The Town of Summerdale Summerdale, Alabama

Transcription

1 The Town of Summerdale Summerdale, Alabama Annual Financial Report For the Fiscal Year Ended September 30, 2013 Vance CPA LLC Certified Public Accountant 832 Snow St., Suite B Oxford, Alabama Tel. (888) Fax (866)

2 ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED 30, 2010 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor s Report 1 Management s Discussion and Analysis 3 Basic Financial Statements: Government Wide Financial Statements: Fund Financial Statements: Statement of Net Position 7 Statement of Activities 8 Governmental Fund Financial Statements: Balance Sheet 9 Reconciliation of the Governmental Fund Balance to Net Position of Governmental Activities 10 Statement of Revenues, Expenditures, and Changes in Fund Balances 11 Reconciliation of the Statement of Revenues, Expenditure, and changes in Fund Balances of Government Funds 12 Budgetary comparison General Fund 13 Proprietary Fund Financial Statements: Statement of Net Position 14 Statement of Revenues, Expenditures and Changes in Fund Net Position 15 Statement of Cash Flows 16 Reconciliation of Operating Income to Net Cash provided by Operating Activities 17 Notes to the Financial Statements 18 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress 32 OTHER SUPPLEMENTARY INFORMATION Combining Balance Sheet Non-major Governmental Funds 33 Combining Statement of Revenues, Expenditures and Fund Balances Non major Governmental Funds 34

3 Vance CPA LLC Certified Public Account 832 Snow Street Suite B Oxford, Alabama Tel. (888) Fax (866) INDEPENDENT AUDITORS REPORT To the Honorable Mayor and Members of the Town Council Town of Summerdale, Alabama We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the Town of Summerdale, Alabama, as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the Town s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

4 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Summerdale, Alabama, as of September 30, 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and the schedule of funding progress on pages 3-6 and 32 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Stnadards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town of Summerdale, Alabama s basic financial statements. The combining and individual nonmajor fund financial statements are presented for the purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. January 24, 2014 Oxford, Alabama Vance CPA LLC

5 MANAGEMENT DISCUSSION AND ANALYSIS (MD&A)

6 MANAGEMENT S DISCUSSION AND ANALYSIS The Town s basic financial statements are comprised of three components: 1) Government-wide Financial Statements 2) Fund Financial Statements 3) Notes to the Basic Financial Statements This Analysis also contains other supplementary information in addition to the basic financial statements. Government-wide Financial Statements The Government-wide financial statements provide a broad overview of the Town of Summerdale finances. The presentation is in a manner similar to a private-sector business. The Statement of Net Position provides information on all of the Town s assets and liabilities. The difference between the two is reported as net position. Over time, changes (increases or decreases) in net position may provide a useful indicator of the Town s overall financial condition. Fund Financial Statements A fund is a group of related accounts used to maintain control over resources that have been segregated for specific objectives or activities. The Town of Summerdale uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Fund Financial Statements report the City s operations in more detail than the Government-wide Financial Statements. All of the funds of the City are governmental or proprietary. Governmental Funds Governmental Funds provide information, which may be useful in evaluating and determining a government s near-term financing requirements. The financial statements focus on near-term inflows and outflows of spendable resources and on fiscal year end available balances of spendable resources. Readers of the financial statements may better understand the long-term impact of the government s near-term financial decisions. The Town of Summerdale s governmental funds are: General Fund, Debt Service, Library fund, the SAIL fund, and the Special Revenue funds. Proprietary Funds The Town of Summerdale maintains two enterprise funds: Government Utility Service Corporation and the Building Authority Fund. Enterprise funds report the same function presented in business-type activities in the Government-wide financial statements. Notes to the Basic Financial Statements The notes provide additional information and are essential to the full understanding of the data provided in the Government-wide and fund Financial Statements. 3

7 Government-wide Financial Analysis As previously noted, over time, net position may serve as a useful indicator of a government s financial condition. At the close of Fiscal Year 2013, the Town of Summerdale s assets exceeded its liability by $6,394,447. Table 1 below represents the Town s Condensed Statement of Net Position as of September 30, 2013 and September 30, 2012, and is derived from the Government-wide Statement of Net Position. Town of Summerdale s Condensed Statement of Net Position Governmental Activities Business-type Activities Total Primary Government Current assets $ 1,858,640 $ 2,205,310 $ 529,717 $ 276,987 $ 2,388,357 $ 2,482,297 Property and equipment 3,726,190 3,573,197 4,591,329 3,820,713 8,317,519 7,393,910 Other assets 188,754 57, ,983 83, , ,921 Total Assets 5,773,584 5,835,815 5,224,029 4,181,313 10,997,613 10,017,128 Accounts & other payables 409, , , ,914 1,055, ,137 Long-term liabilities 861,224 1,451,544 2,140,000 1,845,000 3,001,224 3,296,544 Total liabilities 1,270,419 1,668,767 2,786,177 1,953,914 4,056,596 3,622,681 Net position - Investment Net investment in ds 2,619,516 2,027,091 2,386,329 1,975,713 5,005,845 4,002,804 Net Position - Restricted 445, ,390 28, , , ,454 Net Position - Unrestricted 1,437,668 1,536,567 23,107 99,622 1,460,775 1,636,189 Total net position $ 4,503,165 $ 4,167,048 $ 2,437,852 $ 2,227,399 $ 6,941,017 $ 6,394,447 At the end of Fiscal Year 2013, the Town of Summerdale is able to report positive balances in both categories of net position. For more detailed information see the Statement of Net Position on page 7. 4

