CITY OF JASPER, ALABAMA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED SEPTEMBER 30, 2011

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1 CITY OF JASPER, ALABAMA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEAR ENDED SEPTEMBER 30, 2011

2 City of Jasper Table of Contents September 30, 2011 Page INDEPENDENT AUDITORS' REPORT 1-2 MANAGEMENT'S DISCUSSION AND ANALYSIS 3-10 BASIC FINANCIAL STATEMENTS Statement of Net Assets 11 Statement of Activities 12 Balance Sheet - Governmental Funds 13 Reconciliation ofthe Governmental Funds Balance Sheet to Statement of Net Assets 14 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 15 Reconciliation ofthe Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 16 Statement of Net Assets - Proprietary Funds 17 Statement of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds 18 Statement of Cash Flows - Proprietary Funds 19 Statement of Fiduciary Net Assets 20 Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Pension Plan Funding Progress 41 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual, General Fund 42 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual, Alcohol Fund 43 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual, Project Fund 44

3 OTHER SUPPLEMENTARY INFORMATION Combining Balance Sheet: All Nonmajor Governmental Funds 45 Nonmajor Special Revenue Funds 46 Nonmajor Capital Projects Funds 47 Nonmajor Debt Service Funds 48 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances: All Nonmajor Governmental Funds 49 Nonmajor Special Revenue Funds 50 Nonmajor Capital Projects Funds 51 Nonmajor Debt Service Funds 52 SINGLE AUDIT SECTION Report on Internal Control Over Financial Reporting and on Compliance And Other Matters Based on an Audit of Financial Statements In Accordance With Government Auditing Standards Independent Auditors' Report on Compliance With ReqUirements That Could Have a Direct and Material Effect on Each Major Program And on Internal Control Over Compliance in Accordance With OMB Circular A Schedule of Expenditures of Federal Awards 57 Notes to the Schedule of Expenditures of Federal Awards 58 Schedule of Findings and Questioned Costs 59-60

4 Haynes IIJU Downard LLP Certified Public Accountants and Business Advisors To the City Council City of Jasper, Alabama INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Jasper, Alabama, as of and for the year ended September 30, 2011, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Jasper, Alabama's management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Jasper City Board of Education or the Industrial Development Board of the City of Jasper which represent 100% of the assets, net assets and revenue of the componenet unit columns. Those financial statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Jasper City Board of Education or the Industrial Development Board of the City of Jasper, is based on the report of the other auditors. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Jasper, Alabama, as of September 30, 2011, and the respective changes in financial position, and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated May 22, 2013, on our consideration of the City of Jasper, Alabama's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. BI:RMINGHAM nd Avenue North Suite 400 Birmingham, Alabama PhD,,", 205/ Fa." 205/ JASPER th Avenue Jasper, Alabama Pho"e: 205/ Fa.": 205/ Toll: llllll/

5 Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the schedule of pension plan funding progress and the budgetary comparison information on pages 3 through 10 and 41 through 44 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 Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Jasper, Alabama's financial statements as a whole. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Haynes Downard LLP May 22,

6 CITY OF JASPER, ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2011 As management of the City of Jasper, Alabama (the "City"), we present this narrative overview and analysis designed to assist readers of the City's financial statements for the fiscal year ended September 30, Our discussion and analysis focuses on significant financial issues, provides an overview of the City's financial activity, identifies changes in the City's financial position, identifies any material deviations from the financial plan (the approved budget), and identifies individual fund issues or concerns. Financial Highlights The assets of the City exceed its liabilities at the close of the fiscal year ended September 30, 2011, by $8,164,969 (net assets). The portion of net assets that may be used to meet the City's ongoing obligations to citizens and creditors (unrestricted net assets) reflects a deficit of $4,177,514. The deficit is primarily the result of the reporting of the OPEB obligation as required by GASB No. 45. The City's total net assets increased by $3,391,332 in fiscal The factor that most influenced this increase was the City's success in reducing operational costs and obtaining grant revenue. The City's total net capital assets increased by $2,912,374 in fiscal This increase was mainly attributable to construction of an access road at the industrial park. As of the close of the current fiscal year, the City's governmental funds reported combined fund balances of $1,283,730, a decrease of $555,552 from the prior year. All of this amount is available for spending at the City's discretion (unreserved fund balances). At the end of the current fiscal year, the unreserved fund balance of the General Fund (the City's primary operating fund) was a deficit of $60,475. The City's net long-term debt decrea$ed by $1,068,380, or 14.39%, primarily resulting from principal payments. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The City's basic financial statements are comprised of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. 3

