TOWN OF SOUTH PALM BEACH, FLORIDA

Transcription

1 COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2010

2 COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2010 PREPARED BY FINANCE DEPARTMENT

3 TABLE OF CONTENTS Introductory Section Letter of Transmittal... i-iv Organizational Chart...v Certificate of Achievement for Excellence in Financial Reporting... vi Financial Section Independent Auditors Report Management s Discussion and Analysis (Required Supplementary Information) Basic Financial Statements Government-wide Financial Statements Statement of Net Assets...13 Statement of Activities...14 Fund Financial Statements Governmental Fund Financial Statements Balance Sheet...15 Statement of Revenues, Expenditures and Changes in Fund Balance...16 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance of the Governmental Fund to the Statement of Activities...17 Proprietary Fund Financial Statements Statement of Net Assets...18 Statement of Revenues, Expenses and Changes in Net Assets...19 Statement of Cash Flows...20 Notes to Basic Financial Statements Required Supplementary Information (Other than MD&A) Budgetary Comparison Schedule General Fund...35 Note to Budgetary Comparison Schedule...36

4 TABLE OF CONTENTS Statistical Section Net Assets by Component...37 Changes in Net Assets...38 Fund Balances of Governmental Funds...39 Changes in Fund Balances of Governmental Funds...40 General Governmental Tax Revenues by Source...41 Net Assessed Value and Estimated Actual Value of Taxable Property...42 Property Tax Rates Direct and Overlapping Governments...43 Principal Property Taxpayers...44 Property Tax Levies and Collections...45 Ratios of Outstanding Debt by Type...46 Ratios of General Bonded Debt Outstanding...47 Direct and Overlapping Governmental Activities Debt...48 Pledged Revenue Coverage...49 Demographic and Economic Statistics...50 Principal Employers...51 Full-Time Equivalent Town Government Employees by Function...52 Operating Indicators by Function/Program...53 Capital Asset Statistics by Function/Program...54 Compliance Section Independent Auditors 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 Management Letter in Accordance with the Rules of the Auditor General of the State of Florida

5 INTRODUCTORY SECTION 1

6 TOwN of SoUTH PnI-v BencH 3577 South Ocean Boulevard, South Palm Beach, Florida (561) Fax (561) March 14,2010 To the Honorable Mayor, Members of the Town Council and Citizens of the Town of South Palm Beach: The Government Finance Officers Association (GFOA) recommends that all units of local government publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with auditing standards generally accepted in the United States and in accordance with Govemment Auditing Standards by a firm of licensed certified public accountants. Pursuant to that recommendation, we hereby issue the comprehensive annual financial report of the Town of South Palm Beach for the fiscal year ended September 30, This report consists of management's representation concerning the finances of the Town of South Palm Beach. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Town of South Palm Beach has established a comprehensive internal framework that is designed both to protect the Town's assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the Town of South Palm Beach's financial statements in conformity with GA.AI'}. Because the cost of intemal controls should not outweigh their benefits, the Town of South Palm Beach's comprehensive framework of intemal controls has been designed to provide reasonable, rather than absolute, assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The firm of Marcum LLP, licensed certified public accountants has audited the Town of South Palm Beach's financial statements. The goal of the independent audit was to provide reasonable assurance that the basic financial statements of the Town of South Palm Beach for the fiscal year ended September 30, 2010, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amount and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based upon the audit, that there was a reasonable basis for rendering an -l-