8 Table 2 Condensed Statement of Activities Governmental Activities Business-type Activities Total Primary Government Primary Government: Governmental activities: General $ 62,486 $ (85,442) $ $ $ 62,486 $ (85,442) Public Safety (652,595) (772,820) (652,595) (772,820) Public Works 95,467 (381,155) 95,467 (381,155) Community Development (56,247) (56,247) Parks and Recreation (221,552) (214,736) (221,552) (214,736) Total Governmental Activities (716,194) (1,510,400) (716,194) (1,510,400) Business-type-Activities: Governmental Utilities Services Corporation (40,583) (312,582) (40,583) (312,582) Public Building Authority (62,633) (172,574) (62,633) (172,574) Total Business-Type Activities (103,216) (485,156) (103,216) (485,156) General Revenues: Taxes 1,225,973 1,392,608 1,225,973 1,392,608 Investment Income 6,957 6,601 6,957 6,601 Intergovernmental 65,455 11,771 65,455 11,771 Other 16,843 38,006 16,843 38,006 Transfers 45,211 (274,703) (45,211) 274,703 Total general revenues, Special items and transfers 1,360,439 1,174,283 (45,211) 274,703 1,315,228 1,448,986 Change in Net Position 644,245 (336,117) (148,427) (210,453) 495,818 (546,570) Net Position - Beginning 3,858,920 4,503,165 2,586,279 2,437,852 6,445,199 6,941,017 Total Net Position Ending $ 4,503,165 $ 4,167,048 $ 2,437,852 $ 2,227,399 $ 6,941,017 $ 6,394,447 Overall Analysis Financial highlight for the Town of Summerdale as a whole during the fiscal year ended September 30, 2013 include the following: The assets of the Town exceeded its liabilities (net position) at the close of the fiscal year by $4,167,045 for Governmental Activities and by $2,227,399 for Business-type Activities. (See Table 1-Condensed Statement of Net Position) Total primary government net position decreased during the year by $546,570. 5

9 Financial Analysis of the Government s Funds The Town of Summerdale uses fund accounting to ensure and demonstrate compliance with finance related requirements. Funds that experienced significant changes in Fund Balance during the year are as follows: Governmental Funds At the close of the fiscal year, the Town s governmental Funds showed a combined ending fund balance of $2,030,215 with $1,259,599 reported as unreserved fund balance. General Fund The fund balance at September 30, 2013 is $1,396,995, an increase of $280,609 from the fund balance at September 30, Proprietary Funds As of the close of Fiscal year the Town s Proprietary Funds (GUSC and PBA) reported total net position of $2,227,399, a decrease of $210,453 from the total net position at September 30, Budget Variances in the General Fund The Town Council approved the General Fund budget October, The actual expenditures, before financing uses, of the General Fund were $385,259 below the final budgeted amounts. The overage was primarily due to departments operating expenditures being under budget. Actual revenues were $40,517 below the final budgeted amounts, primarily due to miscellaneous revenues not meeting budget amount. Capital Asset Activity At September 30, 2013, the Town of Summerdale reported capital assets, net of depreciation of $3,573,197 for the governmental activities and capital assets, net of depreciation of $3,820,713 for the business-type activities. Refer to Note 3 to the financial statement for additional information on capital assets. Long-Term Debt and Long-Term Accrued Compensated Absences Activity As of the year-end, the Town had $3,391,106 in total debt outstanding compared to $3,311,674 last year. The Town had $28,168 in long term accrued compensated absences outstanding at September 30, 2013, compared to $34,918 last year. Refer to Notes 4 and 5 to the financial statement for additional information on long-term debt activity. Future Events Impacting the City s Financial Condition Town of Summerdale faces a number of factors that will impact the City s financial and fiscal condition net year and beyond: (1) The Town will pursue annexation of properties along the new County Road 83 extension and along Highway 59. (2) The Town is in the process of preparing a new well for the utilities. 6

