REPORT CITY OF HAMMOND, LOUISIANA JUNE 30,2007

Transcription

1 REPORT, LOUISIANA JUNE 30,2007 Under provisions of state law, this report is a public document. A copy of the report has been submitted to the entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Auditor and, where appropriate, at the office of the parish clerk of court. Release Date 0%

2 , LOUISIANA JUNE 30, 2007 TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT 1 2 MANAGEMENT'S DISCUSSION AND ANALYSIS 3 12 BASIC FINANCIAL STATEMENTS Governmentwide Financial Statements: Statement of Net Assets 13 Statement of Activities 14 Fund Financial Statements: Balance Sheet Governmental Funds 15 Reconciliation of the Balance Sheet to the Statement of Net Assets Governmental Funds 16 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 17 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of ActivitiesGovernmental Funds 18 Statement of Net Assets Proprietary Funds 19 Statement of Revenues, Expenses and Changes in Fund Net Assets Proprietary Funds 20 Statement of Cash Flows Proprietary Funds Component Unit Financial Statements: Statement of Fiduciary Net Assets Fiduciary Funds 23 Notes to Financial Statements 24 59

3 , LOUISIANA JUNE 30, 2007 TABLE OF CONTENTS (Continued) REQUIRED SUPPLEMENTARY INFORMATION: PAGE Budget Comparison Schedules General Fund 60 Sales Tax Fund 61 OTHER SUPPLEMENTARY INFORMATION: Compensation Paid Council Members 62 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 Report on Compliance With Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance With OMB Circular A Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards 69 Schedule of Findings and Questioned Costs 70 72

4 MICHAEL J. O'ROURKE, C.PA. WILLIAM G. STAMM, C.PA. CLIFFORD J. GIFFIN, JR, C.PA. DAVID A. BURGARD, C.PA. LINDSAY J. CALUB, C.PA., L.L.C. GUY L. DUPLANT1ER, C.PA. MICHELLE H. CUNNINGHAM, C.PA DENNIS W. DILLON. C.PA. ANN H. HEBERT, C.PA. ROBIN A. STROHMEYER, C.PA. GRADY C. LLOYD, III, C.PA. HENRY L. SILVIA, C.PA. nymmmmm DUPLAN TIER, HRAPMANN. HOGAN & MAHER, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS 1340 Poydras St., Suite 2000 New Orleans, LA (504) FAX (504) AJ. DUPLANT1ER JR, C.PA. ( ) FELIX J. HRAPMANN, JR, C.PA. ( ) WILLIAM R. HOGAN, JR. C.PA. ( ) JAMES MAHER, JR, C.PA. MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOCIETY OF LA C.PA.'S KENNETH J. BROOKS, C.P.A., ASSOCIATE INDEPENDENT AUDITOR'S REPORT November 25,2007 To the Honorable Mayson Foster, Mayor Members of the City Council City of Hammond, Louisiana We have audited the accompanying financial statements of the governmental activities, businesstype activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Hammond, Louisiana, as of and for the year ended June 30, 2007, which collectively comprise City of Hammond, Louisiana's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the management of City of Hammond, Louisiana. Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of the component units discretely presented in the financial statements which account for 100% of the assets and 100% of the revenues of the governmental activities of the component units. Those financial statements were audited by other auditors, whose reports thereon were furnished to us, and our opinion, herein, insofar as it relates to the amounts included for these entities, is based solely upon the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the provisions of Office of Management and Budget, Circular A133, Audits of States, Local Governments and NonProfit Organizations. Those standards and OMB Circular A133 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 opinion.

5 PAGE 2 In our opinion, based upon our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the businesstype activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Hammond as of June 30, 2007, 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 on pages 3 to 12, the other required supplementary information on pages 60 to 61 and other supplementary information on page 62 are not a required part of the basic financial statements but are supplementary information required by the Government 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. In accordance with Government Auditing Standards, we have also issued our report dated November 25, 2007 on our consideration of the City of Hammond'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 that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying schedule of expenditures of federal awards, as required by the U.S. Office of Management and Budget Circular A133, Audits of States, Local Governments, and NonProfit Organizations, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole., Mtapmann, Jiogan < Mafi&t, 3*

6 PAGE 3, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2007 The Management's Discussion and Analysis (MD&A) of the City of Hammond, Louisiana's financial performance provides an overview and an objective, narrative analysis of the City's financial activities for the year ended June 30, This document focuses on the current year's activities, resulting changes, and currently known facts in comparison with the prior year's information. Please read it in conjunction with the City's financial statements, which begin on page 13. FINANCIAL HIGHLIGHTS The assets of the City of Hammond's Governmental Activities exceeded the liabilities at the close of the most recent year by $36,064,061, $4,833,103 of (unrestricted net assets) may be used to meet the City's ongoing obligations to the citizens and creditors. The City's Governmental Activities unrestricted net assets decreased $3,748,928 from the prior year. As of the close of the current fiscal year, the City's governmental funds reported combined ending fund balances of $29,141,780, an increase of $13,334,004, in comparison with the prior year. The driving force behind this increase were proceeds issued for capital projects. At the end of the current fiscal year, unreserved fund balance for the general fund was $3,006,357 or 15% of the general fund expenditures. The City's total liabilities in the Statement of Net Assets at the end of the current fiscal year were $37,376,064 in comparison to $24,087,168 of the prior year. The City completed the Wetlands Assimilation Project. The Project consists of the construction of a Lift Station, Force Main, Treatment Facility, Effluent Distribution System, and an Aerated Lagoon system. The consolidation of the North and South Sewer Treatment facilities is still ongoing. The City received $624,433 in gaming revenue from Video Bingo. The City's General Fund receives 75% of the gross proceeds and the Children's Museum Fund receives 25% of the proceeds. For the fiscal period , they received $468,325 and $156,108 respectively. Starting with the fiscal period the 75% will be allocated for capital improvements. The City has been mildly affected by the reduction in sales tax revenue as post Katrina purchases declined. The City of Hammond collected $15,342,298 in sales tax. This is a decrease of $1,206,428 in comparison to the prior fiscal period. The City's Proprietary fund experienced a short fall this fiscal. The Council and Administration took corrective action by passing a rate increase and a $5.00 per month user fee. The user fee is projected to provide about $400,000 for operations and intra fund loan repayment.

7 PAGE 4, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2007 FINANCIAL HIGHLIGHTS (Continued) The City's outlook for the future is very bright as a result of several entities setting up shop in Hammond. The U.S. Military will bring $120,000, in construction projects and will deliver 100 permanent and 400 per month training positions. Stock Building Supply will create 100 positions. The Louisiana Heart Hospital will have over 80 high paying positions. Latham Intralox will have 36 positions. Boh Brothers will have 50 positions. The City of Hammond sold $15,000,000 sales tax bond to provide funds needed for a major infrastructure project to assist in the redevelopment of the Hammond Square Shopping Center. The sale of bonds was recorded in the Sales Tax 2006 Construction Fund. As a of June 30, 2007, the Sale Tax 2006 Construction Fund had $14,583,143 available for future infrastructure project cost associated with Hammond Square Shopping Center. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City's basic financial statements. The basic financial statements comprise three components: (1) governmentwide financial statements, (2) fund financial statements and (3) notes to the financial statements. This report also contains required and other supplementary information in addition to the basic financial statements. Governmentwide financial statements. The governmentwide financial statements are designed to provide readers with a broad overview of the City's finances, in a manner similar to privatesector business. The statement of net assets presents information on all of the City's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the cash flows. Thus, revenue and expenses reported in this statement for some items will only result in cash flows in future fiscal periods (e.g. earned but unused vacation leave). Both of the governmentwide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees or charges (businesstype activities). The businesstype activities of the City include one enterprise activity a water and sewer system.

8 PAGE 5, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2007 OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) The governmentwide financial statements include not only the City itself (known as the primary government), but also three component units: The Hammond Downtown Development District, City Court of Hammond, and Marsha! of City Court of Hammond. Financial information for the Hammond Downtown Development District is blended with the financial information for the City. Financial information for City Court of Hammond and Marshal of City Court of Hammond is reported separately from the financial information presented for the primary government itself. Complete financial statements of these entities, which include separate MD&A's, can be obtained directly from their respective administrative offices. The governmentwide financial statements can be found on pages of this report. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. All of the funds of the City can be divided into two categories: governmental funds and proprietary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the governmentwide financial statements. Unlike the governmentwide financial statements, governmental fund financial statements focus on the nearterm inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's nearterm financing requirements. Because the focus of governmental funds is narrower than that of the governmentwide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the governmentwide financial statements. By doing so, readers may better understand the longterm impact of the government's nearterm financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues; expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City maintains a variety of funds, which are grouped for management purposes into special revenue; debt service and capital projects fund groups. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the General Fund, the Special Revenue Fund used to account for activities of the Sales Tax Fund and the Sales Tax 2006 Bond Construction Fund, all of which are considered major funds. Data from all the other governmental funds are combined into a single aggregated presentation. The basic governmental fund financial statements can be found on pages of the report.

9 PAGE 6, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE OVERVIEW OF THE FINANCIAL STATEMENTS (Continued) Proprietary funds. The City maintains two types of proprietary funds. Enterprise funds are used to report the same functions presented as businesstype activities in the governmentwide financial statements. The City uses enterprise funds to account for its water and sewer operations. Internal service funds are an accounting device used to accumulate and allocate costs internally for general liability and worker's compensation selfinsurance. The services provided by these funds benefit the governmental and businesstype functions. They have been included within businesstype and governmental activities in the governmentwide financial statements. Proprietary funds provide the same type of information as the governmentwide financial statements, only in more detail. The proprietary funds financial statements provide separate information for water and sewer systems. Proprietary fund financial statements can be found on pages of this report. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the governmentwide and fund financial statements. The notes to the financial statements can be found on pages of this report. Governmentwide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City of Hammond, net assets exceeded liabilities by $54,777,627 at the close of the most recent fiscal year. By far the largest portion of the City's net assets, 82% reflects the investment in capital assets net of any related outstanding debt used to acquire those assets. The City of Hammond uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. For more detailed information refer to page 13, Statement of Net Assets. An additional portion of the City of Hammond's net assets 9% represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net assets 42% may be used to meet the City's ongoing obligations to citizens and creditors.

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11 , LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE PAGE? At the end of the current fiscal year, the City of Hammond is able to report positive balances in net assets in governmental activities, businesstype activities and component units. Net Assets. The following table reflects condensed information on the City's net assets: City of Hammond, Louisiana Net Assets ASSETS: Current and other assets Land Construction in progress Capital assets (net of accumulated depreciation) TOTAL ASSETS Governmental Activities ,010,323 3,417,208 2,051,024 30, ,220,009 Governmental Activities ,446,927 3,417,208 1,533,979 28, ,510,299 BusinessType Activities ,488, ,047 1,129, ,831 22, BusinessType Activities ,786, ,007 9,000,872 10,174,638 23,119,623 Total ,498,345 3, ,180,806 49,899,285 92, Total ,033 3,575,215 10,534,851 38, , LIABILITIES: Other liabilities Noncurrent liabilites TOTAL LIABILITIES 3,729, ,403 33,155,948 4,904, ,268 2,427,180 1, ,220,116 2,126,307 2, ,900 6,156,725 31,219, ,030, ,367 24,087,168 NET ASSETS: Invested in capital assets, net of related debt Restricted for: Debt service Capital Projects Unrestricted TOTAL NET ASSETS 26,610,511 2,053,976 2,566,471 4, ,121,026 1,678, ,430 8,582,031 18,500, ,906 16,943, , ,111,171 2,266,882 2,566, ,103 40,064,543 1,966, ,430 10,138,562 36,064,061 $ ,031 $ 18,713,566 $ 18,787,723 $ 54,777,627 $ 52,542,754 Changes in Net Assets. The City's total revenues and expenses for governmental and businesstype activities are reflected in the table of condensed information:

12 , LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2007 PAGES City of Hammond, Louisiana Changes in Net Assets Revenue: Program revenues: Charges for services Operating grants and contributions Capital grants and contributions Genera! revenues: Sales tax Advalorem taxes Franchise fees Investment earnings Gaming revenues Transfers Gain on disposal of asset Total revenues Governmental Activities BusinessType Activities ,545,317 $ 1,459,450 1,199,336 15,342,298 2,818, ,615 1,180, ,433 (327,074) 26,720,716 3,162,862 $ 3,742,524 $ 3,391,590 $ 3,154,382 1,410,874 29,559 1,629,972 16,548,726 2,984, , , , ,919. (23,701) 327,074 23,70! 26,340 28,639,674 4,230,331 5,278, Total 7,287,841 $ 1,459,450 1,228,895 15,342,298 2,818, ,615 1,311, ,433 30,951, ,554,452 3,154,382 3,040,846 16,548,726 2,984, , ,097 26,340 33,917,856 Expenses: General government Economic development Urban redevelopment Public safety police/fire Public works Health and sanitation Culture and recreation Airport Cemeteries and municipal grounds Water and sewer operating expenses Bond insurance costs Paying agent fees on longterm debt Interest on longterm debt Loss on disposal of capital assets 4,137, ,902 71,797 11,461,295 4,126, ,760 1,129, , ,799 4,552. 1, ,463 44,609 24,273,806 5,273,455 76,330 50,749 11,509,189 3,526, , , , ,848 48, ,706 4,304,488 3,791,303 23,827,703 4,304,488 3,791,303 4,137, ,902 71,797 11,461,295 4,126, ,760 1,129, , ,799 4,304,488 4,552 1, ,463 44,609 28,578,294 5,273,455 76,330 50,749 11,509,189 3,526, , , , ,848 3,791,303 48, ,706 _ 27,619,006 Increase (decrease) in net assets 2,446,910 4,811,971 (74,157) 1,486,879 2,372,753 6,298,850 Net assets Beginning of year as previously stated 33,755,031 23,504, ,787, ,300,844 52,542,754 40,805,395 Prior period adjustment (137,g80) 5,438,509 (137,880) 5,438,509 Net assets beginning of year restated 33,617,151 28,943,060 18,787,723 17,300,844 52,404,874 46,243,904 Net assets End of year 36,064,061 $ 33,755,031 $ 18,713,566 $ 18,787,723 $ 54,777,627 $ 52,542,754