7 CITY OF JASPER, ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2011 Government-wide Financial Statements The government-wide financial statements are designed to provide readers with an overview of the City's finances, in a manner similar to private-sector business. The statementof net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. This statement combines governmental funds' current financial resources with capital assets and long-term obligations. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement ofactivities presents information focused on functions, and shows how the City's net assets changed during the most recent fiscal year. This is intended to summarize and simplify the user's analysis of revenue and expenses of various governmental services and/or subsidies to various business-type activities. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused employee leave). Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to typically recover all or a significant portion of the cost of operation, including depreciation, through user fees and charges for services (business-type activities). The governmental activities of the City include general government, public safety, public works, recreation and cultural services, and non-departmental. The business-type activities of the City reflect private sector type operations and include cemeteries. The government-wide financial statements include not only the City itself (known as the primary governmenf), but also the activities of its component units. the Jasper City Board of Education and the Industrial Development Board of the City of Jasper, Alabama. A component unit is a legally separate organization over which the City can exercise influence and/or may be obligated to provide financial subsidies. The focus of.the statements is clearly on the primary government and the presentation allows the readers to address the City's relative relationship with the component units. The Board of Education and the Industrial Development Board issue complete financial statements, which may be obtained by contacting the entities directly. Fund Financial Statements Traditional users of governmental financial statements will find the Fund Financial Statements presentation more familiar. The focus is on the City's major funds rather than the City as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental, proprietary, and fiduciary are the three categories of fund types. 4

8 CITY OF JASPER, ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2011 Fund Financial Statements - Continued Governmental Funds - The City of Jasper maintains three individual major governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the alcohol tax fund, and the project fund. Data from other governmental funds are combined into a single, nonmajor governmental funds aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. For management control of expenditures, the City adopts an annual appropriated budget for all funds. A budgetary comparison statement has been provided as required supplementary information for the City's major governmental funds to demonstrate compliance with their budgets. Proprietary Funds - The City of Jasper maintains two proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to provide for separate information for the two cemeteries, each of which is considered a major fund of the City. Fiduciary Funds -Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support City programs. Notes to the Financial Statements The notes to the financial statements provided in this report convey additional essential information that will magnify the readers' understanding of the data in the government-wide and fund financial statements. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning budgetary comparisons and the City's progress in funding its obligations to provide pension benefits to its employees. The combining fund statements and schedules are presented immediately following the required supplementary information. 5

9 CITY OF JASPER/ ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30/ 2011 Government-wide Financial Analysis Condensed Statement of Net Assets as of September 30/2011 and 2010 Governmental Business-type Total Activities Activities Primary Government Current and other assets $3,632,874 $3,175,343 $271,769 $286,572 $3,904,643 $3,461,915 Capital assets 18,406,436 15,492, , ,413 18,683,760 15,770,630 Total assets 22,039,310 18,667, , ,985 22,581,119 19,232,545 Other liabilities 2,399,379 2,602, ,713 2,399,379 2,738,654 Long-term liabilities 11,804,143 11,607, , ,534 12,016,771 11,722,707 Total liabilities 14,203,522 14,210, , ,247 14,416,150 14,461,361 Net assets: Invested in capital assets, net of related debt 12,172,168 8,202, , ,379 12,349,767 8,351,475 Unrestricted (deficit) (4,336,380) (3,744,650) 158, ,359 (4,177,514) (3,580,291) Total net assets $7,835,788 $4,457,446 $329,181 $313,738 $8,164,969 $4,771,184 The City's total assets were $22,581,119 as of September 30, Of this amount, $18,683,760 is accounted for by capital assets, which includes infrastructure. Of the remaining City assets, $2,641,062 is accounted for in cash and cash equivalents, $993,143 in accounts receivable, $24,300 in liens receivable, and the remainder spread among miscellaneous assets. At September 30, 2011, the City had outstanding liabilities of $14,416,150, of which $12,016,771 was long-term. Long-term liabilities include warrants and notes payable, compensated absences, accrued landfill closure and post closure care costs, and the OPES obligation. Of the total amount outstanding approximately $1,242,251 was due within one year, with the remainder due at various dates before Included in other liabilities in the above table are $2,349,144 in accounts payable and other current liabilities and $50,235 in accrued interest payable. The largest portion of the City's net assets reflects its investment in capital assets, less any outstanding related debt used to acquire those assets. The City's capital assets are used to provide services to citizens. Consequently, investments in capital assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The remaining unrestricted net assets reflects a deficit of $4,177,514. This deficit is primarily the result of recording the OPES obligation of $3,977,207. 6