10 BASIC FINANCIAL STATEMENTS

11 STATEMENT OF NET POSITION SEPTEMBER 30, 2013 Governmental Business-type Activities Activities Total ASSETS Cash and Cash Equivalents... $ 1,334,024 $ 116,776 $ 1,450,800 Inventories 29,866 29,866 Receivables, net 169,256 45, ,108 Other assets 32,013 32,013 Internal balances 37,705 (37,705) Restricted assets: Cash and cash equivalents 602, , ,510 Capital assets: Non-depreciable 837,059 81, ,116 Depreciable, net 2,736,138 3,739,656 6,475,794 Bond issuance expense, net 57,308 83, ,921 Total Assets 5,835,815 4,181,313 10,017,128 LIABILITIES Accounts payable and other accrued expenses 94, , ,407 Long-term liabilities Accrued compensated absences 28,168 28,168 Due within one year 94,562 94,562 Due in More Than one Year 1,451,544 1,845,000 3,296,544 Total Liabilities 1,668,767 1,953,914 3,622,681 NET POSITION Net investment in capital assets 2,027,091 1,975,713 4,002,804 Restricted for: Debt Service 83,565 35, ,089 Roads and Bridges Capital Improvement 19, , ,716 Public Safety 499, ,705 Unrestricted 1,536,567 99,622 1,636,189 Total Net Position 4,167,048 2,227,399 6,394,447 Total Liabilities and Net Position $ 5,835,815 $ 4,181,313 $ 10,017,128 See accompanying notes to the basic financial statements 7

12 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2013 Program Revenues Operating Capital Net (Expense) Charges for Grants and Grants and and Changes in Activities Expenses Services Contributions Contributions Fund Balance Governmental: General $ 1,431,805 $ 1,308,556 $ 17,442 $ 20,365 $ (85,442) Public Safety 845,822 23,763 49,239 (772,820) Public Works 438,164 57,009 (381,155) Community Development 56,247 (56,247) Parks and Recreation 251,798 16,956 20,106 (214,736) Total governmental activities 3,023,836 1,406,284 86,787 20,365 (1,510,400) Business-type activities: Governmental Utilities Corporation 543, ,892 (312,582) Public Building Authority 264,961 92,387 (172,574) Total business-type activities 808, ,279 (485,156) Total primary government $ 3,832,271 $ 1,729,563 $ 86,787 $ 20,365 $ (1,995,556) Primary Government Governmental Business-type Activities Activities Total Net (expense)/revenue $ (1,510,400) $ (485,156) $ (1,995,556) General revenues: Taxes: Property 194, ,248 Sales 896, ,826 Fuel 77,953 77,953 Fire 145, ,462 Other 78,119 78,119 Investment Income 6,601 6,601 Intergovernmental 11,771 11,771 Other 38,006 38,006 Transfers (274,703) 274,703 Total general revenues, special items and transfers 1,174, ,703 1,448,986 Change in net position (336,117) (210,453) (546,570) Net position beginning of year 4,503,165 2,437,852 6,941,017 Net position end of year $ 4,167,048 $ 2,227,399 $ 6,394,447 See accompanying notes to the basic financial statements 8

13 BALANCE SHEET FOR THE YEAR ENDED SEPTEMBER 30, 2013 Major Funds Debt Fire Nonmajor General Service Department Governmental Fund Fund Fund Funds Total ASSETS Cash... $ 1,226,858 $ $ 105,225 $ 1,941 $ 1,334,024 Cash-restricted... 74,102 83, , ,446 Due from other funds 39,995 39,995 Inventory... 29,866 29,866 Local tax receivables, net 83,796 83,796 Other receivables, net 85,460 85,460 Prepaid insurance and other assets 32,013 32,013 Total Assets... 1,486, , ,004 1,941 2,207,600 LIABILITIES Liabilities Accounts payable... 73,326 73,326 Other payables... 16,309 16,309 Deferred revenue... 85,460 85,460 Due to other funds... 2,290 2,290 Total Liabilities... 89,635 85,460 2, ,385 Fund Balance Unspendable... 32,013 32,013 Restricted for: Roads and Bridges Capital Improvement 19,176 19,176 Public Safety... 54, , ,705 Debt Service... 83,565 83,565 Assigned for: Parks and Recreation Public Safety... 29, , ,068 Unassigned... 1,261,037 (1,438) 1,259,599 Total Fund Balance. 1,396,995 83, ,004 (349) 2,030,215 Total Liabilities & Fund Balance $ 1,486,630 $ 169,025 $ 550,004 $ 1,941 $ 2,207,600 See accompanying notes to the basic financial statements 9

