City of Grenada FINANCIAL STATEMENTS SEPTEMBER 30, 2012

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1 City of Grenada FINANCIAL STATEMENTS SEPTEMBER 30, 2012

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5 MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED SEPTEMBER 30, 2012 UNAUDITED This Discussion and Analysis of The City of Grenada, Mississippi's financial performance provides an overall review of the City's financial activities for the year ended SEPTEMBER 30, The intent of this discussion and analysis is to look at the City's financial performance as a whole. Readers should also review the basic financial statements to enhance their understanding of the City's financial performance. Financial Highlights Key financial highlights for 2012 were as follows: Total net assets increased $74,791 from Total assets of governmental activities decreased $6,404 from Total liabilities decreased by $81,195 from In total, cash decreased $7,047,935 from Additions to capital assets decreased $2,722,298 from Using this Annual Financial Report This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the City of Grenada as a financial whole or as an entire operating entity. The statements then proceed to provide an increasingly detailed look at specific financial conditions. The Statement of Net Assets and Statement of Activities provide information about the activities of the whole City, presenting both an aggregate view of the City's finances and a longer-term view of those assets. Major fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what dollars remain for future spending. The fund financial statements also look at the City's most significant funds with all other non-major funds presented in total in one column. Reporting the City of Grenada as a Whole Statement of Net Assets and the Statement of Activities While this document contains information about the funds used by the City to provide services to our citizens, the view of the City as a whole looks at all financial transactions and asks the question, "How did we do financially during 20 12?" The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by private sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when the cash is received or paid. These two statements report the City's net assets and the changes in those assets. This change in assets is important because it tells the reader whether, for the City as a whole, the financial position of the City has improved or diminished. However, in evaluating the overall position of the City, non-financial information such as changes in the City's tax base and the condition of the City's capital assets will also need to be evaluated. In the Statement ofnet Assets and the Statement of Activities, all of the City's activities are reported as Governmental Activities or Business-type Activities. Governmental Activities include all of the City's governmental type services including police, fire, streets, administration, and other similar departments, while Business-type Activities include the City Water and Sewer Department and Solid Waste Department. 3

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7 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2012 UNAUDITED The City of Grenada as a Whole (Continued) Net Assets Governmental Activities Business-type Activities Assets: Current and other assets $ 11,460,558 $ 3,808,851 Capital Assets, Net 43,460,552 15,415,875 Total Assets $ 54,921,110 $ 19,224,726 Liabilities: Current and other liabilities 6,719,410 4,312,372 Long-term liabilities: Due Within One Year 812, ,351 Due in more than one year 13,161,818 6,073,393 Total Liabilities $ 20,694,136 $ 10,646,116 Net Assets: Invested in Capital Assets Net of Debt 20,694,136 9,190,921 Restricted: Debt Service 795, ,548 Capital Projects 4,001,419 42,684 Economic Development 1,214,017 0 Unrestricted 7,521,747 (791,543) Total Net Assets $ 34,226,974 $ 8,578,610 Total assets for governmental activities decreased $6.404 from 20 I I. Total assets for business-type activities decreased $I,429,603 from 20I I. Net assets of the City's governmental activities increased by $74,79I from 20I I and net assets for business-type activities decreased $ from 20I I. The table on the next page shows the Changes in Net Assets for the year ended September 30, 20 I 2 as compared to Changes in Net Assets for the year ended September 30, 20I I. 5

8 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2012 UNAUDITED Governmental Activities: Revenues: Program Revenues: 2012 Charges for services $ 662,167 $ Operating grants and contributions 112,199 Capital Grant and contributions 809,655 Total Program Revenues 1,584,021 General Revenues: Property taxes 4,256,946 Other taxes and licenses 4,642,461 Fines and forfeitures 864,377 Grants and contributions not restricted to specific programs 999,082 Investment and other revenues 249,307 Total General Revenues 11,012,173 Total Revenues $ 12,596,194 $ Program Expenses: General government 1,377,745 Public Property 1,229,467 Public Safety 6,121,233 Streets and sanitation 1,266,245 Motor vehicle maintenance 109,992 Planning and zoning 99,929 Recreation and senior citizens 872,088 Health and welfare 27,355 Airport 216,316 Loss on Bowater Receivable 0 Appropriations and non-departmental 336,125 Interest and fiscal charges 506,595 Total Program Expenses 12,163,090 Increase in Net Assets $ 433,104 $ Business-Type Activities: Revenues: Program Revenues: Charges for services 5,287,464 Operating grants and contributions Total Program Revenues 5,287,464 General Revenues: Investment and other revenues 325 Total Revenues 5,287,789 Program Expenses: Water and Sewer 4,106,249 Solid Waste 733,625 Golf 870,346 Total Program Expenses 5,710,220 Increase in Net Assets $ (422,431) $ , ,045 2,365,897 3,533,729 3,962,851 4,756, , , ,561 9,969,288 13,503,017 1,196,053 1,913,184 5,967,445 1,254, , , ,756 23, , , ,520 11,857,658 1,645,359 5,786,082 5,786,082 6,098 5,792,180 3,901, , ,618 5,523, ,942 6

9 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2012 UNAUDITED Governmental Activities Several revenue sources fund our Governmental Activities. Under the accrual basis of accounting, the City property tax accounted for $4,256,946 or 33.66% of gross revenue; revenues from charges for services and grants and contributions accounted for $1,634,480 or 12.92% of gross revenue; and state sales and gas taxes accounted for $4,642,461 or 36.71% of gross revenue. The City property tax millage rate remained at mills. The City's major expense activity is public safety which includes police and fire. These expenses totaled $6,121,233 or 51.34% of total governmental activity expenses. Business-type Activities Charges for services fund our Business-type activities. Our proprietary funds include the Water and Sewer Fund and the Solid Waste Fund and Dogwoods Golf Course. Total charges for services revenues decreased $504,391 or 8.71% from Operating expenses increased $186,983 or 3.39% from The City's Funds Information about the City's major governmental funds begins on page 10. These funds are accounted for using the modified accrual basis of accounting. All governmental funds had total revenues of$12,657,337. This was consistent with the prior year. Total revenues in the General Fund increased by $141,392 or 1.48% from Total expenses for the General Fund increased $535,428 or 5.73% from General government increased $156,685 or 15.00%. Public property increased $122,455 or 19.40%, Public safety increased $112,180 or 1.99% and Streets and sanitation decreased $12,690 or 1.12%. Total expenditures exceeded total revenues in the General Fund by $167,957 for 2012 as compared to revenues exceeding expenditures by $226,079 in Information about the City's proprietary funds begins on page 14. These funds are accounted for using the accrual basis of accounting. The basis of accounting for these funds is the same as for the city as a whole and the results of operations are discussed above under "Business-type Activities." 7

10 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2012 UNAUDITED Capital Assets and Long-Term Obligations Capital Assets Capital Assets at September 30, 2012 as compared to 2011: Governmental Activities: Land Buildings Improvements other than buildings Machinery and equipment Infrastructure Construction in progress Total Governmental Activities Business-type Activities: Land Buildings Water and Sewer system Machinery and Equipment Vehicles Total Business-type Activities Total $ $ ,328,260 $ 17,570,057 8,751,083 6,934,572 10,057, ,641, ,301 93,013 38,096,222 2,088, ,186 41,370,704 90,011,764 $ ,328,260 16,857,020 8,175,544 6,934,572 4,081, ,376, ,301 93,013 37,899,269 2,074, ,657 41,139,838 82,516,469 Long-Term Obligations At SEPTEMBER 30,2012, the City of Grenada had $12,555,000 in outstanding General Obligation Bonds, Notes and Revenue Bonds and Commitments. The following table shows the total outstanding long-term obligations of the City. Long-Term Oligations at Year End Governmental Activities: General obligations bond $ 12,555,000 $ 13,205,000 Notes Payable 811, ,829 Compensated absences 608, ,028 Total Governmental Activities 13,974,726 14,824,857 Business-type Activities: Revenue bonds 6,165,000 6,625,000 Loans payable 20, ,914 Compensated absences 148, ,247 Total Business-type activities 6,333,744 7,280,161 Total Long-Term Obligations $ 20,308,470 $ 22,105,018 8