10 CITY OF JASPER, ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2011 Condensed Statement of Activities For the Years Ended September 30, 2011 and 2010 Revenues Program revenues: Governmental Business-Type Total Activities Activities Primary Government Charges for services $2,249,545 $2,325,083 $19,702 $18,506 $2,269,247 $2,343,589 Grants/contributions 5,048, ,774 5,048, ,774 General revenues: Property taxes 3,025,305 3,046,786 3,025,305 3,046,786 sales taxes 8,403,156 8,156,345 8,403,156 8,156,345 Other taxes 1,974,684 2,619,815 1,974,684 2,619,815 Ucenses and perrms 3,069,015 2,990,191 3,069,015 2,990,191 Other general revenue 237, ,436 3,802 2, , ,841 Total revenues 24,007,503 19,653,430 23,504 20,911 24,031,007 19,674,341 Expenses Governrrental activities: 'General governrrent 2,408,106 2,699,027 2,408,106 2,699,027 Public safety 6,145,001 5,963,745 6,145,001 5,963,745 Public works 3,963,848 3,498,769 3,963,848 3,498,769 Recreation and cultural 2,375,935 2,340,022 2,375,935 2,340,022 Non-departrrental 5,508,692 4,051,648 5,508,692 4,051,648 Interest on long-term debt 227, , , ,866 Business-type activities: Cerreteries 7,539 13,610 7,539 13,610 other 2,975 4,848 2,975 4,848 Total expenses 20,629,161 18,800,077 10,514 18,458 20,639,675 18,818,535 Net Increase (Decrease) $ 3,378,342 $ 853,353 $ 12,990 $ 2,453 $ 3,391,332 $ 855,806 Total revenues for the City were $24,031,007 for the year ended September 30, Governmental activities provided $24,007,503 or 99.9%, while $23,504 of business-type activities revenue was provided by charges for services and interest income. The governmental activities received $8,403,156, or 35.0% of total revenue, from sales taxes and $3,069,015, or 12.78% of total revenue, from business licenses and permits. 7

11 Governmental Funds CITY OF JASPER, ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 3D, 2011 Fund Financial Analysis In the current fiscal year, the City adopted GASB Statement No. 54 which prescribes several new classes of governmental fund balance. As of year-end, the governmental funds reported an unassigned fund balance of $1,283,730 or 30.20% lower than the beginning of the year balance of $1,839,282. The General Fund decreased in fund balance from $352,127 to $(60,475). Enterprise Funds The City operates the New Prospect Cemetery and the North Oakhill Cemetery. Lots are sold for $250 each at New Prospect and $600 each at North Oakhill. The City normally charges New Prospect $1,000 for each mowing. The cemeteries will generally operate with a small profit each year, largely as a result of interest income from a certificate of deposit owned by North Oakhill Cemetery. This year New Prospect Cemetery recorded loss from operations of $110 and North Oakhill Cemetery recorded income from operations of $12,273. Budgetary Highlights The following is a brief review of the budgeting changes from the original to the final budget for the General Fund. Salaries were increased $220,547 in certain departments. Certain departments increased repairs and maintenance due to overages. Sales tax revenue was increased totaling $279,441 for the fiscal year. Grant revenue from FEMA was added due to disaster in the amount of $669,173. Capital Assets and Debt Administration Capital Assets capital Assets As of September 3D, 2011 and 2010 (Net of Depreciation) Governmental Business-Type Total Activities Activities Primary Government Land $ 1,739,473 $ 1,739,473 $122,500 $122,500 $ 1,861,973 $ 1,861,973 Construction in process 2,626,429 2,626,429 BUildings 5,414,285 5,097,491 5,414,285 5,097,491 Equiprrent 3,529,433 3,654, , ,385 3,676,973 3,803,594 Infrastructure 5,096,816 5,001,044 5,096,816 5,001,044 Total $ 18,406,436 $15,492,217 $270,040 $271,885 $18,676,476 $15,764,102 8

