CITY OF ZACHARY. LOUISIANA FINANCIAL REPORT JUNE Release Date_ P&N

Transcription

1 of FINANCIAL REPORT JUNE Release Date_ P&N

2 FINANCIAL REPORT JUNE30.2Q06

3 TABLE OF CONTENTS Page Independent Auditors' Reports Independent Auditors' Report Independent Auditors' Report on compliance and other matters and on internal control over financial reporting based on an audit of the financial statements performed in accordance with Government Auditing Standards I - n ffi Required Supplemental Information Management's Discussion and Analysis IV - XI Basic Financial Statements: GOVERNMENT-WIDE FINANCIAL STATEMENTS (GWFS): Statement of Net Assets 1 Statement of Activities 2-3 FUND FINANCIAL STATEMENTS (FFS): Balance Sheet - Governmental Funds 4 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 5 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 6 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 7 Statement of Net Assets - Proprietary Fund 8 Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Fund 9 Statement of Cash Flows - Proprietary Fund 10 Notes to Financial Statements Required Supplementary Information Budgetary Comparison Schedule - General Fund 23 Budgetary Comparison Schedule - Special Revenue Fund 24

4 TABLE OF CONTENTS Page Supplementary Information Schedule of Revenues - General Fund 25 Schedule of Expenditures - General Fund Statement of Revenues, Expenses and Changes in Fund Net Assets - Budget and Actual - Public Utility Enterprise Fund 29 Schedule of Operating Expenses by Department - Public Utility Enterprise Fund 30 Schedule of Compensation of City Officials 31 Performance and Statistical Data Schedule of Insurance-in-force 32 Schedule of Utility Statistics 33 Schedule of Findings and Questioned Costs 34 Summary Schedule of Prior Audit Finding 35

5 P&N Postlethwaite & Netterville A Professional Accounting Corporation Associated Offices in Principal Cities of the United States INDEPENDENT AUDITORS 1 REPORT To the Honorable Mayor and Members of the Council City of Zachary, Louisiana We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, and each major fund, of the City of Zachary, Louisiana (the City), as of and for the year ended June 30,2006, 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's management. Our responsibility is to express opinions on these financial statements based on our audit. "We conducted our audits in accordance with auditing standards generally accepted in the United States, 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 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 discretely presented component unit and each major fund of the City of Zachary, Louisiana, as of June 30,2006, 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. The management's discussion and analysis and budgetary comparison information on pages IV through XI and 23 through 24 are not a required part of the basic financial statements but are supplementary information required by the Governmental Accounting Standards Board. 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 City's basic financial statements. The other supplementary information on pages 25 through 31 are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The information included in the performance and statistical data on pages 32 and 33 has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it United Plaza Blvd. Suite 1001 Baton Rouge, IA Tel: Fax:

6 In accordance with Government Auditing Standards, we have also issued our report dated November 15,2006 on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. 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 our testing, and not to provide an opinion on the internal control over financial reporting or compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Baton Rouge, Louisiana November 15,2006 n P&N

7 Fostlethwaite & Nettervffle A Professional Accounting Corporation Associated Offices in Principal Cities of the United States REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of the Council City of Zachary, Louisiana We have audited the financial statements of the City of Zachary, Louisiana (the City) as of and for the year ended June 30,2006, and have issued our report thereon dated November 15,2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reportine In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. However, we noted other matters involving the internal control over financial reporting, which we have reported to management of the City in a separate letter dated November 15,2006. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matter that is required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and responses as item This report is intended for the information of the administration, the Council, federal and state awarding agencies, and the Louisiana Legislative Auditor and is not intended to be and should not be used by anyone other than these specified parties. However, under Louisiana Revised Statute 24:513, this report is distributed by the Legislative Auditor as a public document. Baton Rouge, Louisiana November 15, United Plaza Blvd. Suite 1001 m Baton Rouge, LA Tel: Fax:

8 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2006 This section of the City of Zachary, Louisiana's (the City) annual financial report presents our discussion and analysis of the City's financial performance during the twelve months ended June 30, Please read it in conjunction with the City's financial statements which follow this section. During 2004 the City changed its year-end from a fiscal year ending October 31 st to a fiscal year ending June 30 th. Consequently the prior fiscal year financial statements represent only eight months of activity as opposed to twelve months. FINANCIAL HIGHLIGHTS The City's combined total net assets as of June 30, 2006 and June 30, 2005, were $23,160,544 and $20,253,137, respectively. Net assets of our governmental activities were $14,733,476 and $12,246,485, respectively while those of our business-type activities were $8,427,068 and $8,006,652, respectively. The general fund ended the current fiscal year with a $3,384,343 fund balance, $737,572 of which is reserved for interfund payables. In the prior fiscal year the general fund ended the year with a $2,027,754 fund balance of which. $565,777 was reserved for the payment of interfund payables. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of four parts management's discussion and analysis (this section), the basic financial statements, required supplementary information, and an optional section that presents supplemental statements and schedules. The basic financial statements include two kinds of statements that present different views of the City: The first two statements are government-wide financial statements that provide long-term and short-term information about the City's overall financial status and economic condition. The remaining statements are fund financial statements that focus on individual parts of the City government, reporting the City's operations in more detail than the government-wide statements. The governmental funds statements tell how general government services like public safety were financed in the short term as well as what remains for future spending. " Proprietary fund statements offer short and long-term financial information about the activities the government operates like businesses, such as water and sewer systems. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. Figure A-l shows how the required parts of this annual report are arranged and relate to one another. In addition to these required elements, we have included a section with more detailed schedules providing further insight into the revenue and expenses of the City. Figure A-l summarizes the major features of the City's financial statements, including the portion of the City's government they cover and the types of information they contain. The remainder of this overview section of management's discussion and analysis explains the structure of contents of each of the statements. IV