7 unqualified opinion that the Town of South Palm Beach's financial statements for the fiscal year ended September 30,2010, are fairly presented in conformity with GAAP. The independent auditor's report is presented as the fust component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to complementhe MD&A and should be read in conjunction with it. The Town of South PaIm Beach's MD&A can be found immediately following the report of the independent certified public accountants in the financial section and provides a narrative introduction, overview and analysis of the basic financial statements. Profile of the Government The Town of South Palm Beach, incorporated in 1955, is a small community on one of South Florida's barrier islands frve eighths of a mile in length located on US highway AlA. The Town is comprised of 1,853 housing units, of which only 4 are single family homes, the balance are condominium apartrnents. Because of the Town's unique location and beauty, its own police force and a dedicated and well-trained professional staff, property values in the Town are above average for Palm Beach County. Local access to the Town is by two nearby bridges across the inta coastal waterway; Ocean Avenue to the south, and Lake Worth Road to the north. The Town of South Palm Beach began operating with a Town adminisfiator in 1982 and changed the form of governmento a Town Manager in Policymaking and legislative authority are vested in a governing council consisting of the mayor and four other council members. The Council is responsible among other things, for passing ordinances and resolutions, adopting the annual budget and appointing the Town Manager. The Town Manager is responsible for carrying out the policies and ordinances of the Council, and overseeing the daily operations of the government. The Town of South Palm Beach ofiflers a range of services, including police protection, building, zoning and planning, code enforcement and cultural activities. County wide services include fire rescue, corrections rehabilitation, judicial administration, Palm Tran, public health, air quality resources, human and social services, the airport, and the SherifPs office. Palm Beach County is the regional government for all cotrnty residents. The annual budget serves as a foundation for the Town of South Palm Beach's financial planning and conhol. Deparftnents of the Town are required to submit requests for appropriations to the Town Manager and these requests are the initiation of developing the proposed budget. The Town Manager then presents a proposed budget to the Council for review. The Council is required to hold public hearings on the proposed budget and to adopt a final budget no later than September 30, the close of the Town's fiscal year. The appropriated budget is prepared by fund and departrnent. The Town Council approves supplemental appropriations. Budget to actual comparisons are provided in this report for the general fund for which an appropriated annual budget has been adopted. The general fund, budget to actual report, is presented in the required supplemental information sebtion of this report. -ll-

8 Factors Affecting X'inancial Condition The information presented in the financial statements is best understood when it is considered from the broader perspective of the specific environment with which the Town of South Palm Beach operates. Local Economy The Town of South Palm Beach has suffered the same economic downturn that has affected all of Florida. The Town has also experienced a decline in assessed taxable value of property. However, this exclusive community is comprised of well-educated and involved citizens who take a genuine interest in the goveming aspects of their Town. The Town is comprised of exclusive residential housing stock. There are no industrial or corlmercial uses in the community with the exception of a nonconforming 58 unit motel on the ocean. Long-term Financial Planning The Town utilizes a comprehensive living projection three years into the future to assess revenue trends and expenditure needs to assure a balanced stable financial progftm while addressing the various goals and objectives of the community. Cash Management Policies and Practices The Town's Cash Management strategy emphasizes immediate funds collection and deposit into the appropriate fund utilizing automated clearing house debit (ACH debit) or wire transfer methods in over 90%of all funds received. Currently the Town's investment policy follows Chapter 218, Florida Statutes. Cash in any of the fund's operating accounts are closely monitored to maximize interest earning potential. Surplus cash is invested with the BB&T, and SunTrust and are withdrawn to cover expenditures only as needed. Investment objectives are the preservation of principal, liquidity in accordance with planned cash flows, and return on invesfrnent in that order. Risk Management The Town is exposed to various risks of loss related to torts, theft or damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Town participates in the Florida League of Cities Municipal lnsurance Trust for workers' compensation, liability and property insurance with deductibles of up to $5,000 per claim. Flood insurance is provided by the Florida State Flood Insurance Pool. Pension and Other Post-Employment Benefits. The Town joined the Florida Retirement System (FRS) on January l, 2005 to provide post employment retirement benefits to its employees. The Town's required contribution ranges from 10.77% to 23.25Y of covered payroll, based on employee risk goups. In addition, the Town -lll-

9 sponsors a 457 deferred compensation plan in which any employee may contribute on a voluntary basis. Awards and Acknowledgements The Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of South Palm Beach for its Comprehensive Annual Financial Report (CAFR) for the fiscal year ended September 30,2009. This was the fourth year that the Town received this prestigious award. In order to be awarded a Certificate of Achievement, the government published an easily readable and effrciently organized CAFR. This report satisfied both GAAP and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. I believe the current CAFR continues to meet the Certificate of Achievement Program's requirements and am submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the effrcient and dedicated services of the entire staff of the Town of South Palm Beach. I would like to express my appreciation to all members of the Town staffwho assisted and contributed to the preparation of this report. Appreciation is also extended to the Mayor and the Town Council for their unfailing support for maintaining the highest standards of professionalism in the management of the Town of South Palm Beach's finances. Respectfu lly submitted, -) 9Veh.-- / (/ Rex Taylor Town Manager -lv-