12 Capital Assets - Continued CITY OF JASPER, ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2011 This investment in capital assets includes land, buildings, improvements other than buildings, system improvements (drainage and streets) machinery and equipment, park facilities, roads, highways, and bridges. The total increase in the City's investment in capital assets for the current fiscal year was $2,912,374 (an increase of $2,914,219 for governmental activities and a decrease of $1,845 for business-type activities). Major capital asset events during the current fiscal year included the following: Construction of an access road at the industrial park totalling $2,626,429 Purchase of equipment for the police department in the amount of $466,937 Development of sidewalks, lighting and landscaping in the amount of $209,610 Debt Administration As of year-end, the City had $6,354,200 in debt (bonds, notes, etc.) outstanding compared to the $7,422,580 at the end of last year, a $1,068,380 decrease. Outstanding Debt at Year-End GovernmentaI: 2003 Bond Issue $ $ 205, B Bond Issue 505, , Bond Issue 74, , Bond Issue 456, , B Bond Issue 32,916 50, C Bond Issue 118, , Bond Issue 4,805,000 5,430,000 Deferred amounts 20,207 17,075 Bank Loans 241, ,000 Business-Type: 2006-B Bond Issue 99, ,384 Total Debt $ 6,354,200 $ 7,422,580 The Business-Type debt activity occurred during 2007 totaling $160,534 of the 2006-B Bond Issue used to purchase land to establish the North Oakhill Cemetery. Current year activity consisted only of payment ofthe Cemetery's portion ofthe 2006-B Bond. There were no new borrowings during the year. 9

13 CITY OF JASPER, ALABAMA MANAGEMENT'S DISCUSSION AND ANALYSIS SEPTEMBER 30, 2011 Economic Factors The City of Jasper is largely dependent upon its sales tax revenue for growth in income. In periods of economic decline! the City is faced with increasing taxes! licenses, or user charges as a means to increase revenue or reducing expenses in the form of reductions in services or employee reductions. Financial Contact The City's financial statements are designed to present users (citizens! taxpayers! customers, investors! and creditors) with a general overview of the City's finances and to demonstrate the City's accountability. If you have questions about the report or need additional financial information! contact the City Clerk on the second floor of City Hall! 400 West 19 th Street, Post Office Box 1589, Jasper, Alabama

14 BASIC FINANCIAL STATEMENTS

15 STATEMENT OF NET ASSETS CITY OF JASPER SEPTEMBER 30/ 2011 Primary Government Component Units Industrial Jasper City Dev. Board Governmental Business-Type Board of of the City of Activities Activities Total Education Jasper, Alabama Assets Cash and cash equivalents $ 2,371,194 $ 269,868 $ 2,641,062 $ 3,462,865 $ 162,596 Investments 8,658,968 Receivable, net 991,242 1, ,143 2,741, ,444 Liens receivable 24,300 24,300 Accrued interest receivable 72,676 Internal balances 48, Inventories and prepaids Capital assets, net Non-depreciable 4, , , Depreciable 14,040, ,540 14,188,074 11,813,757 6,929,604 Total assets $ 22,039,310 $ 541,809 $ 22,581,119 $ 29,119,361 $ 8,056,644 Liabilities Accounts payable $ 1,951,923 $ $ $ 1, Deferred revenue ,081 1, $ Accrued interest payable Due to other governments Noncurrent liabilities: Due within one year 1,225,768 16,483 1, Due in more than one year 10,578, ,145 10,774,520 54,642 1,585,128 Total liabilities 14,203, ,628 14,416,150 3,703,043 3,303,583 Net Assets Invested in capital assets net of related debt 12, , , ,626,021 Restricted Capital projects Unrestricted (4,336,380) 158,866 (4,177,514) 5,228,229 1,127,040 Total net assets $ 7,835,788 $ 329,181 $ 8,164,969 $ 25,416,318 $ 4,753,061 :See accompanying notes. 11