9 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30,2006 OVERVIEW OF THE FINANCIAL STATEMENTS (continued) Figure A-l Major Features of City's Government and Fund Financial Statements Government-wide Statements Fund Statements Governmental Funds Proprietary Funds Scope Entire City government The activities of the City that are not proprietary or fiduciary, such as police, fire, and streets Activities the City operates similar to private businesses: the water and sewer systems Required financial statements Statement of net assets Statement of activities Balance Sheet Statement of revenues, expenditures, and changes in fund balances * Statement of net assets Statement of revenues, expense, and changes in net assets Statement of cashflows Accounting basis and measurements focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources focus Accrual accounting and economic resources focus Type of asset/liability information All assets and liabilities, both financial and capital, and shortterm and long-term Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included All assets and liabilities, both financial and capital, and short-term and long-term Type of inflow/outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter All revenues and expenses during year, regardless of when cash is received or paid V

10 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE OVERVIEW OF THE FINANCIAL STATEMENTS (continued) Government-wide Statements The government-wide statements report information about the City as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the government's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the City's net assets and how they have changed. Net assets the difference between the City's assets and liabilities is one way to measure the City's financial health, or position. Over time, increases or decreases in the City's net assets are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the City, one needs to consider additional nonfinancial factors such as changes in the City's property tax base and the condition of the City's roads and utilities infrastructure. The government-wide financial statements of the City are divided into two categories: Governmental activities most of the City's basic services are included here, such as the police, fire, public works, recreation department, and general administration. Property taxes, sales taxes and franchise fees finance most of these activities. Business-type activities The City charges fees to customers to help it cover the costs of certain services it provides. The City's water, gas and sewer systems are included here. Fund Financial Statements The fund financial statements provide more detailed information about the City's most significant funds not the City as a whole. Funds are accounting devices that the City uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law, while others may be required by bond covenants. The City has two kinds of funds: Governmental funds - Most of the City's basic services are included in governmental funds, which focus on (!) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed shortterm view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. Because this information does not encompass the additional long-term focus of the government-wide statements, we provide additional information on the subsequent page which explains the relationship (or differences) between them.» Proprietary funds - Services for which the City charges customers a fee are generally reported hi proprietary funds. Proprietary funds, like the government-wide statements, provide both long and short-term financial information. In fact, the City's enterprise VI

11 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE OVERVIEW OF THE FINANCIAL STATEMENTS (continued) Fund Financial Statements (continued) funds (one type of proprietary fund) are the same as its business-type activities, but provide more detail and additional information such as cash flows. FINANCIAL ANALYSIS OF THE CITY AS A WHOLE Current and other assets Capital assets Total assets Current liabilities Long term Liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted funds Unrestricted Total net assets Current and other assets Capital assets Total assets Current liabilities Long term Liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted funds Unrestricted (deficit) Total net assets Table A-l City's Net Assets Governmental Activities ,100,968 10,181,782 15,282,750 (198,866) 748, ,274 10, ,012,648 2,573,160 14,733,476 Table A-l City's Net Assets Business-Type Activities ,907,660 10,871,993 12,779,653 2,025,535 2, ,352,585 8,760,181 54,923 (388,036) 8,427,068 Governmental Activities ,789,268 8,080,522 12,869,790 (146,621) 769, ,305 8,080,522 3,115,068 1,050,895 12,246,485 Business-Type Activities ,535,762 10,324,251 11,860,013 1,473,132 2,380,229 3,853,361 8,163,839 44,962 (202,149) 8,006,652 vn

12 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 FINANCIAL ANALYSIS OF THE CITY AS A WHOLE (continued) Changes in Net Assets The City's total change in net assets was approximately $2,907,407; $2,486,991 from governmental activities and $420,416 from business-type activities. The changes in net assets results from the City continuing to see an increase in commercial and residential growth. With Zachary having its own independent school district, the City has seen a benefit in residential growth which in turn has fueled commercial growth. This trend should continue over the next several years. This increase brings with it a growth in sales tax, services offered by the City and revenue growth in most categories. Table A-2 shows the composition of revenues and summarizes the expenses by function or service area. Table A-2 Changes in City's Net Assets Revenues Charges for services Fines Grants and contributions General revenues: Taxes Commissions Licenses and permits Miscellaneous/Interest income Total Revenues Expenses General Government Public Safety Streets Sanitation & Utilities Total Expenses Transfers/Capital Contributions Increase in net assets Governmental Activities 2006 (Twelve Months) 673, , ,724 6,958, , , ,986 10,172,076 2,126,893 4,246, , ,071 7,740,085 55,000 2,486,991 Governmental Activities 2005 (Eight Months) 423,182 77, ,890 3,914, , ,620 93,128 5,815,741 1,814,747 2,726, , ,688 5^86,365 40, ,376 VIII