11 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) FOR THE YEAR ENDED SEPTEMBER 30, 2012 UNAUDITED Current Financial Related Activities Property Tax Revenues Property taxes levied by the City remained at mills for the year. The City Bond Fund continues to be in a deficit position due to loss of rent income from buildings in the industrial park. This will have to be made up through increased tax collections or rent income or spending reduction in the future. Urban System Overlay Project This was funded by MDOT project for the purpose of enhancing our roads for the citizens of Grenada. The roads improved are North Sundown, Main, 2"d Street, South Street, Eddie and Monroe Street. Lewis Johnson Senior Citizen Complex This will service the senior citizens of Grenada. The complex will provide an exercise room, therapeutic pool, indoor track, arts & crafts, and computer labs, in addition to being a feeding site for the seniors of our community. This project was funded through a USDA Rural Development Grant. Contacting the City's Finance Department This financial report is designed to provide our citizens, taxpayers, creditors, and investors with a general overview of the City's finances and to show the City's accountability for the money it receives. If you have any questions about this report or need additional financial information, contact Lois Freelon, City Clerk at

12 City of Grenada, Mississippi Statements of Net Assets September 30,2012 Primary Government Governmental Business-type Activities Activities Total ASSETS Cash 4,377, ,593 4,492,156 Receivables, net allowance for uncollectibles 4,354, ,425 4,890,247 Due from other governments 679,83 I I4, ,929 Due from other funds I,627,762 2,756,525 4,384,287 Inventory 0 I 13,805 I I3,805 Bowater Stock 226, ,499 Unamortized bond issuance cost I94,08I 210, ,389 Other Assets 0 64,097 64,097 Capital assets: Non-depreciable 5,328, ,301 5,75I,561 Depreciable, net 38,132,292 14,992,574 53,124,866 Total Assets $ 54,92I,1 10 $ I9,224,726 $ 74,I45,836 LIABILITIES Accounts payable 663, ,747 9I6,613 Accrued liabilities 295,098 73, ,432 Due to other funds I,5I4,533 3,899,768 5,4I4,301 Due to other governments 0 40,524 40,524 Deferred Revenue 4,245, ,245,913 Customer refundable meter deposits 0 45,999 45,999 Noncurrent Liabilities: Due within one year: Bonds and loans payable 8I2, ,35 I 1,073,259 Due in more than one year: Loans payable 678,8I ,816 Bonds payable I 1,875,000 5,925,000 17,800,000 Compensated absences 608, , ,395 Total Liabilities $ 20,694,136 $ I 0,646, I 16 $ 3 I,340,252 NET ASSETS Invested in capital assets, net of related debt 20,694,I36 9,I90,92I 29,885,057 Restricted for: Debt service 795, , ,203 Capital projects 4,00I,4I9 42,684 4,044,I03 Economic development I,214,0I7 0 1,214,017 Unrestricted 7,521,747 (791,543) 6,730,204 Total Net Assets $ 34,226,974 $ 8,578,6IO $ 42,805,584 The accompanying notes are an integral part of the financial statements. 10

13 City of Grenada, Mississippi Statement of Activities For the Year Ended September 30, 2012 Program Revenues Operating Capital Net (E enses) Revenues Charges for Grants and Grants and Governmental Business-type Functions/Pro rams enses Services Contributions Contributions Activities Activities Governmental activities: Gmeral government $ 1,377,745 $ 355,000 $ - - $ $ (1,022,745) $ $ Public Property 1,229, , ,655 (134,852) 0 Public Safety 6,121,233 22, (6,099,026) 0 Streets and sanitation 1,266, ,199 0 (1, 154,046) 0 Motor vehicle maintenance 109, (109,992) 0 Planning and zoning 99, (99,929) 0 Recreation and senior citizens 872, (872,088) 0 Health and welfare 27, (27,355) 0 Airport 216, (216,316) 0 Appropriations and non-departn 336, (336,125) 0 Interest on long-term debt 506, (506,595) 0 Total Governmental activities $ 12,163,090 $ 662,167 $ 112,199. $ 809,655 $ (10,579,069) $ - $ Business-type activities: Water and Sewer 4,106,251 3,303,778 (802,473) Solid Waste 733, ,966 69,341 Dogwoods Golf 870, ,553 (351,794) Total business -type activities 5,710,223 4,625, (1,084,926).Total $ 17,873,313 $ 5,287,464 $ 112,199 $ 809,655 $ (10,579,069) $ ( 1,084,926) $ General revenues: Taxes: Taxes levied for general purpose 4,256,946 0 Sales and gas taxes 4,056,094 0 Occupational licenses and franchise fees 586,367 0 Fines and forfeitures 864,377 0 Grants and contributions not restricted to specfic programs 0 0 Homestead exemption reimbursement 132,705 0 Other intergovernmental revenues and grants 866,377 0 Investment earnings 80, Miscellaneous 168,691 0 Total general revenues 11,012, Transfers in 0 364,000 Sales of Assets 10,682 0 Transfers out (369,000) 0 Total general revenues & transfers 10,653, ,325 Change in net assets 74,786 (720,601) Net assets-beginning 34,152,185 9,299,211 Net assets-ending $ 34,226,971 $ 8,578,610 $ Total (1,022,745) (134,852) (6,099,026) (I, 154,046) (109,992) (99,929) (872,088) (27,355) (216,316) (336,125) (506,595) (IQ,579,069) (802,473) 69,341 (351,794) ( 1,084,926) (II,663,995) 4,256,946 4,056, , , , ,377 80, ,691 11,012, ,000 10,682 (369,000) 11,018,180 (645,815) 43,451:396 42,805,581 The accompanying notes are an integral part of the financial statements. 11

14 ASSETS BALANCE SHEET GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Other Total 2007 GO 2011 GO Govermental Governmental General Fund Bond Bond Bond UDAG Funds Funds Cash $ (1,253,659) $ 358,579 $ 1,127,643 $ 745,478 $2,137,774 $ 1,261,748 $ 4,377,563 Receivables: Property Taxes 3,220, ,116, ,882 4,354,822 Due from Other Funds 614,899 1, , , ,431 1,627,762 Due from Other Governments 648, , ,831 Bowater Stock , ,499 Other Total Assets $ 3,229,919 $ 359,704 $ 1,127,643 $ 1,913,986 $2,614,403 $ 2,020,822 11,266,477 LIABILITIES AND FUND BALANCES: Liabilities: Accounts Payable $ 233, ,749 2, ,259 12, ,865 Accrued Payroll 171, , ,584 Accrued Payroll Taxes & Retire 120, , ,514 Due to Other Funds 322, , ,555 1,514,533 Deferred Revenue 3,129, ,116, ,245,913 Total Liabilities 3,977, ,454 1,118, , ,710 6,719,409 Fund Balances Reserved for: Special Projects 0 359, , ,820 Unreserved, reported in: General Fund (747,663) , ,992 Debt Service Funds Special Revenue Funds ,347,112 1,347,112 Capital Projects Funds ,436, ,436,144 Total Fund Balances (747,663) 359, , ,655 2,436,144 1,347,112 4,547,068 Total Liabilities & Fund Balances $ 3,229,919 $ 359,704 $ 1,127,643 $ 1,913,986 $2,614,403 $ 2,020,822 $ 11,266,477 The accompanying notes are an integral part of the financial statements. 12

15 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Total Fund Balance-Governmental Funds Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not fmancial resources and therefore are not reported in the govermental funds Governmental capital assets 48,641,060 Less accumulated depreciation (5, 180,508) $ 4,547,067 43,460,552 Other assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds Bonds Costs 255,047 Less current year amortization (60,967) 194,080 Long-term liabilities, including bonds payable are not due payable in the current period and therefore are not reported in governmental funds Governmental bonds and notes payable (13,366,724) Compensated Absences (608,002) (13,974,726) $ 34,226,973 The accompanying notes are an integral part of the financial statements. 13