13 PAGE 9, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2007 Revenues by Source Governmental Activities June Ei Sales tax Gaming revenue 2% Investment income 4% Franchise fees 3% Advalorem taxes 10% Charges for services 14% Sales tax 58% perating grants and contributions 5% Capital grants and contributions 4% Operating grants and contributions D Capital grants and contributions D Charges for services Advalorem taxes Ei Franchise fees Investment income D Gaming revenue Revenues by Source June Governmental Activities Other Income 0% Investment income 2% Franchise fees 3% Advalorem taxes 10% Charges for services 11% Capital grants and contributions 5% Sales tax 58% rating grants and contributions 11% M Safes tax Operating grants and contributions D Capital grants and contributions D Charges for services Advalorem taxes D Franchise fees Investment income D Other Income

14 PAGE 10, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE The following chart reflects the City's revenues for the years ended June 30,2007 and June 30, 2006: Revenues Sales Tax Capital Grants and Contributions Ad valorem Taxes Charges for Services Operating Grants and Contributions Franchise Fees Investment Income Gaming Revenue Other income June ,342,298 1,199,336 2,818,012 3,545,317 1,459, ,615 1,180, ,433 June $ 16,548,726 1,410,874 2,984,361 3,162,862 3,154, , ,178 26,340 Difference $ (1,206,428) (211,538) (166,349) 382,455 (1,694,932) 62, , ,433 (26,340) Total Revenues 27,047,790 $ 28,663,375 $ (1,615,585) The cost of all governmental activities the year ended June 30, 2007 was $24,229,197. The Statement of Activities for the year ended June 30, 2007 on page 14 shows that those who use the services financed $3,545,317 and $2,658,786 was financed by grants and contributions with the City's general revenues financing $20,472,004. The City's largest programs are public safety, public works, and general government. The graph below shows the expenses and program revenues generated by governmental activities. Expenses and Program Revenue Governmental Activities For the Year Ended June 30, ,000,000 10,000,000 8,000,000 Expenses Charges for services D Operating grants and contributions. D Capital grants and contributions 4,000,000 2,000,000 0 I 1 1 n IL *^^^ ' ^m m F 1 *i rl^b > * />/ / / T ic*" <^* <^" 'C P 1 _<$.& ttf* *& o^ cf* < & <^ 0<f «r < $!. & < & «S c/

15 PAGE 11, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2007 Expenses and Program Revenue Governmental Activities For the Year Ended June 30, ,000,000 10,000,000 8,000,000 6,000,000 Charges for services D Operating grants and contributions D Capital grants and contributions 4,000,000 2,000,000 0 A ^ A r4> /* &

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17 PAGE 12, LOUISIANA MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2007 Request for Information Questions concerning any financial information provided or request for additional financial information should be addressed to Larry Francis, Director of Finance, City of Hammond, P.O. Box 2788, 310 East Charles, Hammond, Louisiana , (985)

18 PAGE 13 STATEMENT OF NET ASSETS JUNE ASSETS: Cash and cash equivalents Investments at cost Receivables: Accounts Customers (net of allowance for doubtful accounts of $50,000) Franchise taxes receivable Notes receivable (net of allowance for doubtful accounts of $9,329) Other receivable Prepaid insurance Prepaid rent Due from other governments Restricted assets: Cash and cash equivalents Bond issuance costs, net Internal balances Due from other funds Land Construction in Progress Capital assets (net of accumulated depreciation) TOTAL ASSETS Governmental Activities 6,972,338 $ 189, , , ,516 3,443,336 19,622, , ,119 3,417,208 2,051,024 30,741,454 69,220,009 Primary Government Businesstype Activities 1,047,915 $ 689,628 4, ,780 17, ,047 1,129,782 19,157,831 22,933,682 Total 8,020,253 $ 689, , , , ,516 3,443,336 20,350, , ,119 3,575,255 3,180,806 49,899,285 92,153,69! City Court of Hammond Component Units 401,520 $ 494,423 65,670 73, Marshal of City Court of Hammond 229, ,087 60, ,800 LIABILITIES: Accounts payable Cash overdraft Payroll taxes payable Withholdings payable Salaries payable Claims payable Claims incurred but not reported Due to other governments Interest payable Retainage payable Internal balances Unearned grant income Other payable Payable from restricted assets: Accounts payable Retainage payable Customers' deposits Bonds payable current portion Noncurrent liabilities: Bonds payable Accumulated leave payable TOTAL LIABILITIES 994,858 63, , , , ,112 16, ,790 17,335 15, , ,705 68, ,000 26,490,000 2,936,403 33,155, , ,191 70, , , ,000 1,485, ,936 4,220,116 1,212,289 63, , , , ,112 16, , ,790 87, ,119 15, , ,705 68, ,356 1,300,000 27,975,000 3,244,339 37,376,064 15,942 17,558 64, ,717 35,050 15,135 61,902 NET ASSETS Invested in capital assets, net of related debt Restricted for: Debt service Capital projects Unrestricted TOTAL NET ASSETS 26,610,511 2,053,976 2,566,471 4,833, $ 18,500, , $ 45,111,171 2,266,882 2,566,471 4,833,103 54,777,627 $ 105,132 28, , $ 279,898 See accompanying notes.

19 PAGE 14 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE Program Revenue Net (Expense) Revenue and Changes in Net Assets Operating Capital Primary Government Functions/Programs Charges for Grants and Expenses Services Contributions Grants and Contributions Governmental Activities Businesstype Activities Total Component Units Primary government Governmental activities: General government Economic development Urban redevelopment Public safety police Public safety fire Public works Health and sanitation Culture and recreation Airport 4,137,329 $ 2,416, , ,902 90,921 71,797 7,013, , ,331 4,447, ,914 4,126,445 19, , ,051 1,129, , ,177 37,400 $ (1,375,488) $ (146,981) (71,797) (6,103,649) (4,191,507) (4,107,308) (3,709) 161,034 (866,710) 1,000, ,725 $ (1,375,488) (146,981) (71,797) (6,103,649) (4,191,507) (4,107,308) (3,709) (866,710) 369,725 Cemeteries and municipal grounds 990,799 90,575 (900,224) (900,224) Paying agent fees on longterm debt 1,431 (1,431) (1,431) Bond insurance expense Interest on longterm debt Total governmental activities 4, ,463 24,229,197 3,545,317 1,459,450 (4,552) (621,463) 1,199,336 (18,025,094) (4,552) (621,463) (18,025,094) Businesstype activities: Water and sewer 4,304,488 3,742,524 29,559 (532,405) (532,405) Total businesstype activities 4,304,488 3,742,524 29,559 (532,405) (532,405) Total primary government 28,533,685 7,287,841 1,459,450 1,228,895 (18,025,094) (532,405) (18,557,499) Component units: City Court of Hammond 1,547, , ,736 $ 175,361 Marshal of City Court of Hammond 705, , ,512 69,047 Total component units 2,252,622 1,193,782 1,303, ,408 General revenues: Taxes: Sales taxes 15,342,298 15,342,298 Ad valorem taxes, levied for general purposes 2,261,526 2,261,526 Ad valorem taxes, levied for fire and police 556, ,486 Franchise fees 878, ,615 Gaming revenues 624, ,433 Unrestricted investment earnings 1,180, ,174 1,311,503 Loss on disposal of capital assets (44,609) (44,609) Transfers (327,074) 327,074 Total general revenues and transfers 20,472, ,248 20,930,252 Change in net assets 2,446,910 (74,157) 2,372, ,408 Net assets beginning of year originally stated 33,755,031 18,787,723 52,542,754 1,079,988 Prior period adjustment (137,880) (137,880) (2,118) Net assets beginning of year restated 33,617,151 18,787,723 52,404,874 1,077,870 Net assets end of year S 36,064,061 $ 18,713,566 $ 54,777,627 $ 1,322,278 See accompanying notes.

20 PAGE 15 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2007 ASSETS: Cash and cash equivalents Franchise taxes receivable Notes receivable Other receivables Prepaid insurance Due from other funds Due from other governments TOTAL ASSETS General Fund Sales Tax 2006 Bond Other Sales Tax Construction Governmental Fund Fund Funds 241,591 3S 382,143 $ 14,567,322 $ 10,321,147 $ 189, , ,981 3,234, ,964 46,000 2,734,413 86, , , ,959 4,286,543 3G 3,162,556 $ 14,653,818 $ 11,287,316 $ Total Governmental Funds 25,512, , , ,103 86,496 3,280,337 3,443,336 33,390,233 LIABILITIES AND FUND BALANCE: Liabilities: Accounts payable Payroll taxes payable Salaries payable Due to other funds Retainage payable Unearned grant income Other payable Total liabilities 559, , , ,373 1,100, ,448 70, ,727 2,318, ,000 85,417 15,782. 2,432,666 70, ,926 1,067, , ,336 2,539,218 85,417 15, ,373 4,248,453 FUND BALANCE: Reserved: Capital Projects Longterm assets Debt service Designated: Capital Projects Unreserved Unreserved reported in nonmajor: Special Revenue Fund Total fund balance 180,000 3,006,357 3,186, ,890 1,095,596 2,741, ,648 2,207,766 13,487,547 2,972,333 2,577, ,890 14,583,143 10,642,390 3,837, ,648 2,207,766 16,459,880 3,736,247 2,577,823 29,141,780 TOTAL LIABILITIES AND FUND BALANCE 4,286,543 Ji 3,162,556 $ 14,653,818 $ 11,287,316 $ 33,390,233 See accompanying notes.

21 PAGE 16 RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET ASSETS GOVERNMENTAL FUNDS JUNE 30, 2007 Total fund balances at June 30, 2007 Governmental Funds $ 29,141,780 Amounts reported for governmental funds in the statement of net assets are different because: Capital assets net of accumulated depreciation at June 30, 2007 Governmental funds report bond issuance costs as expenditures. However, in the Statement of Net Assets, bond issuance costs are amortized over the life of the bond and are reported as amortization expense. This is the amount of unamortized bond issuance costs. In the Statement of Net Assets, interest is accrued on outstanding bonds, whereas in governmental funds, an interest expenditure is reported when due. Internal service funds' assets and liabilities (governmental activities) Long term liabilities at June 30, 2007 General obligation bonds payable Certificates of indebtedness Accumulated leave payable Net assets of governmental activities 36,209, ,752 (153,790) 998,036 (26,075,000) (1,255,000) (2,936,403) See accompanying notes.

22 PAGE 17 GOVERNMENTAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2007 REVENUES: Taxes Licenses and permits Court witness fees Fines and forfeitures Public safety: police Public safety: fire Sanitation service fees Cemeteries and municipal grounds Highway and street Federal grants State grants Donations Parks and recreation Court awards Interest State supplemental pay Gaming revenue Miscellaneous Total revenues General Fund $ 3,540,133 1,827, ,044 44, , ,051 90,575 19,137 34, ,503 95, , , , ,451 Sales Tax Fund $ 15,342,298 $. 20,057 Sales Tax 2006 Bond Construction Fund 74, , , ,274 Other Governmental Funds 156,494 63,072 1,299, ,228 52,418 53, , , ,976 Total Governmental Funds 19,038,925 1,827,250 63, ,044 44, , ,051 90,575 19,137 1,299, ,953 52, ,503 53,820 1,135, , , ,246 26,994,963 EXPENDITURES: General government Economic development Urban redevelopment Public safety: Police Fire Highways and streets Cemeteries and municipal grounds Buildings Sanitation Parks and recreation Airport Capital outlay Debt Service: Principal retirement Bond issuance costs Bond insurance expense Interest and charges Paying agent fees Total expenditures 3,846,844 6,464,544 4,177,814 1,844, ,920 1,245, , , , ,094 20,467, ,686 16,864 88, , , ,170 1, ,250 4, ,972 34, ,584 71, ,341 15,001 99,738 1,370 2,391 3,890, , ,483 1, ,030 4,011, ,584 71,797 6,677,885 4,192,815 1,944, ,154 1,334, ,760 1,062, ,894 5,260, ,000 93,250 4, , ,196,006 Excess (deficiency) of revenues over expenses OTHER FINANCING SOURCES (USES) Operating transfers in Operating transfers out Proceeds from sale of bonds Total other financing sources (uses) Excess (deficiency) of revenues and other sources over expenditures and other uses FUND BALANCE BEGINNING OF YEAR originally statec (11,854,035) 13,448,821 (786,804) 12,662,017 ' 807,982 2,516,255 14, ,000 (18,525,545) (18,475,545)' (4,347,801) 5,077,691 (128,698) (288,159) 15,000,000 14,711,841 14,583,143 (3,346,054) 7,476,255 (1,701,642) 5,774,613 2,428,559 8,213,831 ( ) 20,975,076 (21,302,150) 15,000,000 14,672,926 13,471,883 15,807,777 PRIOR PERIOD ADJUSTMENT ( ) ( ) FUND BALANCE BEGINNING OF YEAR restated , FUND BALANCE END OF YEAR $ See accompanying notes.

23 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE PAGE 18 Net Change in Fund Balances Total Governmental Funds $ 13,471,883 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays ($5,260,885) exceeded depreciation ($2,069,961) in the current period. 3,190,924 Governmental funds do not report the disposal of capital assets. This is the amount of the loss on diposal of assets, which should be recognized in the Statement of Activities. (44,609) The issuance of longterm debt (e.g. bonds) provides current financial resources to governmental funds, while the repayment of the principal of longterm debt consumes the current financial resources of governmental funds. 780,000 In the Statement of Activities, bond proceeds are recorded as a longterm liability, whereas in the governmental funds, the proceeds are shown as income. This is the amount of bond proceeds that was recorded as revenue in the governmental funds. (15,000,000) Internal Service Funds are used by management to charge the costs of certain activities, such as insurance, to individual funds. The net revenue (expense) of internal service funds is reported with governmental activities. 481,761 Governmental funds report bond issuance costs as expenditures. However, in the Statement of Net Assets, bond issuance costs are allocated over the life of the bond and reported as amortization expense. This is the amount of amortization expense in the current period. (7,690) Governmental funds report bond issuance costs as expenditures. However in the Statement of Net Assets, bond issuance costs are allocated over the life of the bond and reported as amortization expense. This is the amount of bond issuance cost on the Sales Tax 2006 bonds. 93,250 In the Statement of Activities, interest is accrued on outstanding bonds, whereas in governmental funds, an interest expenditure is reported when due. This is the amount of the additional accrued interest for the current year. (102,980) Some expenses reported in the Statement of Activities, such as compensated absences, do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. (415,629) Change in Net Assets of Governmental Activities $ 2,446,910 See accompanying notes.

