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Home My WebLink About07.15.2026 Telecom Board Agenda BOARD MEMBERS Andrew Van Fleet Board Chair Theodore Batemon Ritch Kurtenbach Mike Young Amy Wienands City Council Liaison: Steve Schmitt July 15, 2026 Waterloo City Council Chambers Waterloo City Hall 4:00 p.m. 1. Roll call. 2. Approval of the agenda, as presented. 3. Approval of the minutes of the June 10, 2026, special session, as presented. 4. Resolution No. 2026-11 approving payment of bills for May and June 2026. 5. Motion to receive and file the Fiscal Year End December 31, 2024, audit. 6. Update from consultants. 7. Closed session pursuant to Iowa Code Section 388.9(1) to discuss marketing and pricing strategies or proprietary information if its competitive position would be harmed by public disclosure not required of potential or actual competitors, and if no public purpose would be served by such disclosure. 8. Adjourn. Kelley Felchle Board Secretary WATERLOO Telecommunications Utility Board of Trustees TELECOMMUNICATIONS UTILITY BOARD OF TRUSTEES Council Chambers June 10, 2026 2:00 p.m. 1. Members present: Mr. Van Fleet, Mr. Kurtenbach, Mr. Young and Mr. Batemon. Absent: Ms. Wienands. 2. Moved by Kurtenbach seconded by Young that the agenda as proposed, be approved. Voice vote-Ayes: Four. Motion carried. 3. Moved By Kurtenbach seconded by Young that the meeting minutes of May 27, 2026, as presented, be approved. Voice vote-Ayes: Four. Motion carried. 4. Moved by Young seconded by Kurtenbach for a motion to approve a Search Agreement with JM Search for the General Manager position and authorizing the General Manager of Telecommunications to execute said document. Voice vote-Ayes: Four. Motion carried. John Warrack, JM Search, provided an introduction of himself and the firm. Renee Hauch, JM Search, provided an introduction of herself. Mr. Kurtenbach inquired about JM Search’s experience recruiting for General Manager-level positions and its success in placing candidates in Iowa. John Warrack stated that they have had luck locating this level of position within the region, but not Iowa specifically. He expressed that they are a national research firm and are skilled at locating leaders within similar companies in the country. Renee Hauch stated that she has similar experience as John Warrack with locating candidates. Mr. Kurtenbach asked if they had experience with a community of the size that Waterloo Fiber services. John Warrack stated Waterloo Fiber would be the smallest company they have worked with but does not see that as a challenge. Mr. Young inquired about the proportion of JM Search’s clients that are private companies compared with public entities, such as Waterloo Fiber. John Warrack stated that the majority are private equity-backed companies. Renee Hauch provided an example of a client they had in the past that mirrors the size of community that Waterloo Fiber serves. Page 2 Mr. Kurtenbach questioned if their initial search would be narrowed down to candidates within the Midwest. John Warrack expressed that they would draw a circle around Waterloo and provide the top priorities when searching for candidates. Mr. Van Fleet requested the time range of finding a candidate. John Warrack stated they would begin by collecting information about what exactly the company is looking for in a candidate. They would then take that information and create a job description. Once that is complete, that is when the outreach begins. After a couple of weeks of outreach, JM Search would calibrate with Waterloo Fiber on possible candidates. By week three, they plan on having candidates ready to interview. He stated that a search for this type of position would take around 90 -100 days to complete. 5. Moved by Kurtenbach seconded by Young for a motion to approve a General Manager Consulting Agreement with Ben Steinman and authorizing the General Manager of Telecommunications to execute said document. Voice vote-Ayes: Four. Motion carried. 6. Moved by Kurtenbach seconded by Young for a motion to approve a Human Resources Consulting Agreement with Gearhart Consulting and authorizing the General Manager of Telecommunications to execute said document. Voice vote-Ayes: Four. Motion carried. Mr. Kurtenbach asked if this was someone who works for the City of Waterloo. Kelley Felchle, Board Secretary, confirmed that Missy Gearhart works in the Human Resources department for the City of Waterloo. Mr. Kurtenbach requested clarification that this is a separate agreement with her and not the city. Kelley Felchle confirmed. Mr. Kurtenbach asked if Missy Gearhart is the owner of the business and if she has had prior experience. Kelley Felchle confirmed that Missy Gearhart is the sole owner of Gearhart Consulting and has experience. She also expressed that Missy was involved with the Waterloo Fiber staff hiring process in the beginning and is confident in her ability to provide the necessary assistance. Mr. Kurtenbach asked if there is a timeline in which the agreement needs renewed. Page 3 Kelley Felchle stated that the agreement is set up like the Interim General Manager’s agreement and can be terminated at any time. Mr. Kurtenbach expressed his concern that the public may take issue with this agreement. Mr. Van Fleet stated he has no concerns about this agreement. He noted that Ben Stineman, Interim General Manager, is primarily focused on the construction process and has indicated that he will require support from a human resources standpoint. 7. Adjourn. With no further business before the board, it was moved by Kurtenbach seconded by Young that the meeting be adjourned at 2:29 p.m. Voice vote-Ayes: Four. Motion carried. Kelley Felchle Board Secretary MAY 2026 CAPITAL EXPENSES DATA CENTER WAREHOUSE 2-120V POWER DISTRIBUTION UNITS 1,095.68$ EN ENGINEERING, LLC PROJECT MANAGEMENT AND SUPPORT 136,635.90$ HOFFMAN & HOFFMAN TRENCHING VAULT INSTALLATION 484.38$ ITG COMMUNICATIONS FIBER INSTALLATION 485,473.99$ USTDW HUT 3 SHELTER FINAL PAYMENT 37,875.00$ MAY 2026 OPERATING EXPENSE ADVANTAGE ADMINISTRATORS, INC HEALTH INSURANCE 7,728.13 AHLERS & COONEY, P.C.LEGAL 586.00 AMAZON CAPITAL SERVICES SUPPLIES 931.18 AVESIS VISION INSURANCE 137.31 CALIX, INC OPERATIONS, SERVICE CLOUD, SOLUTION AND SUPPORT 10,061.92 CAMVIO, INC CUSTOMER BILLING SYSTEM 2,191.25 CEDAR FALLS UTILITIES WHOLESALE BANDWIDTH 3,710.00 CEDAR RAPIDS TV, LLC ADVERTISING 4,585.00 CEDAR VALLEY CATHOLIC SCHOOLS ADVERTISING 3,500.00 CINTAS, CORP BUILDING MAINTENANCE 378.76 CITY OF WATERLOO VEHICLE FUEL 214.38 COLOFF MEDIA ADVERTISING 1,243.00 COMPLIANCE SOLUTIONS, INC CONSULTING 450.00 CONSORTIA CONSULTING, INC CONSULTING 2,100.00 DELTA DENTAL OF IOWA DENTAL INSURANCE 912.52 DICKEY'S PRINTING, INC CLOTHING 3,717.50 ELAN FINANCIAL SERVICES SUPPLIES/ADVERTISING 19,832.32 FUSE TECHNIC, LLC CONSULTING 3,150.00 HURRICANE ELECTRIC, LLC INTERNET-EXCHANGE 400.00 IMON COMMUNICATIONS, LLC VOICE SERVICES 1,750.00 IOWA DEPARTMENT OF REVENUE SALES TAX 642.06 IPERS RETIREMENT 11,906.42 ITG COMMUNICATIONS, LLC INSURANCE ON STORAGE 500.00 KIELKOPF ADVISORY SERVICES, LLC CONSULTING 3,847.50 LAMAR COMPANIES ADVERTISING 10,710.00 LESLEY WILDER BUILDING MAINTENANCE 750.00 LINCOLN SAVINGS BANK BANK FEES 60.00 MENARD, INC SUPPLIES 294.02 MIDAMERICAN ENERGY COMPANY HUT UTILITIES 1,745.05 MUTUAL OF OMAHA LIFE INSURANCE 975.20 NRTC ISP TECH SUPPORT 1,000.00 ORKIN BUILDING MAINTENANCE 96.30 PAYMENTUS CORPORATION A/R TRANSACTION FEES 529.60 POWER & TELEPHONE SUPPLIES 967.16 RENDER NETWORKS, INC CONSULTING 4,995.00 RON STEELE ADVERTISING 3,000.00 SEGRA DARK FIBER 6,400.00 SOUTH FRONT NETWORKS, LLC UPN CONNECTION 1,200.00 T-MOBILE TECHNOLOGY SERVICES 525.85 TWIN TREES, LLC OFFICE RENT 14,825.33 UNDERGROUND LOCATION COMPANY UNDERGROUND LOCATES 293.40 VGM GROUP, INC ADVERTISING 1,427.38 VOYANT SOLUTIONS, LLC PHONE SERVICE 502.95 WATERLOO BUCKS ADVERTISING 3,000.00 WATERLOO OIL CO, INC FUEL FOR HUTS 338.20 WELLMARK HEALTH INSURANCE 15,179.39 WHIMSICAL TWIST ADVERTISING 588.50 JUNE 2026 CAPITAL EXPENSES DATA CENTER WAREHOUSE SENSORS FOR HUTS 3,814.15$ EN ENGINEERING, LLC PROJECT MANAGEMENT AND SUPPORT 53,456.71$ ITG COMMUNICATIONS, LLC FIBER INSTALLATION 469,930.58$ JUNE 2026 OPEARATING EXPENSES ACP INTERNATIONAL SUPPLIES 1,416.72 ADVANTAGE ADMINISTRATORS, INC HEALTH INSURANCE 3,335.76 AHLERS & COONEY, P.C.LEGAL 3,447.00 AVESIS VISION INSURANCE 161.42 CALIX, INC OPERATIONS, SERVICE CLOUD, SOLUTION AND SUPPORT 10,129.12 CAMVIO, INC CUSTOMER BILLING SYSTEM 2,327.50 CBAN CORP MARKETING 641.25 CEDAR FALLS UTILITIES WHOLESALE BANDWIDTH 3,710.00 CEDAR RAPIDS TV, LLC ADVERTISING 4,585.00 CINTAS, CORP BUILDING MAINTENANCE 184.28 CITY OF WATERLOO VEHICLE FUEL 2,579.67 COLOFF MEDIA ADVERTISING 2,347.00 CONSORTIA CONSULTING, INC CONSULTING 4,200.00 DELTA DENTAL OF IOWA DENTAL INSURANCE 912.52 ELAN FINANCIAL SERVICES SUPPLIES/ADVERTISING 20,080.49 FUSE TECHNIC, LLC CONSULTING 6,300.00 GEARHART TALENT CONSULTING CONSULTING 1,234.90 HURRICANE ELECTRIC, LLC INTERNET-EXCHANGE 400.00 IOWA DEPARTMENT OF REVENUE SALES TAX 888.45 IOWA IRISH FEST ADVERTISING 10,000.00 IPERS RETIREMENT 15,911.43 ITG COMMUNICATIONS, LLC INSURANCE ON STORAGE 500.00 KIELKOPF ADVISORY SERVICES, LLC CONSULTING 8,167.50 LESLEY WILDER BUILDING MAINTENANCE 600.00 MENARD, INC SUPPLIES 21.73 MIDAMERICAN ENERGY COMPANY HUT UTILITIES 990.96 MUTUAL OF OMAHA LIFE INSURANCE 427.56 NRTC ISP TECH SUPPORT 1,482.42 ORKIN BUILDING MAINTENANCE 96.30 PAYMENTUS CORPORATION A/R TRANSACTION FEES 372.15 RON STEELE ADVERTISING 1,600.00 SEGRA DARK FIBER 6,400.00 SOUTH FRONT NETWORKS, LLC UPN CONNECTION 950.00 SWISHER & COHRT, P.L.C.LEGAL 2,720.00 THE COURIER/COLUMN PBC LEGAL 383.18 T-MOBILE TECHNOLOGY SERVICES 265.56 TWIN TREES, LLC OFFICE RENT 14,825.33 VGM GROUP, INC ADVERTISING 101.65 VOYANT SOLUTIONS, LLC PHONE SERVICE 504.58 WELLMARK HEALTH INSURANCE 15,179.39 CUSTOMER REFUNDS REFUNDS 450.50 j C* berganKDv Waterloo Fiber Waterloo, Iowa Communications Letter December 31, 2024 Waterloo Fiber Table of Contents Report on Matters Identified as a ReSUtt of the Audit of the Basic Financial Statements Material Weakness Required Communication Financial Analysis Emerging Issues 1 3 r C berganKDV Report on Matters Identified as a Result of the Audit of the Basic Financial Statements Board of Trustees Waterloo Fiber Waterloo, Iowa In planning and performing our audit of the basic financial statements of Waterloo Fiber, a component unit of the City of Waterloo, as of and for the year ended December 31, 2024, 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, we considered the Utilitys internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Utility's internal control. Accordingly, we do not express an opinion on the effectiveness of the Utility's internal control over financial reporting. 