STATE OF NEW MEXICO VILLAGE OF EAGLE NEST AUDIT REPORT JUNE 30, 2014
TABLE OF CONTENTS INTRODUCTORY SECTION Official Roster... Page Number i FINANCIAL STATEMENTS SECTION Independent Auditors Report... 1 3 Basic Financial Statements: Government-wide Financial Statements Statement of Net Position... 4 5 Statement of Activities... 6 7 Fund Financial Statements Balance Sheet-Governmental Funds... 8 9 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position... 11 Statement of Revenues, Expenditures and Changes in Fund Balances- Governmental Funds... 12 13 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities... 15 Statement of Revenues and Expenditures Budget (Non-GAAP Basis) and Actual (Budgetary Basis) General Fund... 17 Statement of Net Position Proprietary Funds... 19 Statement of Revenues, Expenses and Change in Fund Net Position Proprietary Funds... 21 Statement of Cash Flows Proprietary Funds... 23 Notes to the Financial Statements... 25 42 SUPPLEMENTARY INFORMATION Nonmajor Governmental Funds... 44 45 Combining and Individual Fund Financial Statements: Combining Balance Sheet-Nonmajor Governmental Funds... 46 53 Combining Statement of Revenues, Expenditures and Changes in Fund Balances-Nonmajor Governmental Funds... 54 61
Statement of Revenues and Expenditures Budget (Non-GAAP Basis) and Actual (Budgetary Basis): Local Corrections Fund... 62 EMS Fund... 63 Fire Protection Fund... 64 Law Enforcement Protection Fund... 65 Library Fund... 66 Lodgers Tax Fund... 67 Municipal Street Fund... 68 Recreation Fund... 69 Senior Citizen s Fund... 70 Water Rights Fund... 71 Activities Fund... 72 Beautification Fund... 73 Enchanted Eagle Park Fund... 74 Aquaponics Fund... 75 Recycle Fund... 76 NMED SWD Fund... 77 Marina Way Fund... 78 Ambulance Replacement Fund... 79 PW Vehicle Replacement Fund... 80 2008 State Coop Fund... 81 Demolition Fund... 82 CDBG Fund... 83 MAP 7607 Fund... 84 13-1440 STB Fund... 85 Debt Service Fund... 86 Statement of Revenues and Expenses Budget and Actual Joint Utility Fund... 87 Solid Waste Fund... 88 OTHER SUPPLEMENTARY INFORMATION Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... 90 91 Schedule of Findings and Responses... 93 Exit Conference... 95
INTRODUCTORY SECTION
OFFICIAL ROSTER Village Council Name Richard Cordova Bill Lowery Laura Bowers Jamie McCaslin Aaron Becton Title Mayor Mayor Pro-Tem/Councilor Councilor Councilor Councilor Administrative Officials Lynda Perry Cathy Coppy, CMC Faye Longo Village Administrator Village Finance Officer Deputy Clerk i
FINANCIAL STATEMENTS SECTION
INDEPENDENT AUDITORS REPORT Richard Cordova, Mayor and the Village Council Village of Eagle Nest Eagle Nest, New Mexico and Hector H. Balderas New Mexico State Auditor Santa Fe, New Mexico Report on Financial Statements We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, the aggregate remaining fund information, and the budgetary comparison for the general fund of the Village of Eagle Nest, New Mexico (Village), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the Village s basic financial statements as listed in the table of contents. We also have audited the financial statements of each of the Village s nonmajor governmental, and the budgetary comparisons for the capital project funds, and all nonmajor funds presented as supplementary information, as defined by the Government Accounting Standards Board, in the accompanying combining and individual fund financial statements as of and for the year ended June 30, 2014, 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 Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 6743 ACADEMY RD NE, SUITE B ALBUQUERQUE, NM 87109 (505) 266-5904 FAX: (505) 268-6444 www.pbhcpa.com AFFILIATE OFFICES: WACO, TX (254) 772-4901 BROWNSVILLE, TX (956) 544-7778 HILLSBORO, TX (254) 582-2583 TEMPLE, TX (254) 791-3460 1
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, we 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Village of Eagle Nest, New Mexico, as of June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the general fund for the year then ended in accordance with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of each nonmajor governmental fund of the Village as of June 30, 2014, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparisons for the capital project funds, and all nonmajor funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Management has omitted the MD&A which is required to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements is required by the Government 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. Our opinion on the basic financial statements is not affected by this missing information. Other Information Our audit was conducted for the purpose of forming opinions on the Village s financial statements, the combining and individual fund financial statements, and the budgetary comparisons. The additional schedules listed as Other Supplementary Information in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The other supplementary information is the responsibility of management and was derived from and relates 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 our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 21, 2014 on our consideration of the Village s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing 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 in considering the Village s internal control over financial reporting and compliance. Pattillo, Brown and Hill, LLP Albuquerque, New Mexico November 21, 2014 3