24 STATEMENT OF NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE PAGE 19 ASSETS: Cash and cash equivalents Receivables: Customers (net of allowances for doubtful accounts of $50,000) Other receivables Prepaid insurance Total current assets RESTRICTED ASSETS: Customers' deposits: Cash and cash equivalents Bond Sinking Fund: Cash and cash equivalents Total restricted assets CAPITAL ASSETS (NET OF ACCUMULATED DEPRECIATION) OTHER ASSETS: Bond issuance costs (net of accumulated amortization) Total other assets TOTAL ASSETS CURRENT LIABILITIES (PAYABLE FROM CURRENT ASSETS): Accounts payable Cash overdrafts Withholdings payable Retainage payable Claims payable Claims incurred but not reported Due to other funds Due to other governments Total current liabilities (payable from current assets) CURRENT LIABILITIES (PAYABLE FROM RESTRICTED ASSETS): Customers' deposits Bonds payable current portion Total current liabilities (payable from restricted assets) LONGTERM LIABILITIES: Bonds payable longterm portion Accumulated leave payable Total longterm liabilities TOTAL LIABILITIES NET ASSETS: Invested in capital assets, net of related debt Restricted for: Debt service Unrestricted TOTAL NET ASSETS TOTAL LIABILITIES AND NET ASSETS See accompanying notes. BusinessType Activities Enterprise Fund $ 1,047, ,628 4,672 1,742,215" 381, , ,780 20,445,660 17,027 17,027 S $ 217,431 70, , ,191 1,436, , , ,356 1,485, ,936 1,792,936 4,220,116 18,500, ,906 18,713,566" $ 22,933,682 Governmental Activities Internal Service Fund $ 1,082, , ,020 2,024,556 $ $ 176,440 63, , ,112 16,022 1,026,520" 1,026, , ,036 $ 2,024,556

25 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2007 PAGE 20 OPERATING REVENUES: Sewer charges Water sales Tapin and reconnect fees Insurance charges Insurance reimbursements Miscellaneous Total operating revenues OPERATING EXPENSES: Insurance Personnel services Contractual services, supplies, materials and other Depreciation Amortization bond issuance cost Total operating expenses Operating income (loss) NONOPERATING REVENUES (EXPENSES): Interest income Miscellaneous income Federal grant State grant Interest expense Loss on disposal of assets Total nonoperating revenues (expenses) Income (loss) before operating transfers TRANSFERS IN TRANSFERS OUT Total operating transfers Change in net assets Total net assets beginning of year TOTAL NET ASSETS END OF YEAR BusinessType Activities Enterprise Funds $ 2,338,699 1,133,893 43, ,660 3,742,524 1,500,799 1,735, ,141 4,802 4,240,327 (497,803) 131,174 (3,088) 8,000 21,559 (59,689) (1384) 96,572 (401,231) 4,420,520 (4,093,446) 327,074 (74,157) 18,787,723 $ 18,713,566 Governmental Activities Internal Service Funds $ 1,480, ,185 8,196 2,417,461 1,980,331 1,980, ,130 44,631 44, , , ,275 $ 998,036 See accompanying notes.

26 PAGE 21 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2007 CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers and users Payments to suppliers Payments (to) from employees Payments from claim settlements Receipts from other funds Net cash provided by (used in) operating activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Principal paid on capital debt Purchases of capital assets Interest paid Miscellaneous receipts Receipts from grants Operating transfers out Operating transfers in Net cash provided by (used in) capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES: Interest and dividends received Net cash provided by (used in) investing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, July 1, 2006 BusinessType Activities Enterprise Funds $ 3,768,927 (1,958,778) (1,453,456) ,097,811 (445,000) (2,344,720) (59,689) (3,089) 296,669 (4,093,446) 4,420,520 (2,228,755) 131, ,174 (999,770) 2,776,465 Governmental Activities Internal Service Funds $ 1,480,080 (1,915,463) 549, ,660" 44,631 44, , ,062 Cash and cash equivalents, June 30, 2007 $ 1, $ 1,018,353 Non Cash Capital: Transfer of assets 18J67 (Continued)

27 PAGE 22 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2007 Reconciliation of operating income to net cash provided by operating activities: Operating income (loss) Adjustments to reconcile operating income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization (Increase) decrease in accounts receivable (Increase) decrease in other assets (Increase) decrease in prepaid insurance Increase (decrease) in accounts payable Increase (decrease) in withholdings payable Increase (decrease) in customer deposits Increase (decrease) in due to other governments Increase (decrease) in due to other funds Increase (decrease) in accumulated leave Increase (decrease) in retainage payable Increase (decrease) in claims payable BusinessType Activities Enterprise Funds 1,003,943 26,403 (208,472) 26,985 (41,706) 741,118 47,343 Governmental Activities Internal Service Funds $ (497,803) $ 437,130 (388,338) 64, , ,001 (284,850) Total adjustments NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,595,614 $ 1,097,811 (323,470) $ 113,660 See accompanying notes.

28 PAGE 23 COMPONENT UNITS STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2007 ASSETS: Cash Cash on hand and in banks TOTAL ASSETS Marshal's Office City Court of Hammond $ 1,651 1,651 City Court of Hammond 421, ,599 LIABILITIES: Accounts payable Internal balances TOTAL LIABILITIES 1,651 1, , , ,599 NET ASSETS: Held in Trust for Plantiffs Held in Trust for Benefit of Others TOTAL NET ASSETS See accompanying notes.

29 PAGE 24 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 INTRODUCTION: On April 15, 1977, the United States District Court for the Eastern District of Louisiana ordered and decreed that the City of Hammond (the City) shall institute the proposed Home Rule Charter dated April 11,1977. The City operates under a MayorCouncil form of government. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: REPORTING ENTITY: As the municipal governing authority, the City of Hammond is considered a separate entity for reporting purposes. The financial reporting entity consists of (a) the Primary Government (City of Hammond), (b) organizations for which the Primary Government is financially accountable, and (c) other organizations for which the nature and significance of their relationship with the Primary Government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Government Accounting Standards Board (GASB) Statement No. 14 established criteria for determining which component units should be considered part of the City of Hammond for financial reporting purposes. The basic criterion for including a potential component unit within the reporting entity is financial accountability. The GASB has set forth criteria to be considered in determining financial accountability. This criteria includes: 1. Appointing a voting majority of an organization's governing body, and a. The ability of the municipality to impose its will on that organization and/or b The potential for the organization to provide specific financial benefits to or impose specific financial burdens on the municipality. 2. Organizations for which the municipality does not appoint a voting majority but are fiscally dependent on the municipality. 3. Organizations for which the reporting entity's financial statements would be misleading if data of the organization is not included because of the nature or significance of the relationship. Based on the previous criteria, the City of Hammond has determined that the following component units are part of the reporting entity:

30 PAGE 25 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 i. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) REPORTING ENTITY: (Continued) Component Unit City Court Marsha! of City Court Hammond Downtown Development District Year End June 30, 2007 June 30, 2007 June 30, 2007 Criteria Used As required by accounting principles generally accepted in the United States of America, these financial statements present the City of Hammond (the primary government) and its component units. Blended Component Unit Blended component units, although legally separate entities, are, in substance, part of the City's operations. The City has one blended component unit which is reported as if it were part of or blended with the City's operations. The Hammond Downtown Development District (the District) was created to formulate and implement a redevelopment plan for the central business district of the City. The City's governing authority appoints the District's board members and approves the redevelopment plan. The District is reported as a Special Revenue Fund of the City. No separate financial statements for the District have been issued. Discretely Presented Component Units Component units that are legally separate from the City, but are financially accountable to the City or whose relationship with the City are such that exclusion would cause the City's financial statements to be misleading or incomplete, are discretely presented. The Component Unit columns of the combined financial statements include the financial data of the discretely presented component units. They are reported in separate columns to emphasize that they are legally separate from the City. Funding for the following state constitutionally defined agencies is included in the City's General Fund. These agencies, however, have certain statutorily defined sources of funds for their own operating and/or capital budget discretion. These funds have been discretely presented in the City's financial statements: City Court of Hammond The Judge of the Court is an elected official provided by the Louisiana State Constitution. Fiscal interdependency exists between the City and the City Court in that the City is required to provide the City Court office facilities. In addition, the City assists in funding the operations of the Court. The City's financial statements discretely present the City Court of Hammond's financial statements for the year ended June 30, 2007.

31 PAGE 26 NOTES TO FINANCIAL STATEMENTS JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) REPORTING ENTITY: (Continued) Discretely Presented Component Units (Continued) Marshal of City Court of Hammond The Marshal is an elected official provided by the Louisiana State Constitution. Fiscal interdependency exists between the City and the Marshal in that the City is required to provide the Marshal's office facilities. In addition, the City assists in funding the operations of the Marshal's office. The City's financial statements discretely present the Marshal's financial statements for the year ended June 30, Related Organizations The Hammond Section 8 Housing Authority is a legally separate government entity formed to administer housing programs funded by the U.S. Department of Housing and Urban Development (HUD). The City's governing authority appoints a majority of the Authority's members; however, there is no financial relationship between the Authority and the City. This organization is not a component unit of the City's reporting entity. It is classified as a related organization. The City's accountability does not extend beyond making the appointments. The Hammond Mortgage Finance Authority is a nonprofit corporation established pursuant to State Statutes to finance debt for various public purposes within Tangipahoa Parish. The City Council appoints the board members of the agency. The agency is fiscally independent from the City, issues its own debt, approves its budgets, and sets its rates and charges. The City has no authority to remove board members, designate management, or approve or modify rates. The City is not obligated in any manner for the debt issues of this agency. This agency is classified as a related organization. Complete financial statements for each of the City of Hammond's component units and related organizations can be obtained at the Office of the Legislative Auditor of the State of Louisiana; 1600 North Third Street, P.O. Box 94397, Baton Rouge, LA , or at each of the agency's administrative offices. GOVERNMENTWIDE AND FUND FINANCIAL STATEMENTS: In accordance with Statement No. 34 of the Governmental Accounting Standards Board (GASB), Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, included in the City's Annual Financial Report are the Management Discussion and Analysis (MD&A), governmentwide financial statements which include the Statement of Net Assets and the Statement of Activities and fund financial statements which include the Balance Sheet, Reconciliation of the Balance Sheet to the Statement of Net Assets, Statement of Revenues, Expenditures and Changes in Fund Balances and Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities.

32 PAGE 27 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) GOVERNMENTWIDE AND FUND FINANCIAL STATEMENTS: (Continued) The Statement of Net Assets and the Statement of Activities include the governmental and businesstype activities of the City and also the component units for which the City is financially accountable. These governmentwide statements for the governmental activities begin with the governmental funds financial statements balances and adjust them to incorporate the City's capital assets, longterm debt and internal service funds. These adjustments are detailed in the financial statements in the Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets and the Reconciliation of the Governmental Funds Changes in Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities. For the most part, the effect of interfund activity has been removed from the governmentwide statements. The Statement of Activities presents financial information in a manner that shows the income and expenses generated by each individual governmental function or unit. Taxes are reported as general revenues along with other items that cannot be properly included in program revenues. Fund financial statements report major individual governmental funds in a separate column. Separate financial statements are provided for governmental funds, proprietary funds and component units. Governmental funds are used to account for the majority of government's general activities, including the collection and disbursement of earmarked monies, (special revenue funds), the acquisition or construction of capital assets (capital projects funds), and the servicing of general longterm debt (debt service funds). The general fund is used to account for all activities of the general government not accounted for in some other fund. Proprietary funds are used to account for activities similar to those found in the private sector, where the determination of net income is necessary or useful to sound financial administration. Goods or services from such activities can be provided either to outside parties (enterprise funds) or to other departments or agencies primarily within the government (internal service funds). Fiduciary funds account for assets held in a trustee or agency capacity on behalf of others. The City has no fiduciary funds except those employed by its component units.

33 PAGE 28 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: GovernmentWide Financial Statements The governmentwide financial statements and the proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule the effect of interfund activity has been eliminated from the governmentwide financial statements. Exceptions to this general rule are interest income and intergovernmental revenues derived from providing services to entities outside the primary government. Elimination of these charges would distort the direct costs and program revenues reported for various functions concerned. Amounts reported as program revenues include: 1. Charges to customers or applicants for goods, services or privileges provided, 2. Operating grants and contributions and 3. Capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Fund Financial Statements: Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, generally only current assets and current liabilities are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. Revenues are recognized when susceptible to accrual (i.e. when they become both measurable and available). "Measureable" means the amount of the transaction can be determined, and "available" means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The City considers ad valorem (property) taxes revenue in the year for which they are levied. Expenditures are recorded when the related fund liability is incurred. Principal and interest on general longterm debt are recorded as fund liabilities when due.

34 PAGE 29 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS. BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: (Continued) Fund Financial Statements: (Continued) Those revenues susceptible to accrual are franchise taxes, licenses, fines, interest revenue and charges for services. In accordance with GASB Statement No. 22, sales taxes collected and held by merchants and the intermediary collecting governments at year end on behalf of the City are recognized as revenue. Permits are not susceptible to accrual because generally they are not measurable until received in cash. All proprietary funds are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the balance sheet. Proprietary fundtype operating statements present increases (i.e. revenues) and decreases (i.e. expenses) in net total assets. In accordance with Statement No. 20 of the Governmental Accounting Standards Board (GASB), "Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting", the City applies all applicable GASB pronouncements as well as all Financial Accounting Standards Board Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the Committee on Accounting Procedures issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. As allowed by GASB Statement No. 20, the City has elected not to apply pronouncements other than those issued by GASB after November 30, The City government reports the following major governmental funds: * General Fund the General Fund is the City's primary operating fund. It accounts for all financial resources of general government, except those required to be accounted for in another fund. * Sales Tax Fund the Sales Tax Fund is used to account for sales and use tax collected and its subsequent disbursement in accordance with sales tax dedication.