14 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2013 Fund balances total governmental fund $ 2,030,215 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore are not reported in the funds. Governmental capital assets 6,304,540 Less accumulated depreciation (2,731,343) Deferred revenues reported in the governmental funds are recognized as revenues for the governmental activities. 85,460 Various costs and other related expenses are treated as expenditures in the governmental funds. Bond issue costs 59,800 Less accumulated amortization (2,492) Long-term liabilities, including bonds payable are not due and payable in the current period and therefore are not reported in the governmental funds. Governmental bonds payable (1,275,000) Governmental loans payable (271,106) Compensated absences not expected to be paid with current resources as determined under Government Accounting Statement #14 are not reported in the fund financial statements. (28,168) Accrued interest in the governmental activities is not payable from current resources and, therefore, is not reported in the governmental funds. (4,858) Net position of governmental activities $ 4,167,048 See accompanying notes to the basic financial statements 10

15 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED SEPTEMBER 30, 2013 Major Funds Debt Fire Nonmajor General Service Department Governmental Fund Fund Fund Funds Total REVENUES Taxes... $ 1,129,785 $ $ 145,462 $ 4,541 $ 1,279,788 Licenses and permits 210, ,561 Intergovernmental. 76,200 29, ,706 Fees and charges... 82,422 3,713 86,135 Fines... 1,088,029 1,088,029 Other , , ,602 Interest... 5,074 1, ,601 Total Revenues... 2,768,397 1, ,376 46,449 2,962,422 EXPENDITURES General government 1,082,132 63,050 18,165 1,163,347 Public safety ,585 23, ,354 Public Works ,011 6, ,541 Community Development 56,247 56,247 Parks and recreation 181,644 37, ,770 Debt service payments Principal... 45, , ,128 Interest... 13, , ,576 Capital outlay ,251 17,968 19, ,544 Total Expenditures. 2,501,648 1,035,976 41,737 81,146 3,660,507 Excess (Deficiency) of revenues over Expenditures 266,749 (1,034,776) 104,639 (34,697) (698,085) OTHER FINANCING SOURCES (USES) Debt Proceeds... 34,560 1,320,000 1,354,560 Operating transfers in 112,637 20, ,337 Operating transfers out (20,700) (387,340) (408,040) Total Other Financing Sources And (Uses)... 13,860 1,045,297 20,700 1,079,857 Net Change in Fund Balance 280,609 10, ,639 (13,997) 381,772 Fund Balances - Beginning 1,116,386 73, ,365 13,648 1,648,443 Fund Balances - Ending $ 1,396,995 $ 83,565 $ 550,004 $ (349) $ 2,030,215 See accompanying notes to the basic financial statements 11

16 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2013 Net change in fund balances total governmental funds $ 381,772 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is depreciated over their estimated useful lives. Expenditures for capital assets 155,544 Less current year depreciation (308,537) Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of long term liabilities is expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Proceeds from long term debt (1,354,560) Principal payments on long term debt 915,128 Some expenses reported in the statement of activities does not require the use of current financial resources and is therefore not reported as expenditures in governmental funds. Amortization of bond costs (2,492) Decrease in refunded bond costs (128,954) Decrease in accrued long term compensated absences 6,750 Increase in interest accrued on long term debt (768) Change in net position of governmental activities $ (336,117) See accompanying notes to the basic financial statements 12

17 BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE YEAR ENDED SEPTEMBER 30, 2013 Budgeted Amounts Actual Original Final Amounts REVENUES Taxes $ 837,437 $1,060,500 $1,129,785 Licenses and permits 180, , ,927 Intergovernmental 70,999 81,349 76,200 Charges and fees for services 80,720 83,020 82,422 Fines and court costs 1,088,029 1,052,536 1,088,029 Miscellaneous 319, , ,034 Total Revenues 2,576,785 2,808,914 2,768,397 EXPENDITURES General government 1,385,849 1,544,513 1,082,132 Public Safety 540, , ,585 Public Works 287, , ,011 Community Development 56,009 60,925 56,247 Parks and recreation 193, , ,644 Capital outlay 78, , ,251 Debt service: Principal 45,128 45,128 45,128 Interest and fiscal agent fees 13,650 13,650 13,650 Total Expenditures 2,600,182 2,886,907 2,501,648 EXCESS (DEFICIENCY) OF REVENUE OVER EXPENDITURES (23,397) (77,993) 266,749 OTHER FINANCING SOURCES (USES) Debt proceeds 34,560 34,560 Operating transfers out (50,150) (20,700) (20,700) Total Other Financing Sources and Uses (50,150) 13,860 13,860 Net change in Fund Balances $ (73,547) $ (64,133) 280,609 Fund Balances, October 1 1,116,386 Fund Balances, September 30 $1,396,995 See accompanying notes to the basic financial statements 13