16 REVENUES: STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, GO 2011 GO General Fund BOND BOND BOND UDAG Property taxes $ 2,949,245 $ $ $ 1,307,701 $ Franchise fees 488, Licenses and permits 98, Administrative fee 355, Intergovernmental 4,405, ,103 0 Fines and forfeits 864, Grand Gulf in lieu of taxes 162, Recreation fees 22, Confiscated monies Sales of assets 4, ,000 Rent 168, ,242 0 Interest 68, , Miscellaneous 132, TOTAL REVENUES 9,719, ,674 I,433,315 31,159 EXPENDITURES: General Government 1,201, Public property 753,581 15, ,245 Public safety 5,742, Streets and sanitation 1,115, Motor vehicle maintenance 84, Planning and zoning 99, Recreation and senior citizens 493, Health and welfare Airport Appropriations and non-departmental 96, Unrealized decline in value ,501 Capital Outlay 243, ,975, ,445 Debt service: Principal retirement 25, , , ,780 0 Interest and other TOTAL EXPENDITURES Excess (deficiency) of revenues over expenditures 167,957) 140,226) 6, 199,625) 549, ,032) Other financing sources (uses): Bond and loan proceeds 48, Transfers in 0 125, , Transfers out ,000 0 Total other financins sources uses 2: 48, , ,000 (350,000) 0 Net chanse in Fund Balances 119,257) 115,226) 15,974,625) 199, ,032) Fund Balances-Beg ofj::ear 369,636) 374,857 6,473, ,523 2,852,105 Fund Balances - End of year (488,893) 359, , ,075 2,490,073 $ Other Governmental Funds ,428, , ,207 9, ,471, ,052 32, , , , , , ,885 0 I ,096) 0 (435,820)!435,820)!603,916) 1,498, ,408 Total Governmental Funds 4,256, ,028 98, ,000 5,865, , ,816 22,311 il,ii8 10, ,857 80, ,842 12,657,337 1,201,I48 796,285 5,775,296 1,115,952 84,966 99, , , , , ,501 7,264, , ,488,384) 48, ,000 (85,820) (387,120) 6,875,504) 11,422,570 4,547,066 The accompanying notes are an integral part of the financial statements 14

17 RECONCILIATION OF THE STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUNDS BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENTS OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Net change in fund balances-total governmental funds Amounts reported for governmental activities in the statement are different because: $ (6,875,504) 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 Less current year depreciation Repayment of bond and loan principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the amount of bond and loan principal repayments. Proceeds of long-term debt is another financing source in the governmental funds, but the proceeds increase long-term liabilities in the statement of net assets. This is the amount of note payable proceeds 7,264,429 (1,033,173) 841,656 (48,700) 6,231, ,656 (48,700) Some expenses reported in the Statement of Activities do not require the use of current available resources and therefore are not reported as expenditures in the governmental funds Amortization of bonds costs Decrease in accrual for compensated absences Change in Net Assets of Governmental Activities (16,139) (57, 784) --,--_...(7_3.;:..,9_23~) $ 74,785 The accompanying notes are an integral part ofthejinancial statements. 15

18 ASSETS Current Assets: STATEMENT OF NET ASSETS PROPRIETARY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 Business Type Activities-Enterprise Fund Water and Sewer Solid Waste Fund Fund Golf Fund Total Cash and Cash equivalents $ 123,710 $ (79,821) $ 28,020 $ 71,909 Accts Rec less allowance 422, ,056 $ 6, ,425 Unbilled revenue 59, ,308 Due from other funds 2,750,799 5,726 2,756,525 Due from other govt 14, ,098 Bond Escrow 4, ,139 Inventory 108, , ,805 Total Current Assets 3,483,561 31,961 39,687 3,555,209 Non-Current Assets: Restricted: Cash $ 42,684 $ 42,684 Capital Assets: Land 423, ,301 Building and improvements 93, ,013 Water and sewer system 38,096,222 38,096,222 Equipment 1,634,936 50, , ,088,982 Vehicles 586,979 54, , ,186 Office equipment & furniture Less accumulated depreciation (25,730,213) (85,624) (138,992) (25,954,829) Construction in progress Unamortized bond costs 323, ,551 Accumulated Amortization (113,243) 0 0 (113,243) Deposits Total Non Current Assets 15,357,880 19, ,387 15,669,517 Total Assets: $ 18,841,441 $ 51,211 $ 332,074 $ 19,224,726 The accompanying notes are an integral part ofthefinancial statements. 16

19 LIABILITIES: Current Liabilities: STATEMENTOFNEf ASSETS PRO PRIEr ARY FUND... Continued FOR THE YEAR ENDID SEPTEMBER 30,2012 Business Type Activities-Enterprise Fund Water and Sewer Solid Waste Fund Fund Golf Fund Total Accounts Payable 156,135 57,511 39, ,747 Accrued Payroll 29, ,293 41,052 Accrued retirement & payroll taxes 16,173 5,160 21,333 Customer refundable meter deposits 45, ,999 Accrued sales taxes 9, ,095 10,949 Due to otherg;overnment 40, ,524 Due to other funds 3,489, ,790 97,190 3,899,768 Deferred Revenue Leases payable-current ,351 20,351 Notes Payable, ST ofms Revenue bonds payable 240, ,000 Total Current Liabilities 4,028, , ,190 4,572,723 Non-Current Liabilities: Leases payable after one year Notes payable due after one ye: Revenue Bonds Payable 5,925, ,925,000 Compensated Absences 115,034 5,546 27, ,393 Total Non-current Liabilities 6,040,034 5,546 27,813 6,073,393 Total Liabilities $ 10,068,266 $ 375,847.$ 202,003 $ 10,646,116 NET ASSETS Invested in capital assets 8,918, ,035 9,190,921 Restricted: Debt Service 136, ,548 Capital Projects 42, ,684 Unrestricted $ (324,943) (324,636) (141,964) (791,543) Total Net Assets $ 8,773,175 $ (324,636) $ 130,071 $ 8,578,610 The accompanying notes are an integral part of the financial statements. 17

20 STATEMENT OF REVENUES, EXPENSES PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Water and Business-type Activities-Enterprise funds Solid Waste Sewer Fund Fund Golf Total Operating revenues: Water Sales $ 2,012,629 $ 0 $2,012,629 Sewer Sales 893, ,508 Garbage fees 0 802, ,966 Other charges for services 335, ,681 Grants 61, ,960 Golf fees , ,300 Sponsorships ,187 89,187 Food and Beverage ,836 54,836 Golf Merchandise ,230 45,230 Total Operating revenues 3,303, , ,553 4,625,297 Operating Expenses: Salaries and wages $ 777,729 $ 23,902 $ 288,()85 1,090,316 Payroll taxes and retirement 156,849 7,375 54, ,982 Insurance 253, , ,549 Supplies, material and maintenance 653,526 1, , ,195 Utilities and communications 304, , ,253 Contractual services 192, , ,318 1,029,949 General and administrative 397, , ,766 Uncollectible accounts 0 13, ,365 Depreciation 1,045,265 21,408 1,066,673 Amortization 16,178 16,178 Total operating expenses 3,797, , ,802 5,399,226 Income (loss) from operations (494,021) 69,341 (349,249) (773,929) Non-operating revenues, expenses: Interest income Interest expenses (308,450) (2,544) (31 0,994) Transfer In 364, ,000 (308,134) 0 361,465 53,331 Changes in net assets (802,155) 69,341 12,216 (720,598) Net assets-beginning (as related) 9,575,326 (393,977) 117,859 9,299,208 Net assets-ending $ 8,773,171 $(324,636) $ 130,075 $8,578,610 The accompanying notes are an integral part of the financial statements. 18

