THE TOWN OF LAKE VIEW LAKE VIEW, ALABAMA ANNUAL REPORT SEPTEMBER 30, 2014 DON WALLACE, CPA, PC CERTIFIED PUBLIC ACCOUNTANT NORTHPORT, ALABAMA

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1 THE TOWN OF LAKE VIEW LAKE VIEW, ALABAMA ANNUAL REPORT SEPTEMBER 30, 2014 DON WALLACE, CPA, PC CERTIFIED PUBLIC ACCOUNTANT NORTHPORT, ALABAMA

2 Annual Report September 30, 2014 Table of Contents DESCRIPTION PAGE Independent Auditor s Report Independent Auditor s Report on Compliance and Internal Control Management s Discussion & Analysis. 5-8 Financial Statements Statement of Net Assets. 10 Statement of Activities Governmental Funds- Balance Sheet. 13 Governmental Funds- Statement of Revenues, Expenditures & Change in Fund Balance Reconciliation of the Statement of Revenues, Expenditures & Change in Fund Balance to the Statement of Activities.. 15 Notes to the Financial Statements Required Supplementary Information General Fund- Budgeted Schedule of Revenues and Disbursements Required Supplementary Information Nonmajor Governmental Funds- Combining Balance Sheet.. 27 Nonmajor Governmental Funds- Combining Statement of Revenues, Expenditures & Change in Fund Balance

3 DON WALLACE, CPA, PC 527 MAIN AVENUE, SUITE G NORTHPORT, AL (205) November 11, 2014 INDEPENDENT AUDITOR S REPORT Honorable Mayor Bruce Wade & Members of the Town Council Town of Lake View, Alabama I have audited the accompanying basic financial statements of governmental activities, each major fund, and the aggregate remaining fund information of the Town of Lake View, Alabama, as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the Town s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility My responsibility is to express opinions on these financial statements based on the audit. I conducted the audit in accordance with auditing standards generally accepted in the United States of America,and the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinions. Page 1

4 Opinions In my opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Lake View, Alabama, as of September 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information According principles generally accepted in the United States of America require that the management s discussion and analysis on pages 5-8 and Budget Comparison Schedules be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. I have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge I obtained during the audit of the basic financial statements. I do not express an opinion or provide any assurance on the information because the limited procedures do not provide me with sufficient evidence to express an opinion or provide any assurance. Other Information The audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In my opinion, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, I have also issued my report dated November 11, 2014, on my consideration of the Town s internal control over financial reporting and on tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town s internal control over financial reporting and compliance. Don Wallace, CPA Page 2

5 DON WALLACE, CPA, PC 527 MAIN AVENUE, SUITE G NORTHPORT, ALABAMA November 11, 2014 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor Bruce Wade & Members of the Town Council Town of Lake View, Alabama I have audited, in accordance with the 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, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town, as of and for the year ended September 30, 2014, and the related notes to the financial statements, which collectively comprise the Town s financial statements and have issued our report thereon dated November 11, Internal Control over Financial Reporting In planning and performing my audit, I considered the Town of Lake View s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing my opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town s internal control. Accordingly, I do not express an opinion on the effectiveness of the Town s internal control. A deficiency in internal control 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 and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. My consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during the audit I did not identify any deficiencies in internal control that we consider to be material weaknesses. However, I noted other matters involving internal control that were reported to management of the Town of Lake View in a separate letter dated November 11, Page 3

6 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Lake View s financial statements are free from material misstatement, I 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 my audit and, accordingly, I do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. However, certain immaterial instances of noncompliance were reported to the management of the Town of Lake View, in a separate letter dated November 11, Purpose of this Report The purpose of this report is solely to describe the scope of my testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Governmental Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Don Wallace, CPA, PC MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ALABAMA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS Page 4

