APPENDIX A: MATTERS FOR YOUR CONSIDERATION

Transcription

1

2

3 City of St. Marys, Kansas December 31, 2015 Audit Communication Letter to Governing Body APPENDIX A: MATTERS FOR YOUR CONSIDERATION The following recommendations are submitted to assist in improving accounting, administrative and operational controls and procedures. Cost effectiveness may not warrant the implementation of the items listed. The City should consider the suggestions and prioritize as needed. Financial Statement Preparation (required per audit standards) As we state in our management representation letter signed by the Commission, we assisted management in the preparation of the audited financial statement and related note disclosures for external reporting. Current auditing standards require us to discuss with the Commission and management our involvement in assisting with preparation; while we assisted in the preparation our firm cannot be considered as part of the City s internal control structure and we cannot perform management functions or make management decisions with regards to the preparation. While the City personnel does not have adequate resources available to them to prepare the financial statements and related footnote disclosures in accordance with the basis of accounting adopted by the City for external purposes, they do have the skill and knowledge to process the basic financial transactions and prepare interim financial statements needed to provide appropriate budget and operating information to the governing body. The City does not have any documented policies and procedures with regards to preparation of external financial statements and related note disclosures and therefore we consider this to be a deficiency under the standards established by the American Institute of Certified Public Accountants. We understand that management and governing body may not find it cost effective to hire personnel on a full-time basis with the expertise or to purchase the additional resources it would require for staff to prepare the financial statements and related notes for external use, and therefore have chosen to rely on the assistance of the auditors and have accepted responsibility for the work performed by the auditors. Recommendations: While it may be cost prohibitive to have full-time staff with the skill, knowledge and expertise and resources to prepare the external financial statements and related notes, there are procedures and policies the City could implement, at relatively low cost, to ensure that the deficiency does not become a material weakness and that staff and management continue to possess adequate skill, knowledge and expertise to accept responsibility for the work performed by the auditors. We recommend that the governing body and management continue to monitor the policies and procedures over the preparation of external financial statements and note disclosures and consider the following as additional controls to strengthen their controls over financial reporting: Stay up to date with KMAAG requirements by obtaining the up to date Kansas Municipal Audit and Accounting Guide (KMAAG), issued by the Kansas Society of Certified Public Accounts and the KMAAG Board. Continue to participate in periodic training sessions on governmental and KMAAG financial statement preparation and reporting with guidance pertaining to KMAAG requirements. Adopt a policy that annual KMAAG financial statements will be included in the City s current interim financial statement review prior to being subject to the audit to ensure that all KMAAG related adjustments have been properly made. 3

4 City of St. Marys, Kansas December 31, 2015 Audit Communication Letter to Governing Body Golf Course- Record Keeping In the prior year s audit, we noted that record keeping for the golf course was incomplete. This year we have noted this issue again. It is our understanding the Golf Course Manager and Advisory Board resigned their positions in 2015 and early 2016, respectively. We were able to obtain records pertaining to the memberships but no other supporting documents were provided with regards to other fees or inventory control. We recognize this particular fund may not be significant to the City s overall financial statement but having and maintaining records are a vital part of the City s internal controls for all departments. Recommendation: We recommend that if the City leases this operation to an outside entity to manage or if the City assigns an individual to manage, the necessary procedures, tools and budget must be established to control and maintain proper records and inventory. We also recommend that other supporting documentation (noted in the public property fees resolution) be implemented to account for the various fees charged by the golf course. This will increase controls and assist to ensure that all fees are assessed, collected and turned in to and recorded in the City s financial records. 4

5 AUDITED FINANCIAL STATEMENT AND SUPPLEMENTARY INFORMATION December 31, 2015 Reese & Novelly, PA Certified Public Accountants St. Marys, Kansas

6 Audited Financial Statement and Supplementary Information City of St. Marys, Kansas Independent Auditor s Report...1 Regulatory Basis Financial Statement Summary Statement of Receipts, Expenditures and Unencumbered Cash...3 Notes to Financial Statement...6 Regulatory Required Supplementary Information (Regulatory Basis) Schedule 1: Summary of Expenditures - Budget and Actual...17 Schedule 2: Schedules of Receipts and Expenditures - Budget and Actual: General Fund...18 Bond and Interest Fund...19 Special Purpose Funds: Special Highway Fund...20 Special Park and Recreation Fund...21 Fire Equipment Fund...22 County Sales Tax Fund...23 Summary of Non-budgeted Special Purpose Funds...24 Summary Schedule of Capital Project Funds (Non-budgeted)...25 Business Funds: Electric Utility Fund...26 Water Utility Fund...27 Sewer Service Fund...28 Sewer Debt Service Reserve Fund...29 Golf Course Fund...30 Refuse Utility Fund...31 Summary of Non-budgeted Business Funds...32 Schedule 3: Summary of Receipts and Disbursements Agency Funds...33 Other Information Schedule 4: Key Ratios of Financial Condition...34

7

8

9 FINANCIAL STATEMENT AND NOTE DISCLOSURES

10 SUMMARY STATEMENT OF RECEIPTS, EXPENDITURES AND UNENCUMBERED CASH REGULATORY BASIS Beginning Unencumbered Cash Balance Prior Year Cancelled Encumbrances Receipts Expenditures Ending Unencumbered Cash Balance Add Encumbrances and Accounts Payable Ending Cash Balance Funds General Funds: General $ 421,681 $ $ 1,057,579 $ 1,040,800 $ 438,460 $ 16,052 $ 454,512 Bond and Interest Funds: Bond and Interest 52,138 50,254 45,990 56,402 56,402 Special Purpose Funds: Special Highway 39, ,149 91,410 49, ,733 Special Parks and Recreation 14,971 40,742 44,487 11, ,136 Fire Equipment 201,326 84,864 61, , ,139 County Sales Tax 559, , , , ,913 Crime Prevention 2,482 2,610 2,301 2,791 2,791 Capital Improvements 15, ,438 2,783 2,783 Equipment Reserve 136,322 33,084 10, , ,215 TOTAL SPECIAL PURPOSE 968, , ,160 1,037,276 1,434 1,038,710 Capital Projects: Electric Substation Project 4,864 4,864 4,864 The notes to the financial statement are an integral part of this statement. 3