13 CITY OF ZACHARY, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE FINANCIAL ANALYSIS OF THE CITY AS A WHOLE (continued) Changes in Net Assets (continued) Table A-2 Changes in City's Net Assets Revenues Charges for services General revenues: Miscellaneous/Interest income Total Revenues Expenses Sanitation & Utilities Total Expenses Transfers/Capital Contributions Increase (Decrease) in net assets Business-Type Activities 2006 (Twelve Months) 5,682,711 5,837 5,688,548 5,268,132 5,268, ,416 Business-Type Activities 2005 (Eight Months) 3,141,962 2,858 3,144,820 3,221,417 3,221,417 75,129 (1,468) FINANCIAL ANALYSIS OF THE CITY'S FUNDS As the City completed the year, its governmental funds reported a combined fund balance of $5,396,991 consisting of $3,384,343 in the general fund and $2,012,648 in the special revenue fund. $737,572 of the general fund balance was reserved for the payment of intertund payables. The remaining fund balance in the general fund and the balance in the special revenue fond are unreserved and available for spending. General Fund Budgetary Highlights Over the course of the fiscal year, the Council may approve amendments to the City's budget. These budget amendments result from items involving accounting changes, increased costs and revenues to the City. The City made one budgetary amendment for this fiscal year. There were expenditures which increased after the adoption of the budget, which the City had no control over, i.e. retirement and health insurance costs. Other cost increases were hi projects that were scheduled to finish in the prior fiscal year, not anticipated to carryover, but were unable to finish this budget year. Additional costs increases and revenue increases were a result of the hurricanes of the past year. Any costs that had a fuel factor as part of the cost have increased significantly over the past year as did products in the utility departments. A positive increase as a result of the storms was the increase in sales tax revenue and commission on the sale of electricity. The City experienced an increase in its population which affected both revenues and expenditures. These trends are expected to continue into the next budget year. IX

14 MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE CAPITAL ASSETS At the end of June 2006, the City had invested approximately $21,054,000 in a broad range of capital assets, including police and fire equipment, buildings, vehicles, and water and sewer systems. See Table A-3. This amount represents a net increase (including additions and deductions) of approximately $2,649,000 or 14.4 percent over last year. This increase reflects the continued improvements to the roadways in Zachary. The figures in the Business Activities - Buildings/Infrastructure include buildings, gas, sewer and water lines and structures. Many projects under construction-in-progress were completed during the period and were added to the appropriate category. Table A-3 City's Capital Assets (net of depreciation) Governmental Activities Business Activities Land Construction-in- Progress ,183, , , , , ,960 Buildings/Infrastructure Street Improvements Equipment Total 2,589,605 3,723,089 1,685,703 10,181,782 2,627,130 1,694,833 1,575,174 8,080,522 10,256, ,618 10,871,993 9,176, ,960 10,324,251 This year's major capital asset additions included: Roadway improvements totaling $2,075,883 Coppermill Sewer Project totaling approximately $332,000 Car Wash Pump Station totaling approximately $559,000 Warehouse totaling approximately $58,000 Radio Read Gas Meters placed in service approximately $565,000 ECONOMIC.FACTORS AND NEXT YEAR'S BUDGETS AND RATES The City's major sources of revenue for the general fund are sales taxes, utility franchise fees, licenses and permits, and fines. As a result of the hurricanes experienced in Louisiana, the City of Zachary expects to see an increase in these revenues due to the growth in population in the area. This will also result in an increase in the infrastructure needs for the City. The timing of the projects will be determined as the City anticipates and realizes growth. At this point in time all that can be predicted is a larger growth in revenues and expenditures than previously estimated. The Administration will closely monitor the budget as the year progresses in order to effectively deal with the changes. X

15 CITY OF 2ACHARY. LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE CONTACTING THE CITY'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a genera! overview of the City's finances and to demonstrate the City's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City's Chief Administrative Officer, Stephen H. Nunnery, Post Office Box 310 Zachary, Louisiana 70791, (225) XI

16 STATEMENT OF NET ASSETS JUNE ASSETS: Cash and Cash equivalents Certificates of deposit Accounts receivable (net) Sales tax receivable Accrued interest receivable Prepaid Expenses Other receivables Inventory Capital assets: Land and construction in progress Other capital assets, net of depreciation Governmental Activities $ 2,384,690 1,545, ,143 7,559 5, ,735 2,183,385 7,998,397 Primary Government Business-type Activities $ 446, ,000 1,228,519 15, , ,476 10,553,517 Total $ 2,830,922 $ 1,645,041 1,228, ,143 7,559 5, , ,919 2,501,861 18,551,914 Component Unit City Court of Zachary 27,379 23,527 TOTAL ASSETS 15,282,750 12,779,653 28,062,403 50,906 LIABILITIES: Accounts payable Other payables Interfund balances Customer meter deposits Long-term debt: Due within one year Due beyond one year 173, ,310 (737,572) 97,156 74*, , , , ,275 60,000 2,322, , , , ,156 3,070,380 - TOTAL LIABILITIES 549,274 4,352,585 4,901,859 NET ASSETS: Invested in Capital Assets, net of related debt ;bt 10,147,668 Restricted for: Streets and improvements 2,012,648 Customer meter deposits Unrestricted 2,573,160 8,760,181 54,923 (388,036) 18,907,849 2,012,648 54,923 2,185,124 23,527 27,379 TOTAL NET ASSETS $ 14,733,476 $ 8,427,068 $ 23,160,544 50,906 The accompanying notes are an integral part of this statement. -1 -