16 STATEMENT OF ACTIVmES CITY OF JASPER FOR THE YEAR ENDING SEPTEMBER 30, 2011 Net Revenue (Expense) and Changes in Net Assets Program Revenues Primary Government Component Units Industrial Charges for Program Grants and Capital Grants and Governmental Business- Type Jasper City Board of Development Board of the Expenses Services Contributions Contributions Activities Activities Total Education City of Jasper Primary Government: Governmental activities: General government $ (2,408,106) $ - $ 31,576 $ 3,640,925 $ 1,264,395 $ - $ 1,264,395 $ $ Public safety (6,145,001) 633,405 1,135,790 (4,375,806) (4,375,806) Public works (3,963,848) 1,406,145 (2,557,703) (2,557,703) Recreation and cultural services (2,375,935) 209,995 20, ,450 (1,926,092) (1,926,092) Non-departmental (5,508,692) (5,508,692) (5,508,692) Interest on long-term debt (227,579) (227,579) (227,579) Total governmental activities (20,629,161) 2,249,545 51,974 4,996,165 (13,331,477) (13,331,477) Business-type activities: Cemeteries (7,539) 19,702-12,163 12,163 Interest on long-term debt (2,975) - (2,975) (2,975) Total business-type activities (10,514) 19,702 9,188 9,188 Total primary government $ (20,639,675) $ 2,269,247 $ 51,974 $ 4,996,165 (13,331,477) 9,188 (13,322,289) Component Units Jasper City Board of Education $ (27,382,847) $ 2,063,188 $ 15,614,109 $ 635,468 (9,070,082) Industrial Development Board $- (603,876) $ 351,164 $ - $ (252,712) General Revenues: Taxes: Sales and use tax 8,403,156 8,403,156 6,322,172 Property tax 3,025,305 3,025,305 1,635,139 License and permits 3,069,015 3,069, ,000 other taxes 1,974,684 1,974, , ,531 Investment earnings 3,048 3,802 6, , other general revenues 234, , ,274 Transfers Total general revenues and transfers 16,709,819 3,802 16,713,621 9,186, ,151 Change In net assets 3,378,342 12,990 3,391, , ,439 Net assets - beginning 4,457, ,191 4,773,637 25,299,601 4_,247,622 See accompanying notes. Net assets - ending $ 7,835,788 $ 329,181 $ 8,164,969 $ 25,416,318 $ 4,753,061 = 12

17 BALANCE SHEET GOVERNMENTAL FUNDS CITY OF JASPER SEPTEMBER 30, 2011 Other Total Major Funds Govern- Govern- Alcohol Project mental mental General Fund Fund Funds Funds Assets Cash and cash equivalents $ 938,180 $ 58[200 $ 595[422 $ 779[392 $ 2[371[194 Receivables[ net 866,256 66[854 58[ [242 Liens receivable 24[300 24[300 Due from other funds 251,560 85[826 11[ [ [460 Inventories and prepaids 197[ [593 Total assets $ 2[277,889 $ 144,026 $ 673[283 $ 1[413,591 $ 4[508[789 Liabilities and Fund Balance Liabilities Accounts payable $ 1[631[805 $ 50[000 $ 60[579 $ 209[539 $ 1[951[923 Due to other funds 476[ [ , [915 Due to other governments 127[ [140 Deferred revenue 230,194 39, [081 Total liabilities 2[338[364 50[ [ [723 3[225[059 Fund Balance Unassigned (60[475) 94, [ [868 1[283[730 iotal fund balance (60,475) 94[ , [868 1,283J30 iotai liabilities and fund balance $ 2[277,889 $ 144,026 $ 673)83 $ 1[413,591 $ 4,508,789 See accompanying notes. 13

18 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO STATEMENT OF NET ASSETS CITY OF JASPER SEPTEMBER 30, 2011 Fund Balances - total governmental funds $ 1,283,730 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not current financial resources and therefore are not reported in the governmental funds balance sheet. Governmental capital assets Less accumulated depreciation 41,035,533 (22,629,097) 18,406,436 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the governmental funds balance sheet. Governmental bonds payable and loans payable Current year accrued interest Accrued landfill closure and postclosure costs Compensated absences OPEB obligation (6,234,268) (50,235) (53,334) (1,502,762) (3,993,572) (11,834,171) Advance bond refunding gains and losses cannot be expensed, but must be deferred and amortized over the remaining life of the old debt or the life of the new debt, whichever is shorter. Advance refunding call premium Bond discount 78,246 (98,453) (20,207) Net assets of governmental activities $ 7,835,788 See accompanying notes. 14