7 Annual Report September 30, 2014 Management s Discussion & Analysis This section of the Town of Lake View s annual financial report presents our discussion and analysis of the Town s financial performance during the fiscal year that ended September 30, Please read it in conjunction with the Town s financial statements, which follow this section. FINANCIAL HIGHLIGHTS The Town s total net assets increased slightly by $96,245 to $1,584,459. Overall revenues increased 12% to $427,289. Sales tax revenue and licenses increased 15%, respectively, to $57,709 and $115,712. Total bank balances increased slightly to $469,616. Total outstanding debt was $14,606. Building permit revenue increased significantly with the addition of new areas into the Town. No capitalized assets were recognized during the year, while depreciation on existing town assets totaled $41,611. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of four parts Management s Discussion and Analysis, Basic Financial Statements, Required Supplementary Information, and Combining Statements for nonmajor governmental funds. The Basic Financial Statements include two types of statements that present different views of the town: The first two statements are government-wide, which provide short and long-term information about the Town s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the government, reporting operations in more detail than the government-wide statements. The financial statements also include Notes that explain some of the information in the report and provide further detailed data. Required Supplementary Information includes a budgetary analysis that also explains information in the statements. Government-Wide Financial Statements Fund Financial Statements Report information about the Town as a whole, using methods similar to those of private-sector companies. Report Net Assets the difference between Assets and Liabilities as one way to measure financial health. Provide more detail about the most significant funds, not the Town as a whole. Funds track specific sources of funding. Some are required by law, others by bond covenants or resolution. Page 5

8 Annual Report September 30, 2014 Management s Discussion & Analysis Lake View s governmental funds and activities reflected in its financial statements, which account for the Town s basic services, include police and court, street, and administrative activities. Sales Taxes, Privilege Licenses, and Intergovernmental revenues financed most of these activities. FINANCIAL ANALYSIS OF THE TOWN AS A WHOLE A comparison of the Town s net assets is shown below: Governmental Activities 9/30/2013 9/30/2014 Assets Current $ 456,750 $ 586,620 Capital 1,072,843 1,031,232 Total Assets 1,529,593 1,617,852 Liabilities Current 26,773 23,855 Long-Term Debt 14,606 9,538 Total Liabilities 41,379 33,393 Net Assets Invested in Capital Assets 1,050,243 1,016,626 Restricted 164, ,309 Unrestricted 273, ,524 Total Net Assets 1,488,214 1,584,459 Combined net assets of the Town increased $96,245 from $1,488,214 to 1,584,459. A total of $203,309 in net assets are restricted for street expenditures, capital improvements or court operations. Depreciation expense was $41,611. Governmental Activities Revenues 9/30/2013 9/30/2014 Taxes $ 123,213 $ 128,822 Licenses, Franchises & Permits 105, ,126 Intergovernmental 68,775 48,909 Fines 85,114 94,945 Other ,296 Total Revenues 382, ,098 Expenses Administration 158, ,511 Police 178, ,569 Municipal Court 34,355 18,172 Street 7,247 1,601 Sewer 3,479 0 Total Expenses 382, ,853 Change in Net Assets ,245 The Town s total combined revenues increased 12% to $432,098. Of the year s revenues, 29% came from taxes, 32% from licenses and permits, 21% from court fines and 10% from intergovernmental support. The total combined cost of programs decreased 12% to $335,853 compared to $382,357 in the prior year. Current year expenses included 43% for police and 50% for administrative activities, which continue to include significant legal services related to annexation and other matters. Page 6

9 Annual Report September 30, 2014 Management s Discussion & Analysis The Statement of Activities shows the financial burden that was placed upon the Town s taxpayers by each of those functions, and the amount of general revenues necessary to fund the net expenses of governmental programs. FINANCIAL ANALYSIS OF THE TOWN S FUNDS As the Town completed the year, the governmental funds reported a combined fund balance of $567,905. Included in the year s $129,934 increase in fund balance are $65,771 in property taxes, $141,126 in licenses, franchises and permits, and $94,945 in net court fines. Without those revenues, the Town s ability to provide services such as police, courts, streets and administration would not be easily achieved. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets. At the end of 2014, the Town had invested $1,031,232 in capital assets, including land, building, equipment and improvements net of accumulated depreciation. This total represents a decrease of $41,611 over the prior year. Capital Assets, net of depreciation 9/30/2013 9/30/2014 Governmental activities: Land $ 68,373 $ 68,373 Improvements to Land 969, ,773 Furniture & Equipment 35,160 25,086 Capital Assets, net $ 1,072,843 1,031,232 Debt. In July 2013, the Town took out a four year loan for $20,000 to pay for new police vehicles. At year end, the balance on the note was $14,606. BUDGET ANALYSIS A comparison of budget to actual results for the General Fund was as follows: Budget Actual General Fund Revenues and transfers $ 238,000 $ 385,785 Disbursements 214, ,503 Excess (Deficiency) 23,800 91,282 The Town budgeted very conservatively due to past problems with annexations, lawsuits and revenue shortfalls. During the year the General Fund experienced significant increases in revenues, partly as the result of new annexations into the Town. This allowed the Town to add more expenditures during the year, while still ending up with a significant surplus. No budgets were adopted for Nonmajor funds. Page 7