18 STATEMENT OF NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2013 Major Funds Public Governmental Building Utilities Authority Services Fund Corporation Totals ASSETS Current assets Cash and cash equivalents $ 7,221 $ 109,555 $ 116,776 Accounts receivable Utilities, net... 45,852 45,852 Total Current Assets 7, , ,628 Non-Current Assets: Restricted cash... 35, , ,064 Capital Assets: Land and non-depreciable assets 81,057 81,057 Buildings... 1,751,347 1,751,347 Equipment , ,420 Water system... 2,915,992 2,915,992 Less: accumulated depreciation (118,215) (995,888) (1,114,103) Unamortized bond cost - net 83,613 83,613 Total Non-Current Assets 1,752,269 2,304,121 4,056,390 Total Assets... $ 1,759,490 $2,459,528 $ 4,219,018 LIABILITIES Current Liabilities: Accounts payable.. $ $ 30,123 $ 30,123 Due to general fund 37,705 37,705 Customer deposits. 50,377 50,377 Accrued bond interest 28,414 28,414 Bond payable... Total Current Liabilities 28, , ,619 Non-Current Liabilities: Bond payable... 1,845,000 1,845,000 Total Non-Current Liabilities 1,845,000 1,845,000 Total Liabilities... 1,873, ,205 1,991,619 NET POSITION Unspendable... 83,613 83,613 Net investment in capital assets (211,868) 2,187,581 1,975,713 Restricted for: Debt service... 35,524 35,524 Capital improvements 116, ,540 Unrestricted... (21,193) 37,202 16,009 Total Net Position... (113,924) 2,341,323 2,227,399 Total Liabilities and Net Position $ 1,759,490 $ 2,459,528 $ 4,219,018 See accompanying notes to the basic financial statements 14

19 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2013 Major Funds Public Governmental Building Utilities Authority Services Fund Corporation Totals Operating Revenues Water charges... $ $ 206,145 $ 206,145 Late charges and penalties 8,290 8,290 Tap and perm fees. 13,950 13,950 Lease income... 92,350 92,350 Miscellaneous... 2,092 2,092 Total Operating Revenues 92, , ,827 Operating Expenses Purchased water... 64,250 64,250 Salaries... 37,771 37,771 Payroll taxes... 3,016 3,016 Fringe benefits... 9,974 9,974 Supplies... 6,745 6,745 Insurance... 4,939 4,939 Utilities... 13,579 13,579 Telephone... 4,732 4,732 Purification Well expense , ,062 Repairs and maintenances 23,739 23,739 Depreciation and amortization 40,840 78, ,568 Miscellaneous... 3,062 3,062 Total Operating Expenses 40, , ,314 Operating Income (Loss) 51,510 (312,997) (261,487) Non-Operating Revenues (Expenses) Loss in disposal of capital assets (133,839) (133,839) Interest income Interest expense... (90,282) (90,282) Total Non-Operating Revenue (Expense) (224,084) 415 (223,669) Income (Loss) before Contributions and Transfers... (172,574) (312,582) (485,156) Operating transfers in 40, , ,340 Operating transfers out (112,637) (112,637) Change in Net Position (132,098) (78,355) (210,453) Net Position - Beginning 18,174 2,419,678 2,437,852 Net Position Ending $ (113,924) $ 2,341,323 $ 2,227,399 See accompanying notes to the basic financial statements 15

20 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2013 Major Funds Public Governmental Building Utilities Authority Services Fund Corporation Totals Cash Flows From Operating Activities Cash received from customers $ $ 227,895 $ 227,895 Cash received from lease 92,350 92,350 Cash paid to employees (50,761) (50,761) Cash paid to suppliers (319,925) (319,925) Net cash provided (used) by operating activities 92,350 (142,791) (50,441) Cash Flows From Noncapital Financing Activities Transfers (to) from other funds 40, , ,703 Cash Flows From Capital and Related Financing Activities Sale (Acquisition of property) (83,349) (6,900) (90,249) Principal reduction payments on debt (295,000) (295,000) Interest expenses... (90,282) (90,282) Net cash provided (used) by capital and related financing activities (468,631) (6,900) (475,531) Cash Flows From Investing Activities Interest payments received Net increase (decrease) in cash and cash equivalents (335,768) 84,951 (250,817) Cash balance beginning of year 378, , ,657 Cash balance end of year $ 42,745 $ 226,095 $ 268,840 Classified as: Restricted... 35, , ,064 Unrestricted... 7, , , $ 42,745 $ 226,095 $ 268,840 See accompanying notes to the basic financial statements 16