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, material weaknesses or significant deficiencies may exist that have not been identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error, or fraud may occur and not be detected by such controls. However, as discussed below, we identified a certain deficiency in internal control that we consider to be a material weakness. flA deficiency in internal control exists when the design or operation of a control does not allow I I 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 over financial reporting, such that there is a reasonable possibility that a material misstatement of the Utility's basic financial statements will not be prevented, or detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of an event occurring is either reasonably possible or probable as defined as follows: Reasonably possible. The chance of the future event or events occurring is more than remote but less than likely. U Probable. The future event or events are likely to occur. The material weakness identified is stated within this letter. The accompanying memorandum also includes financial analysis provided as a basis for discussion. The matters discussed herein were considered by us during our audit and they do not modify the opinion expressed in our Independent Auditor's Report dated March 18, 2026, on such statements. f This communication, which is an integral part of our audit, is intended solely for the information and use of the Members of the Board of Trustees and management and others within the Utility and state oversight agencies and is not intended to be, and should not be, used by anyone other than these specified parties. k hero ,kDV U' b - St. Cloud, Minnesota March 18, 2026 ( Waterloo Fiber Material Weakness Lack of Segregation of Accounting Duties During the year ended December 31, 2024, the Utility had a lack of segregation of accounting duties due to a limited number of office employees. The lack of segregation of accounting duties could adversely affect Utility's ability to initiate, record, process and report financial data consistent with the assertions of management in the basic financial statements. Adequate segregation of accounting duties is in place when the following four areas of a transaction have been separated: authorization, custody, recording, and reconciliation. Management and the Board of Trustees are aware of this condition and have taken certain steps to compensate for the lack of segregation. However, due to the number of staff needed to properly segregate all of the accounting duties, the costs of obtaining desirable segregation of accounting duties can often exceed benefits which could be derived. Management and the Board of Trustees must remain aware of this situation and should continually monitor the accounting system, including changes that occur. Waterloo Fiber Required Communication We have audited the basic financial statements of Waterloo Fiber, a component unit of the City of Waterloo, as of and for the year ended December 31, 2024. Professional standards require that we advise you of the following matters related to our audit. Our Responsibility in Relation to the Basic Financial Statement Audit As communicated in our engagement letter, our responsibility, as described by professional standards, is to form and express opinions about whether the basic financial statements prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the basic financial statements does not relieve you or management of its respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the basic financial statements are free of material misstatement. An audit of the basic financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Utility's internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the Utility solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgement, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. Generally accepted accounting principles provide for certain Required Supplementary Information (RSI) to supplement the basic financial statements. Our responsibility with respect to the RSI, which supplements the basic audit financial statements, is to apply certain limited procedures in accordance with generally accepted auditing standards. However, the RSI was not audited and, because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance, we do not express an opinion or provide any assurance on the RSI. Our responsibility for the supplementary information accompanying the basic financial statements, as described by professional standards, is to evaluate the presentation of the supplementary information in relation to the basic financial statements as a whole and to report on whether the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Our Responsibility in Relation to Government Auditing Standards As communicated in our engagement letter, part of obtaining reasonable assurance about whether the basic financial statements are free of material misstatement, we performed tests of the Utility's 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 basic financial statement amounts. However, the objective of our tests was not to provide an opinion on compliance with such provisions. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. ',� 4 Waterloo Fiber Required Communication Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, and our network firms have complied with all relevant ethical requirements regarding independence. Significant Risks We addressed the following significant risks of material misstatement identified in our planning procedures: • Management Override of Controls Overall Financial Statements Management override of internal control is considered a risk in substantially all engagements as management may be incentivized to produce better results. • Improper Revenue Recognition - Revenue recognition is considered a fraud risk on substantially all engagements as it generally has a significant impact on the results of the governments operations. In addition, complexities exist surrounding the calculation and recording of various revenue sources. • Risk of Misappropriation of Assets - Due to the volume of transactions, there is a risk of incorrect disbursements being made from the Utility. Accounts payable could also be misstated at year end. • Lease Valuation - Right to use lease assets and lease payables are material to the financial statements and involve significant estimates. • Capital Assets Valuation - Capital assets and related depreciation and amortization are material to the financial statements and involve significant estimates. • Pension Valuation - Net pension liability, deferred outflows of resources related to pensions, and deferred inflows of resources related to pensions are generally material to the financial statements and involve significant estimates. Qualitative Aspects of the Utility's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the Utility is included in the notes to the basic financial statements. There have been no initial selection of accounting policies and no changes to significant accounting policies or their application during 2024. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates and Related Disclosures Accounting estimates and related disclosures are an integral part of the basic financial statements prepared by management and are based on management's current judgements. Those judgements are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the basic financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgements. The most sensitive estimates affecting the basic financial statements relate to: Depreciation and Amortization -The Utility is currently depreciating and amortizing its capital assets over their estimated useful lives, as determined by management, using the straight-line method. ''I Waterloo Fiber Required Communication Qualitative Aspects of the Utility's Significant Accounting Practices (Continued) Significant Accounting Estimates and Related Disclosures (Continued) Net Pension Liability, Deferred Outflows of Resources Relating to Pensions and Deferred Inflows of Resources Relating to Pensions - These balances are based on an allocation by the pension plans using estimates based on contributions. Lease Payables and Right to Use Lease Assets- These balances are based on estimates and judgments determined by the Utility related to the discount rate, lease term and lease payments. We evaluated the key factors and assumptions used to develop the accounting estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Financial Statement Disclosures Certain basic financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. The basic financial statement disclosures are neutral, consistent, and clear. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For the purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effects of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the basic financial statements taken as a whole and each applicable opinion unit. Management did not identify, and we did not notify them of any uncorrected financial statement misstatements. In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the basic financial statements taken as a whole. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the Utility's basic financial statements or the auditor's report. No such disagreements arose during the course of our audit. Representations Requested from Management We have requested certain written representations from management, which are included in the management representation letter. Waterloo Fiber Required Communication Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management has informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. ' i Other Significant Matters, Findings, or Issues In the normal course of our professional association with the Utility, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events I or transactions that occurred during the year, operating, and regulatory conditions affecting the Utility, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the Utility's auditor. Other Information in Documents Containing Audited Basic Financial Statements We applied certain limited procedures to the RSI that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. With respect to the supplementary information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the basic financial statements or to the basic financial statements themselves. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the basic financial statements. 1 I Waterloo Fiber Financial Analysis 11 The following page provides graphic representation of select data pertaining to the financial position _ and operations of the Utility for the past year. Our analysis of each graph is presented to provide a I basis for discussion of past performance and how implementing certain changes may enhance future performance. A subsequent discussion of this information should be useful for planning purposes. r I Waterloo Fiber This is the first full year of operations for the Fiber utility, this graph will include future years for comparative purposes up to 5 years. At the end of the year the fund had unrestricted net position of ($2,321,608). Fiber Fund $1,500,000 $1,000,000 $500,000 S- $(500,000) $(1,00%000) $(13500,000) $(25000,000) $(21500,000) 2024 ■Total Revenues $56,786 ■Total. Expenses 1,837,023 ■Income (Loss) (11780,237) m Income without Depreciation (1 741 114) ■Unrestricted (2,3211608) I� IU Waterloo Fiber Emerging Issues Executive Summary The following is an executive summary of financial related updates to assist you in staying current on emerging issues in accounting and finance. This summary will give you a preview of the new standards that have been recently issued and what is on the horizon for the near future. The most recent and significant updates include: • Accounting Standard Update -GASB Statement No. 102 -Certain Risk Disclosures GASB has issued GASB Statement No. 102 relating to risk disclosures. The disclosures will provide users with timely information regarding certain concentrations or constraints and related events that have occurred or have begun to occur that make a government vulnerable to a substantial impact. • Accounting Standard Update - GASB Statement No. 103 - Financial Reporting Model Improvements GASB has issued GASB Statement No. 103 relating to changes in financial reporting requirements. The changes provide clarity, enhance the relevance of information, provide more useful information for decision -making, and provide for greater comparability amongst government entities. The following is an extensive summary of the current updates. As your continued business partner, we are committed to keeping you informed of new and emerging issues. We are happy to discuss these issues with you further and their applicability to your Utility. Waterloo Fiber Emerging Issues Accounting Standard Update - GASB Statement No. 102 - Certain Risk Disclosures The objective of this Statement is to provide users of government financial statements with information about risks related to a government's vulnerabilities due to certain concentrations or constraints that is essential to their analyses for making decisions or assessing accountability. This Statement provides definitions for concentration and constraint. A concentration as a lack of diversity related to an aspect of a significant inflow of resources or outflow of resources. A constraint is a limitation imposed on a government by an external party or by formal action of the government's highest level of decision -making authority. This Statement requires a government to assess whether a concentration or constraint could present a risk of financial difficulty. The District will need to make a disclosure in the notes to the financial statements if all three of the following criteria are true: • The District knows about the concentration or constraint prior to financial statement issuance. • The concentration or constraint makes the District is vulnerable to risk of a substantial impact. • An event or events associated with the concentration or constraint that could cause a substantial impact have either (1) happened; (2) started to happen; or (3) are more likely than not to start happening within 12 months of the financial statements being issued. government determines the above criteria for disclosure have been met, it should disclose information in notes to financial statements in sufficient detail to enable users of financial statements to understand the nature of the circumstances disclosed and the government's I vulnerability to the risk of a substantial impact. Disclosures are required for the government as a whole as well as any opinion unit in the financial statements that includes outstanding revenue debt. Disclosures can be combined to avoid unnecessary duplication (e.g., a subsequent event footnote). GASB Statement No. 102 is effective for fiscal years beginning after June 15, 2024. Earlier application is encouraged. Information provided above was obtained from www.gasb.org, 10 s Waterloo Fiber Emerging Issues Accounting Standard Update - GASB Statement No. 103 - Financial Reporting Model Improvements The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government's accountability. This Statement also addresses certain application issues. This Statement addresses 5 areas of the financial statements (1) Management's Discussion and Analysis (MDftA), (2) Unusual or Infrequent Items, (3) Presentation of the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position, (4) Major Component Unit Information, l and (5) Budgetary Comparison Information. This Statement continues the requirement that the MD@A precede the basic financial statements as part of the Required Supplementary Information (RSI). This Statement requires that the information presented in MDFtA be limited to the related topics discussed in five sections: (1) Overview of the Financial Statements, (2) Financial Summary, (3) Detailed Analyses, (4) Significant Capital Asset and Long -Term Financing Activity, and (5) Currently Known Facts, Decisions, or Conditions. The Statement stresses that detailed analyses should explain why balances and results of operations changed, rather than stating amounts and "boilerplate" discussions. This Statement describes unusual or infrequent items as transactions and other events that are either unusual in nature or infrequent in occurrence. Furthermore, governments are required to display the inflows and outflows related to each unusual or infrequent item separately as the last presented [owls) of resources prior to the net change in resource flows in the government -wide, governmental fund, and proprietary fund statements of resource flows. This Statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net position continue to distinguish between operating and nonoperating revenues and expenses. The Statement provides clarification regarding operating and nonoperating revenues and expenses. Also, this Statement requires that a subtotal for operating income (loss) and noncapital subsidies be presented before reporting other nonoperating revenues and expenses. This Statement requires governments to present each major component unit separately in the reporting entity's statement of net position and statement of activities if it does not reduce the readability of the statements. If the readability of those statements would be reduced, combining statements of major component units should be presented after the fund financial statements. This Statement requires governments to present budgetary comparison information using a single method of communication -RSI. Governments also are required to present (1) variances between original and final budget