35 PAGE 30 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: (Continued) Fund Financial Statements: (Continued) * Sales Tax 2006 Construction Fund the Sales Tax 2006 Construction Fund is used to account for the proceeds received from the issuance of a sales tax bond and the expenditures associated with various street and drainage improvement projects occurring within the City. The City government reports the following major proprietary fund: * Water and Sewer Fund the Water and Sewer Fund is used to account for the provisions of water and sewer services to residents of the City and certain residents outside of City limits. The fund also accounts for the maintenance of the water and sewer system, including capital outlay for the system. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, financing and related debt service, and billing and collection. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Water and Sewer Fund are charges to customers for sales and services. Operating expenses for enterprise funds include personnel services, contractual services, supplies, materials, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. The reporting focus of fiduciary funds is upon net assets and changes in net assets and employs accounting principles similar to proprietary funds. Fiduciary funds are not included in the governmentwide financial statements as they are not available to support City programs.

36 PAGE 31 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: (Continued) Budgets: The City follows these procedures in establishing the budgetary data reflected in the financial statements: 1. By May 15, the Mayor submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures and the means of financing them. 2. Public hearings are conducted at council meetings to obtain taxpayer comments. 3. By May 15, the budget is legally enacted through passage of an ordinance. 4. Only the City Council is authorized to transfer budgeted amounts between departments within any fund or revise the total expenditures of any fund. 5. Formal budgetary integration is employed as a management control device during the year for the General and Special Revenue Funds, except those Special Revenue Funds established to account for a particular grant. Such grant funds are budgeted over the life of the grant and not necessarily on an annual basis. 6. Budgeted amounts are as originally adopted or as amended by the City Council. Individual amendments were not material in relation to the original appropriations which were amended. 7. All budgetary appropriations lapse at the end of each fiscal year. 8. Those budgets which the City adopts are on a basis consistent with accounting principles generally accepted in the United States of America as applied to governmental units. Budgetary data for the discretely presented component units are not presented in these financial statements.

37 PAGE 32 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS. BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: (Continued) Compensated Absences: The City accrues accumulated unpaid vacation and sick leave and associated employee related costs when earned by the employee. For governmental funds, the current portion of unpaid compensated absences is the amount that is normally expected to be paid using expendable available financial resources. These amounts are recorded in the fund from which the employees who have accumulated leave are paid. The noncurrent portion of the liability is not reported in the governmental funds financial statements. In proprietary funds, the entire amount of compensated absences is reported as a fund liability. In the governmentwide financial statements, the entire compensated absence liability is reported. Substantially all employees of the City government earn from one week to four weeks of annual leave each year depending on length of service. Each year any unused annual leave may be accumulated up to a maximum of 280 hours. Upon termination, an employee shall be paid a value of his accrued annual leave up to 280 hours. Employees earn 12 days a year of sick leave regardless of the length of service. Each year any unused sick leave may accumulate. Upon retirement an employee shall be paid up to 1,440 hours of accrued sick leave. Upon termination, an employee is not paid for accrued sick leave. Sales and Use Tax: The City of Hammond has a two percent sales and use tax. The Tangipahoa Parish School Board is authorized to collect and remit this tax to the City for a stipulated fee. The City's sales tax ordinances provide that the proceeds can be used for general governmental operations of the City. Fund Equity: In the fund financial statements, reserves represent those portions of fund equity not appropriable for expenditures in the following year or legally segregated for a specific future use. Designated fund balances represent tentative plans for future use of financial resources.

38 PAGE 33 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS. BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: (Continued) LongTerm Obligations: In the governmentwide financial statements and proprietary fund types in the fund financial statements, longterm debt and other longterm obligations are reported as liabilities in the applicable governmental activities, businesstype activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bond payables are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as an other financing source. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Restricted Assets: Included in restricted assets of the governmental activities in the Statement of Net Assets are: 1) the "Capital Project Fund", which is used to segregate those resources accumulated through sale of bond or state financing to be used for capital projects, and 2) the "Debt Service Fund" account, which is used to pay principal and interest on the City's general obligation bonds and certificates of indebtedness. Included in restricted assets of the business type activities in the Statement of Net Assets are: 1) the "Customers' Deposits" account, which is used to segregate water meter deposits used to pay any outstanding water bills when customers discontinue service, and 2) the "Debt Service Fund" account, which is used to pay the principal and interest payments on the City's revenue bonds. Allowance For Doubtful Accounts: The City has established an allowance for doubtful accounts for writeoff of delinquent accounts. The City's allowance is based on management's best estimate of uncollectible amounts. The allowance for doubtful accounts at June 30, 2007 is $50,000.

39 PAGE 34 NOTES TO FINANCIAL STATEMENTS JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: (Continued) Cash and Cash Equivalents: For the purpose of the Statement of Cash Flows, cash includes amounts in petty cash, demand deposits, interest bearing demand deposits, and money market accounts Advance To/From Other Funds Noncurrent portions of longterm interfund loans on receivables are reported as advances. ShortTerm Interfund Receivables/Pavables During the course of operations, numerous transactions occur between individual funds for goods provided or services rendered. These receivables and payables are classified as due to or from other funds on the balance sheet. Shortterm interfund loans are classified as interfund receivables or payables or due to or from other funds. Prepaid Items Payments made to vendors for services that will benefit periods beyond June 30, 2007 are recorded as prepaid items. Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g. roads, bridges, sidewalks and similar items) are reported in the applicable governmental or businesstype activities columns in the governmentwide financial statements and the fund financial statements for proprietary funds. Capital assets are defined by the City as assets with an initial, individual cost of more than $1,000 for equipment, $100,000$250,000 for infrastructure, and $50,000 for buildings. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of businesstype activities is included as part of the capitalized value of the assets constructed. No interest was incurred by the City during the current fiscal year.

40 PAGE 35 NOTES TO FINANCIAL STATEMENTS JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PRESENTATION: (Continued) Capital Assets (Continued) Depreciation is computed using the straightline method over the estimated useful lives of the assets. Estimated useful lives are as follows: Building Lines and mains Equipment and vehicles Life 25 years 2050 years 410 years Interfund Transactions On fund financial statements, longterm interfund loans are classified as "advances to/from other funds" on the balance sheet and are equally offset by a fund balance reserve account which indicates that they do not constitute available expendable resources. These amounts are eliminated in the governmental and businesstype activities columns of the statement of net assets, except for any net residual amounts due between governmental and businesstype activities, which are presented as internal balances. Transfers between governmental and businesstype activities on the governmentwide financial statements are reported in the same manner as general revenues. Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after nonoperating revenues/expenses in proprietary funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented on the financial statements. USE OF ESTIMATES: The City uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, and the reported revenues and expenditures. Actual results could vary from the estimates that are used.

41 PAGE 36 NOTES TO FINANCIAL STATEMENTS JUNE 30, AD VALOREM TAXES: Ad Valorem taxes attach as an enforceable lien on property as of January 1 of each year. Taxes are levied by the City during the year and are billed to taxpayers in November. Billed taxes become delinquent on March 1 of the following year. Revenues from Ad Valorem taxes are budgeted in the year billed and recognized as revenue when received. The City bills and collects its own property taxes using the assessed value determined by the Tax Assessor of Tangipahoa Parish. The City is permitted by state law to levy taxes up to seven mills of assessed valuation for general operating purposes. In addition, voters renewed a tenyear millage in 1996 of two mills to be used for public improvements upkeep. The total is for general government services. No assessment was required for payment of longtern debt. On November 20, 1999, the voters of the City renewed a ten (10) mill property tax for a period often (10) years, beginning with the year 2001, for the purpose of operating, maintaining and acquiring police and fire protection services, facilities and equipment and paying Police and Fire Department salaries. For the year ended June 30, 2007, taxes of mills were levied on property with assessed valuations totaling $154,856,563. The total tax levied was $2,948,469. Tax collections for the year ended June 30, 2007 were 89% of the tax levy. The Hammond Downtown Development District (the District) is permitted by state law to levy taxes up to fifteen (15) mills on all property subject to taxation by the District for the purpose of constructing, acquiring, operating or maintaining public facilities contemplated by the redevelopment plan and for the operating expenses of the District. 3. CASH AND CASH EQUIVALENTS: Primary Government Cash and cash equivalents include amounts in demand deposits and interest bearing demand deposits. Under state law, the City may deposit funds in demand deposits, interest bearing demand deposits, money market accounts, or time deposits with state banks organized under Louisiana law and national banks having their principal offices in Louisiana.

42 PAGE 37 NOTES TO FINANCIAL STATEMENTS JUNE 30, CASH AND CASH EQUIVALENTS: (Continued) Primary Government (Continued) At June 30, 2007, the City of Hammond has cash (book balances) totaling $28,371,196, as follows: Governmental Funds: Petty cash Demand deposits Interest bearing demand deposits Proprietary Funds: Enterprise Fund Interest bearing demand deposit Internal Service Fund Interest bearing demand deposit Cash with agent Total 1 1,100 5,742 25, ,776,695 1,047, $28,371,196 These deposits are stated at cost, which approximates market value. Under state law, these deposits (or the resulting bank balances) must be secured by federal deposit insurance or the pledge of securities owned by the fiscal agent bank. 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. These securities are held in the name of the City in a holding or custodial bank that is mutually acceptable to both parties. At June 30, 2007, the City of Hammond has $28,826,820 in deposits (collected bank balances). These deposits are secured from risk by federal deposit insurance and pledged securities. Custodial Credit Risk Custodial credit risk is defined as the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its deposit or collateral securities that are in the possession of an outside party. The City's bank balance of $28,826,820 at June 30, 2007 is secured by pledged collateral held in joint custody. The City has no formal policy regarding custodial credit risk. Deposits collateralized by pledged securities are considered to be exposed to credit risk (Category 3), under the provision of GASB Statement No. 40. However, Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodial bank to advertise and sell the pledged securities within ten days of being notified by the governmental entity that the fiscal agent has failed to pay deposited funds upon demand.

43 NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007 PAGE CASH AND CASH EQUIVALENTS: (Continued) Discretely Presented Component Units The discretely presented component units are required to invest funds within the same state statutes as the primary government. Component unit deposits (including demand deposit accounts and certificates of deposit) at June 30,2007, are as follows: City Court of Hammond The City Court of Hammond reported on the governmentwide financial statements cash and cash equivalents in the amount of $401,520 in deposits (book balances) at June 30, Total cash (book balances) from fiduciary responsibilities was $421,599 at June 30, Bank balances as of June 30, 2007 was $1,355,650 of which $622,859 was insured by FDIC Insurance, $724,478 was collateralized with investments held by pledging bank's trust department not in the City Court's name, and $8,313 was uninsured and uncollateralized. Custodial Credit Risk Deposits. Custodial credit risk is the risk that in the event of a bank failure, the entity's deposits may not be returned to it. The City Court does not have a deposit policy for custodial risk. As of June 30, 2007, $732,791 was exposed to custodial credit risk. Deposits collateralized by pledged securities are considered to be exposed to credit risk under the provision of GASB Statement 40. However, Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodial bank to advertise and sell the pledged securities within ten days of being notified by the governmental entity that the fiscal agent has failed to pay deposited funds upon demand. As of June 30, 2007, the City Court did not comply with state law, which requires any uninsured cash balances with the fiscal agent bank to be adequately collateralized by a pledge of securities. Marshal of City Court of Hammond At June 30, 2007, the Marshal's Office reported on the governmentwide financial statements cash and cash equivalents (book balances) in the amount of $229,117. Total cash (book balances) from fiduciary responsibilities not reported on the governmentwide financial statements was $1,651 at June 30, The bank balances as of June 30, 2007 was $277,445, of which $188,465 was insured by FDIC Insurance and $88,980 was collateralized by securities held by pledging bank's trust department not in the Marshal's Office's name. Custodial Credit Risk Custodial credit risk is defined as the risk that, in the event of a bank failure, the entity's deposits and collateral securities that are in the possession of an outside party may not be recovered. The Marshall's Office is exposed to custodial credit risk at June 30, 2007 for deposits in the amount of $88,980. The Marshal's Office has no formal policy regarding custodial credit risk.