21 STATEMENT OF CASH FLOWS PROPRIETARY FUND FOR THE YEAR ENDED SEPTEMBER 30, 2012 Solid Water Waste Golf Total Cash flows from operating activities: Cash received from customers $ 3,175,464 $802,966 $ 518,553 4,496,983 Cash payments for goods and services (1 '793,467) (686,173) (397,410) (2,877,050) Cash payments for payroll, payroll taxes and retirement (1,144,940) (26,423) (429,458) ( 1,600,821) Cash received-operating grant 61,960 61,960 Net provided by operating activities 299,017 90,370 (308,315) 81,072 Cash flows from non-capital financing activities: Advances from other funds 364, ,000 Net cash provided by non-capital financing activities 364, ,000 Cash flows from capital and related financing activities: Repay other funds Capital Leases Principal payments on capital leases (100,172) (22,752) (122,924) Interest on capital leases (3,232) (2,544) (5,776) Acquisition and construction of capital assets (223,366) (7,500) (230,866) Principal payments on St ofms revolving loan (194,519) (194,519) Interest payments on St ofms revolving loan (3, 175) (3,175) Retirement of revenue bonds (235,000) (235,000) Interest paid on revenue bonds (307,585) (307,585) Net cash provided (used) by capital and related financing activities (1,067,049) (32,796) (1,099,845) Cash flows from investing activities: Interest received on cash and cash equivalents Net cash provided (used) by investing activities Net increase (decrease) in cash for the year (767,716) 90,370 22,898 (654,448) Cash and cash equivalents, including $656,167 of restricted cash, beginning of year 934,110 (170,191) 5, ,040 Cash and cash equivalents, including $42,684 of restricted cash, end of year 166,394 (79,821) 28, ,592 The accompanying notes are an integral part of the financial statements. 19

22 STATEMENT OF CASH FLOWS PROPRIETARY FUND FOR YEAR ENDED SEPTEMBER 30, 2012 Reconciliation of Income from Operations Water To net Cash provided by operating Activities: Income (loss) from operations $ (494,021) $ Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 1,045,265 Amortization 16,178 Changes in assets and liabilities: (Increase) decrease in net accounts receivable (88,295) (Increase) decrease in unbilled revenues (Increase) decrease in other liabilities 337,305 (Increase) decrease in accounts payable (524,776) (Increase) decrease in due to agency funds (Increase) decrease in accrued personnel services Increase (decrease) in due to other funds (Increase) decrease in accrual for compensated absences 7,361 Sales Tax Notes Payable Increase (decrease) in leases payable Increase (decrease) in due to other governments Net Cash provided by operating activities $ 299,017 $ Solid Waste Golf Total 69,341 $ (349,249) $ (773,929) 21,408 1,066,673 16,178 14,633 3,173 (70,489) 3, ,826 (297) 335 (524,738) 12,239 43,180 55,419 (5,546) (7,931) (6, I 16) (22,752) (22,752) 90,370 $ (308,315) $ 81,072 The accompanying notes are an integral part of the financial statements. 20

23 AGENCY FUNDS STATEMENT OF FIDUCIARY NET ASSETS FOR THE YEAR ENDED SEPTEMBER 30, 2012 Accounts Tax Payable Payroll Insurance Collector's Evidence Clearing Fund Fund Fund Fund Total ASSETS Cash $ 13,288 $ 104,677 $ 315,042 $ 72,122 $ 20, ,661 Due from Governmental Funds 70,187 70,187 Due from Other Funds $ 279,153 $ 18,318 $ 2,192 $ 10,554 $ 310,217 Due from others 5,474 5,474 Total Assets 292, , ,421 88,150 20, ,539 LIABILITIES Accounts payable $ $ $ $ 31,949 20,533 52,482 Due to other funds 257, , ,496 38, ,929 Due to Governmental Fund 0 Total Liabilities $ 257,293 $ 181,189 $ 374,496 $ 70,900 $ 20,533 $ 904,411 The accompanying notes are an integral part of the financial statements. 21

24 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements ofthe City of Grenada, Mississippi (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The City's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Propriety funds and similar component units apply Financial Accounting Standards Board (F ASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. The City does not apply FASB pronouncements or APB opinions issued after November 30, The more significant of the government's accounting policies are described below. 1. A. FINANCIAL REPORTING ENTITY The City's financial reporting entity comprises the following: Primary Government: City of Grenada In determining the financial reporting entity, the City complies with the provisions of GASB Statement No. 14, The Financial Reporting Entity, and includes all component units of which the City appointed a voting majority of the units' board; the City is either able to impose its will on the unit or a financial benefit or burden relationship exists. Blended Component Units Blended component units are separate legal entities that meet the component unit criteria described above and whose governing body is the same or substantially the same as the City Council or the component unit provides services entirely to the City. These component units' funds are blended into those of the City's by appropriate activity type to compose the primary government presentation. No component units are presented. Discretely Presented Component Units Discretely presented component units are separate legal entities that meet the component unit criteria described above but do not meet the criteria for blending. Currently, the City has no discretely presented component units. Government-wide Financial Statements: The Statement of Net Assets and Statement of Activities display information about the reporting government as a whole. They include all funds ofthe reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-exchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. 22

25 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. B. BASIS OF PRESENTATION Fund Financial Statements: Fund financial statements of the reporting entity are organized into funds, each of which is considered to be separate accounting entities. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, liabilities, fund equity, revenues, and expenditure/expenses. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 1 0% of the corresponding total for all funds of that category or type; and b. Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5% of the corresponding total for all governmental and enterprise funds combined. The funds of the financial reporting entity are described below: Governmental Funds General Funds The General Fund is the primary operating fund of the City and always classified as a major fund. It is used to account for all activities except those legally or administratively required to be accounted for in other funds. Special Revenue Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for certain purposes. Capital Project Fund The Capital Project Fund is used to account for resources restricted for the acquisition or construction of specific capital projects or items. The reporting entity includes only one Capital Project Fund and it is used to account for the acquisition of capital assets with transfers made from the General Fund. Debt Service Fund The Debt Service Fund accounts for the accumulation of financial resources for the payment of interest and principle on the general long-term debt of the City other than debt service payments made by enterprise funds. Ad valorem taxes are used for the payment of principle and interest on the City's bonds and interest. 23

26 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. B. BASIS OF PRESENTATION- (Continued) Proprietary Fund Enterprise Fund Enterprise Funds are used to account for business-like activities provided to the general public. These activities are financed primarily by user charges and the measurement of financial activity focuses on net income measurement similar to the private sector. The reporting entity includes the Grenada Water and Sewer Fund, Solid Waste Fund, Water & Sewer Bond Fund, and Dogwoods Golf Course. Fiduciary Funds (Not included in governmental-wide statements) Agency Funds Agency funds account for assets held by the City in a purely custodial capacity. The reporting entity includes four agency funds. Since agency funds are custodial in nature (i.e., assets equal liabilities), they do not involve the measurement of results of operations. The agency funds are as follows: Fund Brief Description Accounts Payable Clearing Accounts for funds transferred in to pay claims of the City. Funds are transferred in monthly from Governmental and Proprietary type funds and payments are made to vendors. Payroll Fund Tax Collector's Fund Evidence Fund Insurance Fund Accounts for disbursement of payroll checks for City. Funds are transferred in monthly from Governmental and Proprietary type funds and payroll checks are disbursed to employees. All property taxes collected are deposited to this fund. Settlements are made monthly from this fund to the General Fund, City Bond Fund and the City library. Accounts for funds used in criminal investigations. Accounts for payments to insurance companies for employees 24

27 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. B. BASIS OF PRESENTATION- (Continued) Major and Non-Major Funds The funds further classified as major or non-major are as follows: General See above for description. UDAG Accounts for proceeds of an Urban Development Action Grant. Bond Fund Accounts for accumulation oftaxes to pay principal and interest Accounts for proceeds of 2007 GO Bonds Accounts for proceeds of2009 GO Bonds Accounts for proceeds of2011 GO Bonds 2007 GO Bond 2009 GO Bond 2011 GO Bond Non-Major: Special Revenue Funds: Airport Special Tourism/Civic Center Airport Improvements Summer Food Aging Service Confiscated Drug Crime Prevention Tips FEMA Firefighter LEA HOME Incubator Homeland Security Hazard Mitigation Fund Brown-Hoffa Creek Bond Issuance Cost-Pennaco Tourism Fund Accounts for revenues and expenses associated with the Grenada Airport Accounts for a portion of tourism tax revenue designated for special purposes and for funds earmarked for construction of a municipal civic center. Accounts for funds designated for airport improvements. Accounts for revenues from the State Department of Education and expenditure of these funds for program purposes Accounts for federal program revenues and expenditure of these revenues under Title XX Social Services Block Grant, Title III-B Transportation and Medicaid Waiver programs. Accounts for funds confiscated in criminal cases. Accounts for state and federal grant funds received for funding crime prevention programs. Accounts for funds used in criminal investigations. Accounts for the proceeds and expenditures of a federal grant for funding the cost of firefighter training. Accounts for the proceeds and expenditures of state and federal law enforcement assistance grants. Accounts for the proceeds and expenditures of a HOME Investment Partnerships Program federal grant. Accounts for the proceeds for private, state and federal grants for a business incubator program and the expenditure of these funds for the development of a facility that can be rented to a local business or industry to promote commerce. Accounts for the proceeds and expenditures of Federal Homeland Security Grants. Accounts for the proceeds of a federal grant for relocating homeowners in hazard prone areas. Accounts for work done on Brown-Hoffa Creek Accounts for amortization of Bond costs on Pennaco Accounts for a portion of tourism tax. 25

