodial credit risk.

Concentration of Credit Risk - The District places no limit on the amount that may be invested in any one issuer. At December 31, 2018, the District's investment in money market mutual funds of $71,811 constituted 17% of its total investments and the District's fixed income investments constituted 83% of its total investments. At December 31,2017, the District's investment in money market mutual funds of $250,3 77 constituted I 0% of its total investments and the District's fixed income investments constituted 90% of its total investments.

Note 3.

Note 4.



DEPOSITS AND INVESTMENTS (continued)

Page 1 3

The carrying values of deposits and investments shown above are included in the balance sheets as follows:

Deposits Investments Total Carrying Value

DEBT OBLIGATIONS

2018 $5,615,031

406.085 $6.021.116

2017 $2,643,807

2,480.539 $ 5.124,346

The following is a summary oflong-term transactions for the year ended December 31, 2018:

BONDS PAYABLE Revenue Bonds -

2017 Series

Beginning Balance

$ 3,217,000

Additions Deductions

279,000 $

Ending Balance

2,938,000

In December 2011, the District issued $4,655,000 in 2011 revenue bonds for the purpose of refunding the 1993 revenue bonds, acquiring land for expansion purposes and acquiring, constructing and equipping improvements to the solid waste disposal and collection facilities. The bonds consist of $4,655,000 in serial bonds, bearing interest from 1.2% to 5.25% and were to mature in December 2036.

In April 2017, the District issued $3,353,000 in 2017 revenue bonds for the purpose of refunding the 2011 revenue bonds. The bonds interest rate is 3.1% and will mature in December 2027.

These bonds require semi-annual payments of principal and interest at June 1 and December 1. The restrictive covenants include the creation of a bond fund and a debt service fund. At December 31, 2017, these funds contained adequate amounts to meet the requirements of the debt covenants. Another restrictive covenant is that the Districts's remaining permitted capacity should not be exhausted prior to final maturity of the bonds, and if so, the District covenants and agrees that it will initiate and pursue diligently the regulatory process to obtain a final permit for expansion of the Facility in a timely manner so as not to allow the Facility's capacity to be exhausted while bonds remain outstanding. The 2018 engineering report

Note 5.



Page 14

estimates a remaining life of approximately 2.0 years for the Class 1 landfill and 15.0 years for the Class 4 landfill. The bonds mature in 2027. On March 17, 2015, the District closed on the purchase of additional land adjacent to the current permitted area in order to expand the overall life of the landfill by an estimated 20 years. The additional permitted area was approved by ADEQ in May 2019.

The debt service requirements for bonds payable as of December 31, 2018, are as follows:

Year Ending December 31 Total to be Qaid PrinciQal Interest

2019 $ 376,861 $ 288,000 $ 88,861

2020 376,872 297,000 79,872

2021 376,587 306,000 70,587

2022 377,024 316,000 61,024

2023 376,166 325,000 51,166

2024-2027 1l505l851 1l406l000 99 851 $ 3,389,361 $ 2,938,000 $ 451,361

PENSION PLAN

Plan Description: The District part1c1pates in the Arkansas Public Employees Retirement Systems (APERS), a cost-sharing multiple-employer defined benefit pension plan administered by the State of Arkansas. APERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members and/or beneficiaries. The State of Arkansas issues an annual report that includes financial statements and required supplementary information for APERS. The plan is available to the public by contacting the APERS. That report may be obtained by writing to Arkansas Public Employees Retirement System, One Union National Plaza, 124 West Capitol Avenue, Little Rock, Arkansas 72201 or by calling 800.682.7377.

Funding Policy: The District contributes an actuarially determined amount to the plan, which was approximately 15% of annual covered payroll for the year ending December 31, 2018 and 14.6% for the year ending December 31, 2017.

Contributions made by the District for the years ended December 31, 2018 and 2017, were $132,622 and $121,012, respectively. Employees are currently required to contribute approximately 5% to the plan. However, certain employees are not required to be in the plan if they were employed by the District prior to the date that the requirement that all employees must participate was adopted.