10 Annual Report September 30, 2014 Management s Discussion & Analysis ECONOMIC FACTORS The Town of Lake View is in a corridor between the metropolitan areas of Birmingham and Tuscaloosa, an area which includes the major automobile manufacturing facility of Mercedes Benz. This development has spawned a wave of development interest and speculation along the Interstate 20/59 corridor. The Town is adjacent to a new elementary school recently opened by the Tuscaloosa County Board of Education, which should spur development and continue to improve the quality of life of our citizens. Efforts are also underway to legislatively annex certain property into Lake View, including the Town s municipal complex which has been severed from the corporate limits by court action. An unfavorable court ruling returned the Town to its original boundaries, limiting its tax base until additional annexations can be redone. The legislative annexation effort is important to the Town s ability to serve the local school and its community. The Town of Lake View is a member of the West Alabama Regional Council. Population analysis for Lake View shows a population of 1,943 in This represents an increase of 44% during the past 10 years. The Town expects those population numbers to continue increasing in the coming years, which has spurred the need for sewer expansion and other services as discussed previously. CONTACTING THE TOWN S MANAGEMENT This financial report is designed to provide our citizens and taxpayers with a general overview of the Town s finances and to demonstrate the Town s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Town of Lake View, Town Clerk, Central Park Dr., Lake View, AL TOWN OFFICIALS AS OF SEPTEMBER 30, 2014 Mayor: Bruce Wade Town Clerk: Sharon Hayes Police Chief: Charles E. Frederick, Jr. Council: Vivian Holt Bean Shannon Phillips Michael Nichols Jimmie Ruth Thomas Leslyn Weathers Page 8

11 GOVERNMENT-WIDE FINANCIAL STATEMENTS The accompanying notes are integral to the financial statements. Page 9

12 Statement of Net Assets September 30, 2014 ASSETS Current assets: Cash $ 426,600 Cash, Court 43,016 Receivables, net: General 7,617 Court 103,455 Prepaid expenses 5, ,620 Capital assets: Nondepreciable 68,373 Depreciable, net 962,859 1,031,232 Total assets 1,617,852 LIABILITIES Current liabilities: Accounts payable 1,748 Payroll withholdings 3,569 Current portion of long-term debt 5,068 Accrued absences 7,680 Court payables 5,790 23,855 Long-term liabilities: Note payable, less current 9,538 Total liabilities 33,393 NET ASSETS Invested in capital assets, net of related debt 1,016,626 Restricted for: Capital projects 114,923 Road & bridge 73,878 Court 14,508 Unrestricted 364,524 Total net assets 1,584,459 The accompanying notes are integral to the financial statements. Page 10

13 Statement of Activities Year Ended September 30, 2014 Charges for Services Program Revenues Operating Grants & Contributions Capital Grants & Contributions Net Revenues (Deficiencies) Expenses FUNCTIONS/PROGRAMS Governmental activities: Administration $ 168,511 $ 0 $ 0 $ 0 $ -168,511 Police 147,569 76, ,477 Court 18,172 18, Street 1, , ,670 Total functions/programs 335,853 94,945 9, ,637 GENERAL REVENUES Taxation: Sales 57,709 Ad valorem 65,771 Tobacco & alcohol 5,342 Licenses & franchises 115,712 Building permits 25,414 Intergovernmental: Coal Severance Tax 13,000 State Grant 6,508 Other Governmental 1,073 Capital 19,057 Other 18,296 Total general revenues 327,882 Change in net assets 96,245 Net assets- Oct. 1, ,488,214 Net assets- Sept. 30, ,584,459 The accompanying notes are integral to the financial statements. Page 11