17 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2006 Primary Government Program Revenues Fees, Fines, and Operating Grants Expenses Charges for Services and Contributions Net (Expense) Revenue and Changes in Net Assets Governmental Business-Type Activities Activities Function/Programs Primary Government Governmental: General government Streets Public safety Sanitation Total governmental activities $ 2,126,893 $ 29, , ,474-72,322 4,246, , , , ,961 7,740, , ,724 $ (1,951,980) (601,152) (3,803,245) (49,110) (6,405,487) - -. Business-type: Enterprise - Utilities Total business-type activities 5,268,132 5,682,711 5,268,132 5,682, , ,579 Total primary government 13,008,217 6,458, ,724 (6,405,48?) 414,579 Component Unit: Judicial court services Total component units 314, , $ 314,367 $ 367,092 $ $ $ General Revenues: Taxes Commissions Licenses and permits Interest Income Other Transfers Total general revenues Change in net assets Net assets, June 30, 2005 Net assets, June 30, ,958, , ,901 52,342 97,644 55,000 8,892,478 2,486,991 12,246,485 $ 14,733, , , ,416 8,006,652 $ 8,427,068 The accompanying notes are an integral part of this statement. -2-

18 Component Unit Total Chy Court of Zachary $ (1,951,980) (601,152) (3,803,245) (49,110) (6,405,487) 414, ,579 (5,990,908) 52,725 52,725 6,958, , ,901 58,179 97,644 55,000 8,898,315 2,907,407 20,253, (55,000) (55,000) (2,275) 53,181 $ 23,160,544 $ 50,906-3-

19 CITY OF ZACHARY, LOUISIANA GOVERNMENTAL FUNDS ASSETS Cash and cash equivalents Certificates of deposits Sales tax receivable Other receivables Accrued interest receivable Prepaid Expenses Due from other funds TOTAL ASSETS General Special Revenue Total Governmental Funds $ 1,942, , , ,735 $ 442,145 1,412, ,393 $ 2,384,690 1,545, , ,735 7,559 7,559 5,800 5, , ,572 $ 3,808,938 $ 2,029,602 $ 5,838,540 LIABILITIES Accounts payable Other payables TOTAL LI ABILITIES 156, , ,595 16,954 16, , , ,549 FUND BALANCES Reserved - due from other funds Unreserved TOTAL FUND BALANCES 737,572 2,646,771 3,384,343 2,012,648 2,012, ,572 4,659,419 5,396,991 TOTAL LIABILITIES AND FUND BALANCES $ 3,808,938 $ 2,029,602 $ 5,838,540 The accompanying notes are an integral part of this statement. -4-

20 CITY OF ZACHARY, LOUISIANA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE Total fund balances - Governmental Funds $ 5,396,991 Cost of capital assets at June 30, ,815,617 Less: accumulated depreciation as of June 30,2006 (3,633,835) 10,181,782 Long-term liabilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities: Capital lease obligation (34,114) Claims and judgments payable (116,000) Compensated absences (695,183) Total net assets at June 30, governmental activities $ 14,733,476 The accompanying notes are an integral part of this statement. -5-

21 STATEMENT OF REVENUES. EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2006 Revenues: Taxes Licenses and permits Intergovernmental Charges for services Commissions Fines Miscellaneous Total revenues General $ 5,824, , , , , , ,078 9,001,401 Special Revenue 1,133,767 $ 46,975 1,180,742 Total Governmental Funds 6,958, , , , , , ,053 10,182,143 Expenditures: General government Public safety - Police Fire Streets Sanitation Total expenditures 2,102,272 2,617,335 1,695, , ,071 7,733,926 2,085,470 2,085,470 2,102,272 2,617,335 1,695,822 2,710, ,071 9,819,396 Excess (deficiency) of revenues over expenditures 1,267,475 (904,728) 362,747 Other financing sources (uses): Proceed from capital lease obligation Transfers from (to) other funds 34,114 55,000 89,114-34,114 55,000 89,114 Excess (deficiency) of revenues and other sources over expenditures and other uses 1,356,589 (904,728) 451,861 Fund balance, beginning 2,027,754 2,917,376 4,945,130 Fund balance, ending $ 3,384,343 $ 2,012,648 $ 5,396,991 The accompanying notes are an integral part of this statement. -6-

22 RECONCTT JATIQN OF yhe STATEMENT OF REVENUES. EXPENDITURES. AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES JUNE 30,2006 Net change in fund balances - Governmental Funds 451,861 The change in net assets reported for governmental activities in the statement of activities is different because: Capital outlay which is considered expenditures; capitalized on statement of acitivites Net book value of assets disposed of during the fiscal year Depreciation expense for the year ended June 30,2006 Proceeds from capital lease obligation Excess of compensated absences earned over compensated absences used 2,574,099 (10,067) (462,772) (34,114) (32,016) Change in net assets of governmental activities $ 2,486,991 The accompanying notes are an integral part of this statement. -7-