10 ORGANIZATION CHART SEPTEMBER 30, 2010 v

11 vi

12 FINANCIAL SECTION

13 INDEPENDENT AUDITORS REPORT

14 INDEPENDENT AUDITORS REPORT Honorable Mayor and Members of the Town Council Town of South Palm Beach, Florida We have audited the accompanying financial statements of the governmental activities, the business-type activities and each major fund of the Town of South Palm Beach, Florida (the Town) as of and for the year ended September 30, 2010, which collectively comprise the Town s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Town's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Town s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and 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 financial position of the governmental activities, the business-type activities and each major fund of the Town of South Palm Beach, Florida, as of September 30, 2010 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 March 14, 2011, on our consideration of the Town 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 on internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1 Marcum LLP n 450 East Las Olas Boulevard n Ninth Floor n Fort Lauderdale, Florida n Phone n Fax marcumllp.com

15 Management s discussion and analysis and the required supplementary information on pages 3 to 12 and pages 35 and 36, respectively, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town s basic financial statements. The introductory section and the statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The information included in the introductory and statistical sections has not been subjected to auditing procedures applied by us in the basic financial statements and, accordingly, we do not express an opinion on them. Fort Lauderdale, FL March 14,

16 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A)

17 MANAGEMENT S DISCUSSION AND ANALYSIS As management of the Town of South Palm Beach, we offer readers of the Town of South Palm Beach s (the Town) financial statements this narrative overview and analysis of the financial activities of the Town of South Palm Beach for the fiscal year ended September 30, FINANCIAL HIGHLIGHTS The assets of the Town of South Palm Beach exceeded its liabilities at the close of the most recent fiscal year by $4,042,140 (net assets). The Town s total net assets increased by $77,393. This increase is attributable to excess revenues over expenses for As of the close of the current fiscal year, the Town of South Palm Beach s governmental fund reported an ending fund balance of $2,042,744. The Town did not incur any debt during the current fiscal year. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Town of South Palm Beach s basic financial statements. The Town of South Palm Beach s basic financial statements comprise 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. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town of South Palm Beach s finances, in a manner similar to a private sector business. The statement of net assets presents information on all of the Town of South Palm Beach s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the Town of South Palm Beach is improving or deteriorating. The statement of activities presents information showing how the government s net assets changed during the most recent fiscal year. 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 periods (e.g., uncollected taxes and earned but unused vacation leave). Both of the government-wide financial statements distinguish functions of the Town of South Palm Beach that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business type activities). The governmental activities of the Town of South Palm Beach include general government, public safety and code enforcement. The government-wide financial statements include only the Town of South Palm Beach itself (known as the primary government). 3

18 The government-wide financial statements can be found on pages 13 and 14 of this report. Fund financial statements. 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 Town of South Palm Beach, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The Town of South Palm Beach has two fund categories: the governmental fund and the enterprise fund. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statement focus on near-term inflows and outflows of spendable resources as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The Town of South Palm Beach maintains one governmental fund, the general fund. The Town of South Palm Beach adopts an annual appropriated budget for this fund. A budgetary Comparison schedule has been provided for this fund to demonstrate compliance with the budget. The basic governmental fund financial statements can be found on pages 15 to 17 of this report. Proprietary Funds. The Town maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town uses an enterprise fund to account for its Sewer Utility operations. Notes to the basic financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 21 to 34 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government s financial position. In this case, the Town s assets exceeded liabilities by $4,042,140 at the close of the most recent fiscal year. A portion of the Town s net assets, $1,479,214, reflects its investment in capital assets (e.g., land and equipment). The Town of South Palm Beach uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Further details on the Town s capital assets are disclosed in Note 5 to the financial statements found on pages 31 to 32 of this report. 4