14 FUND FINANCIAL STATEMENTS The accompanying notes are integral to the financial statements. Page 12

15 Balance Sheet Governmental Funds September 30, 2014 General Capital Improvement Nonmajor Total Governmental ASSETS Cash $ 238,609 $ 114,923 $ 73,068 $ 426,600 Cash Court 28, ,508 43,016 Receivables, net: General 6, ,617 Court 103, ,455 Prepaid expenses 5, ,932 Total assets 383, ,923 88, ,620 LIABILITIES Accounts payable 1, ,748 Payroll withholdings 3, ,569 Court bonds/payables 5, ,790 Accrued absences 7, ,680 Total liabilities 18, ,715 FUND BALANCE Non-spendable 5, ,932 Restricted 0 114,923 88, ,309 Unrestricted: Unassigned 358, ,664 Total fund balance 364, ,923 88, ,905 Total liabilities & fund balance 383, ,923 88, ,620 The accompanying notes are integral to the financial statements. Page 13

16 Governmental Funds Statement of Revenues, Expenditures & Change in Fund Balance Year Ended September 30, 2014 REVENUES General Capital Improvement Nonmajor Total Governmental Taxes $ 128,822 $ 0 $ 0 $ 128,822 Licenses, franchise & permits 141, ,126 Intergovernmental 20,581 18,951 9,212 48,744 Fines & forfeitures 76, ,853 94,945 Other 18, ,533 Total revenues 384,989 19,057 28, ,170 EXPENDITURES Administration 136, ,588 Police 146, ,409 Court 9, ,733 17,638 Streets 1, ,601 Total expenditures 294, , ,236 Changes before transfers 90,486 19,057 20, ,934 Transfers Change in fund balance 91,282 19,057 19, ,934 Fund balance- Oct. 1, ,314 95,866 68, ,971 Fund balance- Sept. 30, , ,923 88, ,905 Reconciliation of fund balance to net assets: Fixed assets are capitalized and depreciated in the government-wide statements 1,031,232 Loan balances are reported as long-term debt in the government-wide statements -14,606 Net assets in the government-wide statements 1,584,459 The accompanying notes are integral to the financial statements. Page 14

17 Reconciliation of the Statement of Revenues, Expenditures & Change in Fund Balance to the Statement of Activities Year Ended September 30, 2014 Net changes in fund balances total governmental funds $ 129,934 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report payments on long-term debt as expenditures, rather than decreases in liabilities and interest expense in the Statement of Activities. This is the amount by which the incursion of long-term debt exceeded repayment. 7,994 Governmental funds report capital outlays as expenditures, rather than as depreciated in the Statement of Activities. This is the amount (less) by which depreciation exceeded capital outlays. -41,611 Other adjustment -72 Changes in net assets governmental activities 96,245 Reconciliation of Fund Disbursements to Program Expenses: Admin Police Court Street Sewer Total Disbursements 136, ,409 17,638 1, ,236 Add: Depreciation 31,923 9, ,611 Less: Debt Reduction 0-7, ,994 Less: Capital Outlays Program Expenses 168, ,569 18,172 1, ,853 The accompanying notes are integral to the financial statements. Page 15

18 Annual Report September 30, 2014 Notes to the Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Town complies with Generally Accepted Accounting Principles (GAAP). These principles include all relevant Governmental Accounting Standards Board (GASB) pronouncements. In the government-wide Statement of Net Assets and Statement of Activities, Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, have been applied unless they conflict with GASB pronouncements. 1.A. FINANCIAL REPORTING ENTITY The Town s financial reporting entity is comprised of the following in accordance with GASBS No. 14, The Financial Reporting Entity : Primary Government: Town of Lake View Blended Component Units: None Blended Component Units Blended component units are separate legal entities that meet the component unit criteria described above and whose governing body is the same or substantially the same as the Town Council or the component unit provides services entirely to the Town. These units are blended into those of the Town s by appropriate activity type to compromise the primary government presentation. The Governmental Utility Services Corporation of Lake View (GUSC) The GUSC was formed on June 22, 1999, to construct and develop sewer utility facilities to the Town and to serve users on an equal class basis within the Tuscaloosa, Bibb, and Jefferson County service area. A resolution of the Town of Lake View granted permission to organize the GUSC on June 14, The system will be operated by agreement with a private utility company, SERMA Holdings, LLC. By agreement, SERMA Holdings, LLC purchased the entire sanitary sewer system under terms of a thirty (30) year franchise agreement with the Town. At the end of the franchise term, the Town may renew and extend the franchise, or notify the provider that it desires to acquire the system at fair market value. Therefore, no assets or related liabilities for the system are shown on the Town s records. 1.B BASIS OF PRESENTATION Government-Wide Financial Statements The statement of net assets and statement of activities display information about the reporting government as a whole, except for fiduciary funds. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-exchange revenues. Businesstype activities are financed in whole or in part by fees charged to external parties for goods and services. Page 16