44 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2007 PAGE CASH AND CASH EQUIVALENTS: (Continued) Custodial Credit Risk: (Continued) Deposits collateralized by pledged securities are considered to be exposed to credit risk (Category 3), under the provision of GASB Statement No. 40. However, Louisiana Revised Statute 39:1229 imposes a statutory requirement on the custodial bank to advertise and sell the pledged securities within ten days of being notified by the Marshal's Office that the fiscal agent has failed to pay deposited funds upon demand. 4. INVESTMENTS: Primary Government: The primary government had no longterm investments as of June 30, All monies are invested in short term cash equivalents. Discretely Presented Component Units Certificates of deposit with a maturity of 90 days or more are classified on the governmentwide financial statements, fund financial statements and statement of fiduciary net assets as "Investments". The City Court of Hammond reported on the governmentwide financial statements unrestricted investments (book balance) of $494,423 at June 30, See Footnote 3 for additional disclosure of investments. 5. RECEIVABLES: Receivables as of June 30, 2007, including the applicable allowances for uncollectible accounts, are as follows: Governmental Funds Other Proprietary Funds Total Total Receivables; General Governmental Funds Total Enterprise Internal Primary Component Service Government Units Reporting Entity Taxes: Ad Valorem Franchise Notes Accounts Other $ 499,108 $ $ 189, , , , , ,108 $ 189, , , ,103 4,672 $ $ 499,108 $ 189, , , , ,013 $ 499, , , , ,013 Gross Receivables 1,029, ,210 1,566, , ,238 2,720, ,721,294 Less: Allowance for Uncollectibles (499,108) (499,108) (50,000) (549,108) (549,108) Net Receivables $ $ $ $ : $ $ $ 787 $

45 PAGE 40 NOTES TO FINANCIAL STATEMENTS JUNE 30, INTERFUND RECEIVABLES, PAYABLES, TRANSFERS IN, TRANSFERS OUT: Governmental Funds: Sales Tax Fund General Fund Other Governmental Funds Total Governmental Funds Proprietary Fund: Enterprise Fund Total Proprietary Fund Total Primary Government Interfiind Receivables ; 46,000 3,234, ,337" S Interfiind Pavables $ 2,318, ,000 2,539, , ,119 S Governmental Funds: General Fund Sales Tax Fund Sales Tax 2006 Construction Fund Other Governmental Funds Total Governmental Funds Proprietary Fund: Enterprise Fund Total Proprietary Fund Total Primary Government Transfers In i 13,448,821 50,000 7,476,255 20,975,076 4,420,520 4,420,520 S Transfers Out $ 786,804 18,525, ,159 1,701,642 21,302,150 4,093,446 4,093,446 The principal purpose of transfers between funds is to fund expenditures associated with those funds. 7. DUE FROM OTHER GOVERNMENTS: State of Louisiana: Beer tax State Grants Tangipahoa Parish Council: Fire Insurance Tax Reimbursement of Courtroom Security Miscellaneous Tangipahoa Parish Rural Fire District #2 Tangipahoa Parish School Board sales tax City Court of Hammond City of Hammond Federal Grants Total due from other governments General $ 14,000 $ 65,800 92,500 Governmental Funds Other Governmental Sales Tax Funds 2,734, , Proprietary Fund Enterprise Fund Total Primary Government 14, ,198 65,800 92,500 2,734,413 40, Component Units 22,243 3,484 3,427 20,803 75,917 Total Reporting Entity : 14, ,441 65,800 3,484 3,427 92,500 2,734,413 60,988 75, $ $ $_ S $ $

46 PAGE 41 NOTES TO THE FINANCIAL STATEMENTS JUNE 30, CAPITAL ASSETS: Governmental Funds The following is a summary of governmental fundtype capital assets at June 30, 2007: Governmental activities: Capital assets not being depreciated: Land Construction in progress Balance July 1, 2006 Additions 3,417,208 1,533,979 3,799,031 Deletions Completed Construction $ (3,281,986) Balance June 30, 2007 $ 3,417,208 2,051,024 Total capital assets not being depreciated 4,951,187 3,799,031 (3,281,986) 5,468,232 Capital assets being depreciated: Building Vehicles Equipment Infrastructure 6,198,491 5,698,111 3,289,854 23,575, , , ,946 (566,912) (280,873) 3,281,986 6,411,144 5,744,454 3,644,927 26,857,145 Total capital assets being depreciated 38,761,615 1,461,854 (847,785) 3,281,986 42,657,670 Less: accumulated depreciation (10,649,431) (2,069,961) 803,176 (11,916,216) Total capital assets being depreciated, net 28,112,184 (608,107) (44,609) 3,281,986 30,741,454 Governmental activities capital assets, net $ 33,063,371 S 3,190,924 $ (44,609) $ $ ,686 Depreciation expense was charged to functions as follows: General government Public safety: Police Fire Culture and recreation Building Grounds Airport Streets Economic development $ 183, , ,953 64,595 32,969 38, , , Total governmental activities depreciation expense $

47 PAGE 42 NOTES TO FINANCIAL STATEMENTS JUNE 30, CAPITAL ASSETS: (Continued) Governmental Funds (Continued) The following is a summary of capital assets of the Component Units at June 30,2007: Balance July Additions Deletions Accumulated Depreciation Balance June City Court of Hammond Marshal of City Court of Hammond Total Component Units Proprietary Fund: $42, $2,531 The following is a summary of proprietary fundtype capital assets at June 30, 2007: Businesstype activities: Capital assets not being depreciated: Land Construction in progress Balance July ,047 9,000,870 Additions 1,987,104 Deletions Completed Construction (9.858,192) Balance June , ,782 Total capital assets not being depreciated 9,158,917 1,987,104 (9,858,192) 1,287,829 Capital assets being depreciated: Water: Buildings Equipment Vehicles Lines and Mains Sewer: Buildings Equipment Vehicles Lines and Mains 55, , ,986 5,634,378 65, , ,931 17,227,542 98,864 26,701 (14,026) (18,767) 416,240 9,441, , , ,920 5,634,378 65, , ,931 26,669,494 Total capital assets being depreciated Less: accumulated depreciation 24,514, ,565 (32,793) 9,858,192 34,465,868 (14,340,306) (999,140) 31,409 (15,308,037) Total capital assets being depreciated, net Businesstype activities capita! assets, net 10,174,598 (873,575) (1,384) 9,858,192 S 19,333,515 $ 1,113,529 $ (1,384) $ 19,157,831 $ 20,445,660

48 PAGE 43 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2Q07 8. CAPITAL ASSETS: (Continued) Proprietary Fund: (Continued) Depreciation expense was as follows: Businesstype activities: Water Sewer Total businesstype activities depreciation expense $ 288, $ RESTRICTED ASSETS: Restricted assets for the City were applicable to the following at June 30,2007: Governmental Activities: Unexpended Bond Proceeds Bond Sinking Fund Total Businesstype Activities: Meter Deposit Accounts Bond Sinking Fund Total $17,730, $ $ 381, ,604 S 728, GENERAL LONGTERM DEBT OBLIGATIONS: The following is a summary of general longterm debt transactions for the year ended June 30, Governmental Funds: General obligation bonds Certificates of indebtedness Accumulated leave Total Governmental Funds Outstanding Julv $ 11,570,000 1,540,000 2,520,774 $ 15,630,774 Additions $ 15,000, ,629 $ 15,415,629 Deletions $ (495,000) (285,000) $ (780,000) Oustanding June $ 26,075,000 1,255,000 2,936,403 $ 30,266,403 Amounts Due Within Qne_Y_ear $ 550, ,000 $ 840,000 Proprietary Funds: Bonds payable Accumulated leave Due to other governments Total Proprietary Funds $ 2,390,000 $ $ (445,000) $ 1,945,000 $ 460, ,593 47, , ,897 (41,706) 408, ,191 $ 3,100,490 S 47,343 $ (486,706) $ 2,661,127 S 868,191

49 PAGE 44 NOTES TO FINANCIAL STATEMENTS JUNE 30, GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Governmental Funds: The following is a summary of the bonds of the City at June 30, 2007: General Obligation Bonds $3,360, Public Improvement Refund Bonds, Series 2E, due in annual installments of principal and semiannual installments of interest through December 1, 2007; on $75,000 at 4.40%. $ 75,000 $6,000, Sales Tax Bonds, Series 2002, due in annual installments of principal and semiannual installments of interest through December 1, 2022; interest on $175,000 at 5.375%, on $265,000 at 4%, on $280,000 at 4%, $295,000 at 4%, on $305,000 at 5.5%, on $325,000 at 5.5%, on $340,000 at 4%, on $360,000 at 4%, on $375,000 at 4.125%, on $395,000 at 4.375%, on $415,000 at 4.4%, on $440,000 at 4.5%, on $460,000 at 4.6%, on $485,000 at 4.65%,on $510,000 at 4.7%, and on $535,000 at 4.75%. 5,960,000 $310, Public Improvement Refund Bonds, Series Sales Tax 2002, due in annual installments of principal and semiannual installments of interest through December I, 2007; interest on $40,000 at 3.24%. 40,000

50 PAGE 45 NOTES TO FINANCIAL STATEMENTS JUNE 30, GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Governmental Funds: (Continued) General Obligation Bonds: (Continued) $5,000,000 Sales Tax Bonds, Series 2005, due in annual installments of principal starting December 1, 2007, and semiannual installments of interest starting December 1, 2005, through December i, 2019; interest on $260,000 at 3%, on $315,000 at 3.25%, on $325,000 at 3.25%, on $335,000 at 3.5%, on $350,000 at 3.5%, on $365,000 at 3.5%, on $385,000 at 3.5%, on $400,000 at 4%, on $420,000 at 4%, on $435,000 at 4%, on $455,000 at 4.5%, on $465,000 at 4.5%, and $490,000 at 4.5% $15,000,000 Sales Tax Bonds, Series 2006, due in annual installments of principal starting December 1,2009, and semiannual installments of interest starting December 1,2007, through December 1,2026; interest on $545,000 at 4%, on $570,000 at 4%, on $600,000 at 4%, on $625,000 at 5.25%, on $655,000 at 4%, on $690,000 at 4%, on $720,000 at 5.25%, on $755,000 at 4%, on $790,000 at 4%, on $830,000 at 4%, on $870,000 at 4%, on $910,000 at 4.125%, on $955,000 at 4.125%, on $1,000,000 at 4.25%, on $1,045,000 at 4.25%, on $1,095,000 at 4.25%, on $1,145,000 at 4.25%, and $1,200,000 at 4.25%. 5,000, Total General Obligation Bonds Payable S

51 PAGE 46 NOTES TO FINANCIAL STATEMENTS JUNE 30, GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Governmental Funds: (Continued) General Obligation Bonds: (Continued) A combined schedule of the outstanding Public Improvements Refunding Sales Tax Series 2E, Sales Tax Series 2002, Refunding Series Sales Tax 2002, Sales Tax Series 2005 and Sales Tax Series 2006 bonds and the interest and principal requirements by dates is as follows: December 1,2007 June 1, 2008 December June 1, 2009 December 1,2009 June 1, 2010 December 1,2010 June 1,2011 December 1,2011 June 1, 2012 December 1,2012 June 1, 2013 December 1,201 3 June 1, 2014 December 1, 2014 June 1,2015 December 1, 2015 June 1, 2016 December 1, 2016 June 1, 2017 December 1, 2017 June 1, 2018 December 1,201 8 June I, 2019 December 1,2019 June 1, 2020 December 1,2020 June 1,2021 December 1,2021 June 1, 2022 December 1,2022 June 1, 2023 December 1,2023 June 1,2024 December 1,2024 June 1,2025 December 1,2025 June 1, 2026 December 1, 2026 Total Refunding Sales Tax Series 2E Refunding Series Sales Tax 2002 Sales Tax Series 2005 Sales Tax Series 2006 Principal Interest Principal Interest Principal Interest Principal Principal Totals $ 75,000 $ 1,650 $ 175,000 $ 134,751 $ 40,000 S 648 J 260,000 S %,237 S S 632,856 $ 1,416, ,078 92, , ,844. _ , , , , , , , , , , , , , , ,000 $ 75,000 S 1,650 S 5,960, , , , , , , , , ,890 95,953 95,953 89,153 89,153 81,953 81,953 74,218 74,218 65,578 65,578 56,448 56,448 46,548 46,548 35,968 35,968 24,691 24,691 12,706 12,706.. S 2,484,417 $ 40,000 S , , , , , , , , , , , ,000 S 5,000,000 92,337 87,219 87,219 81,937 81,938 76,075 76,075 69,950 69,950 63,562 63,563 56,825 56,825 48,825 48,825 40,425 40,425 31,725 31, ,488 11,025 11,025 S 1,459, , , , , , , , , , , , , ,000 1,000,000 1,045,000 1,095,000 1,145,000 1,200,000 S 15,000, , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,556 95,306 95,306 73,100 73,100 49,831 49,832 25,500 25,500 $ 8,051,981 1,118, ,825 1,677, ,643 1, ,481 1,738, ,968 1,771, ,237 1,805, ,600 1,848, ,600 1,884, ,565 1,919, ,125 1,962, ,957 2,001, ,995 2,049, ,585, ,625, ,262 1,664,262 95,306 1,140,306 73,100 1,168,100 49,831 1,194,832 25,500 1,225,500 $ 38,072,721

52 PAGE 47 NOTES TO FINANCIAL STATEMENTS JUNE GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Governmental Funds: (Continued) General Obligation Bonds: (Continued) The Refunding Sales Tax Series 2E, Sales Tax Series 2002, Refunding Series Sales Tax 2002, Sales Tax 2005 and Sales Tax 2006 Bond Indentures provide that ail revenues of the Sales Tax Fund are pledged for purposes in the following order of priority: a. Reasonable and necessary expenses of collecting the tax; b. Payments into the Sales Tax Bond Sinking Fund for each issue of the amount required to pay maturing bonds and coupons, such payments to be made in equal monthly installments; c. Payments into the Sales Tax Bond Reserve Fund for each issue for a specified amount per month until the fund reaches an amount equal to the highest future annual principal and interest requirements for any succeeding calendar year; d. All revenues not required for the above payments shall be regarded as surplus and may be used by the City for any of the purposes for which the imposition of the tax is authorized or for the purpose of retiring future bonds. Certificates of Indebtedness $1,290,000,2003 Refunding Certificates of Indebtedness due in annual installments of principal and semiannual installments of interest through November 1,2010; interest on $170,000 at 2.63%,on $180,000 at 2.82%, on $185,000 at 3.01%,and on $200,000 at 3.17%. $ 735,000 $750,000, 2005 Series Limited Tax Certificates of Indebtedness due in annual installments of principal and semiannual installments of interest through March 1,2011; interest on $120,000 at 0.1%, on $125,000 at 3%, on $135,000 at 4.95%, and on $140,000 at 5%. 520,000 Total Certificates of Indebtedness SI

53 PAGE 48 NOTES TO FINANCIAL STATEMENTS JUNE 30, GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Governmental Funds: (Continued) Certificates of Indebtedness (Continued) A schedule of the outstanding 2003 Certificates and the interest and principal requirements by date is as follows: Due Date November 1,2007 May 1,2008 November 1,2008 May 1,2009 November 1,2009 May 1,2010 November 1,2010 Totals Principal Interest Totals ; no,ooo 180, , $ 10,728 8,492 8,492 5,954 5,954 3,170 3,170 $180,728 8, ,492 5, ,954 3, S A schedule of the outstanding 2005 Certificates and the interest and principal requirements by date is as follows: Due Date Principal Interest Totals September 1,2007 March I, 2008 September 1,2008 March 1,2009 September 1,2009 March 1,2010 September 1,2010 March 1, , , , ,000 $ 8,776 8,776 8,716 8,716 6,841 6,842 3,500 3,500 $ 8, ,776 8, ,716 6, ,842 3, Totals I S S