11 SUMMARY STATEMENT OF RECEIPTS, EXPENDITURES AND UNENCUMBERED CASH REGULATORY BASIS Beginning Unencumbered Cash Balance Prior Year Cancelled Encumbrances Receipts Expenditures Ending Unencumbered Cash Balance Add Encumbrances and Accounts Payable Ending Cash Balance Funds Business Funds: Electric Utility 796,362 2,140,211 2,089, ,625 13, ,363 Water Utility 232, , , ,548 3, ,259 Sewer Service 276, , , ,047 1, ,959 Sewer Debt Service Reserve 193, , , , ,376 Golf Course 4, , ,691 4,913 1,213 6,126 Refuse Utility 55, , ,696 57,731 6,624 64,355 Sewer Reserve 45,776 40,000 70,066 15,710 15,710 TOTAL BUSINESS FUNDS 1,604,831 3,624,504 3,677,385 1,551,950 27,198 1,579,148 TOTAL REPORTING ENTITY $ 3,052,376 $ - $ 5,379,911 $ 5,343,335 $ 3,088,952 $ 44,684 $ 3,133,636 The notes to the financial statement are an integral part of this statement. 4

12 SUMMARY STATEMENT OF RECEIPTS, EXPENDITURES AND UNENCUMBERED CASH REGULATORY BASIS Composition of Cash: Checking accounts $ 1,081,193 Money market accounts 1,157,158 Certificates of deposit 943,345 Municipal court 15 TOTAL CASH 3,181,711 Less Agency Funds (per Schedule 3) (48,075) TOTAL REPORTING ENTITY (EXCLUDING AGENCY FUNDS) $ 3,133,636 The notes to the financial statement are an integral part of this statement. 5

13 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of St. Marys, Kansas (Municipality) was chartered October 9, 1869, and operates under a Commission-Manager form of government. The accounting policies of the Municipality conform to the cash-basis and budget laws of Kansas (regulatory basis). The following is a summary of the more significant policies: 1. The Financial Reporting Entity: The financial reporting entity of the City of St. Marys, Kansas is comprised of the primary government (the Municipality). The basic criterion for including a separate entity in the Municipality's financial reporting entity is the financial accountability of the Municipality for the separate entity. The Municipality is financially accountable if it appoints a voting majority of a related municipal entity s governing body and if it either has the ability to impose its will on the related municipal entity or there is a potential for the related municipal entity to provide certain financial benefits to, or impose certain financial burdens on, the primary government. There were no related municipal entities. 2. Regulatory Basis Fund Types: The accounts of the Municipality are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its cash, liabilities, fund balance, receipts, and expenditures. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The various funds are grouped, in the financial statement in this report, into generic regulatory basis fund types and broad fund categories as follows: Governmental Funds The General Fund is the chief operating fund of the Municipality. It is used to account for all financial resources except those that are required to be accounted for in another fund. Special Purpose Funds are used to account for the proceeds of specific tax levies and other specific revenue sources (other than capital project and tax levies for long-term debt) that are intended for specified purposes. Bond and Interest Funds are used to account for the accumulation of resources, including tax levies, transfer from other funds and payment of long-term debt principal, interest, and related costs. Capital Projects Funds are used to account for the debt proceeds and other financial resources to be used for the acquisition or construction of major capital facilities or equipment. 6

14 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 Business Funds Business Funds are used to account for operations that provide goods or services to the general public on a continuing basis. Such operations are financed and operated in a manner similar to private business entities and (a) are intended to be self supporting through charges to users or (b) the governing body has deemed it appropriate to account for them as business funds for capital maintenance, public policy, management control, accountability, or other purposes. Trust and Agency Funds Trust Funds are used to report assets held in trust for the benefit of the municipal financial reporting entity (i.e. pension funds, investment trust funds, private purpose trust funds which benefit the municipal reporting entity, scholarship funds, etc.). Agency Funds are used to account for assets held by the municipal reporting entity in a purely custodial capacity (payroll clearing fund, tax collection accounts, etc.). 3. Regulatory Basis of Accounting and Departure from Accounting Principles Generally Accepted in the United States of America: The municipal reporting entity prepares the financial statements using Kansas Municipal Audit and Accounting Guide (KMAAG) regulatory basis of accounting, which is designed to demonstrate compliance with the cash basis and budget laws of the State of Kansas. The KMAAG regulatory basis of accounting involves the recognition of cash, cash equivalents, marketable investments, and certain accounts payable and encumbrance obligations to arrive at a net unencumbered cash and investments balance on a regulatory basis for each fund, and the reporting of changes in unencumbered cash and investments of a fund resulting from the difference in regulatory basis revenues and regulatory basis expenditures for the fiscal year. Receipts are recognized when the cash balance of a fund is increased. For an interfund transaction, a receipt is recorded in the fund receiving cash from another fund, and the expenditure would be charged in the fund from which the transfer is made. All recognized assets and liabilities are measured and reported at cost, unless they have been permanently impaired and have no future cash value or represent no future obligation against cash. The KMAAG regulatory basis does not recognize capital assets, long-term debt, accrued receivables and payables, or any other assets, liabilities or deferred inflow or outflows, other than those mentioned above. The Municipality has approved a resolution that is in compliance with K.S.A a(c), waiving the requirement for application of generally accepted accounting principles and allowing the municipality to use the KMAAG regulatory basis of accounting. 7