19 Annual Report September 30, 2014 Notes to the Financial Statements Fund Financial Statements Fund financial statements of the reporting entity are organized into funds, each of which are considered to be separate accounting entities. Each fund is accounted for by a separate set of selfbalancing accounts which constitute its assets, liabilities, fund equity, revenues and expenditures. Funds reporting for the Town consist of governmental funds only, with an emphasis placed on major funds. The funds of the Town are described below: Governmental Funds General Fund the primary operating fund of the Town and always classified as a major fund. It is used to account for all activities except those legally required to be accounted for in separate funds. Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditure for certain purposes. Major and Non-Major Funds Major: General Capital Improvement Brief Description See above for description Accounts for revenues from the State of Alabama Oil and Gas Windfall Trust funds and related expenditures for capital purposes. Special Revenue Funds: 4 & 5 Gas Tax Accounts for revenues from the State of Alabama 4% and 5% gas excise taxes and related expenditures for street improvements. 7 Gas Tax Accounts for revenues from the State of Alabama 7% gas excise tax and related expenditures for street repairs, maintenance and utilities. Corrections Accounts for special fines received from court cases that are restricted to funding the Town s municipal court activity. 1.C. MEASUREMENT FOCUS & BASIS OF ACCOUNTING Measurement focus is a term used to describe which transactions are recorded within the various financial statements. Basis of accounting refers to when transactions are recorded regardless of the measurement focus applied. Page 17

20 Annual Report September 30, 2014 Notes to the Financial Statements Measurement Focus On the government-wide Statement of Net Assets and the Statement of Activities both governmental and business-like activities are presented using the economic resources measurement focus as defined under Basis of Accounting below. In the fund financial statements, the current financial resources measurement focus or the economic resources measurement focus is used as appropriate: All governmental funds utilize a current financial resources measurement focus. Only current financial assets and liabilities are included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources in a given period. These funds use fund balance as their measure of resources. Basis of Accounting In the government-wide statements activities are presented using the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset is used. In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Expenditures (including capital outlays) are recorded when the related fund liability is incurred. 1.D. ASSETS, LIABILITIES & EQUITY Cash & Investments For the purpose of the Statement of Net Assets, cash includes all demand, savings, and certificates of deposit of the Town. Investments are carried at fair value, based on quoted market price. Depositories are participants in the SAFE Program. Interfund Receivables & Payables Those transactions that occur between individual funds that may result in amounts owed between funds are classified as due to and from other funds. Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of Net Assets. Equity Classifications Government-Wide Statements: Equity is classified as net assets and displayed in 3 components: a. Invested in capital assets, net of related debt. Page 18

21 Annual Report September 30, 2014 Notes to the Financial Statements b. Restricted net assets those with constraints placed on the use either by (1) external groups such as grantors, creditors, or laws and regulations, or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets all other net assets that do not meet the definition of restricted or invested in capital assets. Fund Statements: Governmental fund equity is classified as fund balance. Fund balance is further classified as Nonspendable, Restricted and Unrestricted in accordance with GASB 54. Unrestricted is further divided into Committed, Assigned and Unassigned per GASB 54. Proprietary fund equity is presented as retained earnings. 1.E. REVENUES, EXPENDITURES & EXPENSES Revenues Sales Tax The Town currently levies a two-cent sales tax on taxable sales in the town limits and a one-cent sales tax in the police jurisdiction. The tax is now being collected by the State of Alabama. Taxes collected in September, and not remitted to the Town until October are recorded as receivables on the balance sheet. Franchise Tax The Town levies a franchise tax on utility and cable service providers within its town limits, which is also collected by RDS. Expenditures In the government-wide statements, expenses are classified by function for governmental or business-type activities. In the fund financial statements, expenditures are classified by character (function, debt service or capital outlay) for governmental funds, and by Operating and Non-Operating for proprietary funds. NOTE 2: STEWARDSHIP, COMPLIANCE & ACCOUNTABILITY By its nature as a local government, the Town is subject to various federal, state and local laws and contractual regulations. An analysis of the Town s compliance with laws and demonstration of stewardship over resources is as follows: 2.A. FUND ACCOUNTING REQUIREMENTS The Town complies with all state and local laws requiring the use of separate funds, including the following: State Gasoline Excise Tax Funds Required by State of Alabama Capital Improvement Fund Required by State of Alabama Corrections Fund Required by State of Alabama Page 19