23 STATEMENT OF NET ASSETS PROPRIETARY FUND JUNE 30,2006 ASSETS Current assets: Cash and Cash equivalents Accounts receivable (net) Other receivables Inventory Total current assets Restricted assets Cash Investments Total restricted assets Capital assets Land Structures and improvements Construction in process Machinery and Equipment Less: accumulated depreciation Total capital assets TOTAL ASSETS LIABILITIES Current liabilities (payable from current assets): Accounts payable Other payables Long-term debt, current Due to other funds Total current liabilities (payable from current assets) Current liabilities (payable from restricted assets) Customers' deposits Total current liabilities (payable from restricted assets) Long-term liabilities Compensated absences Long-term debt Total long-term liabilities TOTAL LIABILITIES NET ASSETS Invested in capital assets, net of related debt Restricted - Customer meter deposits Unrestricted TOTAL NET ASSETS 100,034 1,228,519 15, ,919 1,461, , , ,198 29,761 19,008, ,715 1,296,412 20,623,175 (9,751,182) 10,871,993 12,779, , ,994 55, ,572 1,634, , , ,428 2,056,612 2,327,040 4,352,585 8,760,181 54,923 (388,036) 8,427,068 The accompanying notes are an integral part of this statement. -8-

24 STATEMENT OF REVENUES. EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUND FOR THE YEAR ENDED JUNE 30,2006 OPERATING REVENUES: Charges for service - Water sales $ 1,568,626 Gas sales 3,279,745 Sewer service charges 373,978 Installation charges 238,851 Late fees 82,950 Miscellaneous service revenues 138,561 Total operating revenues 5,682,711 OPERATING EXPENSES: Water department 871,383 Gas department 2,697,766 Sewer department 570,766 General and administrative 424,368 Depreciation 703,849 Total operating expenses 5? 268,132 INCOME FROM OPERATIONS 414,579 NON-OPERATING REVENUES (EXPENSES): Interest income 5,837 Total nonoperating revenues 5,837 INCOME BEFORE CAPITAL CONTRIBUTIONS 420,416 CAPITAL CONTRIBUTIONS - State Subsidy - CHANGE IN NET ASSETS 420,416 NET ASSETS: Balance, beginning of year 8,006,652 Balance, end of year $ 8,427,068 The accompanying notes are an integral part of this statement. -9-

25 STATEMENT OF CASH FLOWS PROPRIETARY FUND JUNE CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers Cash payments to suppliers for goods and services Cash payments to employees for compensation and related expenses Net cash provided by operating activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Acquisition of capital assets Principal payments on note Net cash used by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Interest income Net cash provided by investing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Reconciliation of cash as listed on the balance sheets: Unrestricted cash Restricted cash RECONCILIATION OF INCOME FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Income from operations Adjustments to reconcile income from operations to net cash provided by operating activities: Depreciation (Increase) decrease in accounts receivable (Increase) decrease in other receivables (Increase) decrease in inventory Increase (decrease) in accounts payable and accrued expenses Increase (decrease) in customer deposits Increase (decrease) in due to other funds Net cash provided by operating activities The accompanying notes are an integral part of this statement $ 5,338,319 (2,935,836) (1,168,556) 1,233,927 (1,251,592) (48,600) (1,300,192) 5,837 5,837 (60,428) 465, , , , , , ,849 (495,706) 92,999 11, ,028 58, ,795 1,233,927

26 NOTES TO THE FINANCIAL STATEMENTS 1. Summary of significant accountine policies The City of Zachary, Louisiana (hereinafter referred to as the City) operates under ahome Rule Charter that provides for a mayor-council form of government. Five Council members are elected at large, and they are compensated for their services. As authorized by its charter, the City is responsible for public safety, highways and streets, sanitation, recreation, public improvements, and general government services. The accounting and reporting practices of the City of Zachary conform to accounting principles generally accepted in the United States of America as applicable to governmental units. The City's reporting entity applies all relevant Government Accounting Standards Board (GASB) pronouncements. The City's proprietary fund applies all Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30,1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB pronouncements prevail Such accounting and reporting procedures conform to the requirements of Louisiana Revised Statute 24:517, to the guidance set forth in the Louisiana Governmental Accounting Guide, and to the industry audit guide, Audits of State and Local Governmental Units, published by the American Institute of Certified Public Accountants. The following is a summary of certain significant accounting policies and practices: Financial reporting entity Statement No. 14 of the Governmental Accounting Standards Board (GASB), The Financial Reporting Entity, establishes criteria for determining the governmental reporting entity and component units that should be included within the reporting entity. Since the City is a general purpose government that has a separately elected governing body, is legally separate, and is fiscally independent of other state and local governments, it is considered a primary government under the provisions of this Statement. As used in GASB Statement 14, fiscally independent means that the City may, without the approval or consent of another governmental entity, determine or modify its own budget, levy its own taxes or set rates or charges, and issue bonded debt. Additionally, the City has one component unit, Zachary City Court, which is defined by GASB Statement No. 14 as another legally separate organization for which the elected officials are financially accountable. Basis of Presentation Government-wide Statements: The statement of net assets and the statement of activities display information about the City of Zachary as a whole entity. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double-counting of internal activities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions, while business-type activities are financed in whole or in part by fees charged to external parties. The statement of net assets presents the assets and liabilities of each activity, with the difference reported as net assets. Net assets are further segregated between the amount invested in capital assets, amounts which are restricted, and those which are unrestricted. -11-

27 NOTES TO THE FINANCIAL STATEMENTS 1. Summary of significant accounting policies (continued) The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of the City and for each function of the City's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) fees, fines, and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the City's funds. Separate statements for each fund category governmental and proprietary are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. The City reports the following major governmental funds: a. General Fund - This is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. b. Special Revenue Fund - This fund accounts for the collection and expenditure of a one-half cent sales tax which is restricted to street improvement and maintenance. The City reports the following major enterprise fond: Public Utilities Fund - As a proprietary fund, the public utility fund is used to account for operations, (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that the costs (expenses, including depreciation) of providing the goods or services to the general public on a continuing basis be financed or recovered through user charges or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Measurement Focus. Basis of Accounting Government- Wide and Proprietary Fund Financial Statements. The government-wide, and proprietary fund financial statements are reported using the economic resources measurement focus. The government-wide and proprietary fund financial statements are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. -12-