15 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, Budgetary Information: Kansas statutes require that an annual operating budget be legally adopted for the general fund, special purpose funds (unless specifically exempted by statute), bond and interest funds, and business funds. Although directory rather than mandatory, the statutes provide for the following sequence and timetable in the adoption of the legal annual operating budget: a. Preparation of the budget for the succeeding calendar year on or before August 1. b. Publication in local newspaper of the proposed budget and notice of public hearing on the budget on or before August 5. c. Public hearing on or before August 15, but at least ten days after publication of notice of hearing. d. Adoption of the final budget on or before August 25. The statutes allow for the governing body to increase the originally adopted budget for previously unbudgeted increases in revenue other than ad valorem property taxes. To do this, a notice of public hearing to amend the budget must be published in the local newspaper. At least ten days after publication the hearing may be held and the governing body may amend the budget at that time. The statutes permit transferring budgeted amounts between line items within an individual fund. However, such statutes prohibit expenditures in excess of the total amount of the adopted budget of expenditures of individual funds. Budget comparison schedules are presented for each fund showing actual receipts and expenditures compared to legally budgeted receipts and expenditures. All legal annual operating budgets are prepared using the regulatory basis of accounting in which revenues are recognized when cash is received and expenditures include disbursements, accounts payable and encumbrances, with disbursements being adjusted for prior year s accounts payable and encumbrances. Encumbrances are commitments by the municipality for future payments and are supported by a document evidencing the commitment, such as a purchase order or contract. Any unused budgeted expenditure authority lapses at year-end. A legal operating budget is not required for capital project funds, trust funds and the following special purpose and business funds: Special Purpose Funds: Capital Improvement; Equipment Reserve Business Funds: Sewer Reserve 8

16 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 Spending in funds, which are not subject to the legal annual operating budget requirement, is controlled by federal regulations, other statutes, or by the use of internal spending limits established by the governing body. 5. Special Assessments: Projects financed in part by special assessments are financed through general obligation bonds of the Municipality and are retired from the bond and interest fund. Special assessments paid prior to the issuance of bonds are recorded as revenue in the appropriate project. Special assessments received after the issuance of bonds are recorded as revenue in the bond and interest fund. 6. Cash and Investments: The Municipality uses an internally pooled cash system in which the cash balances from all funds are combined and invested to the extent available in certificates of deposit and other authorized investments. Earnings from these investments, unless specifically designated, are allocated to the general fund and the utility funds based upon their average cash balances. Investments are stated at cost, which approximates market. 7. Reimbursements: The Municipality records reimbursable expenditures in the fund that makes the disbursement and records reimbursements as revenue to the fund. For purposes of budgetary comparisons, the reimbursement is recorded as a qualifying budget credit in the fund receiving the reimbursement. 8. Property Tax: The Pottawatomie County Clerk calculates the final tax levy rates necessary to finance the budget subject to any legal limitations. After all budgets have been received and tax rates calculated, the clerk certifies the tax roll to, and prepares tax statements for, the County Treasurer who receives payment. Taxes levied to finance the budget are made available to the Municipality after January 1 and are distributed by the County Treasurer per statutes. At least 50% of the taxes levied are available in January. Delinquent tax collections are distributed throughout the year. 9. Other Related Municipal Entitles (excluded from municipal financial reporting entity): The Municipality Commission is also responsible for appointing the members of the board of the St. Marys Housing Authority, but the Municipality's accountability for this organization does not extend beyond making the appointments and the Municipality Commission makes no appropriations to the Authority. NOTE B STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 1. Amendments to Legal Budgets: The legal budgets for the Water Fund, Special Parks and Recreation Fund, and Golf Course Fund were amended during

17 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 NOTE C DEPOSITS AND INVESTMENTS As of December 31, 2015, the Municipality s investments consisted of short-term certificates of deposit. K.S.A establishes the depositories which may be used by the Municipality. The statute requires banks eligible to hold the Municipality s funds have a main or branch bank in the county in which the Municipality is located, or in an adjoining county if such institution has been designated as an official depository, and the banks provide an acceptable rate of return on funds. In addition, K.S.A requires the banks to pledge securities for deposits in excess of FDIC coverage. The Municipality has no other policies that would further limit interest rate risk. K.S.A limits the Municipality s investment of idle funds to time deposits, open accounts, and certificates of deposit with allowable financial institutions; U.S. government securities; temporary notes; no-fund warrants; repurchase agreements; and the Kansas Municipal Investment Pool. The Municipality has no investment policy that would further limit its investment choices. The Municipality had no investments, other than certificates of deposit which are included in the bank deposits; therefore they do not have a rating. Concentration of credit risk: State statutes place no limit on the amount the Municipality may invest in any one issuer as long as the investments are adequately secured under K.S.A and Custodial credit risk deposits: Custodial credit risk is the risk that in the event of a bank failure, the Municipality s deposits may not be returned to it. State statutes require the Municipality s deposits in financial institutions to be entirely covered by federally depository insurance or by collateral held under a joint custody receipt issued by a bank within the State of Kansas, the Federal Reserve Bank of Kansas, or the Federal Home Loan Bank of Topeka, except during designated peak periods when required coverage is 50%. The Municipality had no agreements for designated peak periods. All deposits were legally secured at December 31, At December 31, 2015, the carrying amount of the Municipality s deposits, including certificates of deposit, was $3,181,711 and the bank balance was $3,186,118. The bank balance was held by two banks which resulted in a concentration of credit risk. Of the bank balance, $1,000,000 was covered by federal depository insurance and $2,186,118 was collateralized with securities held by the pledging financial institutions agents in the Municipality s name. Custodial credit risk investments: For an investment, this is the risk that, in the event of the failure of the issuer or counterparty, the Municipality will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. State statutes require investments to be adequately secured. 10