19 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS CITY OF JASPER FOR THE YEAR ENDED SEPTEMBER 30, 2011 Other Total Major Funds Govern- Govern- Alcohol Project mental mental General Fund Fund Funds Funds Revenues Taxes $ 12,460,257 $ 786,216 $ $ 156,672 $ 13,403,145 Interest ,131 3,048 Licenses and permits 3,026,112 42,903 3,069,015 Fines and forfeitures 398, , ,656 Intergovernmental 814,151 89, ,784 Charges and fees 287,167 1,343,601 1,630,768 Rental income 27,121 27,121 Grant proceeds & donations 3,815,739 3,815,739 Miscellaneous 23, , , ,227 Total revenues 17,036, ,588 1,522,422 4,618,521 24,007,503 Expenditures Current: General government 1,911, ,306 19,325 1,941,556 Public safety 5,709,891 6,874 22,874 5,739,639 Public works 3,712,172 17,000 3,729,172 Recreation and cultural services 1,996,820 33,601 34,495 2,064,916 Nondepartmental 2,800,822 2,800,822 Intergovernmental 2,488,049 50,000 2,538,049 Debt service: principal 127, , ,341 1,183,200 Interest and other charges 40, , ,875 Capital outlay 21, ,720 4,161,464 4,331,826 Total expenditures 18,768,561 50, ,468 5,340,919 24,563,055 Excess (deficiency) of revenue over expenditures (1,731,589) 779,481 1,118,954 (722,398) (555,552) Other Financing Sources (Uses) l'ransfer in 1,323,792 1,271,222 2,595,014 l'ransfer out (4,805) (913,991) (1,126,298) (549,920) (2,595,014) Net other financing sources (uses) 1,318,987 (913,991) (1,126,298) 721,302 Net Change in Fund Balance (412,602) (134,510) (7,344) (1,096) (555,552) Beginning Fund Balance 352, , , ,964 1,839,282 Ending Fund Balance $ (60,475) $ 94,026 $ 337,311 $ 912,868 $ 1,283,730 See accompanying notes. 15

20 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVTIES CITY OF JASPER FOR THE YEAR ENDED SEPTEMBER 30, 2011 Net change in fund balances - total governmental funds $ (555,552) Amounts reported for governmental activities in the statement of activities are different because: 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 4,327,234 (1,413,015) 2,914,219 Some expenses reported in the statement of activities differ from amounts reported as expenditures in governmental funds Compensated absences Increase in OPEB obligation Accrued interest Amortization of issuance costs, premiums, etc. Accrued closure and post closure costs Bond proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of bond 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 by which proceeds exceeded repayments. 213,016 (356,170) 9,428 (3,132) (26,667) (163,525) Principal payments 1,183,200 1,183,200 3,933,894 Change in net assets of governmental activities $ 3,378,342 5ee accompanying notes. 16

21 STATEMENT OF NET ASSETS PROPRIETARY FUNDS CITY OF JASPER SEPTEMBER 30, 2011 Enterprise Fund New North Prospect Oakhill Cemetery Cemetery Total Business-Type Activities Assets Current Assets: Cash and cash equivalents Accrued interest receivable Total current assets $ 241,396 1, ,297 $ 28,472 28,472 $ 269,868 1, ,769 Noncurrent Assets: Capital assets Land Equipment and improvements Less: accumulated depreciation Total noncurrent assets Total Assets 122, ,500 30, , , , , ,975 (26,297) (28,638) (54,935) 126, , ,040 $ 370,148 $ 171,661 $ 541,809 Liabilities Due to other funds $ $ $ Noncurrent Liabilities: Due within one year: Bonds payable Due in more than one year: Deferred revenue Bonds payable Total Liabilities Net Assets Invested in capital assets, net of related debt Unrestricted Net Assets 16,483 16, , ,903 83,242 83,?42 112,903 99, , ,851 43, , ,394 28, ,866 $ 257,245 $ 71,936 $ 329,181 See accompanying notes. 17

22 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS CITY OF JASPER FOR THE YEAR ENDED SEPTEMBER 30, 2011 Enterpise Fund New North Total Prospect Oakhill Business-Type Cemetery Cemetery Activities Operating Revenues Sale of lots $ 250 $ 18,000 $ 18,250 Annual upkeep 1,452 1,452 Total operating revenues 1,702 18,000 19,702 Operating Expenses Depreciation 1,557 5,727 7,284 Repairs and maintenance Total operating expenses 1,812 5,727 7,539 Income (Loss) from operations (110) 12,273 12,163 Nonoperating Revenues (Expenses) Interest expense (2,975) (2,975) Interest income 3, ,802 Total Nonoperating Revenues (Expenses) 3,764 (2,937) 827 Changes in net assets 3,654 9,336 12,990 filet assets - Beginning 253,591 62, ,191 Net assets - Ending $ 257,245 $ 71,936 $ 329,181 See accompanying notes. 18