54 PAGE 49 NOTES TO FINANCIAL STATEMENTS JUNE 30, GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Governmental Funds: (Continued) Accumulated Leave At June 30, 2007, employees of the City have accumulated and vested $2,936,403 of leave benefits for all governmental funds. Proprietary Fund Types: Water and Sewer Revenue Bonds: $3,930,000 Series 2003 Water & Sewer Revenue Bonds due in annual installments of principal and semiannual installments of interest through December 1, 2010; interest on the following principal payments of 2.74%: $460,000; $475,000; $495,000 and $515,000. The Series 2003 Bonds were issued to refund the outstanding Series 1993 Bonds, the Series 1998A Bonds, and the Series 1998B Bonds and, therefore, the City is not required to fund the reserve fund requirement for the bonds unless the City issues additional parity bonds in the future. A schedule of the outstanding Series 2003 Water and Sewer Revenue Refunding Bonds and the interest and principal requirements by date is as follows: Due Date Interest Totals December 1,2007 June 1,2008 December 1,2008 June 1,2009 December 1,2009 June 1,2010 December 1,2010 : 460, , , ,000 $ 26,647 20,345 20,345 13,837 13,837 7,056 7,056 $ 486,647 20, ,345 13, ,837 7, ,056 Totals 1 T 945 T 000 S

55 PAGE 50 NOTES TO FINANCIAL STATEMENTS JUNE 30, GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Proprietary Fund Types: (Continued) Water and Sewer Revenue Bonds: (Continued) The Water and Sewer Revenue Refunding Bonds are secured by and payable solely from income and revenues to be derived by the City from the operations of the public waterworks and sewer plants distribution system of the City, after provisions have been made for the payment for the reasonable and necessary expenses of operating and maintaining the system. Accumulated Leave At June 30, 2007, employees of the City who work in the Water and Sewer Department have accumulated and vested $307,936 of leave benefits for the proprietary funds. Due to Other Governments The City received Utility Relocation Assistance Funding from the State of Louisiana Department of Transportation and Development in order to relocate certain utility lines throughout the City. This funding is not considered a loan or a grant and no interest is charged; however, it must be repaid to the State. The total amount originally due to the State was $490,276 of which ten percent of the remaining balance is due annually. No payment was made by the City during the year ended June 30, The balance due at June 30, 2007 is $401,248 and is included on the Statement of Net Assets in Due to Other Governments. In addition, the City also owes the State and local governmental districts $6,943 as of June 30, 2007.

56 PAGE 51 NOTES TO FINANCIAL STATEMENTS JUNE 30, GENERAL LONGTERM DEBT OBLIGATIONS: (Continued) Following is a combined schedule of annual requirements to retire all bonds and certificates as of June 30, 2007: Year Ending June 30, Governmental Funds General Obligations Certificates of Bonds Indebtedness Principal Interest Principal Interest Totals Proprietary Funds Revenue and Refunding Bonds Principal Interest Totals $ 550, ,000 1,150,000 1,200,000 1,255,000 1,315,000 1,380,000 1,450,000 1,515,000 1,585,000 1,660,000 1,735,000 1,820,000 1,395,000 1,465,000 1,535,000 1,045,000 1,095,000 1,145,000 1,200,000 $ 1,405,016 $ 290,000 $ 36,772 1,066, ,000 31,878 1,034, ,000 22, , ,000 10, , , , , , , , , , , , , , ,931 75,332 25,500 $ 2,281,788 1,983,546 2,527,275 2,540,295 2,195,449 2,197,205 2,203,838 2,218,200 2,219,165 2,221,690 2,229,082 2,231,953 2,240,985 1,746,934 1,755,206 1,759,568 1,213,406 1,217,931 1,220,332 1,225,500 $ 460,000 $ 46,992 $ 506, ,000 34, , ,000 20, , ,000 7, , $ 26,075,000 S 11, $ 1.255,000 $ 101,627 S 39,429,348 $ 1,945,000 $ 109,123 2,054, METER DEPOSITS: Meter deposits are paid by customers upon application for utility services and are refundable to them upon termination of service. Receipts from meter deposits are deposited in a meter deposit account and refunds of deposits on termination of service are made from the same account. The City has restricted cash and cash equivalents of the Meter Deposit Fund specifically for meter deposits. At June 30, 2007, meter deposits amounted to $530,356 and the balance of cash and cash equivalents in the Meter Deposit Fund totaled $381, PENSION PLAN: The City of Hammond contributes to the Municipal Employees' Retirement System of Louisiana, the Firefighters' Retirement System of Louisiana and the Municipal Police Employees' Retirement System of Louisiana. The City's payroll for employees covered by the retirement systems for the year ended June 30, 2007 was $10,993,134.

57 PAGE 52 NOTES TO FINANCIAL STATEMENTS JUNE 30, PENSION PLAN: (Continued) a. Municipal Employees' Retirement System Plan Description The City contributes to Plan A of the Municipal Employees' Retirement System of Louisiana (the System), a costsharing multipleemployer defined benefit public employee retirement system (MERS), which is controlled and administered by a separate Board of Trustees. The System provides retirement, deferred and disability benefits, survivor's benefits and cost of living adjustments to plan members and beneficiaries. Act 356 of the 1954 Louisiana Legislative Session established the plan. The System is governed by Louisiana Revised Statutes 11:1731 through 11:1866, specifically, and other general laws of the State of Louisiana. The System issues a publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to Municipal Employees' Retirement System of Louisiana, 7937 Office Park Boulevard, Baton Rouge, Louisiana Funding Policy Plan members are required to contribute 9.25% of their earnable compensation, and the City is required to contribute at an actuarially determined rate. The current rate is 16.25% of earnable compensation. The contribution requirements of plan members and the City are established and may be amended by state statute. The actuarial required employer contributions and the percentage contributed for the Municipal Employees' Retirement System for the past three years is as follows: Fiscal Year June 30, 2005 June 30, 2006 June Actuarial Required Contribution Employer $589, , ,084 Percentage Contributed Employer 95.52% 91.36% % The employer contribution from the City differs from the actuarially required contribution due to the state law that requires the employer contribution rate be calculated and set two years prior to the year effective. b. Firefighters' Retirement System Plan Description The City contributes to the Firefighters' Retirement System of Louisiana (the System), a costsharing multipleemployer defined benefit public retirement system, which is controlled and administered by a separate Board of Trustees. The System provides retirement, deferred and disability benefits, survivor's benefits and cost of living adjustments to plan members and beneficiaries. Act 434 of the 1979 Louisiana Legislative Session established the plan. The System is governed by Louisiana Revised Statutes 11:2251 through 11:2269, specifically, and other general laws of the State of Louisiana. The System issues a publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to Firefighters' Retirement System of Louisiana, P. O. Box 94095, Capital Station, Baton Rouge, Louisiana

58 PAGE 53 NOTES TO THE FINANCIAL STATEMENTS JUNE 30, PENSION PLAN: (Continued) b. Firefighters' Retirement System (Continued) Funding Policy Plan members are required to contribute 8% of their earnable compensation and the City is required to contribute at an actuarially determined rate. The current rate is 18% of annualcovered payroll. The contribution requirements of plan members and the City are established and may be amended by state statute. The actuarial required employer contributions and the percentage contributed for the Firefighters' Retirement System for the past three years is as follows: Fiscal Year June 30, 2004 June 30, 2005 June 30, 2006 Actuarial Required Contribution Employer $409, , ,181 Percentage Contributed Employer % % % The actuarial required employer contributions and the percentage contributed for the year ended June 30, 2007 is not available at this time. c Municipal Police Employees' Retirement System Plan Description The City contributes to the Municipal Police Employees' Retirement System of Louisiana (the System), a costsharing multipleemployer defined benefit public employee retirement system (MPERS), which is controlled and administered by a separate Board of Trustees. The System provides retirement, deferred and disability benefits, survivor's benefits and cost of living adjustments to plan members and beneficiaries. Act 189 of the 1973 Louisiana Legislative Session established the plan. The System is governed by Louisiana Revised Statutes 11:2211 through 11:2233, specifically, and other general laws of the State of Louisiana. The System issues a publicly available financial report that includes financial statements and required supplementary information for the System. That report may be obtained by writing to Municipal Police Employees' Retirement System of Louisiana, P.O. Box 94095, Capital Station, Baton Rouge, Louisiana Funding Policy Plan members are required to contribute 7.5% of their annualcovered salary and the City is required to contribute 15.5% of annual payroll. The contribution requirements of plan members and the City are established and may be amended by state statute.

59 PAGE 54 NOTES TO FINANCIAL STATEMENTS JUNE PENSION PLAN: (Continued) c. Municipal Police Employees' Retirement System (Continued) The actuarial required employer contributions and the percentage contributed for the Municipal Police Employees' Retirement System for the past three years is as follows: Fiscal Year June 30, 2005 June 30, 2006 June 30, 2007 Actuarial Required Contribution Employer $540, , ,051 Percentage Contributed Employer % % % The employer contribution from the City differs from the actuarially required contribution due to the state law that requires the employer contribution rate be calculated and set two years prior to the year effective. 13. RESERVED/DESIGNATED FUND BALANCES AND RESTRICTED NET ASSETS: RESERVED FUND BALANCES Governmental Funds: Reserve for Debt Service The debt service accounts accumulate money from various sources for the payment of interest and principal on the bonds in the following funds: Other Governmental Funds Reserved for LongTerm Assets Amount The reserve for longterm assets represents the longterm portion of receivables from various entities reported in the following funds: General Fund $ 180,000 Other Governmental Funds 142,648 Fund Balance Reserved $ Reserved For Capital Projects: The reserve for capital projects represents funds reserved for current construction projects within the City in the following funds: Sales Tax 2006 Bond Construction Fund Other Governmental Funds Fund Balance Reserved $ 1,095,596 2, $

60 PAGE 55 NOTES TO FINANCIAL STATEMENTS JUNE 30, RESERVED/DESIGNATED FUND BALANCES AND RESTRICTED NET ASSETS: (Continued) DESIGNATED FUND BALANCE: Governmental Funds: Designated For Capital Projects: A portion of fund balance in various capital projects funds are designated for future construction projects in the following funds: Sales Tax 2006 Bond Construction Fund Other Governmental Funds Fund Balance Designated $ 13,487,547 2,972,333 $_ RESTRICTED NET ASSETS Restricted for: Debt Service Capital Projects Net Assets Restricted Governmental Activities $ 2,053,976 2,566,471 $ Businesstype Activities $ 212,906 $ Total $ 2,266,882 2,566,471 $ RISK MANAGEMENT: The City is exposed to various risks of loss related to tort; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. To account for and finance its uninsured risk of loss, the City has established an Insurance Fund (an internal service fund). Under this program, the Insurance Fund provides coverage for up to a maximum of $350,000 for each worker's compensation claim and $100,000 for each general liability claim. The City also purchases commercial insurance for claims in excess of coverage provided by the fund.

61 PAGE 56 NOTES TO FINANCIAL STATEMENTS JUNE 30, RISK MANAGEMENT: (Continued) The General Fund and Enterprise Fund participate in the program and make payments to the fund based on management's estimates of the amounts needed to pay prior and current year claims. These interfund "premiums" related to workers' compensation, general liability and property insurance coverages are reported as quasiexternal transactions. At June 30, 2007, the outstanding claims liability was $653,134, which includes estimated liability for incurred but not reported claims. The liability is based on the requirements of GASB No. 10, "Accounting and Financial Reporting for Risk Financing and Related Insurance Issues" which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable and the amount of the loss can be reasonably estimated. Estimated claims liability is determined using specific claims information obtained from the City's claims administrator. Changes in the general liability and workers' compensation claims liability amount for the years ended June 30, 2007 and 2006 were: Beginning of Year Liability $ 937,985 $ 737,408 Current Year Claims and Estimates $ 568,042 $1,001,842 Claim Payments $ 852,893 $ 801,265 Balance at Year End $ 653,134 $ 937,985 The City has established a Health Insurance Fund (an internal service fund) to account for a partially selfinsured health insurance plan that the City provides to its employees. Under this program, the Health Insurance Fund provides partial coverage for employee deductibles. For a single employee, the deductible is $1,700, of which the City is responsible for $1,000. For a family, the deductible is $3,450, of which the City is responsible for $2,050. Any claims in excess of the above stated deductible amounts are covered by a commercial insurance company. At June 30, 2007, there were no claims outstanding. The liability is based on the requirements of GASB No. 10, "Accounting and Financial Reporting for Risk Financing and Related Insurance Issues" which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable and the amount of the loss can be reasonably estimated. Estimated claims liability is determined using specific claims information obtained from the City's claims administrator. 15. SUPPLEMENTAL PAY: In addition to the compensation paid to the City of Hammond's employees, employees who are firefighters and police officers may be eligible to receive supplemental pay. Each type of employee is governed by their particular revised statute. The amount of the compensation is determined by State Law and is revised periodically.

62 PAGE SUPPLEMENTAL PAY: (Continued) NOTES TO FINANCIAL STATEMENTS JUNE As per Louisiana Revised Statute 33:2002, any full time, regular employee of the City fire department who is hired after March 31, 1986 and who has passed a certified firefighters' training program equal to the National Fire Protection Association Standard 1001 and who is paid three hundred dollars per month from public ftinds is eligible for supplemental pay. These fulltime employees are carried on the payroll paid from funds of the City obtained through lawfully adopted bond issues or lawfully assessed taxes, either directly or through a board or commission set up by law or ordinance. Employees employed by the fire department are not eligible for supplemental pay if they are presently drawing a retirement or disability pension, clerical employees and mechanics and for those employees who have not passed a certified firefighters' training program but are hired after March 31, State supplemental pay for firefighters' must be taken into account in calculating firefighters' holiday pay and overtime pay As per Louisiana Revised Statute 33:2219.2, any employee who devotes his or her full working time to law enforcement and who is hired after March 31,1986 and who has completed a council certified training program as provided in Louisiana Revised Statute 40:2405 and is paid a salary of not less than three hundred fifty dollars per month shall be paid by the state extra compensation. A police officer entitled to additional pay out of state funds includes any person employed on a fulltime basis who works as a duly commissioned law enforcement officer for the performance of primary duties which encompass the enforcement of state laws, supervisory police work, provides necessary services to the officers, desk sergeant or identification technician or a fulltime radio dispatcher. Any person who received additional pay out of state funds shall continue to receive said additional state pay during any period of disability resulting from any injury sustained in the line of duty. The additional pay out of state funds shall continue to be paid to such person until the time that said person is determined to be permanently disabled and no longer able to return to work. As of June 30, 2007, the City has recognized $518,976 in revenues (intergovernmental) and expenditures (public safety) that the State of Louisiana has paid directly to the City's employees. 16. LITIGATION AND CLAIMS: At June 30, 2007, the City is a defendant in several lawsuits seeking damages. Possible liabilities arising from these claims and legal actions are immaterial and will not have a significant effect on the financial statements. 17. LEASES: The City of Hammond entered into an operating lease agreement for the lease of land. The lease term is for five years with an option to renew for three fiveyear periods beginning March The monthly rent beginning March 2003 was $1,711, with an annual adjustment in accordance with the Consumer Price Index, All Urban Consumers. Rent income for the year ending June 30, 2007 was $23,048.