18 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 NOTE D LONG TERM DEBT The following is a summary of debt transactions of the Municipality for the year ended December 31, See Notes L and M for the schedules of long-term liabilities and current maturities of long-term debt. Payable Beginning of Year Issued Retired Payable End of Year General Obligation Bonds $ 195,000 $ 40,000 $ 155,000 Revolving Notes 1,960, ,942 1,755,552 Capital Leases 72,022 64,828 7,194 Total $ 2,227,516 $ - $ 309,770 $ 1,917,746 Total interest expense for the year was $73,896. Conduit Debt From time to time, the Municipality has issued industrial revenue bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial and commercial facilities deemed to be in the public interest. The bonds are generally payable from and secured by the project financed and if needed, additional assets and/or revenues of the private-sector entity served by the bond issuance. Upon repayment of the bonds, ownership of the acquired facilities transfers to the private-sector entity served by the bond issuance. Neither the Municipality, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are not reported as liabilities in the accompanying financial statement. As of December 31, 2015, there was one series of industrial revenue bond outstanding. The aggregate principal amount payable at December 31, 2015 could not be determined; however, the original issue amount totaled $2 million. NOTE E DEFINED BENEFIT PENSION PLAN General Information about the Pension Plan Plan Description: The City of St. Marys, Kansas participates in the Kansas Public Employees Retirement System (KPERS), a cost-sharing, multiple-employer defined benefit pension plan as provided by K.S.A , et. seq. Kansas law establishes and amends benefit provisions. KPERS issues a publically available financial report that includes financial statements and required supplementary information. KPERS financial statements are included in its Comprehensive Annual Financial Report which can be found on the KPERS website at or by writing to KPERS (611 South Kansas, Suite 100; Topeka, KS 66603) or by calling

19 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 Contributions: K.S.A and K.S.A ,210 establish the KPERS member-employee contribution rates. KPERS has multiple benefit structures and contribution rates depending on whether the employee is a KPERS 1, KPERS 2, or KPERS 3 member. KPERS 1 members are active and contributing members hired before July 1, KPERS 2 members were first employed in a covered position on or after July 1, 2009, and KPERS 3 members were first employed in a covered position on or after January 1, Effective January 1, 2015, Kansas law established the KPERS member-employee contribution rate at six percent of covered salary for KPERS 1, KPERS 2 and KPERS 3. Member contributions are withheld by their employer and paid to KPERS according to the provisions of Section 414(h) of the Internal Revenue Code. State law provides that the employer contribution rates for KPERS 1, KPERS 2, and KPERS 3 be determined based on the results of each annual actuarial valuation. Kansas law sets a limitation on annual increases in the employer contribution rates. The actuarially determined employer contribution rate (not including the 0,85% contribution rate for Death and Disability Program) and the statutory contribution rate was 9.48% for the fiscal year ended December 31, Contributions to the pension plan from City of St. Marys, Kansas were $107,144 for the year ended December 31, Net Pension Liability At December 31, 2015, the City of St. Marys, Kansas s proportionate share of the collective net pension liability reported by KPERS was $784,334. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2014, which was rolled forward to June 30, The Municipality s proportion of the net pension liability was based on the ratio of the Municipality s contributions to KPERS, relative to the total employer and non-employer contributions of the Local subgroup within KPERS. Since the KMAAG regulatory basis of accounting does not recognize long-term debt, this liability is not reported in this financial statement. The complete actuarial valuation report including all actuarial assumptions and methods, and the report on the allocation of the KPERS collective net pension liability to all participating employers are publicly available on the website at or can be obtained as described above. NOTE F DEFERRED COMPENSATION The Municipality participates in the Kansas Public Employees Deferred Compensation Plan, as authorized by K.S.A a and b. The City of St. Marys, Kansas is a joint contract owner with the State of Kansas of the group annuity contract issued by ING Life Insurance and Annuity Company in conjunction with the Kansas Public Employees Deferred Compensation Plan. The Municipality annually determines whether matching funds will be paid into employees accounts. For the year ended December 31, 2015, the Municipality paid $10,040 in matching contributions. 12

20 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 The Municipality is not responsible for any loss incurred by an employee under the Municipality s deferred compensation plan. All conditions of the plan shall be controlling. NOTE G OTHER POST EMPLOYMENT BENEFIT As provided by K.S.A , the municipality allows retirees to participate in the group health insurance plan. While each retiree pays the full amount of the applicable premium, conceptually, the municipality is subsidizing the retirees because each participant is charged a level of premium regardless of age. However, the cost of this subsidy has not been quantified in these financial statements. Under the Consolidated Budget Reconciliation Act (COBRA), the municipality makes health care benefits available to eligible former employees and eligible dependents. Certain requirements are outlined by the federal government for this coverage. The premium is paid in full by the insured. NOTE H COMPENSATED ABSENCES The Municipality maintains a policy of providing vacation and sick leave to its full-time employees, granted in varying amounts depending on length of service and date of hire. Vacation days are vesting and accumulate but accumulation is subject to various limits. Sick leave is non-vesting and accumulates up to a maximum of 720 hours for employees hired after January 1, Employees hired prior to January 1, 2005 have unlimited accumulation of sick leave. At December 31, 2015, the Municipality s liability for unused vacation time is approximately $67,776 attributable to governmental and proprietary funds. NOTE I COMMITMENTS AND CONTINGENCIES Construction Contracts: At December 31, 2015, the Municipality had several pending construction project contracts. Commitments related to significant contracts include contracts for the Municipality s street improvements. Risk Management: The Municipality is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Municipality manages these various risks of loss through commercial insurance with varying deductibles. All deductibles are $1,000 or less. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. 13