Note 6.

Note 7.



RELATED PARTY TRANSACTIONS

Page 15

The District provides services to substantially all of the counties and cities whose judges and mayors serve on the District's board of directors . These counties and cities paid approximately $1,405,711 in tipping fees to the District in 2018 and $1,396,737 in 2017, and these counties and cities owed approximately $119,163 to the District at December 31,2018 and $105,297 at December 31,2017.

CLOSURE AND POST CLOSURE COSTS

The District is required to place a final cover on its landfill when closed, and perform certain maintenance and monitoring functions at the landfill site for 30 years subsequent to closure. An expense provision and related liability are being recognized based on the future closure and post closure costs that will be incurred near or after the date that the landfill is no longer able to accept waste. The recognition of these closure and post-closure costs is based on the amount of the landfill used during the year. The estimated total current cost of the landfill closure and post-closure care is computed by an independent engineering firm.

Since the District operates both a Class 1 and Class 4 landfill, the costs have been computed separately. The estimated total current closure and post closure costs at December 31,2018, for the Class 1 and Class 4landfills are approximately $3,169,417 and $228,346 respectively. The liability reflected on the balance sheet is based on an engineering report that reflects the Class 1 and Class 4landfills as approximately 89% and 86% complete , respectively. The engineering report estimates a remaining life of approximately 2.0 years for the Class 1 landfill and 15 .0 years for the Class 4landfill. Actual costs at the projected date of the landfill completion may be higher due to inflation, changes in technology or changes in landfill laws and regulations .

The engineering reports for closure and post-closure costs are based on the current cost at December 31 , 201 7. The estimated total current closure and post closure costs at December 31 , 201 7, for the Class 1 and Class 4 landfills were approximately $2,972,888 and $224,661 , respectively.

Federal and State regulations, as well as the 2011 and 2017 Revenue Bond Indentures require the District to make annual contributions to the Trustee ofthe Landfill Closure and Post-Closure Care Trust Agreement. These deposits are to be held in trust to satisfy the future obligation of closure and post-closure costs . At December 31, 2017, $2,077,405 was in this fund.

In July 2018, the District closed the closure account with Arvest Bank as Trustee and transferred the closure/post closure fund to a certificate of deposit at Diamond Bank. The general release ofTrustee and appointment of Successor Trustee was approved by ADEQ Executive Director on July 25, 2018 and the certificate of

Note 8.

Note 9.



deposit was assigned to ADEQ at that time.

Page 16

On May 23, 2019, ADEQ submitted notice to the District of additional financial assurance required. At the point funds were no longer in a trust, 100% of closure/postclosure costs were required to be funded. The shortage identified by ADEQ for the permitted landfill at December 31, 2018 was $319,877.

SIGNIFICANT ESTIMATES AND CONCENTRATIONS

Current Economic Condition - The current economic environment presents governmental entities with unprecedented circumstances and challenges, which in some cases could result in large declines in certain assets, constraints on liquidity and difficulty obtaining financing or bonding. The financial statements have been prepared using values and information currently available to the District.

Current economic and financial market conditions could adversely affect results of operations in future periods.

In addition, given the volatility of current economic conditions, the values of assets and liabilities recorded in the financial statements could change in the near term and could negatively impact the District's ability to meet debt covenants or maintain sufficient liquidity.

SUBSEQUENT EVENTS AND REVIEW

On May 25, 2011, ADEQ inspected the landfill and waste tire facility and cited deficiencies in its May 27, 2011 letter to the District. On September 2, 2011, the District entered into a Consent Administrative Order (CAO) for the Class 1 landfill and a Consent Administrative Order for the Waste Tire Facility. ADEQ assessed a $24,500 penalty as part of these CAOs. The District submitted its Corrective Action Plans (CAP)s to ADEQ on September 22,2011 which ADEQ accepted. In April2018, the District received notification from ADEQ that all requirements of CAO LIS 11-162, LIS 11-162-1 and LIS 11-162-2 have been satisified an no further actions are required.