28 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I. B. BASIS OF PRESENTATION- (Continued) Major and Non-Major Funds (Continued) Fund Non-Major (continued): Capital Projects Funds: Capital Projects 1998 G.O. Bond Masonic Temple Fire Insurance Rebate Senior Citizen Center Brief Description Accounts for the construction of capital projects. Revenues are primarily from _loans or grants and expenses are for capital outlay. Accounts for the porceeds of general obligation bonds issued in I 998 and expenditure of these bonds for spedfic capital improvement projects. Accounts for activity in the Fine Arts building. -Accounts for proceeds and expenditures of Fire Insurance Rebates. Accounts for construction of Center. I. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Measurement of focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when" transactions are recorded regardless of the measurement focus applied. Measurement Focus On the government-wide Statement of Net Assets and the Statement of Activities, both governmental and business-like activities are presented using the economic resources measurement focus as defined in item b. below. In the fund financial statements, the "current financial resources" measurement focus or the "economic resources" measurement focus is used as appropriate: a. All governmental funds utilize a "current financial resources" measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. b. The proprietary fund utilizes an "economic resources" measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net assets (or cost recovery), financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net assets. c. Agency funds are not involved in the measurement of results of operations; therefore, measurement focus is not applicable to them. 26

29 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (Continued) Basis of Accounting In the government-wide Statement ofnet Assets and Statement of Activities, both governmental and businesslike activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. In the fund financial statements, governmental funds and agency funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when "measurable and available." Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or within sixty days after year-end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. All proprietary funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Budgets and Budgetary Accounting Budgets are adopted on the cash basis of accounting. The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. Prior to September 15, the City Manager submits to the Mayor and City Council a proposed operating budget for the fiscal year commencing the following October 1. The operating budget includes proposed expenditures and the means of financing them. 2. As required by State law, the City conducts public hearings on the budget. 3. The budget as submitted is reviewed by the Mayor and City Council and necessary revisions are made to the budget. Then the budget is approved prior to September The budget is formally revised no later than July of each year or any time a deficit is indicated. 5. Budgetary comparisons are employed by management as a management control device during the year for all governmental funds and Water and Sewer Enterprise Fund. The budget and actual comparisons are formally presented in the financial statements to the Mayor and City Council. Budgetary control over other funds is achieved through applicable state law, bond ordinances, or other restrictions imposed when the fund is created. Budgeted amounts are as originally adopted or as amended by the City Council as of SEPTEMBER 30,

30 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. D. ASSETS, LIABILITIES AND EQUITY Cash and Investments For the purpose of the Statement of Net Assets, "cash" includes all demand, savings accounts, and certificates of deposits of the City. For the purpose of the proprietary fund Statement of Cash Flows, "cash and cash equivalents" include all demand and savings accounts, and certificates of deposit or short-term investments with an original maturity of three months or less. Inter-fund Receivables and Payables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as "due to and from other funds." Short-term inter-fund loans are reported as "inter-fund receivables and payables." Long-term inter-fund loans (noncurrent portion) are reported as "advances from and to other funds." Inter-fund receivables and payables between funds within governmental activities are eliminated in the Statement of Net Assets. Receivables In the government-wide statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Major receivable balances for the governmental activities include sales and use taxes, franchise taxes, grants, and police fines. Business-type activities report utilities and interest earnings as their major receivables. In the fund financial statements, material receivables in governmental funds include revenue accruals such as sales tax, franchise tax, and grants and other similar intergovernmental revenues since they are usually both measurable and available. Non-exchange transactions collectible but not available are deferred in the fund financial statements in accordance with modified accrual, but not deferred in the governmental-wide financial statements in accordance with the accrual basis. Interest and investment earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and available. Proprietary fund material receivables consist of all revenues earned at yearend and not yet received. Utility accounts receivable and interest earnings compose the majority of proprietary fund receivables. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Unbilled Revenues An estimated amount has been recorded for utility services provided but not billed as of the end of the year. Capital Assets The accounting treatment over property, plant, and equipment (capital assets) depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements. 28

31 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. D. ASSETS, LIABILITIES AND EQUITY- (Continued) Capital Assets (Continued) Government-wide Statements In the government-wide financial statements, general capital assets including major general infrastructure assets acquired during the current year are accounted for as capital assets. All capital assets are valued at historical cost or estimated historical cost if actual is unavailable, except for donated capital assets which are recorded at their estimated fair value at the date of donation. Assets capitalized, not including infrastructure assets, have an estimated useful life of over three years. All infrastructure asset additions are capitalized. Depreciation of all exhaustible fixed assets is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement ofnet Assets. Depreciation is provided over the assets' estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Fund Financial Statements Buildings Improvements Machinery and Equipment Utility System Infrastructure years years 3-20 years years years In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same as in the government-wide statements. Restricted Assets Restricted assets include cash of the proprietary fund representing revenue bond reserve accounts and unspent bond proceeds and net assets of the UDAG Fund restricted for economic development. Long-term Debt The accounting treatment of long-term debt depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government-wide or fund financial statements. All long-term debts to be repaid from governmental and business-type resources are reported as liabilities in the government-wide statements. The long-term debt consists primarily of general obligation bonds, revenue bonds, notes payable and accrued compensated absences. Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. The debt proceeds are reported as other financing sources and payment of principal and interest reported as expenditures. The accounting for proprietary fund is the same in the fund statements as it is in the government-wide statements. 29

32 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. D. ASSETS, LIABILITIES AND EQUITY (Continued) Compensated Absences The City's policies regarding vacation time permit employees to accumulate earned but unused vacation leave. The liability for these compensated absences is recorded as long-term debt in the government-wide statements. The current portion of this debt is estimated based on historical trends. In the fund financial statements, governmental funds report only the compensated absence liability payable from expendable available financial resources, while the proprietary funds report the liability as it is incurred. Equity Classifications Government-wide Statements Equity is classified as net assets and displayed in three components: Fund Statements a. Invested in capital assets, net of related debt - 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 assets - Consists of net assets 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 assets- All other net assets that do not meet the definition of"restricted" or "invested in capital assets, net of related debt." Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved, with unreserved further split between designated and undesignated. Proprietary fund equity is classified the same as in the government-wide statements. 1. E. REVENUES, EXPENDITURES AND EXPENSES Property Tax Property taxes attach as an enforceable lien on property as of January I. Taxes are levied on October I and are payable by the following February I. The City bills and collects its own property taxes except for automobile taxes which are collected by the County and remitted to the City. Operating Revenues and Expenses Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services. It also includes all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. 30

33 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 1 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1. E. REVENUES, EXPENDITURES AND EXPENSES (Continued) Expenditures/Expenses In the government-wide financial statements, expenses are classified by function for both governmental and business-type activities. In the fund financial statements, expenses are classified as follows: Governmental Funds - By Character Proprietary Fund- By Operating and Non-operating Current (further classified by function) Debt Service Capital Outlay In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses relating to use of economic resources. Inter-fund Transfers Permanent reallocation of resources between funds of the reporting entity is classified as inter-fund transfers. For the purposes of the Statement of Activities, all inter-fund transfers between individual governmental funds have been eliminated. NOTE 2- CASH AND CASH EQUIVALENTS A summary of cash balances including bank account deposits and cash on hand at SEPTEMBER 30, 2012, follows: Fund Unrestricted Restricted Total General Fund $ (I,253,659) $ $ (1,253,659) Special Revenue Fund (369,878) 1,611,852 1,241,974 Debt Service Fund 0 747, ,458 Capital Projects Fund (4,921) 3,646,710 3,641,789 Enterprise Fund 71,909 42, ,593 Agency Fund 190, , ,662 Total $ (1,366,462) $ 6,384,279 $. 5,017,817 The book balance of the City's total deposits with financial institutions at SEPTEMBER 30, 2012 was $5,017,817 and the bank balance was $5,260,547. The collateral for public entities' deposits in financial institutions are held in the name of the State Treasurer under a program established by the Mississippi State Legislature and is governed by Section , Miss. Code Ann. (1972). 31