21 NOTES TO FINANCIAL STATEMENT FINANCIAL REPORTING ENTITY December 31, 2015 NOTE J TRANSFERS Operating transfers were as follows: FROM TO Statutory Authority Amount General Fund Equipment Reserve Fund K.S.A. 12-1,117 $ 6,000 County Sales Tax General Fund K.S.A. 12-1, ,000 County Sales Tax Golf Course Fund K.S.A. 12-1,118 15,000 County Sales Tax Special Highway Fund K.S.A ,000 County Sales Tax Fire Equipment Reserve K.S.A. 12-1,118 6,500 County Sales Tax Equipment Reserve Fund K.S.A. 12-1,117 27,000 Golf Course Fund Bond and Interest Fund K.S.A d 2,142 Sewer Fund Sewer Reserve Fund K.S.A o 40,000 Sewer Fund Sewer Debt Service K.S.A o 233,419 $ 525,061 NOTE K MANAGEMENT S REVIEW OF SUBSEQUENT EVENTS In preparing these financial statements, the Municipality has evaluated events and transactions for potential recognition or disclosure through June 21, 2016, the date the financial statements were available to be issued. 14

22 NOTES TO FINANCIAL STATEMENT NOTE L - SCHEDULE OF LONG-TERM DEBT The following is a schedule of changes in long term debt for the City for the year ended December 31, 2015 Interest Rate Date of Issue Original Amount Date of Final Maturity Beginning Balance Issued Retired Net Change Interest Paid General Obligation Bonds Series 2011 Refinance 1.0/3.40% 2/16/ ,000 10/1/ ,000 40,000 (40,000) 155,000 5,990 TOTAL GENERAL OBLIGATION BONDS 375, ,000-40,000 (40,000) 155,000 5,990 Ending Balance KDHE Revolving Loan Wastewater Treatment Plant 3.49% 8/22/2000 3,385,268 3/1/2022 1,528, ,640 (181,640) 1,346,990 51,778 Water Supply 3.51% 2/13/ ,673 2/1/ ,864 23,302 (23,302) 408,562 14,956 TOTAL REVOLVING LOANS 3,931,941 1,960, ,942 (204,942) 1,755,552 66,734 Capital Leases 2012 Fire Truck 1.30% 1/15/ ,761 1/15/ ,267 60,267 (60,267) John Deere 997 Mower 4.00% 8/1/ ,015 8/1/ ,755 4,561 (4,561) 7, TOTAL CAPITAL LEASES 133,776 72,022 64,828 (64,828) 7,194 1,172 TOTAL INDEBTEDNESS $ 4,440,717 $ 2,227,516 $ - $ 309,770 $ (309,770) $ 1,917,746 $ 73,896 15

23 NOTES TO FINANCIAL STATEMENT NOTE M: SCHEDULE OF MATURITY OF LONG TERM DEBT The current maturities of long term debt and interest for the next five years and in five year increments through maturity is as follows: Total PRINCIPAL General obligation bonds $ 40,000 $ 40,000 $ 40,000 $ 35,000 $ 155,000 Revolving loans 212, , , , , , ,977 1,755,552 Capital leases 4,747 2,447 7,194 TOTAL PRINCIPAL 256, , , , , , ,977 1,917,746 INTEREST General obligation bonds 4,950 3,750 2,490 1,190 12,380 Revolving loans 59,515 52,040 44,303 36,293 28,002 49,068 8, ,147 Capital leases TOTAL INTEREST 64,666 55,819 46,793 37,483 28,002 49,068 8, ,757 TOTAL PRINCIPAL AND INTEREST $ 321,575 $ 317,901 $ 314,165 $ 307,865 $ 271,677 $ 541,417 $ 133,903 $ 2,208,503 16

24 REGULATORY-REQUIRED SUPPLEMENTARY INFORMATION

25 SUMMARY OF EXPENDITURES - BUDGET AND ACTUAL BUDGETED FUNDS ONLY (SCHEDULE 1) Certified Budget (As Amended) Adjustment for Qualifying Budget Credits Total Budget for Comparison Expenditures Chargeable to Current Year Favorable (Unfavorable) Variance General Funds: General $ 1,174,414 $ $ 1,174,414 $ 1,040,800 $ 133,614 Bond and Interest Funds: Bond and Interest 102, ,091 45,990 56,101 Special Purpose Funds: Special Highway 157, ,511 91,410 66,101 Special Park and Recreation 50,000 50,000 44,487 5,513 Fire Equipment 193, ,608 61, ,557 County Sales Tax 1,007,945 1,007, , ,663 Business Funds: Electric Utility 2,287,378 2,287,378 2,089, ,430 Water Utility 350, , ,263 3,737 Sewer Service 592, , ,304 49,804 Sewer Debt Service 233, , ,417 - Golf Course 161, , ,691 4,309 Refuse Utility 274, , ,696 35,539 See independent auditor's report. 17

26 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS GENERAL FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Taxes and shared revenues $ 452,376 $ 458,345 $ 5,969 Intergovernmental revenue 11,650 12, Sales tax 250, ,858 48,858 Fines, forfeitures, and penalties 17,500 29,823 12,323 Licenses, permits, and fees 30,280 29,616 (664) Charges for services 21,500 22, Use of money and property 11,880 18,054 6,174 Reimbursements and grants 6,000 16,542 10,542 Miscellaneous 4,125 7,078 2,953 Operating transfers 165, ,000 - TOTAL CASH RECEIPTS 970,311 1,057,579 87,268 Expenditures: Personnel expenditures 779, ,946 47,101 General 64,572 75,766 (11,194) Public safety 135, ,076 30,823 Municipal court 6,644 4,015 2,629 Street department 157,172 93,590 63,582 Public buildings and grounds 11,500 5,323 6,177 Swimming pool 13,580 19,084 (5,504) Operating transfers 6,000 6,000 - TOTAL EXPENDITURES 1,174,414 1,040, ,614 RECEIPTS OVER (UNDER) EXPENDITURES (204,103) 16,779 Beginning Unencumbered Cash Balance 204, ,681 ENDING UNENCUMBERED CASH BALANCE $ - $ 438,460 See independent auditor's report. 18