21 STATEMENT OF CASH FLOWS (Continued) PROPRIETARY FUNDS RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2013 Major Funds Public Governmental Building Utilities Authority Services Fund Corporation Totals Operating Income (loss) $ 51,510 $ (312,997) $ (261,487) Adjustments to reconcile operating income to Net cash provided by operating activities: Depreciation... 40,840 78, ,568 Non-cash asset abandonment 78,779 78,779 (Increase) decrease in accounts receivable (2,582) (2,582) Increase (decrease) in accounts payable 10,476 10,476 Increase (decrease) customer deposits Increase (decrease) in due to other funds 4,495 4,495 Total adjustments... 40, , ,046 Net cash provided (used) by operating activities $ 92,350 $ (142,791) $ (50,441) See accompanying notes to the basic financial statements 17

22 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. GENERAL STATEMENT The Town of Summerdale, Alabama, (the Town ), was incorporated under the applicable laws of the State of Alabama. The Town operates under a Mayor-Council form of government and provides the following services to its citizens: Police, Fire, Street maintenance, Culture-Recreation, Public Improvements, Planning and Zoning, Building Inspection and other general administrative services. The accounting and reporting policies of the Town relating to the funds included in the accompanying basic financial statements conform to accounting principles generally accepted in the United States of America applicable to state and local governments. Generally Accepted Accounting Principles (GAAP) for local governments includes those principles prescribed by the Governmental Accounting Standards Board (GASB), the American Institute of Certified Public Accountants in the publication entitled Audits of State and Local Governmental Units and by the financial Accounting Standards Board (when applicable). As allowed in Section P80 of GASB s Codification of Governmental Accounting and financial Reporting Standards, the Town has elected not to apply Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins of the Committee of Accounting Procedure issued after November 30, The more significant accounting policies of the Town are described below. B. FINANCIAL REPORTING ENTITY The Town s basic financial statements include the accounts of all Town operations. The criteria for including organizations as component units within the Town s reporting entity, as set forth in Section 2100 of GASB s Codification of Governmental Accounting and Financial Reporting Standards, include whether: the organization is legally separate (can sue and be sued in their own name) the Town holds the corporate powers of the organization the Town appoints a voting majority of the organization s board the Town is able to impose its will on the organization the organization has the potential to impose a financial benefit/burden on the Town there is fiscal dependency by the organization on the Town The Town has three component units, the Governmental Utilities Services Corporation, the Public Building Authority, and the Library Board of the Town of Summerdale as defined under GASB Statement 14, for which it is financially accountable and/or imposes its will. The component units are presented as blended entities. C. BASIS OF PRESENTATION GOVERNMENT-WIDE AND FUND LEVEL The government-wide financial statements (the statement of net position and the statement of activities) report information on all of the activities of the Town. The effect of interfund activity, within the governmental and business-type activities columns, has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. 18

23 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The statement of activities demonstrates the degree to which the direct expenses of a given program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific program. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given program and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund level The Town segregates transactions related to certain functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Separate statements are presented for governmental and proprietary activities. These statements present each major fund as a separate column on the fund financial statements; all non-major funds are aggregated and presented in a single column. Since governmental fund level statements are presented on a different basis of accounting and measurement focus than governmental activities in the government wide presentation, a summary is presented to explain adjustments necessary to reconcile fund level statements to the government-wide presentation. Governmental funds are those funds through which most governmental functions typically are financed. The measurement focus of governmental funds is on the sources, uses and balance of current financial resources. The Town has presented the following governmental funds as major: General Fund The General Fund is the main operating fund of the Town. It is used to account for all financial resources not accounted for in other funds. All general tax revenues and other receipts that are not restricted by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures, fixed charges and capital improvement costs that are not paid through other funds are paid from the General Fund. Debt Service Fund The Debt Service fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs on general long-term debt paid primarily from taxes levied by the Town. The fund balance of the Debt Service fund is reserved to signify the amounts that are restricted exclusively for debt service expenditures. Special Revenue Funds The Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than special assessments, expendable trust or major capital projects) that are legally restricted to expenditures for specific purposes. The Special Revenue Funds of the Town are: the 4 and 7 cent gas tax fund, fire Department Fund, SAIL Fund, and the Library Fund. The only special revenue fund that meets GASB s definition of major governmental fund is the Firefighter Fund, which accounts for the Firefighter Ad Valorem taxes and allowed expenditures. The remaining special revenue funds do not meet the GASB s definition of major funds, and therefore they are presented as non-major funds. Proprietary Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. The accounting objectives are determinations of net income, financial position and cash flow. All assets and liabilities are included on the Statement of Net Position. 19