amounts and (2) variances between final budget and actual amounts. An explanation of significant variances is required to be presented in notes to RSI. GASB Statement No. 103 is effective for fiscal years beginning after June 15, 2025. Earlier application is encouraged. Information provided above was obtained from www.gasb.org. ilk Waterloo Fiber Waterloo, Iowa Fiscal Year Ended December 31, 2024 Waterloo Fiber Table of Contents Officials Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements 3 7 Statement of Net Position -Proprietary Funds 12 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 13 Statement of Cash Flows - Proprietary Funds Statement 14 Notes to Basic Financial Statements 15 Required Supplementary Information Schedule of Utility's Proportionate Share of Net Pension Liability 26 Schedule of Utility Contributions 27 Supplementary Information Combining Schedule of Net Position - Proprietary Funds 30 Combining Schedule of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 31 Combining Schedule of Cash Flows - Proprietary Funds Statement 32 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 33 Schedule of Findings and Responses 35 (THIS PAGE LEFT BLANK INTENTIONALLY) Waterloo Fiber Officials December 31, 2024 Elected Officials I.F1uT.! Michael Young Board Member Amy Wienands Board Member Rich Kurtenbach Board Member Andrew Van Fleet Board Member Theodore Batemon Board Member Rob Nicholas Ex-Officio Position Term Expires December 28, 2026 May 11 2025 December 12, 2028 January 14, 2025 February 24, 2026 Indefinite 1 (THIS PAGE LEFT BLANK INTENTIONALLY) fl fl C* berganKDv Independent Auditor's Report 16 Board of Trustees n Waterloo Fiber Waterloo, Iowa n Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of Waterloo Fiber (Utility), a component unit of the City of Waterloo, Iowa as of and for the year ended December 31, 2024, and the related notes to the basic financial statements, which collectively comprise the Waterloo Fibers basic financial statements as listed in the Table of Contents. In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the respective financial position of Waterloo Fiber, as of December 31, 2024 and the results of its operations and cash flows 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 Waterloo Fiber 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 management of Waterloo Fiber 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, which raise substantial doubt about the Utility's ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS and Government Auditing Standards, we: • Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the 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 Utility'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, which raise substantial doubt about the Utility'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, signcant 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, which follows this report letter, and Required Supplementary Information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), 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 Utility's basic financial statements. The accompanying supplementary information identified in the Table of Contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The 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 accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 18, 2026, on our consideration of the Utility'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 Utility's internal control over financial reporting and compliance. der jan,kfav, . St. Cloud, Minnesota March 18, 2026 (THIS PAGE LEFT' BLANK INTENTIONALLY) Waterloo Fiber Management's Discussion and Analysis As management of the Waterloo Fiber, we offer readers 01 the Waterloo Fiber's financial statements this narrative overview and analysis of the financial activities of the Waterloo Fiber for the fiscal year ended December 31, 2024. FINANCIAL HIGHLIGHTS • The liabilities and deferred inflows of resources of the Waterloo Fiber exceeded its assets and deferred outflows of resources at the close of the most recent fiscal year by $2,240,071 (net position). Of this amount, the Utility's unrestricted net position is ($2,338,808). • The Utility's total net position decreased by $1,797,437 compared to the 2023 ending net position of ($442,634). OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Utility's basic financial statements. The Utility is a single purpose component unit of the City of Waterloo, Iowa (City). The Utility provides telecommunications services to its customers at rates designed to recover the cost of providing the services. As a result, the Utility prepares financial statements as a single enterprise fund in a manner similar to a private -sector business. The statement of net position presents information about all of the Utility's assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference between them 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 Utility is improving or deteriorating. The statement of activities presents information illustrating how the government's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The statements of cash flows present information showing major sources and uses of cash by four types of activities. The activities are operating, noncapital financing; capital and related financing; and investing. Also included is a schedule which reconciles income form operations to net cash provided by operating activity. The basic financial statements can be found on pages 12 through 14 of this report. The notes to the financial statements provide additional information that is essential to a fall understanding of the data provided in the basic financial statements. Notes are considered to be an integrat part of the financial statements prepared in accordance with generally accepted accounting principle. The notes to the financial statements can be found on pages 15 through 24 of this report. Waterloo Fiber Management's Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Financial Analysis As noted earlier, net position may serve as a useful indicator of an entity's financial position over time. The Utility's liabilities and deferred inflows of resources exceeded its assets and deferred inflows of resources by $2,222,871 on December 31, 2024. The year ended December 31, 2024 was the Utility's first full year of operations, comparative financial statements will be prepared starting for the year ended December 31, 2025. The following is a summary of the composition of net position as of December 31: Business -Type Activities 2024 Current and other assets $ 650,103 Capital assets 2120393585 Total assets 21,689,688 Total deferred outflows of resources 81,471 Current liabilities 20,913,223 Long-term liabilities 31097,995 Total liabilities 24,011, 218 Total deferred inflows of resources 12 Net Position Net Investment in capital assets 98,737 Unrestricted (21338)808) Total net position $ (2,240,071) Net Investment in Capital Assets is the largest portion of the utility's net position and reflect its net investment in capital assets. The Utility uses these capital assets to provide telecommunications services to the customers, consequently, these assets are not available for future spending Unrestricted net position may be used to meet the utility's ongoing obligations to citizens and creditors. It is the Utility's intention to use these assets for future operating purposes and capital acquisition and improvements. Waterloo Fiber Management's Discussion and Analysis OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) The following is a summary of the changes in net position for the years ended December 314 Business -Type Activities 2024 Operating revenue $ 6,309 Operating expenses 11838,012 Operating income (loss) (1,8311703) Net nonoperating revenue 34,266 Change in net position (1,797,437) Net position - beginning (442,634) Net position -ending $ (2,240,071) Operating revenue is the Utility's primary source of revenue and is generated by providing telecommunications services to customers. Net operating revenue includes interest income, interest expense and revenue from the sale of capital assets. Budgetary Highlights Each year the Board of Trustees adopts a budget using the cash basis of accounting. The Utility's originat budget was not amended during the year ended December 31, 2024. Actual cash disbursements were approximately $8.7 million less than budgeted due to capital projects being delayed in 2024. CAPITAL ASSETS The Utility's investment in capital assets amounted to approximately $21.0 million as of December 31, 2024 (net of accumulated depreciation and amortization of $39,123). This investment in capital assets includes construction in progress, lease buildings and equipment. Additional information about the Utility's capital assets can be found in Note 4 to the financial statements. DEBT For the year ended December 31, 2024, the Utility had $20,626,368 due to the City of Waterloo, 3 $2,650,000 in revenue anticipation notes, $534,978 in leases payable. Additional information about the Utility's capital assets can be found in Note 5 to the financial statements. Waterloo Fiber Management's Discussion and Analysis ECONOMIC FACTORS AND RATES Waterloo Fiber proceeded in its construction of a citywide Fiber to the Premise fiber optic backbone ring and distribution network throughout 2024. It commenced retail operations to internet-only customers mid -year. Financing for the construction of the network, and fiber optic lines from the network