STATE OF NEW MEXICO VILLAGE OF EAGLE NEST STATEMENT OF NET POSITION JUNE 30, 2014 Assets Governmental Business-type Activities Activities Total Current assets: Cash $ 249,698 $ 140,227 $ 389,925 Investments 85,879 87,598 173,477 Receivables (net of allowance for uncollectibles) 395,359 34,725 430,084 Total current assets 730,936 262,550 993,486 Noncurrent assets: Restricted cash 67,577 11,944 79,521 Land 363,906 179,500 543,406 Construction in progress 656,503-656,503 Capital assets being depreciated, net 3,937,119 654,408 4,591,527 Total noncurrent assets 5,025,105 845,852 5,870,957 Total assets 5,756,041 1,108,402 6,864,443 The notes to the financial statements are an integral part of this statement. 4
Liabilities Governmental Business-type Activities Activities Total Current liabilities: Accounts payable 292,595 2,632 295,227 Accrued payroll expenses 11,382-11,382 Encroachment and meter deposits 2,848 11,944 14,792 Current portion of compensated absences - 3,040 3,040 Current portion of long term debt 30,742-30,742 Total current liabilities 337,567 17,616 355,183 Noncurrent liabilities: Compensated absences 21,344-21,344 Loans payable 302,874-302,874 Total noncurrent liabilities 324,218-324,218 Total liabilities 661,785 17,616 679,401 Net Position Net investment in capital assets 4,623,912 833,908 5,457,820 Restricted for: Capital projects ( 42,129) - ( 42,129) Debt service 64,729-64,729 Unrestricted 447,744 256,878 704,622 Total net position $ 5,094,256 $ 1,090,786 $ 6,185,042 5
STATE OF NEW MEXICO VILLAGE OF EAGLE NEST STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government: Governmental activities: General government $ 274,220 $ 2,860 $ 94,500 $ - Culture and recreation 59,364 79 9,899 12,304 Public safety 208,233 8,152 95,572 - Public works 179,582 1,240-1,185,655 Health and welfare 99,710 20,458 76,088 - Interest on long-term debt 9,703 - - - Total governmental activities 830,812 32,789 276,059 1,197,959 Business-type activities: Joint Utility 169,283 151,007 - - Solid Waste 106,118 93,830 - - Total business-type activities 275,401 244,837 - - Total primary government $ 1,106,213 $ 277,626 $ 276,059 $ 1,197,959 General revenues: Taxes: Property Gross receipts State shared Lodgers' Franchise Interest on investments Miscellaneous Transfers Total general revenues Change in net position Net position, beginning of year Net position, end of year The notes to the financial statements are an integral part of this statement. 6
Net (Expense) Revenue and Changes in Net Position Primary Government Governmental Business-type Activities Activities Total $( 176,860) $ - $( 176,860) ( 37,082) - ( 37,082) ( 104,509) - ( 104,509) 1,007,313-1,007,313 ( 3,164) - ( 3,164) ( 9,703) - ( 9,703) 675,995-675,995 - ( 18,276) ( 18,276) - ( 12,288) ( 12,288) - ( 30,564) ( 30,564) 675,995 ( 30,564) 645,431 30,070-30,070 196,663 12,938 209,601 26,341-26,341 30,782-30,782 16,103-16,103 613 92 705 15,200 517 15,717 22,633 ( 22,633) - 338,405 ( 9,086) 329,319 1,014,400 ( 39,650) 974,750 4,079,856 1,130,436 5,210,292 $ 5,094,256 $ 1,090,786 $ 6,185,042 7
STATE OF NEW MEXICO VILLAGE OF EAGLE NEST BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2014 General NMED Marina Fund SWD Way Assets Cash $ 55,827 $ - $ - Investments 7,018 - - Accounts receivable (net of allowance for uncollectible) 27,018-328,714 Due from other funds 68,932 - - Restricted cash - - - Total assets $ 158,795 $ - $ 328,714 Liabilities, Deferred Inflows of Resources and Fund Balances Liabilities Accounts payable $ - $ - $ 286,029 Accrued payroll expenses 11,382 - - Due to other funds 5,836-50,322 Advances - - - Encroachment deposits - - - Total liabilities 17,218-336,351 Deferred Inflows of Resources Unavailable property taxes 4,319 - - Unavailable grant revenues - - - Total deferred inflows of resources 4,319 - - Fund balances Restricted for: Special revenue - - - Capital projects - - - Debt Service - - - Unassigned 137,258 - ( 7,637) Total fund balances 137,258 - ( 7,637) Total liabilities, deferred inflows of resources and fund balances $ 158,795 $ - $ 328,714 The notes to the financial statements are an integral part of this statement. 8
Other Governmental Funds Total Governmental Funds $ 193,871 $ 249,698 78,861 85,879 39,627 395,359 5,112 74,044 67,577 67,577 $ 385,048 $ 872,557 $ 6,566 $ 292,595-11,382 17,886 74,044 - - 2,848 2,848 27,300 380,869-4,319 12,304 12,304 12,304 16,623 264,885 264,885 28,134 28,134 64,729 64,729 ( 12,304) 117,317 345,444 475,065 $ 385,048 $ 872,557 9