27 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - BOND & INTEREST BOND AND INTEREST FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Taxes and shared revenues $ 45,995 $ 48,112 $ 2,117 Operating transfers 2,142 2,142 - TOTAL CASH RECEIPTS 48,137 50,254 2,117 Expenditures: Contractual services and other charges Materials and supplies 55,932 55,932 Debt payments: Principal 40,000 40,000 - Interest 5,990 5,990 - TOTAL EXPENDITURES 102,091 45,990 56,101 RECEIPTS OVER (UNDER) EXPENDITURES (53,954) 4,264 Beginning Unencumbered Cash Balance 53,954 52,138 ENDING UNENCUMBERED CASH BALANCE $ - $ 56,402 See independent auditor's report. 19

28 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - SPECIAL HIGHWAY SPECIAL PURPOSE FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Taxes and shared revenues $ 68,300 $ 70,147 $ 1,847 Reimbursements and grants Miscellaneous Operating transfers 30,000 30,000 - TOTAL CASH RECEIPTS 98, ,149 2,849 Expenditures: Contractual services and other charges 9,000 2,697 6,303 Materials and supplies 148,250 88,713 59,537 Capital outlay TOTAL EXPENDITURES 157,511 91,410 66,101 RECEIPTS OVER (UNDER) EXPENDITURES (59,211) 9,739 Beginning Unencumbered Cash Balance 59,211 39,470 ENDING UNENCUMBERED CASH BALANCE $ - $ 49,209 See independent auditor's report. 20

29 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - SPECIAL PARKS AND RECREATION SPECIAL PURPOSE FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Taxes and shared revenues $ 14,045 $ 15,182 $ 1,137 Charges for services 20,500 22,205 1,705 Use of money and property 810 1, Reimbursements and grants Miscellaneous 71 1,550 1,479 Contract revenue 1, (1,350) TOTAL CASH RECEIPTS 37,026 40,742 3,716 Expenditures: Personnel expenditures 17,210 13,645 3,565 Contractual services and other charges 15,490 12,330 3,160 Materials and supplies 9,300 8,176 1,124 Capital outlay 8,000 9,751 (1,751) Miscellaneous 585 (585) TOTAL EXPENDITURES 50,000 44,487 5,513 RECEIPTS OVER (UNDER) EXPENDITURES (12,974) (3,745) Beginning Unencumbered Cash Balance 12,974 14,971 ENDING UNENCUMBERED CASH BALANCE $ - $ 11,226 See independent auditor's report. 21

30 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - FIRE EQUIPMENT SPECIAL PURPOSE FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Miscellaneous $ $ 2,700 $ 2,700 Contract revenue 72,800 75,664 2,864 Operating transfers 6,500 6,500 - TOTAL CASH RECEIPTS 79,300 84,864 5,564 Expenditures: Materials and supplies 15,137 15,137 Capital outlay 178,471 61, ,420 TOTAL EXPENDITURES 193,608 61, ,557 RECEIPTS OVER (UNDER) EXPENDITURES (114,308) 23,813 Beginning Unencumbered Cash Balance 186, ,326 ENDING UNENCUMBERED CASH BALANCE $ 71,782 $ 225,139 See independent auditor's report. 22

31 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - COUNTY SALES TAX SPECIAL PURPOSE FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Taxes and shared revenues $ 365,000 $ 379,397 $ 14,397 Use of money and property Reimbursements and grants 119,761 (119,761) Miscellaneous 4,848 4,848 TOTAL CASH RECEIPTS 484, ,990 (99,771) Expenditures: Capital outlay 774, , ,663 Operating transfers 233, ,500 (10,000) TOTAL EXPENDITURES 1,007, , ,663 RECEIPTS OVER (UNDER) EXPENDITURES (523,184) 27,708 Beginning Unencumbered Cash Balance 523, ,205 ENDING UNENCUMBERED CASH BALANCE $ - $ 586,913 See independent auditor's report. 23

32 SCHEDULE OF RECEIPTS AND EXPENDITURES REGULATORY BASIS SUMMARY OF NON-BUDGETED SPECIAL PURPOSE FUNDS - (SCHEDULE 2) Crime Prevention Capital Improvement Equipment Reserve Cash Receipts: Licenses, permits, and fees $ 1,518 $ $ Use of money and property Miscellaneous 1,092 Operating transfers 33,000 TOTAL CASH RECEIPTS 2, ,084 Expenditures: Materials and supplies 2,495 Capital outlay 2,301 9,943 10,191 TOTAL EXPENDITURES 2,301 12,438 10,191 RECEIPTS OVER (UNDER) EXPENDITURES 309 (12,303) 22,893 Beginning Unencumbered Cash Balance 2,482 15, ,322 ENDING UNENCUMBERED CASH BALANCE $ 2,791 $ 2,783 $ 159,215 See independent auditor's report. 24

33 SCHEDULE OF RECEIPTS AND EXPENDITURES REGULATORY BASIS SUMMARY SCHEDULE OF CAPITAL PROJECTS FUNDS (SCHEDULE 2) Cash Receipts: Electric Substation Project Expenditures: RECEIPTS OVER (UNDER) EXPENDITURES - Beginning Unencumbered Cash Balance 4,864 ENDING UNENCUMBERED CASH BALANCE $ 4,864 See independent auditor's report. 25