to inside customers' premises, transitions from an internal loan from the City of Waterloo to Communications Utility Revenue Capital Loan notes in 2025. The debt structure capitalizes interest due, and the repayment schedule is designed to avoid principal payments until operating revenues are sufficient for both operating and financing expenses. Significant startup operating expenses were incurred throughout 2024. The utility began scaling its operating staff throughout the year to manage the utility, for customer acquisition, and installing services. This will continue throughout 2025 and 2026 as construction is completed and its broadband customer base grows, both throughout the community and market share within each completed area. Financing for working capital transitioned from an internal loan from the City of Waterloo to a drawdown bank note in 2024, with additional borrowing in 2025, as operating income is not anticipated to be sufficient to meet operating expenses through at least 2026. The main economic factors to propel sales growth are completing construction, successfully marketing services, and offering services at competitive prices. Phone and television services are anticipated to commence in 2026. Retail rates for internet and phone services are not expected to change during this period. Those for television services, however, are subject to the utility recovering its pass -through expenses for the channel lineups customers select. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of Waterloo Fiber's finances for all those with an interest in the municipal telecommunication utility's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Eric Lage, Waterloo Fiber, 402 East 4th St., Waterloo, Iowa 50703. 10 BASIC FINANCIAL STATEMENTS Waterloo Fiber Statement of Net Position - Proprietary Funds December 31, 2024 Total Assets Current assets Cash and cash equivalents $ 420,164 Accounts receivable 13 Inventory 22%498 Prepaid items %428 Total current assets 65%103 Noncurrent assets Capital assets, not being depreciated 20,405,870 Capital assets, net of accumulated depreciation/amortization 633,715 Net capital assets 21,039,585 Total assets 21,68%688 Deferred Outflows of Resources Deferred outflows of resources related to pensions 81,471 Total assets and deferred outflows of resources $ 21,771,159 Liabilities Current liabilities Accounts payable $ 523074 Interest payable 12,941 Salaries payable 109,501 Compensated absences 7,088 Lease payable 105,251 Due to primary government 20,6263368 Total current liabilities 203913,223 Noncurrent liabilities Lease payable 429,727 Notes from direct borrowing payable 2,650,000 Net pension liability 18,268 Total noncurrent liabilities 3,097,995 Total liabilities 24,011,218 Deferred Inflows of Resources Deferred inflows of resources related to pensions 12 Net Position Ne[ investment in capital assets 98,737 Unrestricted (2,338, 808) Total net position (2,2403071) Total liabilities, deferred inflows of resources, and net position $ 21,7711159 See notes to basic financial statements. 12 Waterloo Fiber Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Year Ended December 31, 2024 Operating Revenues Total Charges for services $ 6,309 Operating Expenses Personnel services 905,153 Supplies 172,958 Professional services 421,249 Repairs and maintenance 36,285 Advertising 204,024 Depreciation and amortization 39,123 Miscellaneous 59,220 Total operating expenses 1,838,012 Operating income (loss) (1,831,703) Nonoperating Revenues (Expenses) Investment income 29,540 Gain (loss) on disposal of capital assets 20,937 Interest expense (16,211) Total nonoperating revenues (expenses) 34,266 Change in net position (1,797,437) Net Position Beginning of year (442,634) End of year $ (2,240,071) See notes to basic financial statements. 13 Waterloo Fiber Statement of Cash Flows - Proprietary Funds Year Ended December 31, 2024 Total Cash Flows - Operating Activities Receipts from customers $ 6,296 Payments to suppliers for goods and services (11154,074) Payments to employees for services (992,897) Net cash flows - operating activities (20140,675) Cash Flows - Capital and Related Financing Activities Principal paid on debt (39,541) Interest paid on debt (3,270) Note proceeds 21100,000 Acquisition of capital assets (9%319) Transfers out (77,382) Transfers in 77,382 Proceeds from disposal of capital assets 20,937 Net cash flows - capital and related financing activities 1,979,807 Cash Flows • Investing Activities Investment income 29,540 Net change in cash and cash equivalents (1310328) Cash and Cash Equivalents January 1, 551,492 December 31, $ 420,164 Reconciliation of Operating Income (Loss) to Net Cash Flows - Operating Activities Operating income (loss) $ (1,8313703) Adjustments to reconcile operating income (loss) to net cash flows - operating activities Depreciation and amortization 39,123 Accounts receivable (13) Prepaid items (%428) Accounts payable (250,910) Salaries payable (312641) Pension liability (63,191) Compensated absences payable 7,088 Total adjustments (308,972) Net cash flows - operating activities $ (2,140,675) Noncash Items Acquisition of capital assets and inventory from primary government $ 20,626$69 Amount due to the primary government 2%626,369 Acquisition of tease capital assets 529,062 Lease payable issued 529,062 14 Waterloo Fiber Notes to Basic Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Organization Waterloo Fiber (Utility) is a municipal utility that is a political subdivision and component unit of the City of Waterloo, Iowa. The Utility provides telecommunication services to the City of Waterloo. The Utility's rates are set by its governing board. The Waterloo Fiber Board of Trustees has oversight responsibility for telecommunications services provided by the utility. All activities with which the Board has oversight responsibility are included in the financial statements. B. Measurement Focus, Basis of Accounting, and Basic Financial Statement Presentation The Utility is accounted for using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. C. Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position or Fund Balance 1. Cash and Pooled Investments The cash balances of the Utility funds are pooled and deposited into interest -bearing demand deposit accounts. For purposes of the statement of cash flows, all short-term cash investments that are highly liquid are considered to be cash equivalents. Cash equivalents are readily convertible to known amounts of cash and, at the day of purchase, have a maturity date no longer than three months. 2. Receivables Customer accounts receivable consist of amounts owed from private individuals or organizations for goods and services, including amounts owed for which billings have not been prepared. 3. Inventory and Prepaid Items Inventories are valued at cost using the first -in, first -out method. The cost of inventory is recorded as an expenditure when consumed. Prepaids consist primarily of property and liability insurance payments paid in advance. 4. Capital Assets Capital assets are reported in the applicable proprietary funds statement of net position. Capital assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value. Acquisition value is the price that would have been paid to acquire a capital asset with equivalent service potential. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extent asset useful lives are not capitalized. Capital assets, other than infrastructure, are defined by the Utility as assets with an initial, individual cost in excess of $5,000 and estimated useful lives in excess of one year. 15 Waterloo Fiber Notes to Basic Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 4. Capital Assets (Continued) Capital assets of the Utility are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings and network connections 30 Drop construction 20 OSP and NOC equipment and vehicles 10 Customer premise equipment and NOC servers 5 - 20 Capital assets not being depreciated include construction in progress. 5. Deferred Outflows Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until that time. The Utility presents deferred outflows of resources on the Statement(s) of Net Position for deferred outflows of resources related to pensions for various estimate differences that will be amortized and recognized over future years. 6. Compensated Absences Utility policy calls for the accumulation of vacation, compensatory time, and sick leave for subsequent use or for payment upon termination or retirement. Matured compensated absences, for example, as a result of employee retirements and resignations, are considered due and expected to be liquidated with expendable available financial resources and are reported as an expenditure and a fund liability of the respective governmental fund. The liability also includes amounts for leave that has been used for time off but has not yet been paid in cash or settled through noncash means and certain other types of leave. 7. Pensions The net pension liability, deferred inflows and outflows of resources related to pensions, pension expense, information about the fiduciary net position of the Iowa Public Employees' Retirement System (IPERS) and additions to/deductions from IPERS' fiduciary net position have been determined on the same basis as they are reported by IPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 8. Deferred Inflows of Resources Deferred inflows of resources represent an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Deferred inflows of resources in the statement of net position consist of unrecognized items not yet charged to pension expense for various estimate differences that will be amortized and recognized over future years. 