22 Annual Report September 30, 2014 Notes to the Financial Statements NOTE 3: DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS 3.A. CAPITAL ASSETS Schedule of Changes in Capital Assets Year Ended September 30, 2014 GOVERNMENTAL ACTIVITIES Oct. 1, 2013 Additions Disposals Sept. 30, 2014 Land 68, ,373 Buildings & improvements 1,170, ,170,921 Furniture & equipment 187, , ,804 Total, at historical cost 1,426, ,570 1,397,098 Accumulated depreciation: Buildings & improvements 201,611 31, ,148 Furniture & equipment 152,214 10,074 29, ,718 Total depreciation 353,825 41,611 29, ,866 Capital assets, net 1,072,843-41, ,031,232 Depreciation expense was charged to governmental activities as follows: Administration $ 31,923 Police 9,154 Court 534 Total depreciation expense 41,611 3.B. LONG-TERM DEBT At September 30, 2013, the Town had the following long-term debt: Note payable to First United Security Bank of Thomasville, Ala., secured by a police cars, interest rate of 1.86%, amortized through monthly payments ending July of 2017: $ 14,606 Less: Current Portion -5,068 Long-term Portion 9,538 Page 20

23 Annual Report September 30, 2014 Notes to the Financial Statements Long-term debt activity during the year was as follows: Long-term debt- 10/1/2013 $ 22,600 Less: Payments -7,994 Long-term debt- 9/30/ ,606 Future projected minimum payments of principal and interest are as follows: Fiscal Year Principal Interest Total $ 5,068 $ 228 $ 5, , , , ,413 TOTAL 14, ,005 NOTE 4: INSURANCE Insurance coverage for the fiscal year ended September 30, 2014, was reviewed with the Town Clerk and the agent handling the insurance for the Town of Lake View. The Town has maintained adequate coverage for all physical properties, as well as liability and employee s insurance coverage. NOTE 5: DEPOSITS WITH FINANCIAL INSTITUTIONS As of September 30, 2014, the Town had the following deposits with Financial Institutions: First United Security Bank: $469,516. First United Security is a participant in the Security for Alabama Funds Enhancement Program (SAFE). Under the SAFE program, funds in excess of $100,000 are collateralized by pledging securities directly to the State Treasurer for the SAFE collateral pool. Under Section 41-14A of the Code of Alabama, the institution is a Qualified Public Depository. This Program is mandatory for banks to hold public deposits. NOTE 6: BUDGETS & APPROPRIATIONS Under laws of the State of Alabama, the Town is not required to adopt a budget for all funds. Budgets have been adopted for the General Fund. Budgetary comparison schedules are presented in the Supplemental Section as Required Supplemental Information. The budgetary basis is the modified accrual basis for governmental funds and the accrual basis for proprietary funds. Budgets were not adopted for the Capital Improvement or Nonmajor Funds. Page 21

24 Annual Report September 30, 2014 Notes to the Financial Statements NOTE 7: RETIREMENT The Town does not participate in the Employee s Retirement System of Alabama, rather it has a separate deferred compensation plan with American Express Financial Services. Costs of the plan for eligible employees are included in gross payroll and funds are controlled by the employees in separate investment funds. The plan has been discontinued for future periods. NOTE 8: RECEIVABLES The Town had the following receivables as of September 30, 2014: General Receivables $ 6,806 Gas Taxes Receivable 810 Court Receivables 114,951 Allowance for Doubtful Accounts- Court -11,495 Total Receivables 111,072 Court Receivables are recorded of net of 50% estimated court costs and 10% estimated uncollectible. NOTE 9: PROPERTY TAX Property is assessed and property taxes are collected by Tuscaloosa County. Property is assessed and property taxes attach as an enforceable lien on property as of October 1of each fiscal year. The taxes are due and payable October 1 of the subsequent fiscal year and delinquent after January 1. Property tax revenues are accounted for using the modified accrual basis of accounting. Tax collections received by the county tax collectors are remitted to the Town on a monthly basis. All amounts remitted to the Town within the bill-paying period are included in revenue. Taxes collected by the county tax collectors within the fiscal year but remitted to the Town after the fiscal year-end are accrued. NOTE 10: ALLOCATION OF EXPENSES & SPENDING POLICY Expenditures in the General Fund for Payroll related costs and other expenses have been allocated based on a percentage of payroll for the respective departments or as distinguishable per the budget categories compared to general ledger totals. The Town does not have a spending policy in relation to use of restricted resources, however, state policies limit expenditures of various special revenue accounts which the Town uses in accordance with prescribed limitations on streets, capital improvements, etc. Page 22