23 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS CITY OF JASPER FOR THE YEAR ENDED SEPTEMBER 30, 2011 Enterprise Fund New North Total Prospect Oakhill Business-Type Cemetery Cemetery Activities Cash Flows from Operating Activities Receipts from sales of lots $ 250 $ 18,000 $ 18,250 Receipts for annual upkeep 1,452 1,452 Expenditures for upkeep (255) (255) Advances repaid to other funds (1,000) (1,000) Net Cash Provided (Used) by Operating Activities ,000 18,447 Cash Flows from Investing Activities Cash received from interest earnings 3, ,802 Net Cash Provided by Investing Activities 3, ,802 Cash Flows from Capital and Related Financing Activities Purchase of capital assets (5,439) Principal paid on long-term debt (15,659) (15,659) Cash paid for interest expense (2,975) (2,975) Net Cash Used by Capital and Related Financing Activities (5,439) (18,634) (24,073) Net (Decrease) in Cash (1,228) (596) (1,824) Cash and Cash Equivalents - Beginning 242,624 29, ,692 Cash and Cash Equivalents - Ending $ 241,396 $ 28,472 $ 269,868 Reconciliation of Operating Income to Net Cash Provided by (used in) Operating Activities Operating income (loss) $ (110) $ 12,273 $ 12,163 Depreciation expense 1,557 5,727 7,284 Due to other funds (1,000) (1,000) Net Cash Provided by Operating Activities $ 447 $ 18,000 $ 18,447 See accompanying notes. 19

24 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS CITY OF JASPER SEPTEMBER 30, 2011 Assets Cash and cash equivalents $ Private Purpose Trust 32,963 Liabilities Due to other funds 48,545 Net Assets Held in trusts for individuals $ (15,582) See accompanying notes. 20

25 NOTES TO FINANCIAL STATEMENTS CITY OF JASPER, ALABAMA SEPTEMBER 30, 2011 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The City of Jasper[ Alabama (the "City") operates under a Mayor-Council form of government. The City's major operations include police and fire protection[ parks[ library and recreation[ public works[ and general administrative services. In addition[ the City owns and operates two cemeteries. The City's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GMp l ) as applied to governmental units. The Governmental Accounting Standards Board (ngasb") is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The GASB periodically updates its codification of the existing Governmental Accounting and Financial Reporting Standards which[ along with subsequent GASB pronouncements (Statements and Interpretations)[ constitutes the ultimate authority on GMP for state and local governmental units. Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30[ 1989 (when applicable) that do not conflict with or contradict GASB pronouncements. Although the City has the option to apply FASB pronouncements issued after that date to its business-type activities and enterprise funds[ the City has chosen not to do so. The more significant accounting policies established by GMP and used by the City are discussed below. As required by GMP[ these financial statements present the City and its component units[ separate legal entities for which the City is considered to be financially accountable. The City has no blended component units. On the other hand[ the City does have two discretely presented component units. The Jasper City Board of Education has a September 30 year end[ and the Industrial Development Board of the City of Jasper[ Alabama has a December 31 year end. Jasper City Board of Education - Five members of the Board of Education are appointed by the City and the Board of Education as an agency of the State of Alabama under the general supervision and financial jurisdiction of the Alabama State Department of Education. The City is obligated in some manner for the debt of the Board of Education and the City levies a sales tax specifically for operations of the Board of Education. Complete financial statements for the Jasper City Board of Education may be obtained at the following administrative office: Jasper City Board of Education[ th Street West[ P.O. Box 500[ Jasper[ Alabama Industrial Development Board of the City of Jasper, Alabama - The Industrial Development Board's board members are appointed by the City and the City is obligated in some manner for the debt of the Industrial Development Board. Complete financial statements for the Industrial Development Board may be obtained at the following administrative office: Industrial Development Board[ P.O. Box 972[ Jasper[ Alabama