16 Waterloo Fiber Notes to Basic Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 9. Net Position Net position represents the difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources. Amounts reported as net investment in capital assets consist of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction, or improvement of those assets. Net investment in capital assets excludes unspent debt proceeds. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the Utility or through external restrictions imposed by creditors, grantors or taws or regulations of other governments. The Utility applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. 10. Budgetary Information The Utitity is required to prepare a budget each year and submit it, subject to review by the City of Waterloo, to the State of Iowa. The Utility prepares its budget using the cash basis of accounting. The Utility's 2024 budget and comparison to cash basis activity is as follows: Business type activity -fiber Actual disbursements Budgeted disbursements Actual disbursements under budget rz�rzl 2,365,483 20,236,500 (17,871,017) 11. Estimates and Assumptions The preparation of basic 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 basic financial statements. Estimates also affect the reported amounts of revenue and expenditures/expense during the reporting period. Actual results could differ from those estimates. 12.Operating Revenues The Utility defines operating revenue as revenue derived from the provision of telecommunications services. Nonoperating revenue is defined as anything other than revenue from the provision of telecommunication services. NOTE 2 -STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Deficit Net Position At December 31, 2024, the Utility had a deficit net position of $2,222,871. This will be resolved in future years by providing telecommunications services. 17 Waterloo Fiber Notes to Basic Financial Statements NOTE 3 -CASH AND POOLED INVESTMENTS The Utility's deposits in banks at December 31, 2024, were entirely covered by federal depository insurance or by the State Sinking Fund in accordance with Chapter 12C of the Code of Iowa. This chapter provides for additional assessments against the depositories to ensure there will be no loss of public funds. The Utility is authorized by statute to invest public funds in obligations of the United States government, its agencies and instrumentalities, certificates of deposit or other evidences of deposit at federally insured depository institutions approved by Board of Trustees; prime eligible bankers acceptances; certain high rated commercial paper; perfected repurchase agreements; certain registered open-end management investment companies; certain joint investment trusts; and warrants or improvement certificates of a drainage district. At December 31, 2024, the Utility had deposits of $420,064 and petty cash of $100. The Utility had no investments meeting the disclosure requirements of Governmental Accounting Standards Board Statement No. 72. NOTE 4 -CAPITAL ASSETS Capital asset activity for the year ended December 31, 2024, was as follows: Capital assets not being depreciated Construction in progress Capital assets being depreciated/amortized Vehicles, machinery, furniture and equipment Lease buildings Total capital assets being depreciated/amortized Less accumulated depreciation/amortization for Lease buildings Total accumulated depreciation /amortization Capital assets being depreciated/amortized, net Capital assets, net Beginning Ending Balance Increases Decreases Balance - 98,319 574,519 672,838 39,123 39,123 633,715 - 98,319 574,519 672,838 39,123 3%123 633,715 $ 21,039,585 m Waterloo Fiber Notes to Basic Financial Statements NOTE 5 - LONG-TERM DEBT A. Components of Long -Term Liabilities The following is a summary of the changes in long-term liabilities for the year ended December 31, 2024. Beginning Balance Additions Business -type activities Maturities Ending Due Within Balance One Year Due to primary government $ - $ 20,626,368 $ - $ 20,626,368 $ 20,626,368 Revenue anticipation note 550,000 2/1003000 - 29650,000 - Leases payable - 574,519 3%541 534,978 105,251 Compensated absences, net - 7,088 - 71088 7,088 Net pension liability - 18,268 - 18,268 - Total long-term liabilities, business -type activities $ 550,000 $ 231326,243 $ 39,541 $ 230836,702 $ 20,738,707 B. Lease Liability On November 4, 2024, the Utility entered into a lease agreement for building space. The agreement required monthly payments for 5 years with an implicit interest rate of 5.75%, with final payment dLie November 30, 2029. During the year ended December 31, 2024, the Utility paid principal of $9,744 and interest of $0 on the agreement. On September 18, 2023, the Utility entered into a lease agreement for building space. The agreement required monthly payments of $2,000 for 2 years with an implicit interest rate of 5.75%. The final payment is due August 1, 2025, During the year ended December 31, 2024, the Utility paid principal of $22,396 and $1,604 interest on the agreement. Year Ending December 31, Principal Interest Total 2025 $ 105,251 $ 272869 $ 133,120 2026 97,285 22,177 119,462 2027 105,482 16,370 121,852 2028 114,212 10,077 124,289 2029 112,748 3,267 116,015 Total $ 534,978 $ 79,760 $ 614,738 C. Debt Approved But Not Drawn Upon During the year ended December 31, 2024, the Utility entered into a revenue anticipation note with a maximum amount of $4,000,000 which is being used to finance construction projects. At December 31, 2024, the Utility had drawn $2,650,000 on this note. An amortization schedule for this loan is not presented due to the note not being fully drawn at year end. The Utility expects to draw down the remaining balance of this loan during the year ending December 31, 2025. iL: Waterloo Fiber Notes to Basic Financial Statements NOTE 6 - PENSION PLAN A. Plan Description IPERS membership is mandatory for employees of the Utility, except for those covered by another retirement system. Employees of the Utility are provided with pensions through a cost -sharing multiple employers defined benefit pension plan administered by Iowa Public Employees' Retirement System (IPERS). IPERS issues a stand-alone financial report which is available to the public by mail at 7401 Register Drive, P.O. Box 9117, Des Moines, Iowa 50306-9117 or at www.ipers.org. IPERS benefits are established under Iowa Code Chapter 97B and the administrative rules thereunder. Chapter 97B and the administrative rules are the official plan documents. The following brief description is provided for general informational purposes only. Refer to the plan documents for more information. B. Pension Benefits A regular member may retire at normal retirement age and receive monthly benefits without an early -retirement reduction. Normal retirement is age 65, any time after reaching age 62 with 20 or more years of covered employment, or when the member's years of service plus the members age at the last birthday equals or exceeds 88, whichever comes first. These qualifications must be met on the member's first month of entitlement to benefits. Members cannot begin receiving retirement benefits before age 55. The formula used to calculate a regular member's monthly IPERS benefit includes: • A multiplier based on years of service. • The member's highest five-year average salary, except members with service before June 30, 2012, wilt use the highest three-year average salary as of that date if it is greater than the highest five-year average salary. If a Regular member retires before normal retirement age, the member's monthly retirement benefit will be permanently reduced by an early -retirement reduction. The early retirement reduction is calculated differently for service earned before and after July 1, 2012. For service earned before July 1, 2012, the reduction is 0.25% for each month that the member receives benefits before the member's earliest normal retirement age. For service earned after July 1, 2012, the reduction is 0, 50% for each month that the member receives benefits before age 65. Generally, once a member selects a benefit option, a monthly benefit is calculated and remains the same for the rest of the member's lifetime. However, to combat the effects of inflation, retirees who began receiving benefits prior to July 1990 receive a guaranteed dividend with their regular November benefits payments. C. Disability and Death Benefits A vested member who is awarded federal Social Security disability or Railroad Retirement disability benefits is eligible to claim IPERS benefits regardless of age. Disability benefits are not reduced for early retirement. If a member dies before retirement, the member's beneficiary will receive a lifetime annuity or a lump -sum payment equal to the present actuarial value of the member's accrued benefit or calculated with a set formula, whichever is greater. When a member dies after retirement, death benefits depend on the benefit option the member selected at retirement. Waterloo Fiber Notes to Basic Financial Statements NOTE 6 - PENSION PLAN (CONTINUED) D. Contributions Contribution rates are established by IPERS following the annual actuarial valuation, which applies IPERS' Contribution Rate Funding Policy and Actuarial Amortization Method. Statute limits