28 NOTES TO THE FINANCIAL STATEMENTS 1. Summary of significant accounting policies (continued) Governmental Fund Financial Statements. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Property taxes, sales taxes, franchise taxes, licenses, and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. Under the terms of grant agreements, the City funds certain programs by a combination of specific costreimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the City* s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants, and then by general revenues. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Operating and non-operating revenues Proprietary funds separately report operating and non-operating revenues. Revenues from transactions of the City's operation of the utility department are considered operating revenues. All other revenues, which are reported as cash flows from capital or non-capital financing and investing, are reported as non-operating revenues. Capita] assets Depreciation of all exhaustible capital assets is charged as an expense against operations. Depreciation has been provided using the straight-line method over the assets estimated useful lives, which are as follows: Buildings years Sewerage system years Gas system 35 years Water system years Office equipment 5-10 years Automotive equipment 5-10 years All capital assets are stated at historical cost (or estimated cost if historical cost is not available) less accumulated depreciation. Donated assets are valued at their estimated fair value on the date of donation. -13-

29 NOTES TO THE FINANCIAL STATEMENTS 1. Summary of significant accounting policies (continued) Budgets and budgetary accounting The City follows these procedures in establishing the budgetary data reflected in these financial statements: 1. A proposed budget is prepared and submitted to the Mayor and Members of the Council prior to the beginning of each fiscal year. 2. The proposed budget is published in the official journal and made available for public inspection. A public hearing is held to obtain taxpayer comments. 3. The budget is adopted through the passage of an ordinance prior to the commencement of the fiscal year for which the budget is being adopted. 4. Budgetary amendments involving the transfer of funds from one department, program, or function to another or involving increases in expenditures resulting from revenues exceeding amounts originally estimated require the approval from Members of the Council. 5. All budgetary appropriations lapse at the end of each fiscal year. 6. Budgets for the general, debt service, and proprietary funds are adopted on bases consistent with generally accepted accounting principles (GAAP). Louisiana R.S. 39:1310 requires budgets to be amended when revenue collections plus projected revenue collections for the remainder of a year, within a fond, are failing to meet estimated annual budgeted revenues by five percent or more or expenditures plus projected expenditures for the remainder of the year, within a fund, are exceeding estimated budgeted expenditures by five percent or more. The level of budgetary control is total appropriations. Budgeted amounts are as originally adopted. Cash and investments Cash and investments, which include demand deposit accounts, interest-bearing demand deposit accounts, and certificates of deposit, are stated at cost, which approximates market. Certificates of deposit with a maturity date of over three months when purchased are considered investments. Under Louisiana Revised Statutes 39:1271 and 33:2955, the City may deposit funds in demand deposit accounts, interest-bearing demand deposit accounts, money market accounts, and time certificates of deposit with state banks organized under Louisiana law and national banks having principal offices in Louisiana. Accounts receivable Uncollectible amounts due from customers for utility services are recognized through the establishment of an allowance for bad debts account at the time information becomes available which indicates the uncollectibility of the particular receivable. -14-

30 NOTES TO THE FINANCIAL STATEMENTS 1. Summary of significant accounting policies (continued) Inventories Inventory of supplies in the proprietary fund is valued at cost (first-in, first-out). Purchases of operating supplies by governmental fund types are recorded as expenditures when purchased; inventories of such supplies are not recorded and are not considered by management to be material. Compensated absences All employees earn up to 30 days vacation leave each year, depending on their length of service. Vacation leave can be accumulated. Upon termination, all unused vacation is paid to the employee up to a maximum of 60 days. All employees earn a certain amount of sick leave each year, depending upon the length of service and employment status. Sick leave can be accumulated up to 360 days. Accumulated side leave is forfeited upon termination of employment, however employees with 10 years of continuous service shall be considered on leave of absence -with pay for a period of one half of the balance of accumulated leave prior to retirement date. The City's recognition and measurement criteria for compensated absences follows: GASB Statement 16 provides that vacation leave and other compensated absences with similar characteristics should be accrued as a liability as the benefits are earned by the employees if both of the following conditions are met: a. The employees' rights to receive compensation are attributable to services already rendered. b. It is probable that the employer will compensate the employees for the benefits through paid time off or some other means, such as cash payments at termination or retirement. Accordingly, the City records a liability up to the maximum accrual. GASB Statement 16 provides that a liability for sick leave should be accrued to the extent it is probable that the benefits will result in the termination payments, rather than be taken as absences due to illness or other contingencies, such as medical appointments and funerals. The City considers the compensation paid while on leave prior to retirement to be in effect termination payments and records a liability accordingly. In the government-wide financial statements and the proprietary fund types fund statements, the total compensated absences liability is recorded as an expense and a long-term obligation and allocated on a functional basis. A current liability is recorded for the value of one year's accrual of leave. In accordance with GASB Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial Statements, (issued in March of 2000), no compensated absences liability is recorded at June 30,2006, in the governmental fund-type fund financial statements. -15-