19 Our analysis of the financial statements of the Town begins on the next page. The Summary of Net Assets and the Summary of Changes in Net Assets, report information about the Town s activities that will help answer questions about the position of the Town. A comparative analysis is provided with prior year information. NET ASSETS Below in Table A-1 is a Summary of the Town s Net Assets. Also below in Table A-2, is a Summary of Changes in Net Assets. There are six basic transactions that affect the comparability of the Statement of Net Assets summary presentation as reflected below: 1. Net results of activities will impact (increase or decrease) current assets and unrestricted and/or restricted assets. 2. Borrowing for capital will increase current assets and long-term debt. 3. Spending borrowed proceeds on new capital assets will reduce current assets and increase capital assets. There is a second impact, an increase in investment in capital assets and an increase in related debt, which will not change the investment in capital assets, net of debt. 4. Spending of non-borrowed current assets on new capital assets will reduce current assets and increase capital assets and will also reduce unrestricted net assets and increase investment in capital assets, net of debt. 5. Principal payment on debt will reduce current assets, reduce long-term debt, also reduce unrestricted net assets, and increase investments in capital assets, net of debt. 6. Reduction of capital assets through depreciation will reduce capital assets and investment in capital assets, net of debt. Table A-1 Town of South Palm Beach Net Assets Business-type Government Activities Activities Total Current assets $ 2,119,061 $ 2,089,925 $ 809,852 $ 678,833 $ 2,928,913 $ 2,768,758 Capital assets, net 911, , , ,826 1,479,214 1,559,393 Total Assets 3,030,120 3,041,492 1,378,007 1,286,659 4,408,127 4,328,151 Current liabilities 76,317 88, , , , ,448 Non-current liabilities 150, , , ,956 Total Liabilities 226, , , , , ,404 Net Assets: Invested in capital assets, net of related debt 911, , , ,826 1,479,214 1,559,393 Unrestricted 1,892,620 1,841, , ,671 2,562,926 2,405,354 Total Net Assets $ 2,803,679 $ 2,793,250 $ 1,238,461 $ 1,171,497 $ 4,042,140 $ 3,964,747 5

20 As illustrated in Table A-1, at the close of the most recent fiscal year, assets of the Town of South Palm Beach exceeded its liabilities by $4,042,140. The largest portion of the Town of South Palm Beach s assets, $2,562,926 or 63%, are unrestricted assets, which represent the resources that are available to provide services and/or additional capital assets to the citizens of the Town and also meet the Town s obligations to its creditors. The balance of net assets in the amount of $1,479,214 or 37% are composed of investments in capital assets (land, buildings, etc.). The Town uses these capital assets to provide services to its citizens and consequently these assets are not available for future spending. At the end of its most recent fiscal year, the Town of South Palm Beach is able to report positive balances in the two categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The Town s total net assets increased by $77,393 in comparison to the prior year. Generally, the following impacts can significantly affect annual revenues and change net assets: 1. Economic conditions can reflect a growing, stable or declining overall economic environment and those conditions can have a significant impact on property, non-ad valorem assessments, sales and use taxes, fees and other revenues derived from the community as well as received from other governments, 2. Changes in tax, assessment, and fee rates by elected officials directly affect the revenue streams and have the most direct and immediate impact of all changes. 3. Changing patterns in intergovernmental and grant revenues cause measurable deviations and make annual comparisons less than always meaningful. 4. Market impact on investment income might cause investment revenues to fluctuate widely from year to year. Some other basic impacts are responsible for changes in annual expenditures: 1. Introduction of new programs can have substantial impact on department/program expenditures by requiring new personnel, capital, and operating funds. 2. Changes in service levels impacts expenditures by changing the levels of already appropriated expenditures. 3. Salary/contract pricing increases can be a factor contributing to the increase in appropriations. Most contracts entered into by the Town of South Palm Beach have provisions for increases, either automatic or negotiated each year. 4. While inflation generally appears to be at moderate levels, it still always affects the prices the Town pays for commodities, supplies, fuels, parts and miscellaneous services it requires through the year. It is common that such goods may increase in price affecting expenditures. 6