the amount rates can increase or decrease each year to 1 percentage point. IPERS Contribution Rate Funding Policy requires that the actuarial contribution rate be determined using the "entry age normal" actuarial cost method and the actuarial assumptions and methods approved by the IPERS Investment Board. The actuarial contribution rate covers normal cost plus the unfunded actuarial liability payment based on a 30-year amortization period. The payment to amortize the unfunded actuarial liability is determined as a level percentage of payroll, based on the Actuarial Amortization Method adopted by the Investment Board. In fiscal year 2024, pursuant to the required rate, regular members contributed 6.29% of covered payroll and the Utility contributed 9.44% of covered payroll for a total of 15.73%. The Utility's contributions to IPERS for the year ended December 31, 2024, totaled $63,890. E. Net Pension Liabilities, Pension Expense, Deferred Outflows of Resources, and Deferred Inflows of Resources Related to Pensions At December 31, 2024, the Utility reported a liability of $18,268, for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2024, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Utility's proportion of the net pension liability was based on the Utility's share of contribution to IPERS relative to the contributions of all IPERS participating employers. At June 30, 2024, the Utility's proportion was 0.000495%, which was an increase of 0.000495% from its proportion measured as of June 30, 2023. For the year ended December 31, 2024, the Utility recognized pension expense of $699. As of December 31, 2024, the Utility reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Net difference between projected and actual earnings Total Deferred Deferred 1,455 $ 12 228 15, 898 63,890 $ 81,471 $ 12 Waterloo Fiber Notes to Basic Financial Statements NOTE 6 - PENSION PLAN (CONTINUED) E. Net Pension Liabilities, Pension Expense, Deferred Out, of Resources, and Deferred Inflows of Resources Related to Pensions (Continued) The $63,890 reported as deferred outflows of resources related to pensions resulting from the Utility contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending December 31, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as shown below: Year Ending December 31, Amount 2026 $ 1,166 2027 8,017 2028 3,752 2029 2,968 2030 1,666 Total There were no non -employer contributing entities to IPERS. F. Actuarial Assumptions The total pension liability in the June 30, 2023, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Rate of inflation (effective June 30, 2017) Rate of salary increase (effective June 30, 2017) Long-term investment rate of return (effective June 30, 2017) Wage Growth (effective June 30, 2017) 2.60% per annum to 16.25% average, including inflation Rates vary by membership group 7.00% compounded annually, net of investment expense, including inflation 3.25% per annum, based on 2.60% inflation and 0.65% real wage inflation The actuarial assumptions used in the June 30, 2023, valuation were based on the results of a quadrennial experience study covering the period of July 1, 2017, through June 30, 2021. Mortality rates used in the 2023 valuation were based on the PubG-2010 mortality tables with future mortality improvements modeled using Scale MP-2021. 22 Waterloo Fiber Notes to Basic Financial Statements NOTE 6 - PENSION PLAN (CONTINUED) F. Actuarial Assumptions (Continued) The long-term expected rate of return on IPERS' investments was determined using a building-block method in which best -estimate ranges of expected future real rates (expected returns, net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the table below. Asset Class Long -Term Expected Real Asset Allocation Rate of Return Domestic equity 21.0 % 3.52 % International equity 13.0 5.18 Global smart beta equity 5.0 4.12 Core plus fixed income 25.5 3.04 Public credit 3.0 4.53 Cash 1'0 1.69 Private equity 17.0 8.89 Private real assets 9.0 4.25 Private credit 5.5 6.62 Total 100.0 % G. Discount Rate The discount rate used to measure the total pension liability was 7.00%. The projection of cash flows used to determine the discount rate assumed employee contributions will be made at the contractually required rate and contributions from the Utility will be made at contractually required rates, actuarially determined. Based on those assumptions, IPERS' fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on IPERS' investments was applied to all periods of projected benefit payments to determine the total pension liability. 23 Waterloo Fiber Notes to Basic Financial Statements NOTE 6 -PENSION PLAN (CONTINUED) H. Sensitivity of the Utility's Proportionate are of the Net Pension Liability to Changes in the Discount Rate The following presents the Utility's proportionate share of the net pension liability calculated using the discount rate of 7.00%, as well. as what the Utility's proportionate share of the net pension liability would be if it were calculated using a discount rate 1% lower (6.00%) or 1% higher (8.00%) than the current rate. 1%Decrease in Current 1%Increase in Proportionate Share of the Discount Rate Discount Rate Discount Rate Net Pension Liability (6.00%) (7.00%) (8.00%) Utility $ 44,829 $ 18,268 $ (3,977) I. IPERS Fiduciary Net Position Detailed information about the pension plan's fiduciary net position is available in the separately issued IPERS financial report which is available on IPERS' website at www.ipers.org. J. Payables to the Pension Plan AU legally required Utility contributions and legally required employee contributions which have been withheld from employee wages were remitted by the Utility to IPERS by December 31, 2024. NOTE 7 -RISK MANAGEMENT The Utility is exposed to various risks of toss related to torts; theft, damage to and destruction of assets; errors and omissions; injuries to employees, and natural disasters. These risks are covered by the purchase of commercial insurance. Settled claims from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. NOTE 8 -SUBSEQUENT EVENTS On December 30, 2025, the Utility issued $60,000,000 of Communications Utility Revenue Capital Loan Notes, Series 2025. 24 REQUIRED SUPPLEMENTARY INFORMATION 25 Waterloo Fiber Schedule of the Utility's Proportionate Share of the Net Pension Liability For the Last Year• Iowa Public Employees' Retirement System Fiscal Year 2024 Utilitys proportion of the net pension liability (asset) 0,000495% Utilitys proportionate share of the net pension liability (asset) $ 18,268 Utilitys covered payroll 676,807 Proportionate share of the net pension liability (asset) as a percentage of covered payroll 2,70% Plan fiduciary net position as a percentage of the total pension liability (asset) 92.30% Note: GASB Statement No. 68 requires ten years of information to presented in this table. However, until a full ten year trend is complied, the City will present information for those years for which information is available. ' In accordance with GA58 Statement No. 68, the amounts presented for each fiscal year were determined as of June 30, of the current fiscal year. See notes to required supplementary information. 26 Waterloo Fiber Schedule of Utility Contributions Last Fiscal Years Iowa Public Employees' Retirement System Statutorily required contribution Contributions in relation to the Statutorily required contribution Contribution deficiency (excess) Utilties' covered payroll Contributions as a percentage of covered employee payroll Fiscal Year 2024 $ 63,890 (63,890) $ 6762801 9.44% 27 (THIS PAGE LEFT BLANK INTENTIONALLY) FI7 d Ir s SUPPLEMENTARY INFORMATION 29 Waterloo Fiber Combining Schedule of Net Position - Proprietary Funds December 31, 2024 Assets Current assets Cash and cash equivalents Accounts receivable Inventory Prepaid items Total current assets Noncurrent assets Capital assets, not being depreciated Capital assets, net of accumulated depreciation and amortization Net capital assets Total assets Deferred Outflows of Resources Deferred outflows of resources related to pensions Total assets and deferred outflows of resources Liabilities Current liabilities Accounts payable Interest payable Salaries payable Compensated absences Lease payable Due to primary government Total current liabilities Noncurrent liabilities Lease payable Notes from direct borrowing payable Net pension liability Total noncurrent liabilities Total liabilities Deferred Inflows of Resources Deferred inflows of resources related to pensions Net Position Net investment in capital assets Unrestricted Total net position Total liabilities, deferred inflows of resources, and net position Business -Type Activities Enterprise Funds General Fund Capital (7101 Proiects (711) Total $ 420,164 $ - $ 420,164 13 13 22%498 2203498 %428 - 91428 42%605 220p498 650,103 20,405,870 20,405,870 535,396 98,319 633,715 535,396 20,504,189 21,03%585 965,001 20J24,687 21,68%688 81,471 - 81,471 $ 1,046,472 $ 20,724,687 $ 21,771,159 12,941 - 12,941 109,501 - 10%501 7,088 - 7,088 105,251 - 105,251 20,626,368 201626,368 286,855 20,626)368 20,913,223 429,727 - 429,727 2,650,000 - 2,650,000 18,268 - 18,268 3,0973995 - 3,097,995 3,384,850 20,6263368 241011,218 418 98,319 98,737 (2,338,808) - (2,338,808) (2,338,390) 98,319 (2,240,071) $ 1,046,472 $ 20,724,687 $ 21,771,159 30 Waterloo Fiber Combining Schedule of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Year Ended December 31, 2024 Operating Revenues Charges for services Operating Expenses Personnel services