34 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 2 -CASH AND CASH EQUIVALENTS (Continued) Under this program, the entity's funds are protected through a collateral pool administered by the State Treasurer. Financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Depository Insurance Corporation. NOTE 3 -ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS At SEPTEMBER 30,2012, accounts receivable were as follows: Governmental Business-type Total Activities Activities Property taxes receivable $ 4,263,795 4,263,795 Franchise taxes receivable 91,027 91,027 Other Governments 679, ,831 Water, sewer, and garbage 1,327,019 1,327,019 Allowancce for uncollectible accounts (791,594) (791,594) (-) Net accounts receivable $ $ $

35 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 4- CAPITAL ASSETS Capital asset activity for the year ended SEPTEMBER 30, 2012 was as follows: Beginning Additions Balance Governmental Activities: Non-depreciable assets: Land $ 5,328,260 $ Depreciable assets: Buildings 16,857, ,037 Improvements 8,175, ,539 Machinery and equipment 6,934,572 0 Infrastructure 4,081,235 5,975,853 Construction in process 0 Totals at historical cost 41,376,631 7,264,429 Less accumulated depreciation for: Buildings 692, ,698 Improvements 1,276, ,771 Machinery and equipment 1,692, ,535 Infrastructure 485, ,168 Total accumulated depreciation 4,147,336 1,033,172 Governmental activities capital assets, net $ 37,229,295 $ 6,231,257 Business-type Activities: Non-depreciable assets: Land 423,301 Depreciable assets: Buildings 93,013 Water and sewer system 37,899, ,953 Machinery and equipment 2,074,598 14,384 Vehicles 649,657 19,529 Construction in process Totals at historical cost 41,139, ,866 Less accumulated depreciation for: Buildings 175,011 15,539 Water and sewer system 22,487, ,313 Machinery and equipment 1,527,109 86,526 Vehicles 699,005 9,296 Total accumulated depreciation 24,888,155 1,066,674 Business-type activities capital assets, net 16,251,683 (835,808) Retirements Ending Balance $ $ 5,328,260 17,570,057 8,751,083 6,934,572 10,057, ,641, ,297 1,581,340 2,056, ,538 5,180,508 $ $ 43,460, ,301 93,013 38,096,222 2,088, ,186 41,370, ,550 23,442,343 1,613, ,301 25,954,829 15,415,875 33

36 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 4- CAPITAL ASSETS (Continued) Depreciation expense was charged to governmental and proprietary functions as follows: Governmental ProErietary General government 176,597 Public property 231,291 Public safety 277,334 Streets and sanitation 150,293 Motor vehicle maintenance 25,026 Recreation and senior citizens 69,180 Airport 103,451 Buildings 11,597 Vehicles 9,296 Improvements 3,942 Machinery & Equipment 86,526 Water and Sewer 955,313 Total depreciation expense 1,033,172 1,066,674 Total 176, , , ,293 25,026 69, ,451 11,597 9,296 3,942 86, ,313 2,099,846 34

37 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5- LONG-TERM DEBT Beginning Ending Amounts Balance Balance Due Within Date Issued Definition and purpose Oct. I, 2011 Additions Reductions Sept. 30, 2012 One Year GOVERNMENTAL ACTIVITIES: GENERAL OBLIGATION BONDS: 12/1/2007 $3,500,000 Public Improvement Bonds Series Principal payments due annually, varying in amounts from $240,000 to $480,000 beginning on December I, Final installment due December I, Interest payable at various rates from 3.625% to 4.5%. Paying to M&F Bank 3,155, ,000 3,030, , /2009 GO Re-funding Bonds Series Principal payments due annually, varying in amounts from 50,000 to 380,000 beginning on December I, Final installment due December 1, Interest payable at various rates from.75% to 3. 75%. Paying to Peoples Bank. 2,650, ,000 2,350, , /2011 $7,400,000 Public Improvements Bonds, Series 20 I I. Principal payments due annually, varying in amounts from $225,000 to $550,000 beginning on June I, Final installment due June I, Interest payable on December I and June I at various rates from 4.4% to 3.7%. Paying to First National Bank of Clarksdale 7,400, ,000 7,175, ,000 13,205, ,000 12,555, ,000 NOTES PAYABLE: State of Mississippi-Capital Improvements Revolving Loan. Payable in 180 monthly payments of$6, starting November I, 1997 including interest at4.0%. Final payment November I, 2012 Proceeds used to fund portion of cost of construction of industrial rental building 80, ,619 5,919 5,919 7/22/1999 State of Mississippi-Capital Improvements Revolving Loan for manufacturing building. Rent from building pays 240 monthly payments of$3, starting September I, 1999 including interest at4.65%. 253, , ,068 23, , , ,987 29,628 35

38 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5 -LONG-TERM DEBT- Continued Beginning Balance Date Issued Definition and Purpose Oct. I, 20II Additions LONG TERM LIABILITIES: 5/28/2003 Fire Truck I 0 year lease-peoples Ban 56,845 0 I/I4/ Service Truck - Hancock Bank $I04,541.76; 5 annual pmts@ 23,045 64,773 0 I2/28/20 I 0 Fire Truck, Rescue Pumper :$499,295, Regions Bank; 3.78% int, 499,295 0 I 0 ann. rent 60, /23/20I2 AVAYA IP Phone System-$48, Regions Bank, 4.75% int 60 monthly pymts 48,700 at $ Subtotals 620,913 48,700 OTHER LIABILITIES: Compensated Absences 665,028 0 Total Governmental Activities & Long- Term Liabilities $14,824,708 $ 48,700 Ending Amounts Balance Due Sept. 30, Within Reductions 20I2 One Year 27,872 28,973 28,973 20,886 43,887 2I,583 42, ,282 43,60I 5,105 43,595 9,123 95, , ,280 56, ,002 $ 897,682 $13,975,726 $812,908 36

39 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 5- LONG-TERM DEBT- Continued Beginning Ending Amounts Balance Balance Due Within Date Issued Definition and purpose Oct. I, 2011 Additions Reductions Sept. 30, 2012 One Year BUSINESS TYPE ACTIVITIES: REVENUE BONDS (WATER & SEWER ENTERPRISE FUND): 9/30/2005 $7,650,000 MS Dev Bank special obligation bond Series Interest at 5 %. Final pymt Sept. I, Proceeds used for combined water & sewer & solid waste disposal system 6,400, ,000 6,165, ,000 OTHER NOTES PAYABLE (WATER & SEWER ENTERPRISE FUND) 3/l/1991 State Revolving Fund Loan. Payable to the state ofms in 237 monthly installments of$16, including interest at 3.0%. First pymt January Final pmt Sept Proceeds used for to construct lagoon 194, , ST Revolving Fund Loan. Payable to the ST ofms in 237 monthly installments of $4, including interest at 4.0%. First pymt Aug Final pmt April Proceeds used for Brown's Creek Interceptor Project 29, , /21/2006 Caterpillar Excavator-Hancock Bank 5 years $26, , , /22/2007 New Aquatech Sewer cleaner Water dept Hancock Bank $212,677 5 pmts $47, , , OTHER NOTES PAYABLE (GOLF ENTERPRISE FUND) 7/13/2009 Aerifier, Blowers, Roller, Pro Flex, Grinders, Jacobsen Greens King IV, Blades for GK, 628D Turfcat, Truckster- National City Comm Capital $87,323; , ,752 20,351 20,351 Total Other Notes Payable 337, ,443 20,351 20,351 Total Bonds and notes payables 6,737, ,443 6,185, ,351 Compensated absences 149,723 2, ,393 Total Business-type Activities LTD $ 6,887,517 $ $ 554,773 $ 6,332,744 $ 260,351 37