21 As illustrated by Table A-2, Changes in Net Assets, the Town s revenues during Fiscal Year 2010 reached $3,225,065 and exceeded expenditures after transfers by $77,393. Revenues: Program revenues: Charges for services 198,120 Table A-2 Town of South Palm Beach Changes in Net Assets Business-type Government Activities Activities Total $ $ 181,217 $ 284,625 $ 287,457 $ 482,745 $ 468,674 Operating grants 2,000 13, ,000 13,982 Capital grants General revenues: Property taxes 2,244,521 2,365, ,244,521 2,365,847 Other taxes 201, , , ,849 Franchise taxes 108, , , ,097 Intergovernmental 136, , , ,331 Investment income 25,068 (5,579) 15,810 (9,150) 40,878 (14,729) Miscellaneous 8,716 16, ,716 16,284 Total Revenues 2,924,630 3,028, , ,307 3,225,065 3,306,335 Expenses: General government 603, , , ,493 Public safety 2,140,999 2,265, ,140,999 2,265,320 Public works 137, , , ,685 Culture and recreation 31,867 40, ,867 40,792 Utilities , , , ,329 Total Expenses 2,914,201 3,019, , ,329 3,147,672 3,271,619 Increase in Net Assets 10,429 8,738 66,964 25,978 77,393 34,716 Net Assets, Beginning 2,793,250 2,784,512 1,171,497 1,145,519 3,964,747 3,930,031 Net Assets, Ending $ 2,803,679 $ 2,793,250 $ 1,238,461 $ 1,171,497 $ 4,042,140 $ 3,964,747 Governmental Activities: Governmental activities increased the Town s net assets by $10,429. Key elements of this increase are as follows: Property Tax Revenues decreased by $121,326 or 5% due to lower assessed valuations on real property located in the Town. Interest on investments increased by $30,647 or 112% due to investments in the form of certificates of deposit. Expenses for Public Safety decreased by $124,321 or 5% due to an effort by the Town to reduce expenses in response to the decrease in property tax revenues. Expenses for Public Works increased by $31,238 or 29% due to the design phase of the beach renourishment project. 7

22 PROGRAM REVENUES AND EXPENSES GOVERNMENTAL ACTIVITIES Program Revenues Grants, $2,000, 1% Charges for Services, $198,120, 99% Grants Charges for Services Program Expenses Physical Environment, $137,923, 5% Culture and Recreation, $31,867, 1% General Government, $603,412, 21% Public Safety, $2,140,999, 73% General Government Public Safety Physical Environment Culture and Recreation 8

23 REVENUES BY SOURCE GOVERNMENTAL ACTIVITIES Revenues by Sources- Governmental Activities Intergovernmental, $136,686, 5% Utility Franchises, $108,402, 4% Utility Taxes, $201,117, 7% Interest and Other, $33,784, 1% Ad Valorem Taxes Utility Franchises Intergovernmental Utility Taxes Interest and Other Ad Valorem Taxes, $2,244,521, 83% BUSINESS-TYPE ACTIVITIES Business-type activities increased the Town s net assets by $66,964 accounting for 87 percent of the total increase in the Town s net assets. The most significant component of the increase was an increase in investment income due to a more favorable economy in fiscal year Revenues - Proprietary Fund Investment Earnings, $15,810, 5% Charges for Services, $284,625, 95% 9

24 Operating Expenditures- Proprietary Fund Repairs and Maintenance, $14,425, 6% Depreciation, $39,671, 17% General & Administrative, $2,800, 1% Purchased Services, $176,575, 76% FINANCIAL ANALYSIS OF THE GOVERNMENT S FUNDS As noted earlier, the Town of South Palm Beach uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the Town of South Palm Beach s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Town s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, fund balance of the general fund was $2,042,744. Fund balance is reserved for prepaid expenses in the amount of $25,226 and $1,332,506 is reserved for a beach restoration project. The remaining amount of $685,012 is available for appropriations. The general fund is the chief operating fund of the Town of South Palm Beach. As a measure of the general fund s liquidity, it may be useful to compare unreserved fund balance and total fund balance to total fund expenditures. Total fund balance represents 61 percent of total general fund expenditures. 10