25 REQUIRED SUPPLEMENTARY INFORMATION The accompanying notes are integral to the financial statements. Page 23

26 General Fund Budget Comparison Schedule Year Ended September 30, 2014 Budget Actual Variance Beginning Fund Balance $273,314 $273,314 $0 RESOURCES Revenues: Sales tax 45,000 57,709 12,709 Property tax 66,000 65, Tobacco & alcohol 6,000 5, Business licenses & franchises 86, ,712 29,712 Building permits 0 25,414 25,414 Coal severance 11,000 13,000 2,000 State assistance 0 6,508 6,508 Other intergovernmental 0 1,073 1,073 Fines & forfeitures 24,000 76,092 52,092 Accident reports Insurance proceeds 0 15,804 15,804 Other general revenues 0 2,069 2,069 Total Revenues 238, , ,989 Transfers from Other Funds Total Resources 238, , ,785 Amount Available for Appropriation 511, , ,785 CHARGES Expenditures: Administrative: Salaries & wages 23,532 21,497 2,035 Payroll taxes & benefits 3,307 2, Insurance 7,700 13,211-5,511 Travel & training 947 1, Professional Services: Legal 11,000 35,666-24,666 Professional Services: Collections 0 17,253-17,253 Professional Services: Other 4,000 4, Office supplies & postage 2,580 1, Utilities 8,400 8, Telephone 3,000 2,998 2 Computers & equipment 4,000 3, Maintenance 620 3,510-2,890 Other 2, ,333 Total Administrative 71, ,483-48,397 The accompanying notes are integral to the financial statements. Page 24

27 Budget Actual Variance Police: Salaries & wages 84,219 75,272 8,947 Payroll taxes & benefits 6,976 9,475-2,499 Insurance 7,000 13,212-6,212 Debt Service 8,317 8, Automobile expense 9,288 14,233 4,945 Travel & training Telephone 3,000 4,985-1,985 Repairs & maintenance 3,000 8,663-5,663 Prosecutor 3,000 7,050-4,050 Equipment & supplies 0 4,160-4,160 Miscellaneous Total Police 125, ,409-20,729 Municipal Court: Public Defender 0 2,880-2,880 Court supplies Bad Debt allowance 0 5,023-5,023 Bank fees 0 1,122-1,122 Total Municipal Court 0 9,905-9,905 Streets: Utilities & other 0 1,601-1,601 Building Department: Salary & taxes 17,434 14,635 2,799 Other expenses 0 2,470-2,470 Total Building Department 17,434 17, Total Expenditures 214, ,503-80,303 Transfers to Other Funds Total Charges to Appropriations 214, ,503-80,303 Ending Fund Balance 297, ,596 67,482 The accompanying notes are integral to the financial statements. Page 25

28 OTHER SUPPLEMENTARY INFORMATION The accompanying notes are integral to the financial statements. Page 26

29 Nonmajor Governmental Funds Combining Balance Sheet September 30, & 5 Gas Tax 7 Gas Tax Corrections Total Nonmajor ASSETS Cash $ 49,411 $ 23,657 $ 14,508 $ 87,576 Due from other funds Receivables, net Total assets 49,790 24,088 14,508 88,386 LIABILITIES & FUND BALANCE Due to other funds Fund balance 49,790 24,088 14,508 88,386 Total liabilities & fund balance 49,790 24,088 14,508 88,386 The accompanying notes are integral to the financial statements. Page 27