40 NOTE 5 -LONG-TERM DEBT- Continued NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 The annual debt service requirements to maturity, including principal and interest, for long-term debt as of SEPTEMBER 30,2012, are as follows: Governmental Activities Business-Type Activities Year Ended Sept 30 Principal Interest Principal Interest GRAND TOTAL , , , ,802 1,855, , , , ,473 1,795, , , , ,160 1,787, , , , ,435 1,785, , , , ,435 1,788, ,617,283 1,318,374 1,515,000 1,069,500 7,520, ,250, ,625 1,935, ,750 6,589, ,305, ,806 1,405, ,750 4,050,556 Total ( ) 13,366,725 4,378,983 6,185,351 3,242,305 27,173,365 Advanced Refunding On November 12, 2009, the City issued $2,990,000 in General Obligation Refunding bonds with interest rates ranging between 3% and 4%. The City issued the bonds to advance refund $2,835,000 of the 1998 General Obligation bonds with interest rates ranging between 4.2% and 4.4%. The City used the net proceeds along with other resources to purchase U.S. government securities. These securities were deposited in an irrevocable trust to provide for all future debt service on the refunded portion of the 1998 series bonds. As a result, that portion of the 1998 series bonds are considered defeased, and the City has removed the liability from its accounts. The advance refunding reduced the total debt service payments over the next 9 years. This results in an economic gain (difference between the present values ofthe debt service payments on the old and new debt) of$85,

41 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE 6- PENSION PLAN Plan Description. The City of Grenada, Mississippi, contributes to the Public Employees Retirement System of Mississippi (PERS), a cost-sharing multiple-employer defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established to State law and may be amended only by the State of Mississippi Legislature. PERS issues a publicly available financial report that includes financial statements and required supplementary information. That information may be obtained by writing to Public Employee Retirement System, PERS Building, 429 Mississippi Street, Jackson, MS , or by calling (601) or PERS. Funding Policy. PERS members are required to contribute 9.00% of their annual covered salary and the City of Grenada, Mississippi, is required to contribute at an actuarially determined rate. The current rate is 14.26% of annual covered payroll. The contribution requirements of PERS members are established and may be amended only by the State of Mississippi Legislature. The City of Grenada, Mississippi's contributions to PERS for the year ended September 30, 2012, 2011, and 2010 were $737,809, $644,758, and $640,352 respectively, equal to the required contributions of each year. NOTE 7- LOAN ISSUANCE COST The City incurred cost of $323,550 in connection with the 2005 Special Obligation Bond. The unamortized cost at September 30, 2012 is $ The City incurred cost of $81,357 in connection with the 2009 GO Bond. The unamortized cost at September 30,2012 is $53,914. The City incurred cost of$145,000 with the 2012 GO Bond. The unamortized cost at September 30,2012 is $140,167. NOTE 8- COMMITMENTS AND CONTINGENCIES The City of Grenada has entered into a joint and several relationships with other public entities in the Mississippi Municipal Worker's Compensation Group and the Mississippi Municipal Liability Group. Each member shares responsibility for premium contribution based on payroll and their own loss experiences as well as assessments needed for fund inadequacies. They also share the benefit of fund surplus in the form of dividends when applicable. In the normal course of business, the City is occasionally a defendant in various lawsuits filed against it. These cases are turned over to the City's insurer's attorneys, who handle the defense of these suits. At present, it is impossible to predict if any loss may be incurred from these suits. The City believes that these suits will be successfully defended. NOTE 9- COMMITMENTS AND CONTINGENCIES (Continued) The City participated in a number of Federal, State and County programs that are fully or partially funded by grants received from other governmental units. Expenditures financed by grants are subject to audit by the appropriate grantor government. If expenditures are disallowed due to noncompliance with grant program regulations, the City may be required to reimburse the grantor government. The City believes that disallowed expenditures, if any, found in subsequent audits will not have a material effect on any of the individual governmental funds or the overall financial position of the City. 39

42 NOTE 10- FUND BALANCE- DEFICIT NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 The following funds had deficit fund balances at SEPTEMBER 30, 2012: Fund Summer Food FEMA Hazard Mitigation Project Aging Services Law Enforcement Assistance Brown and Hoffa Creek Solid Waste Clearing NOTE 11 -RISK MANAGEMENT Amount (59,827) (369,562) (124,249) (5,856) (13,019) (324,636) (57,724) The City of Grenada has entered into a joint and several relationships with other public entities in the Mississippi Municipal Worker's Compensation Group and the Mississippi Municipal Liability Group. Each member shares responsibility for premium contribution based on payroll and their own loss experiences as well as assessments needed for fund inadequacies. They also share the benefit of fund surplus in the form of dividends when applicable. The City of Grenada is a member of the Mississippi Municipal Association Unemployment Compensation Group Account with Unemployment Compensation Control Systems, Inc., of Mississippi as its agent. NOTE 12- INTERFUND RECEIVABLES AND PAY ABLES Interfund Interfund Government Funds Receivables Payables Due from proprietary funds 116,515 Due to proprietary funds 18,231 Due from agency 53,156 Due to agency 168,044 Proprietary Funds Due from governmental 18,23 I Due to governmental 116,515 Due to agency 5,346 Agency Funds Due from governmental 168,044 Due from proprietary 5,346 Due to governmental 53,156 NOTE 13-INTERFUND TRANSFERS Transfer Transfer From To Governmental Funds 369,000 Proprietary Funds 364,000 Unknown 5,000 NOTE14-SUBSEQUENTEVENTS The City issued combined water and sewer system revenue bonds, Series 2013 in the minimum principle amount of $7,200,000. The City issued the bonds to advance refund the outstanding principal of The Mississippi Development Bank $7,650,000 Special Obligation Bonds, Series

43 BUDGET COMPARISON SCHEDULE- CASH BUDGETARY BASIS-UNAUDITED YEAR ENDED SEPTEMBER 30, 2012 Budgeted Amounts Variance with Final Budget Actual Positive Original Final Amount (Negative2 General Fund: Taxes $ 2,880,991 $ 2,930,841 $ 2,930,839 $ 2 Taxes-Prior Year 9,500 18,406 18,406 0 License and Permits 1,000, , ,386 2 State Revenue 4,338,447 4,383,622 4,383,618 4 Road Tax 153, , ,776 1 Fines and Forfeits 672, , ,377 0 Accident and Offense Report 4,166 4,986 4,986 0 MiscelJaneous Revenue 318, , ,346 2 Total General Fund Revenue 9,377,632 9,678,745 9,678, General Administration Expense: Personnel Services (837,618) (817,142) (817,140) (2) Consumable Supplies (18, 180) (22,693) (22,692) (1) Contractual/Other Services (254,442) (351,459) (351,457) (2) Capital Outlay (9,280) (20,800) (20,799) (1) Total General Administration Expense {1,119,5202 {1,212,0942 {1,212,0882 {62 Planning & Zoning Expenses: Personnel Services (80,232) (92,111) (92,109) (2) Consumable Supplies (5,450) (3,521) (3,518) (3) Contractual/Other Services (9,542) (6,315) (6,313) (2) Capital Outlay ~3,2602 {2,4622 {2,4612 {12 Total Planning & Zoning Expenses (98,484) (104,409) (104,401) (82 Appropriation Expenses: Contractual/Other Services (110,250) {96,750) (96,750) 0 Total Appropriation Expenses {11 0,2502 (96,7502 (96, Police Expenses: Personnel Services (2,043,043) (2,161,430) (2, 161,428) (2) Consumable Supplies (184,284) (212,459) (212,454) (5) Contractual/Other Services (536,943) (509,769) (509,763) (6) Capital Outlay {80,9852 (101,6562 {101,6552 {12 Total Police Expenses (2,845,255) (2,985,314) (2,985,299) (15) Domestic Violence: Personnel Services (28,061) (35,977) (35,975) (2) Contractual/Other Services 0 (1,068) (1,068) 0 Total Domestic Violence Expenses {28,0612 {37,0452 {37,0432 {22 Court Expenses: Personnel Services (299,636) (300,336) (300,335) (1) Consumable Supplies (6,000) (6,903) (6,902) (1) Contractual/Other Services (297,531) (366,000) (365,995) (5) Capital Outlay (6,6502 (5,8562 ~5,8552 ~12 Total Court Expenses (609,817) (679,095) (679,086) (9) 41