25 A summary of the general fund s condensed balance sheet and statement of revenues, expenditures and changes in fund balance is presented in Table B-1 and B-2 for September 30, 2009 and 2010 is shown below: Table B-1 Fiscal Year Total Assets $ 2,119,061 $ 2,089,925 Total liabilities $ 76,317 $ 112,858 Total fund balance 2,042,744 1,977,067 Total Liabilities and Fund Balance $ 2,119,061 $ 2,089,925 Table B-2 Fiscal Year Total revenues $ 2,949,201 $ 3,067,990 Total expenditures 2,883,524 2,944,985 Excess of Revenues Over Expenditures $ 65,677 $ 123,005 The fund balance of the Town s general fund increased by $65,677. Although property tax revenues decreased by $121,326 due to lower assessed property valuations, the Town closely monitored expenditures and reduced costs where possible by approximately $61,000, which offset the decrease in revenues. FUND BUDGETARY HIGHLIGHTS The original budget was not amended. There were no supplemental appropriations for the fiscal year ended September 30, The most significant variances between the final budget and actual results of operations were as follows: The original and final budget included appropriations of $246,000 which included amounts related to the beach restoration project. Due to project delays, less expenditures occurred in fiscal year 2010 than anticipated. 11

26 CAPITAL ASSETS AND DEBT ADMINISTRATION As of September 30, 2010, the Town s net investment in capital assets amounted to $1,479,214, net of accumulated depreciation. The current year increase in capital assets included the purchase of furniture and equipment. Capital Assets, Net of Accumulated Depreciation Governmental Activities Business Activities Total Land $ 108,396 $ 108,396 $ -- $ -- $ 108,396 $ 108,396 Buildings and improvements 581, , , ,142 Improvements other than buildings 131, , , ,294 Sewer system , , , ,826 Furniture, equipment and vehicles 89,332 99, ,332 99,735 Total $ 911,059 $ 951,567 $ 568,155 $ 607,826 $ 1,479,214 $ 1,559,393 Additional information on the Town s capital assets are found in Note 5 beginning on page 31 of this report. At September 30, 2010, the Town s debt only consisted of compensated absences. Additional information on the Town s compensated absences is found in Note 6 on page 32. ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES The unemployment rate for Palm Beach County is currently percent, which is an increase from a rate of 12 percent a year ago. This compares unfavorably to the state s average unemployment rate of percent as well as to the national average rate of 9.20 percent. The government does not have a central business district. It is 100% residential. Inflationary trends in the region compare favorably to national indices. All of these factors were considered in preparation of the Town of South Palm Beach s budget for the 2011 fiscal year. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the Town of South Palm Beach s finances for all those with an interest in the government s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Office of the Town Manager, 3577 South Ocean Boulevard, South Palm Beach, Florida

27 BASIC FINANCIAL STATEMENTS

28 STATEMENT OF NET ASSETS SEPTEMBER 30, 2010 Business- Governmental type Activities Activities Totals Assets Cash and cash equivalents $ 2,005,023 $ 535,473 $ 2,540,496 Investments 35, , ,772 Accounts receivable 53,103 1,316 54,419 Prepaid items 25, ,226 Capital assets not being depreciated 108, ,396 Capital assets being depreciated, net 802, ,155 1,370,818 Total Assets 3,030,120 1,378,007 4,408,127 Liabilities Accounts payable and accrued liabilities 76, , ,563 Deferred revenue Noncurrent liabilities: Due within one year 15, ,012 Due in more than one year 135, ,112 Total Liabilities 226, , ,987 Net Assets Invested in capital assets 911, ,155 1,479,214 Unrestricted 1,892, ,306 2,562,926 Total Net Asset $ 2,803,679 $ 1,238,461 $ 4,042,140 The accompanying notes are an integral part of these basic financial statements. 13