24 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Enterprise Funds Enterprise Funds are used to account for operations which are financed or operated in a manner similar to private business enterprises where the intent of the governing body is that the costs of providing goods or services to the general public on a continuing basis be financed or recovered through user charges and fees. Operating revenues, shown for proprietary operations, generally result from producing or providing goods and services. Operating expenses include all costs related to providing services or products. All other revenues or expenses not meeting these criteria are reported as non-operating income or expenses. The Town has presented both Enterprise funds as major proprietary funds: The Governmental Utility Services Corporation (GUSC) This fund is used to account for the operations of the Town s Water utilities. Utilities are provided to residents in and around the Town of Summerdale. The fund also accounts for the monthly Sewer billings and collections on behalf of Baldwin County Sewer Systems (BCSS). The Town receives an administrative fee in return for handling the billing and collection process in return. The Public Building Authority (PBA) This fund accounts for financial resources to be used to purchase, improve, maintain, and service the debt of the municipal complex. The Town leases the building from the Public Building Authority. D. MEASUREMENT FOCUS/BASIS OF ACCOUNTING Measurement focus refers to what is being measured. Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurement made, regardless of the measurement focus applied. The government-wide statements and fund financial statements for proprietary funds are reported using the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non-current) are included on the statement of net position and the operating statements present increases (revenues) and decreases (expenses) in net total position. Under the accrual basis of accounting, revenues are recognized when earned, including unbilled sewer services which are accrued. Expenses are recognized at the time the liability is incurred. Governmental fund financial statements are reported using the current financial resources measurement focus and are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual; i.e., when they become both measurable and available. Measurable means the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The Town considers property taxes as available if they are collected within 60 days after year end. A one-year availability period is used for recognition of all other Governmental Fund revenues. Expenditures are recorded when the related fund liability is incurred. However, debt service expenditures, as well as expenditures related to compensated absences are recorded only when payment is due. The revenues susceptible to accrual are property taxes, franchise fees, charges for services, interest income and intergovernmental revenues. Taxes collected and held by the state at year end on behalf of the government are also recognized as revenue. All other governmental fund revenues are recognized when received. 20

25 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) E. BUDGETS AND BUDETARY ACCOUNTING The budget is adopted annually at the beginning of each fiscal year. The Mayor and members of the Town Council are responsible for the adoption and amendments to the budget. The budget is adopted on a basis consistent with GAAP. All appropriations lapse at the end of each fiscal year. Budgets were not adopted for the special revenue funds. F. CASH AND INVESTMENTS For the purpose of the Statement of Net Position, cash and cash equivalents includes all demand deposits, savings accounts, and short term investments with original or remaining maturities of three months or less when purchased. For purposes of the proprietary fund statement of cash flows, cash and cash equivalents include all demand and savings accounts, and short term investments with an original maturity of three months or less. At September 30, 2013 the carrying amount of the Town s deposits were fully insured and collateralized with pledged securities held by the Security for Alabama Funds Enhancement Program (SAFE Program) G. REVENUE RECOGNITION PROPERTY TAXES All ad valorem taxes levied by the state, county and any municipality in Baldwin County are assessed and collected by the Revenue Commissioner of Baldwin county. The Baldwin County property tax calendar requires the Revenue Commissioner to assess and attach taxes as enforceable liens on property as of September 30, and taxes are due October 1 through December 31. Property taxes not paid by January 1 are considered delinquent. Tax collections received by the County Revenue Commissioner are remitted to the Town monthly. In accordance with the implementation of Governmental Accounting Standard (GASB) number 33, revenue is recorded based upon taxes assessed and considered available. Any taxes not considered available are recorded as deferred revenue. H. TAXES RECEIVABLE Taxes receivable consists, primarily, of sales tax, and other locally imposed taxes. All amounts are considered to be fully collectible by management. I. ACCOUNTS RECEIVABLE Allowance for uncollectible accounts receivable in the enterprise funds are not recorded because the amounts are insignificant. The Town uses the direct write-off method for bad debts. The expense is recognized during the period in which a specific account is determined to be uncollectible. The effects of using this method approximate those of the allowance method. The Town considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required. J. DUE FROM OTHER GOVERNMENTS Due from other governments are revenues which are collected by, or shared with, the Town by a State or local intermediary agent, and remitted to the Town following the close of the fiscal year. 21

26 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) K. INTERFUND RECEIVABLES AND PAYABLES Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as internal balances. L. TRANSACTIONS BETWEEN FUNDS Legal authorized transfers are treated as interfund transfers and are included in the results of operations or in equity of both Governmental and Proprietary Funds. M. CAPITAL ASSETS The accounting treatment over capital assets depends on whether the assets are used by governmental funds or proprietary funds and fund level or government wide reporting. In government-wide reporting, all capital assets are reported as capital assets both for governmental-type and business-type activities. Depreciation is provided on all capital assets at the government-wide level. In fund level reporting, capital assets are reported as expenditures by governmental funds, while they remain capital assets in proprietary funds. Depreciation is provided, only, in proprietary funds at the funds level. Capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets are valued at estimated fair value on the date donated. Depreciation is allocated as an expense in the Statement of Activities (government-wide level) and accumulated depreciation is reflected in the Statement of Net Position (government-wide level). Depreciation has been provided over the estimated useful lives using the straight line depreciation rates as follows: Buildings and Improvements 40 years Water and Sewage System years Vehicles 5 years Other Equipment 5-10 years N. COMPENSATED ABSENCES Town employees are entitled to certain compensated absences based on their length of employment. With minor exceptions, compensated absences either vest or accumulate and are accrued when they are earned. O. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Accordingly, actual results could differ from those estimates. 22