63 PAGE 58 NOTES TO FINANCIAL STATEMENTS JUNE NOTES RECEIVABLE: Governmental Funds General Fund The City of Hammond entered into a fifteen year promissory note with a partnership to assist in the renovation of a building. The value of the note is $180,000 with an annual interest rate of 6.42%. The collateral received on the note is the renovated building. Annual payments are due to the City only to the extent that the partnership has "cash flow" as defined in the note. If "cash flow" is less than the amount of the annual installment, the amount of unpaid interest and principal is deferred, due and payable in The partnership has not made any payments as of June 30,2007. The amount due over the next five years and beyond is as follows: June Thereafter TOTAL Amount Due $ 12,000 12,000 12,000 12,000 12, Other Governmental Funds The City received federal funds to enter into low interest loans with various businesses throughout the city. The terms of the loans range from five to ten years with interest rates ranging from 1.5% to 8.25%. As the loans are paid off, the City enters into other low interest loans with businesses in the city. All loans are secured with property, inventory, land or certificates of deposit. The amount due to the City over the next five years and beyond is as follows: June Thereafter TOTAL Amount Due $ 22,440 20,629 21,618 22,674 19,118 58,609

64 PAGE 59 NOTES TO FINANCIAL STATEMENTS JUNE 30, COMMITMENTS: The City of Hammond has entered into various construction contracts. The original amount of the contracts was $11,848,703, of which $8,093,553 has been expended as of June 30, PRIOR PERIOD ADJUSTMENT: For the year ended June 30,2006 sanitation service expense in the amount of $137,880 was understated. To correct the understatement, the beginning net assets as previously stated has been decreased by $137,880. Net assets of the component units have been restated as of July 1,2006 due to an adjustment of prior year accounts payable. The effect of the adjustment was a decrease of $2,118 in accounts payable and net assets.

65 REQUIRED SUPPLEMENTARY INFORMATION

66 PAGE 60 SUPPLEMENTARY INFORMATION GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2007 REVENUES: Taxes Licenses and permits Fines and forfeitures Public safety: police Public safety: fire Sanitation service fees Cemeteries and municipal grounds Highway and street State grants Parks and recreation Interest State supplemental pay Gaming revenues Miscellaneous Total revenues EXPENDITURES: General government Public safety: Police Fire Buildings Highways and streets Cemeteries and municipal grounds Sanitation Parks and recreation Capital outlay Airport Total expenditures EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Operating transfers in Operating transfers out Proceeds from sale of capital assets Total other financing sources (uses) EXCESS (DEFICIENCY) OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCE: Beginning of year End of year Budgeted Amounts Original 3,604,000! S 3,704,000 1,370,000 1,680, , ,750 27,500 27, , , , ,000 50,000 50,000 19,000 19, ,450 40, , ,500 7,416,200 3,816,367 6,663,370 4,129,418 1,411,497 1,909, , , , , ,050 21,019,252 (13,603,052) 13,736,052 (1,099,600) 12,636,452 (966,600) Final 104,450 40, , , ,500 8,561,200 4,019,571 6,667,394 4,129,903 1,406,017 1,910, , , , , ,719 21,243,348 (12,682,148) 13,409,905 (1,099,600) 12,310,305 (371,843) 2,378,375 2,378,375 1,411,775 1> 2,006,532 Actual Variance with Final Budget Favorable (Unfavorable) 3,540,133 $ (163,867) 1,827, , ,044 (11,706) 44,966 17, ,800 21, ,051 7,051 90,575 40,575 19, ,668 34, ,503 (2,947) 95,417 55, ,976 (95,024) 468,325 (21,675) 220,606 23,106 8,613,451 52,251 3,846, ,727 6,464, ,850 4,177,814 (47,911) 1,245, ,444 1,844,424 65, ,920 70, ,760 (45,760) 707,619 73, ,094 35, ,894 88,825 20,467, ,862 (11,854,035) (828,113) 13,448,821 38,916 (786,804) 312,796 12,662,017" 351,712" 807,982 1,179,825 2,378,375 _ $ 3,186,357 $ 1,179,825

67 PAGE 61 SUPPLEMENTARY INFORMATION SPECIAL REVENUE FUND SALES TAX FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET (GAAP BASIS) AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2007 REVENUES: Sales and use tax State grant Interest Total revenues Budgeted Amounts Original 15,600,000 80,000 15,680,000 Final $ 15,100,000 80,000 15,180,000 Actual $ 15,342,298 20,057 74,907 15,437,262 Variance with Final Budget Favorable (Unfavorable") $ 242,298 20,057 (5,093) 257,262 EXPENDITURES: General government Fire Department Highways and streets Cemeteries and municipal grounds Buildings Airport Parks and recreation Capital outlay Total expenditures 20,000 35, , ,000 20, , ,259 1,824, ,863 35,000 30, , ,000 20, , ,499 1,942, ,686 16,864 88, , ,841 1,309,518 30,177 35,000 30,000 98, ,378 20, ,354 (133,342) 632,787 Excess revenues over expenditures 13,855,741 13,237,695 14,127, ,049 OTHER FINANCING SOURCES (USES): Operating transfer in Operating transfer out Total other financing sources (uses) (17,186,052) (17,186,052) 50,000 (17,401,471) (17,351,471) 50,000 (18,525,545) (18,475,545) (1,124,074) (1,124,074) Excess (deficiency) of revenues and other sources over expenditures and other uses (3,330,311) (4,113,776) (4,347,801) (234,025) Fund balance, beginning of year 5,077,691 5,077,691 5,077,691 _ FUND BALANCE, END OF YEAR 1,747,380 $ 963,915 $ 729,890 $ (234,025)

68 OTHER SUPPLEMENTARY INFORMATION

69 PAGE 62 SUPPLEMENTARY INFORMATION COMPENSATION PAID MAYOR AND CITY COUNCIL MEMBERS FOR THE YEAR ENDED JUNE 30, 2007 Name Mayson Foster Curtis Wilson Johnny Blount Anthony Licciardi Jason Hood Willie Jackson Kathy Montecino Nicholas Muscarello Michael Williams Title Mayor City Council District 1 City Council District 1 City Council District 2 City Council District 2 City Council Districts City Council District 4 City Council Districts City Council District 5 Amount $ 75,500 3,600 6,000 3,600 6,000 9,600 9,600 3,600 6,000 The schedule of compensation paid to the Mayor and City Council members was prepared in compliance with the Hammond City Charter, Section 204 Compensation. According to the City Charter, the compensation for Council members was $600 per month through December 2006, and was increased to $1,000 per month as of January New council members were elected and took office in January The council members for districts 3 and 4 were reelected. The salary of the Mayor of the City shall be $75,500 per annum.

70 MICHAEL J. O'ROURKE, C.P.A. WILLIAM G. STAMM, C.P.A. CLIFFORD J. GIFFIN, JR, C.P.A. DAVID A. BURGARD, C.P.A. LINDSAV J. CALUB, C.P.A., L.L.C. GUY L. DUPLANTIER, C.P.A. MICHELLE H. CUNNINGHAM, C.P.A DENNIS W. DILLON, C.P.A. ANN H. HEBERT, C.P.A. ROBIN A. STROHMEYER, C.P.A. GRADY C. LLOYD, III, C.PA. HENRY L. SILVIA, C.P.A. hi nduplantier, HRAPMANN. HOGAN & MAHER, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS 1340 Poydras St., Suite 2000 New Orleans, LA (504) FAX (504) AJ. DUPLANTIER JR. C.P.A. (19191M5) FELIX J. HRAPMANN, JR, C.P.A. ( ) WILLIAM R. HOGAN, JR. C.P.A. ( ) JAM ES MAKER, JR, C.P.A. ( ) MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOCIETY OF LA C.P.A.'S KENNETH J. BROOKS, C.P.A., ASSOCIATE 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 Mayson Foster, Mayor and Members of the City Council City of Hammond, Louisiana November 25, 2007 We have audited the financial statements of the governmental activities, the businesstype activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the City of Hammond, Louisiana (the City) as of and for the year ended June 30, 2007, which collectively comprise the City of Hammond's basic financial statements and have issued our report thereon dated November 25, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control.

71 PAGE 64 A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we noted other instances of deficiencies in internal control that we have reported to the management of City of Hammond, Louisiana in a separate letter dated November 25, 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 grant agreements, 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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as items 0701, 0702 and The City's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit City's response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of the Mayor, members of the City Council, management of the City of Hammond, the Legislative Auditor for the State of Louisiana and federal awarding agencies and passthrough entities and is not intended to be and should not be used by anyone other than these specified parties. Under the Louisiana Revised Statute 24:513, this report is distributed by the Legislative Auditor as a public document., 3btapmann, < MaA&t, 3*

72 nduplan MICHAEL J. O'ROURKE, C.P.A. WILLIAM G. STAMM, C.P.A. CLIFFORD J. GIFFIN, JR, C.P.A. DAVID A. BURGARD, C.P.A. LINDSAY J. CALUB, CP.A, L.L.C. GUY L. DUPLANTIER, C.P.A. MICHELLE H. CUNNINGHAM, C.P.A DENNIS W. DILLON, C.P.A. ANN H. HEBERT, C.P.A. ROBIN A. STROHMEYER, C.P.A. GRADY C. LLOYD, III, C.P.A. HENRY L. SILVIA, C.P.A. n TIER, HRAPMANN. HOGAN & MAHER, L.L.P. CERTIFIED PUBLIC ACCOUNTANTS Qt M., iultc Quite ZUUU 900O INCW NPW (504) FAX (504) V, ' 1 A LA. IVi 1Z A J. DUPLANT1ER JR, C.P.A. ( ) FELIX J. HRAPMANN, JR, C.P.A. ( ) WILLIAM R. HOGAN, JR. C.P.A. ( ) JAMES MAHER, JR, C.P.A. fl MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOCIETY OF LA C.P.A.'S KENNETH J. BROOKS, C.P.A., ASSOCIATE REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A 133 To the Honorable Mayson Foster, Mayor and Members of the City Council City of Hammond, Louisiana November 25, 2007 Compliance We have audited the compliance of the City of Hammond, Louisiana (the City), with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, The City's major federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion on the City's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A133, Audits of States, Local Governments, and NonProfit Organizations. Those standards and OMB Circular A133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance with those requirements.

73 PAGE 66 In our opinion, the City of Hammond, Louisiana, complied in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, Internal Control Over Compliance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the Mayor, members of the City Council, management of the City of Hammond, the Legislative Auditor for the State of Louisiana and federal awarding agencies and passthrough entities and is not intended to be and should not be used by anyone other than these specified parties. Under the Louisiana Revised Statute 24:513, this report is distributed by the Legislative Auditor as a public document. ivi, Miapmann,, 3*

74 PAGE 67 Federal CFDA Number Grant Number SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE MAJOR FEDERAL AWARDS Expenditures Received directly from the federal government: Department of Transportation Airport Improvement Program $ 950,857 TOTAL MAJOR PROGRAM EXPENDITURES 950,857 Received directly from the federal government: NONMAJOR FEDERAL AWARDS Department of Commerce CFMS FG LBBX BUBX DJBX DJBX0582 Public Works and Economic Development Facilities Program Department of Homeland Security Assistance to Firefighters Grant Program Department of Justice Local Law Enforcement Block Grants Program Bulletproof Vest Partnership Program Edward Byrne Memorial Justice Assistance Grant Program Edward Byrne Memorial Justice Assistance Grant Program Total Department of Justice 12,053 5, ,230 8,306 18,128 41, X Environmental Protection Agency Surveys, Studies, Investigations & Special Purpose Grants Program Total nonmajor federal awards received directly from the Federal Government $,000 66,413

75 PAGE 68 Federal CFDA Number Grant Number SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2006 Expenditures Passed through the State of Louisiana: Department of Homeland Security GET60069 Homeland Security Grant Program 6,990 Department of Housing & Urban Development CFMS # CFMS# CFMS # CFMS # Community Development Block Grant Emergency Shelter Grants Program Emergency Shelter Grants Program Emergency Shelter Grants Program 64,500 2,485 13,636 6,672 Total Department of Housing & Urban Development 87,293 Department of Culture, Recreation & Tourism HP Historic Preservation Fund Grants in Aid Martin Luther King Park Improvement Grant 2,250 45,351 Total Department of Culture, Recreation & Tourism 47,601 Department of Justice B B A A J B Byrne Formula Grant Program Byrne Formula Grant Program Juvenile Accountability Incentive Block Grants Juvenile Accountability Incentive Block Grants In Home Detention Grant Byrne Formula Grant Program 18,830 4,211 10,000 2,500 6,450 2,097 Total Department of Justice 44,088 Department of Transportation PT PT PT State and Community Highway Safety State and Community Highway Safety State and Community Highway Safety Total Department of Transportation Total nonmajor federal awards passed through the State of Louisiana TOTAL NONMAJOR FEDERAL AWARDS EXPENDITURES 7,012 4,429 40,145 51, , ,971 TOTAL FEDERAL PROGRAM EXPENDITURES $

76 PAGE 69 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Schedule of Expenditures of Federal Awards of the City of Hammond has been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental units. Expenditures are recognized when incurred. DETERMINATION OF TYPE A AND B PROGRAMS: Federal awards programs are classified as either Type A or Type B programs. For the period ending June 30, 2007, Type A programs consist of the federal programs that expended over $300,000 and Type B programs are the programs that expended under $300,000.