29 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010 Program Revenues Net (Expense) Revenue and Changes in Net Assets Charges Operating Capital Businessfor Grants and Grants and Governmental type Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Governmental Activities General government $ 603,412 $ 180,194 $ -- $ -- $ (423,218) $ -- $ (423,218) Public safety 2,140,999 17,926 2, (2,121,073) -- (2,121,073) Physical environment 137, (137,923) -- (137,923) Culture and recreation 31, (31,866) -- (31,866) Total governmental activities 2,914, ,120 2, (2,714,080) -- (2,714,080) Business-Type Activities Sewer 233, , ,154 51,154 Total Business-Type Activities 233, , ,154 51,154 Total $ 3,147,671 $ 482,745 $ 2,000 $ -- (2,714,080) 51,154 (2,662,926) General revenues: Property taxes 2,244, ,244,521 Utility taxes 180, ,926 Franchise fees based on gross receipts 128, ,593 Sales and use tax 104, ,046 State revenue sharing - unrestricted 32, ,640 Investment income 25,068 15,810 40,878 Miscellaneous 8, ,716 Total general revenues 2,724,510 15,810 2,740,320 Change in net assets 10,430 66,964 77,394 Net assets, beginning 2,793,250 1,171,497 3,964,747 Net assets, ending $ 2,803,680 $ 1,238,461 $ 4,042,141 The accompanying notes are an integral part of these basic financial statements. 14

30 BALANCE SHEET GOVERNMENTAL FUND SEPTEMBER 30, 2010 General Fund Assets Cash and cash equivalents $ 2,005,023 Investments 35,709 Accounts receivable 53,103 Prepaid items 25,226 Total Assets $ 2,119,061 Liabilities and Fund Balance Liabilities Accounts payable $ 76,017 Deferred revenue 300 Total Liabilities 76,317 Fund Balance Reserved for prepaid items 25,226 Reserved for beach project 1,332,506 Unreserved, undesignated 685,012 Total Fund Balance 2,042,744 Total Liabilities and Fund Balance $ 2,119,061 Amounts reported for governmental activities in the statement of net assets are different because: Fund balance $ 2,042,744 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds 911,059 Long-term liabilities are not due and payable in the current period and therefore not reported in the funds (150,124) Net Assets of Governmental Activities $ 2,803,679 The accompanying notes are an integral part of these basic financial statements. 15

31 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE GOVERNMENTAL FUND FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010 General Fund Revenues Property taxes $ 2,244,521 Utility taxes 205,499 Franchise fees 128,593 Licenses and permits 145,343 Intergovernmental 138,686 Charges for services 34,851 Fines and forfeitures 17,926 Interest and other 33,783 Total Revenues 2,949,202 Expenditures Current General government 577,338 Public safety 2,107,888 Physical environment 80,741 Culture and recreation 31,866 Capital outlay 85,690 Total Expenditures 2,883,523 Net Change in Fund Balance 65,679 Fund Balance - Beginning 1,977,067 Fund Balance - Ending $ 2,042,746 The accompanying notes are an integral part of these basic financial statements. 16

32 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF THE GOVERNMENTAL FUND TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2010 Amounts reported for governmental activities in the statement of activities (Page 14) are different because: Net change in fund balance (Page 16) $ 65,679 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Expenditures for capital assets $ 28,508 Less current year depreciation (69,016) Some revenues, expenses, gains and losses reported in the statement of activities are not reported in the governmental funds because they have no effect on current financial resources (40,508) Communications service tax revenues (24,572) Some expenses reported in the statement of activities do not require current financial resources and, therefore, are not reported as expenditures in governmental funds. The details of the difference is: Compensated absences 9,831 Change in Net Assets of Governmental Activities (Page 14) $ 10,430 The accompanying notes are an integral part of these basic financial statements. 17

33 STATEMENT OF NET ASSETS PROPRIETARY FUND SEPTEMBER 30, 2010 Assets Business-type Activities Enterprise Fund Current Assets Cash and cash equivalents $ 535,473 Investments 273,063 Accrued interest receivable 1,316 Total Current Assets 809,852 Noncurrent Assets Capital assets, net of accumulated depreciation 568,155 Total Assets 1,378,007 Liabilities Current Liabilities Accounts payable 139,546 Total Liabilities 139,546 Net Assets Invested in capital assets 568,155 Unrestricted 670,306 Total Net Assets $ 1,238,461 The accompanying notes are an integral part of these basic financial statements. 18