26 NOTES TO FINANCIAL STATEMENTS CITY OF JASPER, ALABAMA SEPTEMBER 30, 2011 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Related Organizations - The City is also responsible for appointing a voting majority of the boards of other organizations, but the City's financial accountability for these organizations does not extend beyond making the appointments, or the financial resources and obligations of these organizations are immaterial. The City appointed a voting majority of the following boards: Jasper Water Works and Sewer Board, Inc., City of Jasper Library Board, City of Jasper Housing Authority, City of Jasper Board of Zoning Adjustments, City of Jasper Housing Authority, and City of Jasper Medical and Public Building Authority. These organizations are related organizations, which have not been included in the reporting entity. Government-Wide and Fund Financial Statements The City's basic financial statements include both government-wide and fund financial statements. Government-wide financial statements focus on the City as a whole, and are designed to allow the users of financial reports to assess the City's operational accountability. The fund financial statements focus on major individual funds, and are designed to demonstrate the City's fiscal accountability. Operational accountability refers to the City's responsibility to report the extent to which it has met its operating objectives efficiently and effectively, using all resources available for that purpose, and whether it can continue to meet those objectives for the foreseeable future. Fiscal accountability is the City's responsibility to demonstrate that its actions in the current period have complied with public decisions concerning the raising and spending of public money in the short term (usually one budgetary cycle or one year). For the most part, the effect of interfund activity has been removed from the government-wide financial 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. The government-wide statement of activities reflects both the gross and net costs per functional category (i.e., general government, public safety, etc.) by offsetting direct expenses with 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 function, and 2) operating or capital grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. The fund financial statements provide separate financial statements for governmental funds, proprietary funds and fiduciary funds (even though fiduciary funds are excluded from the government-wide financial statements). The emphasis of the fund financial statements is on the City's major funds, and each major fund is reported in a separate column. Non-major funds of each type are summarized into a single column. 22

27 NOTES TO FINANCIAL STATEMENTS CITY OF JASPER, ALABAMA SEPTEMBER 3D, 2011 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Measurement FOcus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurementfocus and the accrualbasis ofaccounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when the related liability is incurred. Property taxes are recognized as revenues in the year they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis ofaccounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred. However, debt service expenditures! as well as expenditures related to compensated absences and claims and judgments! are recorded only when payment is due. Property taxes! sales and use taxes! beer taxes! lodging taxes! rental and leasing taxes! payments in lieu of taxes! intergovernmental revenue and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal year. All other revenues are considered to be measurable and available only when cash is received by the City. The City reports the following major governmental funds: General Fund - The General Fund is the main operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. 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. Alcohol Fund - The Alcohol Fund is a Special Revenue Fund used to account for the revenue collected from the sale of alcoholic beverages within the City. There are no restrictions on the use of these funds. This fund is used to purchase capital outlay items! pay debt service! provide education funds, and provide funds for payment of lawsuits. It also currently pays the cost of an inspection officer. Project Fund - The Project Fund is a Special Revenue Fund established to account for garbage service provided by the City. Garbage fees collected from businesses and residents are deposited into this fund. The fees collected for garbage service are used to pay for certain garbage expenses and capital improvements.

28 NOTES TO FINANCIAL STATEMENTS CITY OF JASPER, ALABAMA SEPTEMBER 3D, 2011 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Measurement FOcus, Basis of Accounting, and Financial Statement Presentation Continued The City reports the following major proprietary funds to account for the activities associated with the respective cemeteries: New Prospect Cemetery North Oakhill Cemetery Additionally, the City reports the following fund types: Special Revenue Funds - The City's nonmajor special revenue funds are used to account for resources that are legally restricted to expenditure for specific purposes, not including those accounted for in capital projects funds. Debt Service Funds - Debt service funds account for the payment of principal and interest on long-term debt not financed by proprietary funds. capital Projects Funds - The City's nonmajor capital projects funds account for the costs of constucting or acquiring capital assets and major improvements other than those financed by proprietary funds. Fiduciary Funds: Fiduciary Funds are used to report assets held in a trustee or agency capacity for others and therefore are not available to support City programs. The reporting focus is on net assets and changes in net assets and is reported using accounting principles similar to proprietary funds. The City's fiduciary fund is presented in the fiduciary fund financial statements by type. Since by definition these assets are being held for the benefit of a third party (other private parties) and cannot be used to address activities or obligations of the government, this fund is not incorporated into the government-wide statements. The City maintains the following fiduciary fund: Hazardous Duty Pay - In 1992 the Legislature of the State of Alabama enacted a bill enabling the City of Jasper to levy additional court costs and charges of twelve dollars ($12) upon any criminal or civil case whose jurisdiction is in the City of Jasper Municipal Court of the 14 th Judicial Circuit. The legislative act requires that money collected from these charges be placed in a special fund know as the Hazardous Duty Pay Fund. As funds are available, each police officer is entitled to hazardous duty pay of $150 per month, and each jailer is entitled to $100 per month. Funds are transferred into the Hazardous Duty Pay Fund as court costs are collected, and funds are transferred out as payroll to the police officers and jailers. 24