31 NOTES TO THE FINANCIAL STATEMENTS 1. Summary of significant accounting policies (continued) Long-term obligations In government-wide financial statements, debt principal payments of both governmental and business-type activities are reported as decreases in the balance of the liability on the Statement of Net Assets. In fund financial statements, however, debt principal payments of governmental funds are recognized as expenditures when paid. Net Assets In the Statement of Net Assets, the difference between a government's assets and liabilities is recorded as net assets. The three components of net assets are as follows: Invested in Capital Assets, Net of Related Debt This category records capital assets net of accumulated depreciation and reduced by any outstanding balances of bonds, mortgages, notes or other borrowings attributable to the acquisition, construction or improvement of capital assets. Restricted Net Assets Net Assets that are reserved by external sources, such as banks or by law, are reported separately as restricted net assets. Unrestricted Net Assets This category represents all net assets not invested in capital assets or restricted. Transfers in and out Advances between funds which are not expected to be repaid are accounted for as operating transfers. In those cases where repayment is expected, the transfers are accounted for through the various due from and due to accounts. These are eliminated in the government-wide statements. Statements of cash flows For purposes of the statements of cash flows, the City considers all highly liquid investments (including restricted assets) with original maturities of three months or less to be cash equivalents. Encumbrances Encumbrances represent commitments related to unperformed contracts for goods or services. Encumbrance accounting, under which contracts and other commitments for the expenditure of resources are recorded in order to reserve that portion of the applicable appropriation, -is not employed by the City. Encumbrances outstanding at year end are immaterial and not reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. -16-

32 NOTES TO THE FINANCIAL STATEMENTS 2. Capital assets Capital assets and depreciation activity as of and for the year ended June 30,2006 are as follows: Governmental type activities: Balance Balance 6/30/05 Additions Deletions 06/30/06 Land $ 2,183,385 $ - $ - $ 2,183,385 Road infrastructure 1,712,951 2,075,883-3,788,834 Buildings and improvements 3,296, ,296,473 Machinery and equipment ( ) $ $ f$ ) $ Accumulated depreciation (S ) ($ ) $ 40,405 ft ) Capital assets, net of Accumulated depreciation S $ (S ) $ Depreciation expense for the year ended June 30,2006 was charged to the following governmental inactions: General government $ 125,382 Public Safety 289,763 Streets Business type activities: Balance Balance 06/30/05 Additions Deletions 06/30/06 Land $ 29,761 $ - $ - $ 29,761 Construction in Progress 789,960 63,885 ( 565,130) 288,715 Buildings and improvements, Gas, water, sewer systems 17,314,558 1,693,729-19,008,287 Machinery and equipment $ $ ($ ) $ Accumulated depreciation. ($ ) ($ ) $ ($ ) Capital assets, net of Accumulated depreciation $ S (S ) $ Depreciation expense for the year ended June 30,2006 totaled $703,

33 NOTES TO THE FINANCIAL STATEMENTS 3. Long-term debt The following is a summary of changes in long-term debt: Governmental Activities: June 30, 2005 Capital lease obligationon Claims and judgme Compensated absences ts 116, Additions Deletions 34,114 92,992 ( 60,978) June 30, , , Current Portion 10, $ S f$ S S Business-Type Activity: Compensated absences Loan agreement 316, ,412 24,543 ( 70,484) ) 270, Capital Lease Obligation $ S fs ) S 6Q.QQQ Capital leases are accounted for in accordance with Section L20 of GASB Codification and NCGA Statement No.5 which require governments to use the criteria contained in FASB Statement No. 13, Accounting for Leases, and GASB Statement No. 13, Accounting for Operating Leases with Scheduled Rent Increases, to classify leases as capital or operating leases. The GASB Codification and NCGA Statement No. 5 also require that assets under capital leases be recorded as capital leases and the lease obligation be recorded as long-term debt in the Government-wide Statement of Net Assets. hi May 2006, the City executed a 36 month lease agreement with NEC Financial Services for a new telecommunications system hi the amount of $34,114. The rate used in calculating present value equaled 8.5%. Upon payment in full of the rental payments, the City has the right to purchase the equipment at a bargain price. The future minimum lease payments under this agreement along with the present value of the net minimum lease payments as of June 30,2006 is as follows: $12, , $38,820 Less: Amount representing interest j( 4.706) Present value of net minimum lease payments $

34 NOTES TO THE FINANCIAL STATEMENTS 3. Long-term debt (continued^ Loan Agreement In September 2002, the Council authorized the City to execute a loan agreement with the Louisiana Local Government Environmental Facilities and Community Development Authority (the "LCDA") for the purpose of providing funds for the construction of public works and infrastructure related to the Central Service Pump Station and Force Main projects in an amount of $1,500,000. In August 2003, the City amended the original loan agreement with LCDA for an additional $1,500,000 for the acquisition, construction, installation, and equipping of a meter read system for the various utilities. Advances under the loan agreement are drawn down as expenditures are made on these projects. The interest rate on these advances fluctuates weekly with changes in the Bond Market Association (BMA) Municipal Swap Index. The average interest rate on outstanding advances at June 30, 2006 was 5.05%. The future annual debt service requirements as of June 30,2006, are as follows: 4. Ad valorem taxes Year Ending June 30. Principal Interest 2007 $ 60,000 $ 106, , , , , ,600 97, ,100 94, , , , , , , , Total $ S Ad valorem taxes are levied and are actually billed to the taxpayers in December of each year. Billed ad valorem taxes become delinquent on January 2 nd of the following calendar year. If ad valorem taxes are unpaid by June 30, the property is offered at a tax sale, and thirty days after the tax sale a lien is placed on the property. The City bills and collects its own property taxes using the assessed values determined by the tax assessor of East Baton Rouge Parish. For the 2005 calendar year, taxes of 3.17 mils were levied (6.75 mils authorized) on property with assessed valuations totaling $57,779,220 and were available for general purposes. Ad valorem taxes collected during the year ended June 30, 2006 totaled $236,