34 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS PROPRIETARY FUND FISCAL YEAR ENDED SEPTEMBER 30, 2010 Business-type Activities Enterprise Fund Sewer Operating Revenues Charges for services $ 284,625 Operating Expenses Purchased services 176,575 Repairs and maintenance 14,425 General and administrative 2,800 Depreciation 39,671 Total Operating Expenses 233,471 Operating Income 51,154 Non-Operating Income Investment income 15,810 Change in Net Assets 66,964 Net Assets - Beginning 1,171,497 Net Assets - Ending $ 1,238,461 The accompanying notes are an integral part of these basic financial statements. 19

35 STATEMENT OF CASH FLOWS PROPRIETARY FUND FISCAL YEAR ENDED SEPTEMBER 30, 2010 Business-type Activities Enterprise Fund Sewer Cash Flows From Operating Activities Receipts from customers and users $ 284,625 Payments to suppliers (169,416) Net Cash Provided by Operating Activities 115,209 Cash Flows From Investing Activities Purchases of investments (60,007) Interest received 14,494 Net Cash Used in Investing Activities (45,513) Net Increase in Cash and Cash Equivalents 69,696 Cash and Cash Equivalents - Beginning 465,777 Cash and Cash Equivalents - Ending $ 535,473 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating income $ 51,154 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 39,671 Changes in operating assets and liabilities: Increase in accounts payable 24,384 Total Adjustments 64,055 Net Cash Provided by Operating Activities $ 115,209 The accompanying notes are an integral part of these basic financial statements. 20

36 NOTES TO BASIC FINANCIAL STATEMENTS

37 NOTES TO BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town of South Palm Beach, Florida (the Town) is a municipal corporation organized pursuant to Chapter 31276, Laws of Florida, The Town operates under the Council- Manager form of government. The Town s major operations include general government, public safety, physical environment, culture and recreation and sewer services. The basic financial statements of the Town have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the Town s more significant policies: A. FINANCIAL REPORTING ENTITY The financial statements were prepared in accordance with government accounting standards which establishes standards for defining and reporting on the financial reporting entity. The definition of the financial reporting entity is based upon the concept that elected officials are accountable to their constituents for their actions. One of the objectives of financial reporting is to provide users of financial statements with a basis for assessing the accountability of the elected officials. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. The Town is financially accountable for a component unit if it appoints a voting majority of the organization s governing board and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the Town. Based upon the application of these criteria, there were no organizations that met the criteria described above. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the Town. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. 21

38 NOTES TO BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (CONTINUED) The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. 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 or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for the governmental fund and proprietary fund. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which 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 of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures are recorded only when payment is due. Property taxes, franchise fees and other taxes, licenses, 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 period. Revenues for expenditure driven grants are recognized when the qualifying expenditures are incurred. All other revenue items are considered to be measurable and available only when cash is received by the Town. 22

39 NOTES TO BASIC FINANCIAL STATEMENTS FISCAL YEAR ENDED SEPTEMBER 30, 2010 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (CONTINUED) The Town reports the following major governmental fund: The general fund is the Town s primary operating fund and its only governmental fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Town reports the following major proprietary fund in the basic financial statements: The Town has established the Sewer Fund as its only proprietary fund to account for the billing and collection of fees for sewer services provided by the Town. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. The Town has the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Town has elected not to follow subsequent privatesector guidance. As a general rule, the effect of interfund activity has been eliminated from the governmentwide financial statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the Town s various utility functions and various other functions of the Town. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. The proprietary fund distinguishes operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the Town s Sewer fund are charges to customers for services. Revenue is recognized in the sewer fund when the services are performed. Operating expenses for enterprise funds include the costs of services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When an expense is incurred for purposes for which both unrestricted and restricted net assets are available, it is the Town s policy to first apply restricted resources. 23