34 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - ELECTRIC UTILITY BUSINESS FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Charges for services $ 2,089,000 $ 2,113,144 $ 24,144 Use of money and property 14,100 6,429 (7,671) Miscellaneous 4,200 19,732 15,532 Contract revenue 1, (906) TOTAL CASH RECEIPTS 2,109,112 2,140,211 31,099 Expenditures: Personnel expenditures 328, ,333 5,493 Contractual services and other charges 246, ,518 78,684 Materials and supplies 1,477,250 1,449,711 27,539 Capital outlay 235, ,347 85,653 Miscellaneous TOTAL EXPENDITURES 2,287,378 2,089, ,430 RECEIPTS OVER (UNDER) EXPENDITURES (178,266) 50,263 Beginning Unencumbered Cash Balance 790, ,362 ENDING UNENCUMBERED CASH BALANCE $ 611,869 $ 846,625 See independent auditor's report. 26

35 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - WATER UTILITY BUSINESS FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Charges for services $ 303,900 $ 276,527 $ (27,373) Use of money and property 1,140 3,063 1,923 Miscellaneous 4,800 6,853 2,053 TOTAL CASH RECEIPTS 309, ,443 (23,397) Expenditures: Personnel expenditures 199, ,613 1,299 Contractual services and other charges 80,709 82,773 (2,064) Materials and supplies 18,620 15,838 2,782 Capital outlay 12,500 10,772 1,728 Miscellaneous 9 (9) Debt payments: Principal 21,581 23,303 (1,722) Interest 16,678 14,955 1,723 TOTAL EXPENDITURES 350, ,263 3,737 RECEIPTS OVER (UNDER) EXPENDITURES (40,160) (59,820) Beginning Unencumbered Cash Balance 194, ,368 ENDING UNENCUMBERED CASH BALANCE $ 153,953 $ 172,548 See independent auditor's report. 27

36 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - SEWER SERVICE BUSINESS FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Charges for services $ 526,450 $ 524,049 $ (2,401) Use of money and property Miscellaneous 2,608 2,608 TOTAL CASH RECEIPTS 526, , Expenditures: Personnel expenditures 173, ,282 14,246 Contractual services and other charges 62,911 88,792 (25,881) Materials and supplies 19,750 20,798 (1,048) Capital outlay 45,000 45,000 Miscellaneous 13 (13) Operating transfers 290, ,419 17,500 TOTAL EXPENDITURES 592, ,304 49,804 RECEIPTS OVER (UNDER) EXPENDITURES (65,558) (15,498) Beginning Unencumbered Cash Balance 195, ,545 ENDING UNENCUMBERED CASH BALANCE $ 129,637 $ 261,047 See independent auditor's report. 28

37 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - SEWER DEBT SERVICE RESERVE BUSINESS FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Use of money and property $ 115 $ 99 $ (16) Operating transfers 233, ,419 - TOTAL CASH RECEIPTS 233, ,518 (16) Expenditures: Principal 181, ,639 - Interest 51,778 51,778 - TOTAL EXPENDITURES 233, ,417 - RECEIPTS OVER (UNDER) EXPENDITURES Beginning Unencumbered Cash Balance 193, ,275 ENDING UNENCUMBERED CASH BALANCE $ 193,418 $ 193,376 See independent auditor's report. 29

38 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - GOLF COURSE BUSINESS FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Charges for services $ 102,103 $ 82,248 $ (19,855) Use of money and property 20,950 31,403 10,453 Reimbursements and grants 5,010 5,010 Miscellaneous 10,000 18,468 8,468 Contract revenue 4,500 4,500 - Operating transfers 15,000 15,000 - TOTAL CASH RECEIPTS 152, ,629 4,076 Expenditures: Personnel expenditures 109,575 88,647 20,928 Contractual services and other charges 28,264 30,701 (2,437) Materials and supplies 19,000 24,861 (5,861) Capital outlay 4,949 (4,949) Miscellaneous 2,019 5,391 (3,372) Operating transfers 2,142 2,142 - TOTAL EXPENDITURES 161, ,691 4,309 RECEIPTS OVER (UNDER) EXPENDITURES (8,447) (62) Beginning Unencumbered Cash Balance 15,733 4,975 ENDING UNENCUMBERED CASH BALANCE $ 7,286 $ 4,913 See independent auditor's report. 30

39 SCHEDULE OF RECEIPTS AND EXPENDITURES - BUDGET AND ACTUAL REGULATORY BASIS - REFUSE UTILITY BUSINESS FUND - (SCHEDULE 2) Budget Actual Favorable (Unfavorable) Variance Cash Receipts: Licenses, permits, and fees $ 9,500 $ 11,282 $ 1,782 Charges for services 222, ,361 4,161 Miscellaneous 3,500 3,254 (246) TOTAL CASH RECEIPTS 235, ,897 5,697 Expenditures: Personnel expenditures 135, ,468 (727) Contractual services and other charges 87,673 90,849 (3,176) Materials and supplies 20,500 10,923 9,577 Capital outlay 10, ,544 Operating transfers 20,321 20,321 TOTAL EXPENDITURES 274, ,696 35,539 RECEIPTS OVER (UNDER) EXPENDITURES (39,035) 2,201 Beginning Unencumbered Cash Balance 39,035 55,530 ENDING UNENCUMBERED CASH BALANCE $ - $ 57,731 See independent auditor's report. 31

40 SCHEDULE OF RECEIPTS AND EXPENDITURES REGULATORY BASIS SUMMARY OF NON-BUDGETED BUSINESS FUNDS (SCHEDULE 2) Sewer Reserve Cash Receipts: Operating transfers $ 40,000 Expenditures: Capital outlay 70,066 RECEIPTS OVER (UNDER) EXPENDITURES (30,066) Beginning Unencumbered Cash Balance 45,776 ENDING UNENCUMBERED CASH BALANCE $ 15,710 See independent auditor's report. 32