27 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) P. NET POSITION AND FUND EQUITY In the government-wide financial statements, equity is classified as net position and displayed in three components: a. Net investment in capital assets Consists of capital assets, including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net position Consists of net position with constraints placed on the use either by (1) external groups such as creditors, grantors contributors, or laws or regulations of other governments or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net position All other net position that do not meet the definition of restricted or net investment in capital assets. In the fund financial statements, governmental funds report fund balance in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in these funds can be spent. These classifications may consist of the following: Nonspendable Fund Balance includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted Fund Balance includes amounts that have constraints placed on the use of the resources that are either (a) externally imposed by creditors, grantors, contributors or laws and regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. Committed Fund Balance includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal resolutions of the Town Council, the Town s highest level of decision-making authority. Commitments may be modified or removed only by the Town Council through resolution or ordinance, approval through motions, or some other formal action. Assigned Fund Balance includes amounts that are constrained by the Town s intent to be used for specific purposes, but are neither restricted nor committed. The Town s Budget Committee is authorized to make assignments. Unassigned Fund Balance is represented by the residual classification of the General Fund balance that has not been assigned to other funds and that has not been restricted, committed, or assigned to specific purposes within the General Fund. 2. RETIREMENT PLAN The Town of Summerdale, Alabama, contributes to the Employees Retirement System of Alabama, an agent multiple-employer public employee retirement system that acts as a common investment and administrative agent for the various state agencies and departments. 23

28 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, RETIREMENT PLAN (continued) Substantially all employees are members of the Employees Retirement System of Alabama. Membership is mandatory for covered or eligible employees of the Town. Benefits vest after 10 years of creditable service. Vested employees may retire with full benefits at age 60 or after 25 years of service. Retirement benefits are calculated by two methods with the retiree receiving payment under the method that yields the highest monthly benefit. The methods are (1) Minimum Guaranteed, and (2) Formula, of which the Formula method usually produces the highest monthly benefit. Under this method retirees are allowed % of their average final salary (best three of the last ten years) for each year of service. Disability retirement benefits are calculated in the same manner. Pre-retirement death benefits in the amount of the annual salary for the fiscal year preceding death are provided to plan members. The Employees Retirement System was established as of October 1, 1945, under the provisions of Act 515, Acts of Alabama 1945, for the purpose of providing retirement allowances and other specified benefits for State employees, State police, and on an elective basis to all cities, counties, towns and quasi-public organizations. The responsibility for general administration and operation of the Employees Retirement System is vested in the Board of Control. Benefit provisions are established by the Code of Alabama 1975, Sections through , as amended, Sections through , as amended and Sections 36-27B-1 through 36-27B- 6. Authority to amend the plan rests with the Legislature of Alabama. However, the Legislature has granted the Commission authority to accept or reject various Cost-Of-Living-Adjustments (COLAs) granted to retirees. The Retirement Systems of Alabama issues a publicly available financial report that includes financial statements and required supplementary information for the Employees Retirement System of Alabama. That report may be obtained by writing to The Retirement Systems of Alabama, P.O. Box , Montgomery, Alabama The following is information taken from the Employees Retirement System of Alabama, Actuarial Valuation Summary as of September 30, 2012, the latest date for which a valuation was available. Summary of Employee Census Data Number of active members: 18 Annual compensation: $ 587,513 Number of retired members and beneficiaries: 2 Annual retirement allowances: $ 33,223 Required Employer Contribution Rates Normal cost 3.45% Accrued Liability 2.66% Pre-retirement death benefit 0.14% Administrative expense 0.21% Total 6.46% 5% Employer contribution factor (6.46%/5% 1.292% 6% Employer contribution factor (6.46%/6%) % Comments on Employer Contribution Rates: 1. These rates included contributions for cost of living benefit increases granted on or after October 1, 1978 through the valuation date. 2. Employer contributions may increase due to the granting of pay raises in excess of the expected and for any future cost of living adjustments granted to retirees. These contribution rates are determined under the parameters of GASB 25 and 27. Any contributions above the required employer contribution rate, such as lump sum payments, will result in negative Net Pension Obligation, which will have to be disclosed in your auditor s report. 24