44 Personnel services (2,011,090) (2,043,568) (2,043,568) 0 Consumable Supplies (37,500) (42,811) (42,805) (6) ContractuaVOther Services (108,775) (96,515) (96,513) (2) Capital Outlay (2,500) ~6,342) (6,431) 89 Total Fire (2,159,865) (2,189,2362 (2,189,317) 81 Street: Personnel services (444,309) (450,784) (450,781) (3) Consumable Supplies (146,124) (157,523) (157,518) (5) ContractuaVOther Services (461,388) (440,665) (440,661) (4) Capital outlay (98,582) (85,065) (85,062) (3) Total Street (1, 150,403) (1, 134,037) (I, 134,022) (15) Parks & Recreation: Personnel services (256,639) (293,760) (293,757) (3) Materials & supplies (95,352) (125,070) (125,064) (6) Other services & charges (49,558) (43,262) (43,259) (3) Capital outlay (62,500) (59,750) (59,748) (2) Total parks & recreation (464,049) (521,8422 (521,828) (14) Public Property: Personnel services (334,612) (350,217) (350,214) (3) Materials & supplies (47,838) (65,413) (65,408) (5) Other services & charges (196,677) (235,244) (235,242) (2) Capital outlay (83,587) (127,506) (127,503) (3) Total Public Property ~662,714) (778,380) (778,366) (14) MVM: Personnel services (65,610) (65,708) (65,706) (2) Materials & supplies (7,684) (6,868) (6,865) (3) Other services & charges (11,182) (7,712) (7,710) (2) Capital outlay (24,050) (31,118) (31,116) (2) TotalMVM (108,526) (111,406) (111,397) (9) Excess( deficiency) of revenue and (170,863) ther financing sources over expenditures and other financing uses. Fund balance-beginning of year (369,636) Fund balance-end of year (540,499) 42

45 SCHEDULE OF WNG-TERMDEBT FOR THE YEAR ENDED SEPTEMBER 30, 2012 Transactions during year Balance Outstanding Date Issued Description Oct. 1, 2011 Issued Redeemed General Obligations Bonds: 12/1/2007 GO Public Improvement 3,155, ,000 11/12/2009 GO Public Improvement 2,650, , /2011 GO Public Improvement 7,400, ,000 Total General Obligation Bonds 13,205, ,000 Notes Payable: 1/21/1997 ST MS Capital Improvement loan 80, ,619 7/22/1999 ST MS Capital Improvement loan 253, ,161 Total Notes Payable 333, ,780 Long Term Leases: 5/28/2003 Fire Truck 10 yr lease- Peoples Bank 56, ,872 1/14/ Service Truck-Hancock Bank 64, ,886 12/28/2010 Fire Truck Rescue Pumper 499, ,013 2/23/2012 A VA YA IP Phone System 0 48,700 5,105 Total Long Term Leases 620,913 48,700 95,876 Total Govemmental Activities Long Term Liabilities 14,159,680 48, ,656 PROPRIETARYFUNDS WNGTERMDEBT: Special Obligation Bonds: 9/15/2005 Combined Water& Sewer& Solid Waste 6,400, ,000 Total Special Obligations Bonds 6,400, ,000 Other: 3/1/1991 State Revolving Fund Loan 1 194, ,519 5/17/1991 State Revolving Fund Loan 2 29, ,106 Total Other Notes Payable 223, ,625 WATER LONG TERM LEASES: 2/22/2007 Aquatech Sewer Cleaner-Hancock Bank 45, ,935 12/21/2006 Caterpillar Excavator-Hancock Bank 25, ,131 7/13/2009 Aerifier, Mowing Equip- National City Comm 43, ,752 Total Water Fund Long Term Debt 114, ,818 Total Proprietary Debt $ 6,737,794 $ $ 552,443 Total Long Term Debt 20,897,474 48,700 1,394,099 Balance Outstanding Sept.30,2012 3,030,000 " 2,350,000 7,175,000 12,555,000 5, , ,987 28,973 43, ,282 43, ,737 13,366,724 6,165,000 6,165, ,351 20,351 $ 6,185,351 19,552,075 43

46 SCHEDULE OF SURETY BONDS FOR CITY OFFICIALS September 30,2012 Dates of Coverage Insurance From To Company Members of City Council - each 5/12/2012 5/9/2013 Briarfield Co. Mayor 11114/ /2012 Briarfield Co. City Clerk and Tax Collector 5112/ / Briarfield Co. All other City employees collecting taxes 11/30/ /2013 Briarfield Co. Coverage Amount at Sept30,2012 $ 100, , ,000 50,000 44

47 Name of Agency or Department US DEPARTMENT OF AGRICULTURE Rural Development Senior Center-ARRA Natural Resource Conservation Service Watershed Protection and Flood Prevention Total US Department of Agriculture SCHEDULE OF EXPENDI.TURES OF FEDERAL AWARDS FOR THE YFAR ENDED SEPTEMBER 30,2012 CFDA Other No MS Grant I.D. No. Total Awards Expended 65, , ,966 US DEPT OF HOUSING AND URBAN DEVELOPMENT Passed through Mississippi Development Authority Community Development Block Grant Program Senior Center- A RRA Office of Community Planning and Development Home Investment Partnership Program Home Investment Partnership Program Total US Department ofhousing & Urban Development I -PFR-0 I I EM M06-SG M08-8G ,455 61, ,043 20, ,563 US DEPARTMENT OF JUSTICE Violence Against Women Office Passed through Mississippi Department ofpublic Safety Crime Victim Assistance BymeGrant STOP (Services Training Officers Prosecutors) Violence Against Women Formula Grant Program VA-GX JAG-2011-DJ-BX Wl ,lll 16,202 18,967 Total US Department of Justice 65,280 US DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Airport Improvement Program Federal Highway Administration Passed through Mississippi Department oftransportation Highway Planning and Construction- ARRA National Highway Traffic Safety Administration Passed through Mississippi Department ofpublic Safety State and Community Highway Safety STP (003)LPA-ARRA TA-284-I 291,975 38,922 46,076 Total US Department oftransportation 376,973 US DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through State ofl'vlississippidepartment ofhuman Services Title III-B Transportation Title XX Social Services Block Grant Meals & Transportation Title XX 707V20IA $ 13,404 22,385 Total US Department of Health and Human Services 35,789 US DEPARTMENT OF HOMELAND SECURITY Federal Emergency Management Agency FEMA Flood Project FEMA Equipment Total US Department of Homeland Security FEMA Flood Project HS201T 43,917 22,679 66,596 TOTAL EXPENDITURES FOR FEDERAL AWARDS $ 1,182,167 45

48 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS SEPTEMBER 30, 2012 NOTE 1 -BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards including the federal grant activity of the City of Grenada, Mississippi under programs of the federal government for the year ended SEPTEMBER 30,2012 and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements ofomb Circular A-133, Audits ofstates, Local Governments, and Non-Profit Organizations. Because the schedule presents only a selected portion ofthe operations of the City of Grenada, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the City of Grenada. NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available. 46

49 ~RONNIE S. WINDHAM, CPA, LLC P 0 BOX 159, OXFORD, MS (662) cell (662) fax (662) Member American Institute of Certified Public Accountants Member Mississippi State Society of Certified Public Accountants REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Mayor and Board of Aldermen City of Grenada, Mississippi We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Grenada, Mississippi, as of and for the year ended September 30, 2012, which collectively comprise the City of Grenada, Mississippi's basic financial statements and have issued our report thereon dated November 1, We conducted our audit 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered City of Grenada, Mississippi's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Grenada, Mississippi's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Grenada, Mississippi's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies, or material weaknesses and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control over financial reporting that we consider to be material weaknesses and other deficiencies that we consider to be significant deficiencies. 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 47