On March 17,2015, the District purchased approximately 43 acres of land adjacent to the existing Class 1 landfill. In February 2018, a Permit Modification Application was submitted to ADEQ for expansion utilizing this land. In May 201 9, ADEQ appoved the permit modfication adding 18 acres to the orginal 40 acres for Class 1 for a total permitted area of 58 acres.

Events subsequent to the District's December 31, 2018 year end were reviewed as of June 27, 2019 which is also the date the financial statements were available to be issued.

Page 17

BANKS CPA, PLLC 204 North 27'h Street. Arkadelphia. AR 71923-5309 PHONE 870-245-3975 FAX 870-246-7149

Independent Accountants' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an

Audit of the Financial Statements Performed in Accordance with Government Auditing Standards

Board of Directors and Management Upper Southwest Arkansas Regional Solid Waste Management District Nashville, Arkansas

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 Unites States, the financial statements ofUpper Southwest Arkansas Regional Solid Waste Management District as of and for the year ended December 31, 2018, and the related notes to the financial statements and have issued our report thereon dated June 27, 2019

Internal Control Over Financial Reporting In planning and performing our audit, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstance 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 District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, there can be no assurance that all deficiencies, significant deficiencies or material weaknesses have been identified. However, as discussed in the accompanying schedule of findings and responses, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses.

A deficiency in internal control exists when the design of 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 District's financial statements will not be prevented or detected and corrected on a timely basis. We consider the deficiency described in the accompanying schedule of findings and responses as item 2018-1 to be a material weakness .

Member American Institute of Certified Public Accountants and Arkansas Society ofCPAs

Page 18 Compliance and Other Matters

As part of obtaining reasonable assurance about whether the District'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 an instance of material noncompliance required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and responses as item 2018-2.

District's Response to Findings

The District's responses to the finding identified in our audit is described in the accompanying schedule of findings and responses. We did not audit the District's responses and, accordingly, we express no opinion on them.

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 District'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 District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

June 27,2019

Reference

Number

2018-1


SCHEDULE OF FINDINGS AND RESPONSES DECEMBER 31,2018

Finding

Criteria or Specific Requirement - Management is responsible for establishing and maintaining effective internal control over financial reporting.

Condition - The Executive Director and the bookkeeper have incompatible duties in the accounting cycle.

Effect - Potential misstatements in the financial statements could occur, due to error or fraud, and not be detected in a timely manner.

Cause - Duties in the accounting cycles are not adequately segregated and monitoring or other compensating controls are insufficient.

Recommendation - Management should periodically evaluate the costs versus the benefits of further segregation of duties and implement those changes it deems appropriate for which benefits are determined to exceed costs. Additionally, a member of the board of directors should periodically review transactions initiated or approved by the Executive Director.

View of Responsible Officials and Planned Corrective Actions Management will perform the suggested evaluation and make all changes deemed appropriate that are cost beneficial. The District has engaged a local accounting firm to review monthly transactions and prepare monthly compiled financials to improve controls.

Reference

Number

2018-2


SCHEDULE OF FINDINGS AND RESPONSES DECEMBER 31,2018

Finding

Criteria or Specific Requirement - Management is responsible for funding financial assurance for closure/post closure costs.

Condition - Closure/Post Closure trust fund was closed and moved to a certificate of deposit at a local bank. At the point funds are no longer in a trust, 1 00% of closure/post closure costs were to be funded.

Effect -Noncompliance with financial assurance requirements occurred with the change in financial assurance mechanisms.

Cause- Management believed ADEQ's approval of subsequent trustee and moving of funds was adequate and was not aware that 100% of costs would then be required.

Recommendation - Management should periodically review compliance requirements.

View of Responsible Officials and Planned Corrective ActionsManagement plans to move funds from certificate of deposit to a trust upon maturity of certificate of deposit in July 2019.

SS>E'he CR...Interest Expense (97,588) (133,249) Investment Expense (17,330) (24,499) Gain (Loss) on Disposal of Assets 62,897 292,655 137,143 Change in Net Position $ 868,480 $ 598,464

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