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STATE OF NEW MEXICO VILLAGE OF EAGLE NEST RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION FOR THE YEAR ENDED JUNE 30, 2014 Amounts reported for governmental activities in the Statement of Net Position are different because: Fund balances - total government funds $ 475,065 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds Governmental capital assets $ 9,634,340 Less accumulated depreciation ( 4,676,812) 4,957,528 A portion of property taxes and grant revenues are not available to pay for current period expenditures and, therefore, are deferred in the funds 16,623 Long-term liabilities, including loans payable, are not due and payable in the current period and, therefore, are not reported in the funds Loans payable $( 333,616) Compensated absences ( 21,344) ( 354,960) Change in net position of governmental activities $ 5,094,256 The notes to the financial statements are an integral part of this statement. 11
STATE OF NEW MEXICO VILLAGE OF EAGLE NEST STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2014 NMED Marina General SWD Way Revenues Taxes: Gross receipts $ 162,164 $ - $ - Property 32,156 - - Other state shared 1,707 - - Lodgers' - - - Franchise 16,103 - - Licenses and permits 4,139 - - Intergovernmental Federal - - - State 94,500 408,122 487,504 Fines and forfeitures 5,761 - - Charges for services - - - Other 5,911 - - Investment 427 - - Total revenues 322,868 408,122 487,504 Expenditures Current operations: General government 249,861 - - Culture and recreation - - - Public safety - - - Public works - - - Health and welfare - - - Debt Service Principal - - - Interest - - - Capital outlay - 466,622 491,789 Total expenditures 249,861 466,622 491,789 Excess (deficiency) of revenues over expenditures 73,007 ( 58,500) ( 4,285) Other financing sources (uses): Debt proceeds - 58,500 - Transfers in (out) ( 8,459) - ( 3,352) Total other financing sources (uses): ( 8,459) 58,500 ( 3,352) Net change in fund balances 64,548 - ( 7,637) Fund balances, beginning of year 72,710 - - Fund balances, end of year $ 137,258 $ - $( 7,637) The notes to the financial statements are an integral part of this statement. 12
Other Governmental Funds Total Governmental Funds $ 34,499 $ 196,663-32,156 24,634 26,341 30,782 30,782-16,103-4,139 103,074 103,074 368,514 1,358,640 279 6,040 22,610 22,610 9,289 15,200 186 613 593,867 1,812,361-249,861 59,364 59,364 112,917 112,917 46,588 46,588 94,650 94,650 28,391 28,391 9,703 9,703 349,884 1,308,295 701,497 1,909,769 ( 107,630) ( 97,408) - 58,500 34,444 22,633 34,444 81,133 ( 73,186) ( 16,275) 418,630 491,340 $ 345,444 $ 475,065 13
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STATE OF NEW MEXICO VILLAGE OF EAGLE NEST RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014 Amounts reported for governmental activities in the Statement of Activities are different because: Net change in fund balances - total governmental funds $( 16,275) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets are allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which capital outlay exceeded depreciation expense. Capital outlay 1,308,295 Depreciation expense ( 257,443) The repayment of the principal of long-term debt consumes the current financial resources of governmental funds. 28,391 The issuance of long-term debt provides current financial resources to governmental funds. ( 58,500) Recognition of accounts receivable and deferred inflows of resources is reflected on the full accrual basis within the statement of activities. The Village has determined that the receivables are not available, therefore the revenues have been deferred within the governmental funds. 10,218 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Compensated absences ( 286) Change in net position of governmental activities $ 1,014,400 The notes to the financial statements are an integral part of this statement. 15
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STATE OF NEW MEXICO VILLAGE OF EAGLE NEST GENERAL FUND STATEMENT OF REVENUES AND EXPENDITURES BUDGET (Non-GAAP Basis) and ACTUAL (Budgetary Basis) FOR THE YEAR ENDED JUNE 30, 2014 Variance with Budgeted Amounts Final Budget Actual Positive Original Final Amounts (Negative) Revenues Taxes: Gross receipts $ 126,591 $ 126,591 $ 153,881 $ 27,290 Property 33,018 33,018 32,093 $( 925) Other state shared 1,700 1,700 1,707 7 Franchise tax 17,450 17,450 16,103 ( 1,347) Licenses and permits 5,480 5,480 4,139 ( 1,341) Intergovernmental State 98,075 98,075 93,710 ( 4,365) Fines and forfeitures 2,410 2,410 5,761 3,351 Investment 850 850 427 ( 423) Other 14,315 14,315 5,911 ( 8,404) Total revenues 299,889 299,889 313,732 13,843 Expenditures Current operations: General government 254,923 254,923 243,060 11,863 Total expenditures 254,923 254,923 243,060 11,863 Excess (deficiency) of revenues over expenditures 44,966 44,966 70,672 25,706 Other financing sources (uses): Transfers in (out) ( 8,500) ( 8,500) ( 8,459) 41 Net change in fund balances $ 36,466 $ 36,466 62,213 $ 25,747 Beginning cash $ 60,370 $ 60,370 RECONCILIATION TO GAAP BASIS Change in receivables 7,050 Change in accrued payroll expenses ( 6,801) Change in deferred revenue 2,086 Net change in fund balances GAAP basis $ 64,548 The notes to the financial statements are an integral part of this statement. 17