41 SUMMARY OF RECEIPTS AND DISBURSEMENTS REGULATORY BASIS AGENCY FUNDS (SCHEDULE 3) For the Fund Beginning Cash Balance Receipts Disbursements Ending Cash Balance Trust and agency: Municipal Court ADSAP $ 15 $ $ $ 15 Municipal Court 36,060 36,060 - Customer deposits 50,277 32,045 34,262 48,060 TOTAL 50,292 68,105 70,322 48,075 See independent auditor's report. 33

42 OTHER INFORMATION

43 SCHEDULE 4: KEY RATIOS OF FINANCIAL CONDITION GOVERNMENTAL FUNDS ONLY Ratio Total Revenue Per Capita: Compares existing revenue base for all governmental funds (excluding capital project funds and transfers) relative to the population change. Operating revenues 1,518,765 1,533,837 1,732,228 Population* 2,871 $ 529 2,747 $ 558 2,686 $ Intergovernmental Revenues / Total Revenue Percentage: Shows how dependent a jurisidiction is on other units of government such as the state, national, or local units. Total general fund intergovernmental revenues 311, , ,067 Total general fund sources 1,057, % 1,073, % 950, % 3. Property Tax or Own Source Tax Revenue / Total Revenue Percentage: Shows how dependent a jurisdiction is on tax revenues for its general fund operations. General fund tax revenue 488, , ,909 Total general fund sources 1,057, % 1,073, % 950, % 4. General fund sources from other funds / Total Revenue: Shows how dependent a jurisdiction is on operating transfers into the General Fund. General fund sources from other funds 165, ,700 0 Total general fund sources 1,057, % 1,073, % 950, % 5. Total Expenditures per Capita: Compares expenditures for all governmental funds (excluding capital project funds and transfers) to population changes. Operating expenditures 1,416,450 1,666,421 1,447,393 Population* 2,871 $ 493 2,747 $ 607 2,686 $ Operating Expenses / Total Expenditures: Operating expenditures are the total expenditures for general, special purpose, and debt service funds (excluding transfers). Total expenditures is total expenditures of all government funds. Operating expenditures 1,416,450 1,666,421 1,447,393 Total expenditures 1,665, % 1,864, % 1,506, % See independent auditor's report. 34

44 SCHEDULE 4: KEY RATIOS OF FINANCIAL CONDITION GOVERNMENTAL FUNDS ONLY Ratio Total Revenues / Total Expenditures: Total revenues for all governmental funds and total expenditures for all governmental funds. Total revenues 1,755,407 1,758,679 1,798,370 Total expenditures 1,665, ,864, ,506, Operating Surplus (deficit) / Operating Revenues Percentage: Reflects the results of the general fund operations. General fund receipts over (under) expenditures 16,779 9, ,787 General fund revenue 1,057, % 1,073, % 950, % 9. General Fund Balance / General Fund Revenues Percentage: Measures a jurisdictions capacity to withstand financial emergencies. General fund Unencumbered Cash Balance 438, , ,464 Total general fund revenues 1,057, % 1,073, % 950, % 10. General Obligation Debt / Population: Full faith and credit debt of the jurisdiction divided by the population. General obligation debt 155, , ,000 Population* 2,871 $ 54 2,747 $ 71 2,686 $ General Obligation Debt / Assessed Value Percentage: Full faith and credit debt of the jurisdiction divided by the assessed value. General obligation debt 155, , ,000 Assessed Value (per budget) 15,584, % 15,157, % 14,743, % 12. Debt service / Operating Revenues Percentage: Measures the level of debt service to total general fund revenues. Debt service 45,990 46,911 63,326 Operating revenues 1,518, % 1,533, % 1,732, % * Based on 2010 census, average increase per year from 2000 census to 2010 was 2.27% for the City. County wide the population increased 1.86% per year and 6.13% per year statewide. See independent auditor's report. 35

45 SCHEDULE 4: KEY RATIOS OF FINANCIAL CONDITION ELECTRIC UTILITY FUND Ratio Average Revenue (Regulatory Basis) per User: Compares existing revenue base (users include residential, commercial, industry, etc) for business funds (excludes transfers) relative to the change in users. Operating revenues 2,140,211 2,304,469 2,131,387 Avg Number of Users 1,076 $ 1,989 1,083 $ 2,128 1,078 $ 1, Total Expenditures per Capita: Compares expenditures for the business funds (excludes transfers) relative to change in users. Operating expenditures 2,089,948 2,157,741 2,240,896 Avg Number of Users 1,076 $ 1,942 1,083 $ 1,992 1,078 $ 2, Operating Revenues / Operating Expenditures: Total revenues for business fund and total expenditures for business fund. (Excludes transfers in and transfers out) Operating revenues 2,140,211 2,304,469 2,131,387 Operating expenditures 2,089, % 2,157, % 2,240,896 95% 4. Operating Surplus (deficit) / Operating Revenues Percentage: Reflects the results of the business fund operations. Business fund receipts over (under) expenditures 50, , ,509 Business fund revenue 2,140, % 2,304, % 2,131, % 5. Business Fund Balance / Business Fund Revenues Percentage: Measures a jurisdictions capacity to withstand financial emergencies. Business fund Unencumbered Cash Balance 846, , ,634 Operating revenues 2,140, % 2,304, % 2,131, % 6. Business Fund Debt / Average number of users: Full faith and credit debt of the jurisdiction divided by the average number of users. Business fund debt Avg Number of Users 1,076 $ - 1,083 $ - 1,078 $ - See independent auditor's report. 36