30 Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures & Change in Fund Balance Year Ended September 30, & 5 Gas Tax 7 Gas Tax Corrections Total Nonmajor REVENUES Excise taxes $ 4,255 $ 4,957 $ 0 $ 9,212 Fines ,853 18,853 Interest Total revenues 4,291 4,980 18,853 28,124 EXPENDITURES Administration Streets Court 0 0 7,733 7,733 Total expenditures 0 0 7,733 7,733 Excess of revenue over expenditures 4,291 4,980 11,120 20,391 Transfers Change in fund balance 4,291 4,184 11,120 19,595 Fund balance- Oct. 1, ,499 19,904 3,388 68,791 Fund balance- Sept. 30, ,790 24,088 14,508 88,386 The accompanying notes are integral to the financial statements. Page 28

31 DON WALLACE, CPA, PC CERTIFIED PUBLIC ACCOUNTANT 527 MAIN AVENUE, SUITE G NORTHPORT, ALABAMA Honorable Mayor Bruce Wade & Members of the Town Council Town of Lake View November 11, 2014 RE: Management Letter and Letter of Recommendations In planning and performing my audit of the financial statements of the Town as of and for the year ended September 30, 2014, in accordance with auditing standards generally accepted in the United States of America, I considered the Town s internal control over financial reporting as a basis for designing the auditing procedures for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town s internal control. Accordingly, I do not express an opinion on the effectiveness of the Town s internal control. My 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. However, as discussed below, I identified certain deficiencies in internal control that I consider to be significant deficiencies and other deficiencies that I consider to be material weaknesses. 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 a combination of control deficiencies that adversely affects the Town 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 Town s financial statements that is more than inconsequential will not be prevented or detected by the Town s internal control. Further, a material weakness is a significant deficiency, or combination thereof, that results in more than a remote likelihood that a material misstatement of the financial statements will not be detected by the Town s internal control. I did not consider any deficiencies in internal control to be material weaknesses as defined above: MATERIAL WEAKNESSES NONE

32 OTHER MATTERS 1. Minutes had not been signed or approved after March 2014 through the date of the audit. 2. We noted discrepancies in the Court s Cash on Hand and receipts during the period. When the prior magistrate left, $100 of court cash was unaccounted for, as well as one receipt and three bail bonds checks totaling $288. Two additional money orders of $1,000 each were missing and subsequently re-ordered. 3. We reviewed posting of and payment of payroll taxes, which appeared to be paid timely, and assisted the clerk with regard to printing, filing and retaining copies of 941 reports with the IRS. 4. Collection fees by RDS exceeded $14,000, which seemed higher than normal. 5. Most audit adjustments were for routine accruals, prepaid items and reclassifications. One adjustment was made to reclassify court costs netted against the revenue account for fines. Also, we noted that overall court receipts compared favorably to court records and recommend that Balance Due and Bond Balance reports be reviewed periodically. 6. The General Fund Budgetary Comparison is presented on pages The budget was very conservative relative to receipts and disbursements. As with any engagement, there are inherent limitations in internal control, including the possibility of management override of controls. The recommendations described above should be viewed in light of the Town s size and operating characteristics, the cost and benefit of implementing additional controls, or other procedures that could improve internal controls over financial reporting. In addition, I would like to thank the staff for their help and cooperation during the audit. This communication is intended solely for the information and use of management, the Town Council, and others within the Town, and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, Don Wallace, CPA MEMBER: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ALABAMA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS

33 Annual Audit September 30, 2014 The Town Council of the Town of Lake View, approved its annual audit for the year ended September 30, 2014, at the regular Council meeting on December 11, 2014 at 6:00 p.m. A summary of the annual audit is presented below. A complete copy of the Town s annual audit is available for public inspection during normal business hours at the Lake View Municipal Complex. REVENUES Taxes $ 128,822 Licenses & Franchise Fees 115,712 Building Permits 25,414 Intergovernmental Support 48,909 Court Fines 94,945 Other 18,296 Total Revenues 432,098 EXPENSES Administration $ 168,511 Police 147,569 Court 18,172 Streets 1,601 Total Expenses 335,853 Change in Net Assets 96,245 BALANCE SHEET INFORMATION ASSETS $ 1,617,852 LIABILITIES $ 33,393 NET ASSETS $ 1,584,459 Bruce Wade, Mayor Sharon Hayes, Clerk