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STATE OF NEW MEXICO VILLAGE OF EAGLE NEST STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2014 Joint Solid Utility Waste Total ASSETS Current assets: Cash $ 88,840 $ 51,387 $ 140,227 Investments 74,130 13,468 87,598 Accounts receivable (net of allowance for uncollectible) 16,601 18,124 34,725 Total current assets 179,571 82,979 262,550 Noncurrent assets: Restricted assets: Cash and investments: Meter deposits 11,944-11,944 Total restricted assets 11,944-11,944 Capital assets: Non-depreciable assets Land 179,500-179,500 Capital assets being depreciated, net 654,408-654,408 Total capital assets 833,908-833,908 Total noncurrent assets 845,852-845,852 Total assets 1,025,423 82,979 1,108,402 LIABILITIES Current liabilities: Accounts payable 2,632-2,632 Meter deposits 11,944-11,944 Compensated absences 3,040-3,040 Total current liabilities 17,616-17,616 Total liabilities 17,616-17,616 Net Position Net investment in capital assets 833,908-833,908 Unrestricted 173,899 82,979 256,878 Total net position $ 1,007,807 $ 82,979 $ 1,090,786 The notes to the financial statements are an integral part of this statement. 19
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STATE OF NEW MEXICO VILLAGE OF EAGLE NEST STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDING JUNE 30, 2014 Joint Solid Utility Waste Total Operating revenues: Charges for services $ 151,007 $ 93,830 $ 244,837 Miscellaneous 450 67 517 Total operating revenues 151,457 93,897 245,354 Operating expenses: Personnel services 37,781 32,405 70,186 Depreciation 41,179-41,179 Contract services 7,721 65,119 72,840 Other operating expense 82,602 8,594 91,196 Total operating expenses 169,283 106,118 275,401 Operating income (loss) ( 17,826) ( 12,221) ( 30,047) Non-operating revenues (expenses): Investment 78 14 92 Gross receipts taxes 8,625 4,313 12,938 Total non-operating revenues (expenses) 8,703 4,327 13,030 Income (loss) before transfers ( 9,123) ( 7,894) ( 17,017) Other financing sources (uses): Transfers in (out) ( 22,633) - ( 22,633) Total other financing sources (uses) ( 22,633) - ( 22,633) Change in net position ( 31,756) ( 7,894) ( 39,650) Total net position - beginning 1,039,563 90,873 1,130,436 Total net position - ending $ 1,007,807 $ 82,979 1,090,786 The notes to the financial statements are an integral part of this statement. 21
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STATE OF NEW MEXICO VILLAGE OF EAGLE NEST STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDING JUNE 30, 2014 Joint Solid Utility Waste Total Cash flows from operating activities Receipts from customers and users $ 160,316 $ 100,043 $ 260,359 Payments to employees for services ( 37,806) ( 32,405) ( 70,211) Payments to suppliers for goods and services ( 91,789) ( 77,770) ( 169,559) Net cash provided (used) by operating activities 30,721 (10,132) 20,589 Cash flows from noncapital financing activities Taxes collected 8,625 4,313 12,938 Transfers to other funds (22,633) - ( 22,633) Net cash provided (used) by capital and related activities (14,008) 4,313 ( 9,695) Cash flows from investing activities Transfer (to) from restricted cash (1,460) - ( 1,460) Interest on investments 78 14 92 Net cash provided by investing activities (1,382) 14 ( 1,368) Net increase in cash and cash equivalents 15,331 (5,805) 9,526 Cash and equivalents beginning of year 147,639 70,660 218,299 Cash and equivalents end of year $ 162,970 $ 64,855 $ 227,825 Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) $( 17,826) $( 12,221) $( 30,047) Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 41,179-41,179 Change in assets and liabilities: Receivables, net 4,467 6,146 10,613 Customer deposits 1,460-1,460 Accounts payables 1,466 ( 4,057) ( 2,591) Compensated absences ( 25) - ( 25) Net cash provided by operating activities $ 30,721 $( 10,132) $ 20,589 The notes to the financial statements are an integral part of this statement. 23
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STATE OF NEW MEXICO VILLAGE OF EAGLE NEST NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2014 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Village of Eagle Nest (Village) was incorporated in 1976 under Section 3 of the New Mexico State Statutes Annotated 1978 Compilation operating under a Mayor-Council form of government and provides the following services as authorized by its charter: public safety (police and fire), highways and streets, water and sewer, refuse collection, health and social services, culture and recreation, public improvements, planning and zoning, and general administrative services. A. Reporting Entity This summary of significant accounting policies of the Village of Eagle Nest (Village) is