77 PAGE 70 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE SUMMARY OF AUDITOR'S RESULTS: 1. The opinion issued on the financial statements of the City of Hammond for the year ended June 30, 2007 was unqualified. 2. The audit disclosed no instances of noncompliance, which were material to the financial statements of the City of Hammond. 3. An unqualified opinion was issued on compliance for major programs of the City of Hammond for the year ended June 30, City of Hammond had one major program as follows: U.S. Department of Transportation Airport Improvements Program 5. Type A programs are those programs with Federal awards expended during the current year ended June 30, 2007 exceeding $300, City of Hammond qualified as a lowrisk auditee. 7. Finding Required To Be Reported Under Generally Accepted Government Auditing Standards: Compliance: (0701) During the audit it was discovered that eight governmental funds have beginning fund balances with a variance of more than 5% of the budgeted beginning balance. The Louisiana Budget Act requires that actual beginning fund balances have a variance of less than 5% when compared to the budgeted beginning fund balances. Not amending budgeted beginning fund balances to fall within the 5% range is a violation of the Louisiana Budget Act. We recommend that the budget be reviewed periodically and amended when required by law. (0702) During the audit it was discovered that in two funds, actual revenues fell below budgeted revenues by more than 5%, and, in two funds, actual expenditures exceeded budgeted amounts by more than 5%. The Louisiana Budget Act requires that the budget be amended when revenues and expenditures vary by more than 5% from the budgeted amount. Not amending the budget when revenues fall below 5% or expenditures exceed 5% of budgeted amounts is a violation of the Louisiana Budget Act. We recommend that the budget be reviewed periodically and amended when required by law.

78 PAGE 71 Other Matters: (0703) During the audit it was discovered that the City did not iund administrative costs and deductible payments for their self insured health plan. The City should iund their self insured health plan to ensure payment of benefits. Not funding the plan resulted in a deficit fund balance. We recommend that the City fund the self insured health plan in order to meet future needs in administrative costs and deductible payments and to eliminate the deficit fund balance. 8. Finding Required To Be Reported Under OMB Circular A133: None 9. Management Letter Comments: Internal Control: (0704) While conducting cash receipts testing, twenty instances were noted in which signatures were not included on the cash receipts bag, one instance in which the supervisor's signature was not included on the teller summary report, and thirteen instances in which a signature was not included on the cash receipts journal attached to the deposit. The City's internal control procedures require a signature on the cash receipts bag, a supervisor's signature on the teller summary report, and a signature on the cash receipts journal. Failure to follow these procedures results in an internal control deficiency. We recommend that the City follow the internal control procedures to ensure that proper documentation is made on all cash receipt transactions. (0705) During the audit it was noted that the general government depreciation schedule is not correctly rolling forward accumulated depreciation. The depreciation schedule should correctly calculate accumulated depreciation. When the accumulated depreciation schedule does not roll forward it could result in a misstatement of net capital assets. We recommend that the City correct the depreciation schedule so that accumulated depreciation is stated correctly. (0706) During the audit it was noted that the expenses per the project budget reports did not agree to the amount of additions to construction in progress recorded in the general ledger. The expenses per the project budget reports should agree to the additions to construction in progress on the general ledger. Not agreeing the project budget reports to the construction in progress additions could result in a misstatement of additions to construction in progress. We recommend that the City reconcile the project budget reports to the amounts recorded as additions to construction in progress on the general ledger.

79 PAGE 72 STATUS OF PRIOR YEAR COMMENTS: 1. During the prior year audit it was discovered that the water and sewer department's aged accounts receivable subsidiary ledger does not agree with the general ledger. The aged accounts receivable ledger should agree with the general ledger. Not having the aged accounts receivable subsidiary ledger agree with the general ledger could result in misstating receivables and income. We recommended the City produce an aged accounts receivable that agrees to the general ledger. This finding has been resolved for the year ended June 30, The Schedule of Federal Awards provided to us was difficult and time consuming to verify its accuracy. The original schedule was revised several times. In addition, the schedule included all expenditures of the project although only a portion was to be reimbursed by a federal grant. As such the schedule of expenditures was grossly overstated. The Schedule of Federal Awards should only include expenditures which will be reimbursed by a federal grant. Including additional expenditures results in an overstatement of the schedule. We recommended that the City review the schedule for accuracy. This finding has been resolved for the year ended June 30, During the prior year audit while testing the City's compliance with the Louisiana Budget Act, it was determined that the City did not amend its budget when expenditures and other uses exceeded 5% of budgeted amounts. Not amending the budget results in noncompliance with the Budget Act. We recommended the City review its budget periodically and amend it when required by law. This comment is repeated through current year finding #2.

80 DEG FRI 10:16 AM CH, of H.«nd. FAX NO P 02 December 26, 2007 Mayson H. Foster Mayor Mr. Steve J. Theriot, CPA Louisiana Legislative Auditor 1600 N. Third Street Baton Rouge, LA DearMr. Theriot:. '.. This letter..ia. sublettedinresponse to the findings noted by our auditors Duplantier, ftr^maim,. Hog^ the City of Hammond's pidit for the fiscal period : My 1,2006through June 30, ' '. COMPLIANCE: '.. :.. 'V. ' ' '.. ; ' ' ' '. ''. _' ' 'During the audit it Was discovered that;eight governmental fluids,had beginning fund balances with a variance of more than 5% of the budgeted beginning balance. The Louisiana, Budget Apt'requires that actual beginning fund balances have a variance of less than 5% when compared to the budgeted beginning fund balances. Not amending the budgeted beginning ftrnd balances' to' fall within the 5% range ia a violation of the Louisiana Budget Act, We recommend that the budget be reviewed pieriodically and amended wh«irequiredby law., ; Response:... ' ' '.. ' ; '.. ' ;.. Generally we have amended the budget at the end. of the fiioal period when the revenues were leas than 5% of the budgeted revenue land when the encpenditwres were in excess.of 5% of budgeted expenditures. We will incorporate the amendment of'the beginning fund balances into our review procedures immediately for ensure compliance with the Louisiana '... Budget Act ' /.." ; '. ' * '. ' 0702 During,the audit it was discovered that, in two funds, actual revenues fell below budgeted revenues by more than 5%, and, in two fiinds,.actual expenditures exceeded budgeted amounts by more than 5%.' The Louisiana Budget Act requires that the budget be amended when revenues and expenditures vary by_more.than 5% flom the budgeted amount. Not amending the budget when revenues fall bolow 5% or expenditures Exceed Council; Johnny Bloum Disrrkl 1 * Jason Houd Diblricf 2 Willie ti. Jackson Dtsiricr 3 «KiHhy Monicclno Difitrki 4 Mike WilKanw Pisirici 5 HO. Box 27Hfl * Hnmniond, M ro 0^278B «(9a5) M23400 Fttx

81 DEC282QQ7 FRI 10'. 16 AM City of Hanond FAX NO P. 03 5% of budgeted amounts is a violation of the Louisiana Budget Act. We recommend that the budget be reviewed periodically and amended when required by law Response: Generally we have amended the budget at the end of the fiscal period when the revenues were less than 5% of the budgeted revenue and wnen the expenditures were in excess of 5% of budgeted expenditures. We did amend several funds for the fiscal period as required by the Louisiana Budget Act, however we missed the Police Millage Fund and tfre Hazardous Material Fund regarding the revenue requirement Similarly, the Fire Millage Fund and Court Witness Fee Funds were not amended as required. We will review all major and minor funds to ensure compliance During the audit it was discovered that the City did not fund administrative costs and deductible payments for their self insured health plan. The City should fund their self insured health plan to ensure payment of benefits. Not funding the plan.rosulted in a deficit fund balance. We recommend that the City fund their health plan in order to meet future needs in administrative cost and deductible payments and to eliminate the deficit fund balance. Responsq: This was the City's initial year of this new health plan. The initial administrative cost was posted in the fiscal period. In addition, we estimated the amount of deductible payments of the two remaining months of the fiscal period while budgeting the remaining ten months of plan expenditures in the fiscal We will budget and fund the plan as required in the future. < INTERNAL CONTROL; Receivable: 0704 While conducting cash receipts testing, twenty instances were noted in which signatures were not included on the cash receipt bag, one instance in which, the supervisor's signature was not included on the teller summary report, and thirteen instances in which a signature was not included on the cash receipts journal attached to the deposit. The City's internal contra] procedures require a signature on the cash receipts bag» a supervisor's signature on the teller summary report, and a signature on the cash receipts journal. Failure to follow these procedures results in an internal control deficiency. We recommend that the City follow the internal control procedures to ensure that proper documentation is made on all cash receipt transactions: ~ 2

82 DEC FRI 10:16 AM City of Hammond FAX NO P. 04 Response: We have reviewed the comments and have tarted the items mentioned and we we in agreement with the findings. Starting immediately,.the Accounting Supervisor and Senior Accountant will ensure that all required signatures are made in accordance with the City's policies and procedures. A change in personnel may have increased the level of these exceptions, however more support and training from the Accounting Team Leaders is needed to ensure, compliance. We.will also schedule random testa in an effort to resolve any exceptions timely/ ' Accumulate peoreciation: 0705 During the audit it was noted that the general government depreciation schedule is not correctly rolling forward accumulated depreciation. The depreciation schedule should correctly calculate accumulated depreciation. When the accumulated depreciation schedule does not roll forward it could result in a misstatement of the net capital assets. We recommend that the City correct the depreciation schedule so that accumulated depreciation is correctly stated. ' ' '. Response: The City of Hammond utilizes MUNIS by Tyler Technologies Lie. We upgraded from Version 4.1 to Versions 6.2d ( ) and several of the 'components that were working properly have now become areas of concern for the City. We are working closely toe representatives of Tyler Technologies (MUNIS) to resolve these issues. We have contacted MUNIS and they are working to correct this problem. Construction in Progress: 0706 During the audit it was noted that the expenses per the project budget reports did not agree to the amount of additions to the construction in progress recorded in the general ledger. The expense per the project reports should agree to the addition* to construction in progress on the general ledger. Not agreeing the project budget reports to the construction in progress additions could result in a misstatement of additions to construction in progress. We recommend that the City reconcile the project budget reports to the amounts recorded as additions to construction in progress on the general ledger. Response: The Finance Director and Accounting Supervisor will review the monthly reconciliation prepared by the Grants and Projects Accountant to ensure the. detection and correction of exceptions in a timely manner.

83 DEC282Q07 FRI 10:16 AM City of Hanmond FAX NO P. 05 Please contact me with any questions or requests for additional information you may have at (985) or by at francib_kpiaminond.org. Sincerely, Larry Frauds, Sr. Finance Director Cc: Mayson H. Foster* Mayor Don Holtgren, City Administrator Michelle Cunningham, CPA DHHM File 4

84 DUPLANTIER, HRAPMANN, HOGAN & MAHER, L.L.P. MICHAEL J OROURKE, CRA. WILLIAM C.STAMM,CPA. CLIFFORD J. G1FF1N, JR«CRA. DAVID A. BURGARD, CRA. LINDSAY J. CALUB, CRA., LL.C GUY L. DUTLANTIER, CRA, MICHELLE :i CUNNINGHAM, CRA. DENNIS W. DILLON, CP.A. ANN R HfiMEKT, CP.A. ROBIN A. STROHMEYER, CP.A. GRADYC ILOYD, III, CP.A. HENRY L. SILVIA, CJ.A. KENNETH J BROOKS, CJA., ASSOCIATE CERTIFIED PUBLIC ACCOUNTANTS 1340 Poydras St., Suite 2000 New Orleans, LA (504) FAX (504) A J. DUPLANTIER, JR, CP.A. ( ) FELIX J. HRAPMANN, Jfc, CRA. ( ) WILLIAM R. HOGAN, JR., CRA. JAMES MAHER, JR., CRA. a ) MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOCIETY OF LA. CRA.S November 25,2007 Honorable Mayson Foster, Mayor Ard Members of the Council City of Hammond, Louisiana In planning and performing our audit of the financial statements of the City of Hammond, Louisiana as of and for the year ended June 30, 2007, in accordance with auditing standards generally accepted in the United States of America, we considered the City of Hammond, Louisiana's internal control over financial reporting (Internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion of the effectiveness of the City of Hammond, Louisiana's internal control. Accordingly, we do not express an opinion on the effectiveness of the City's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We noted no matters involving the internal control and its operation that we consider to be a material weakness. However, during our audit we noted internal control matters that are an opportunity for strengthening internal controls and operating efficiency which we felt should be presented to management. Receivables: While conducting cash receipts testing, twenty instances were noted in which signatures were not included on the cash receipts bag, one instance in which the supervisor's signature was not included on the teller summary report, and thirteen instances in which a signature was not included on the cash receipts journal attached to the deposit. The City's internal control procedures require a signature on the cash receipts bag, a supervisor's signature on the teller summary report, and a signature on the cash receipts journal. Failure to follow these procedures results in an internal control deficiency. We recommend that the City follow the internal control procedures to ensure that proper documentation is made on all cash receipt transactions.

85 Honorable Mayson Foster, Mayor And Members of the Council 2 November 25, 2007 Accumulated Depreciation: During the audit it was noted that the general government depreciation schedule is not correctly rolling forward accumulated depreciation. The depreciation schedule should correctly calculate accumulated depreciation. When the accumulated depreciation schedule does not roll forward it could result in a misstatement of net capital assets. We recommend that the City correct the depreciation schedule so that accumulated depreciation is stated correctly. Construction in Progress: During the audit it was noted that the expenses per the project budget reports did not agree to the amount of additions to construction in progress recorded in the general ledger. The expenses per the project budget reports should agree to the additions to construction in progress on the general ledger. Nor agreeing the project budget reports to the construction in progress additions could result in a misstatement of additions to construction in progress. We recommend that the City reconcile the project budget reports to the amounts recorded as additions to construction in progress on the general ledger. This communication is intended solely for the information and use of the Mayor and Council of the City of Hammond and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, DUPLANTIER, HRAPMANN, HOGAN & MAKER, LLP MHC/fk Michelle H. Cunning Partner