Supplies Professional services Repairs and maintenance Advertising Depreciation and amortization Miscellaneous Total operating expenses Operating income (loss) Nonoperating Revenues (Expenses) Investment income Gain (loss) on disposal of capital assets Interest expense Total nonoperating revenues (expenses) Income (loss) before transfers Transfers in i Transfers out Change in net position Net Position Beginning of year End of year Business -Type Activities Enterprise Funds General Fund Capital (710) Projects (711) Total $ 6,309 $ - $ 6,309 905,153 - 905,153 172,958 - 172,958 421,249 - 421,249 36,285 - 36,285 204,024 - 204,024 39,123 - 39,123 59,220 - 5%220 11838,012 - 1,838,012 (1,831,703) - (1,831,703) 29,540 - 29,540 - 20,937 20,937 (16)211) - (16,211) 13,329 20,937 34,266 (1,818,374) 20,937 (11797,437) - 77,382 77,382 (77,382) - (77,382) (1,8951756) 98,319 (1)797,437) (442,634) - (442,634) $ (21338,390) $ 98,319 $ (2,240,071) 31 Waterloo Fiber Combining Schedule of Cash Flows - Proprietary Funds Year Ended December 31, 2024 Cash Flows -Operating Activities Receipts from customers Payments to suppliers for goods and services Payments to employees for services Net cash flows - operating activities Cash Flows -Capital and Related Financing Activities Principal paid on debt Interest paid on debt Note proceeds Acquisition of capital assets Transfers out Transfersin Proceeds from disposal of capital assets Net cash flows - capital and related financing activities Cash Flows -Investing Activities Investment income Net change in cash and cash equivalents Cash and Cash Equivalents January 1, December 31, Reconciliation of Operating Income (Loss) to Net Cash Flows -Operating Activities Operating income (loss) Adjustments to reconcile operating income (toss) to net cash flows - operating activities Depreciation and amortization Accounts receivable Prepaid items Accounts payable Salaries payable Pension liability Compensated absences payable Total adjustments Net cash flows -operating activities Noncash Items Acquisition of capital assets and inventory from primary government Amount due to [he primary government Acquisition of lease capital assets Lease payable issued Business -Type Activities -Enterprise Funds General Fund Capital (710) Projects (711) Total 5 6,296 $ - $ 61296 (17154)074) - (1,1543074) (9923897) (992,897) (21140,675) (2,140675) (39,541) - (39,541) (31270) - (3)270) 2,1002000 - 2,1001000 - (98,319) (98,319) (77,382) - (77)382) - 77,382 77,382 - 20,937 20,937 1,979,807 29,540 (131,328) 1,979,807 29,540 (131,328) 551,492 551,492 $ 4201164 $ $ 420,164 39,123 - 39,123 (13) (13) (9,428) - (%428) (250)910) - (2502910) (31,641) - (31,641) (63,191) - (63,191) 7,088 - 7,088 (308,972) - _ (308)972) 20,626,369 $ 20,626,369 - 20,626,369 20,626,369 529,062 - 5293062 529,062 - 529,062 �l H C berganKDV n Report on Internal Control over Financial Reporting I I and on Compliance and Other Matters Based on an Audit of I I Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor's Report r� Board of Trustees Waterloo Fiber Waterloo, Iowa (� We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards), n the financial statements of Waterloo Fiber, a component unit of the City of Waterloo, Iowa as of and for the year ended December 31, 2024, and the related notes to basic financial statements, which collectively comprise the Utility's basic financial statements, and have issued our report thereon -, dated March 18, 2026. Report on Internal Control over Financial Reporting In planning and performing our audit of the basic financial statements, we considered the Utility's internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the basic financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Utility's internal control. Accordingly, we do not express an opinion on the effectiveness of the Utility'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 Utility's basic 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 Uto 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 and therefore, material weaknesses or significant 1 deficiencies may exist that were not identified. We did identify a deficiency in internal control, described in the accompanying Schedule of Findings and Responses as Audit Finding 202+001 to be a I I material weakness. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the Utility's basic financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the basic financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Comments involving statutory and other legal matters about the Utility's operations for the year ended December 31, 2024, are based exclusively on knowledge obtained from procedures performed during out audit of the basic financial statements of the Utility. Since our audit was based on tests and samples, not all transactions that might have had an impact on the comments were necessarily audited. The comments involving statutory and other legal matters are not intended to constitute legalinterpretations of those statutes. Utility's Response to Finding Government Auditing Standards requires the auditor to perform limited procedures on the Utility's response to the finding identified in our audit and described in the accompanying Schedule of Findings and Responses. The Utility's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response. 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 result of that testing, and not to provide an opinion on the effectiveness of the Utility'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 Utility's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. I St. Cloud, Minnesota March 18, 2026 34 Waterloo Fiber Schedule of Findings and Responses SECTION I - BASIC FINANCIAL STATEMENT FINDINGS Instances of Noncompliance There were no reported instances of noncompliance. Current Internal Control Deficiency 2024-001 Lack of Segregation of Accounting Duties Criteria: Internal control that supports the Utility's ability to initiate, record, process and report financial data consistent with the assertions of management in the financial statements requires adequate segregation of accounting duties. Condition: During the year ended December 31, 2024, the Utility had a tack of segregation of accounting duties due to a limited number of office employees. The lack of segregation of accounting duties could adversely affect Utility's ability to initiate, record, process and report financial data consistent with the assertions of management in the basic financial statements. Adequate segregation of accounting duties is in place when the following four areas of a transaction have been separated: authorization, custody, recording, and reconciliation. Management and the Board of Trustees are aware of this condition and have taken certain steps to compensate for the lack of segregation. However, due to the number of staff needed to properly segregate all of the accounting duties, the costs of obtaining desirable segregation of accounting duties can often exceed benefits which could be derived. Management and the Board of Trustees must remain aware of this situation and should continually monitor the accounting system, including changes that occur. Context: This finding impacts the internal control for all significant accounting functions. Cause: There are a limited number of office employees. Effect or Potential Effect: The tack of adequate segregation of accounting duties could adversely affect the Utility's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Recommendation: Continue to review the accounting system, including changes that may occur. Implement segregation whenever practical. Views of Responsible Officials: The Utility will add internal controls where the benefit exceeds the cost. 35 Waterloo Fiber Schedule of Findings and Responses SECTION II: FINDINGS RELATED TO STATUTORY REPORTING: 24-II-A -Certified Budget Disbursements for the year ended December 31, 2024 did not exceed budgeted amounts. 24-11-B - Questionable Disbursements We noted no material expenditures which did not appear to meet the requirements of public purpose as defined in an Attorney General's opinion dated April 25, 1979. 24-II-C - Travel Expense No disbursements of the Waterloo Fiber money for travel expenses of spouses of Utility officials or employees were noted. 24-II-D - Business Transactions There were no business transactions between the Utility and Utility officials or employees that exceeded $6,000. 24-II-E - Restricted Donor Activity No transactions were noted between the Utility, Utility officials or Utility employees and restricted donors in compliance with Chapter 68B of the Code of Iowa (Government Ethics and Lobbying Act). 24-II-F - Bond Coverage Surety bond coverage of the Utility officials and employees is in accordance with statutory provisions and was reviewed and updated during the year. We recommend that the amount of coverage continue to be reviewed annually to ensure that the coverage is adequate for current operations. 24-II-G - Board Minutes No transactions were found that we believe should have been approved in the Board minutes but were not. 244I-H - Deposits and Investments We noted no instances of noncompliance with the deposit and investment provisions of Chapter 12B and 12C of the Code of Iowa and the Utility's investment policy. 24-II-I - Revenue Bonds The Utility has complied with the provisions of the revenue bond indentures. 24-11-J - Telecommunication Services No instances of non-compliance with Chapter 388.10 of the Code of Iowa were noted. 36