35 NOTES TO THE FINANCIAL STATEMENTS 5. Intei-fund receivables and pavables Interfund receivables and payables at June 30, 2006, were as follows; Interfund Interiund Fund Receivables Pavables General fond $ 737,572 $ Proprietary fond r $ S Defined benefit pension plan Substantially all employees of the City of Zachary are members of either, the Municipal Employees Retirement System of Louisiana, the Municipal Police Employees Retirement System of Louisiana, or the Firefighters' Retirement System. These systems are cost-sharing, multiple-employer defined benefit pension plans administered by separate boards of trustees. Pertinent information relative to each plan follows: a. Municipal Employees Retirement System of Louisiana (MERS) Plan description: All of the City's full-time general employees participate in the MERS, a multipleemployer, cost-sharing pension plan administered by a separate Board of Trustees. MERS provides retirement, disability, and survivor benefits to participating, eligible employees. Benefits are established and amended by state statute. MERS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to Municipal Employees* Retirement System of Louisiana, 7937 Office Park Boulevard, Baton Rouge, Louisiana, 70809, or by calling (225) Funding policy: Members are required by state statute to contribute 9.25 percent of their annual covered salary to the System, and the City of Zachary is required to make contributions at an actuarially determined rate. The rate paid by the City during the past fiscal period was percent of annual covered payroll. Contributions to the System also include one-fourth of one percent of the taxes shown to be collectible by the tax rolls of each parish. The contribution requirements of plan members and the City of Zachary are established and amended by state statute. As provided by Louisiana Revised Statute 11:103, the employer contributions are determined by actuarial valuation and are subject to change each year based on the results of the valuation for the prior fiscal year. The City's contributions to the MERS during the year ended June 30, 2006, the eight months ended June 30, 2005 and the years ended October 31,2004 and2003 totaled $325,358, $204,118, $254,338, and $170,578 respectively, equal to the required contributions. The City pays a portion of-the 9.25% employee retirement contribution which would otherwise be deducted from the employees' salary. Payment of this is optional and can be changed. The contributions to MERS under this election were $62,142 for the year ended June 30,

36 NOTES TO THE FINANCIAL STATEMENTS 6. Defined benefit pension plan f continued) b. Municipal Police Employees Retirement System of Louisiana (MPERS) Plan description: All of the City's fall-time police employees participate in the MPERS, a cost-sharing, multiple-employer, defined benefit pension plan administered by a separate Board of Trustees. MPERS provides retirement, disability, and survivor benefits to participating, eligible employees. Benefits are established and amended by state statute. MPERS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to Municipal Police Employees' Retirement System, 8401 United Plaza Boulevard, Suite 270, Baton Rouge, Louisiana, 70809, or by calling (225) Fundine policy: Plan members are required by state statute to contribute 7.50 percent of their annual covered salary to the System, and the City of Zachary is required to make contributions at an actuarially determined rate. The rate paid by the City during the past fiscal period was percent of annual covered payroll. The contribution requirements of plan members and the City of Zachary are established and amended by state statute. As provided by Louisiana Revised Statute 11:103, the employer contributions are determined by actuarial valuation and are subject to change each year based on the results of the valuation for the prior fiscal year. The City's contributions to the MPERS during the year ended June 30,2006, the eight months ended June 30,2005 and the years ended October 31,2004 and 2003 totaled $217,391, $187,696, $199,184 and $118,170, respectively. c. Firefighters' Retirement System (FRS) Plan description: AH of the City's full time fire employees participate in the FRS, a cost-sharing, multiple-employer defined benefit pension plan administered by a separate Board of Trustees. FRS provides retirement, disability, and survivor benefits to participating, eligible employees. Benefits are established and amended by state statute. FRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to Firefighters' Retirement System, Post Office Box 94095, Baton Rouge, Louisiana, 70806, or by calling (225) Fundine policy: Plan members are required by state statute to contribute 8% of their salary to the system. The City is required by this statute to contribute the remaining amounts necessary to pay benefits when due (currently 18%). The contribution requirements of the plan members and the employer are established by, and may be amended by state law. As required by state law, the employer contributions are determined by actuarial valuation and are subject to change each year based on the results of the valuation for the prior fiscal year. The City of Zachary contributions to the FRS during the year ended June 30,2006, the eight months ended June 30,2005 and the years ended October 31,2004 and 2003 totaled %137,049, $125,178, $129,165, and $94,744, respectively. 7. Collateralization of bank deposits Under State law, federal deposit insurance or the pledge of securities owned by the fiscal agent bank must secure these deposits (or the resulting bank balances). The market value of the pledged securities plus the federal deposit insurance must at all times equal the amount on deposit with the fiscal agent. Governmental Accounting Standards Board (GASB) Statement No. 40, "Deposit and Investment Risk Disclosures" requires disclosure of custodial credit risk for bank deposits. Custodial credit risk is the risk that, in the event of the failure of a financial institution, a government will be unable to recover the deposits. -21-