presented to assist in the understanding of the Village s financial statements. The financial statements and notes are the representation of the Village s management who is responsible for their integrity and objectivity. The financial statements of the Village have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the government s accounting policies are described below. In evaluating how to define the government, for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in generally accepted accounting principles (GAAP). The basic (but not the only) criteria for including a potential component unit within the reporting entity is the governing body s ability to exercise oversight responsibility. The most significant manifestation of this ability is financial interdependency. Other manifestations of the ability to exercise oversight responsibility include, but are not limited to, the selection of governing authority, the designation of management, the ability to significantly influence operations, and accountability for fiscal matters. A second criterion used in evaluating potential component units is the scope of public service. Application of this criterion involves considering whether the activity benefits the government and/or its citizens, or whether the activity is conducted within the geographic boundaries of the government and is generally available to its citizens. A third criterion used to evaluate potential component units for inclusion or exclusion from the reporting entity is the existence of special financing relationships, regardless of whether the government is able to exercise oversight responsibilities. Based upon the application of these criteria, the Village has no component units. 25
B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenue, are reported separately from business-like activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenue includes 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenue are reported instead as general revenue. Separate financial statements are provided for governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Sales, franchise, gas, and other similar taxes are recognized when the underlying exchange transaction takes place. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenue to be available if collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, franchise taxes, sales taxes, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Village. 26
The Village reports the following major governmental funds: The General Fund is the Village s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. The Capital Project - NMED-SWD accounts for the grant funds used to establish or modify solid waste facilities. Authorized by the Solid Waste Act, NMSA 1978 paragraph 74-9-40. The Capital Project Marina Way accounts for the grant funds from the New Mexico Department of Game and Fish used for the paving of Marina Way in order to provide improved access to boating and fishing recreational opportunities. Authorized by 17-1-1 NMSA 1978, The Village reports the following major proprietary fund: The Joint Utility Fund is used to account for activities of the Village s water and sewer utility service. The Solid Waste Fund is used to account for activities of the Village s solid waste utility service. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. As a general rule, the effect of interfund activity has been eliminated from the governmentwide financial statements. Exceptions to this general rule are charges between the Village s joint utility function and various other functions of the government. Elimination of these charges would distort the direct costs and program revenue reported for the various functions concerned. Program revenues included in the Statement of Activities are derived directly from the program itself or from parties outside the Village s taxpayers or citizenry, as a whole; program revenues reduce the cost of the function to be financed from the Village s general revenues. Amounts reported as program revenues include: 1) charges for services to taxpayers or applicants who purchase, use or directly benefit from the goods or services provided by the given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the enterprise fund are charges to customers for sales and services. The enterprise fund also recognizes as operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the system. Operating expenses 27
for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. When both restricted and unrestricted resources are available for use, it is the Village s policy to use restricted resources first, then unrestricted resources committed, assigned, and unassigned in order as needed. D. Assets, Liabilities, Net Position and Fund Balance Cash and Investments Cash and cash equivalents include amounts in demand deposits. Investments are deposits in the State Treasurer s Investment Pool. Investments are stated at fair market value. For the purposes of the statement of cash flows, cash and investments include unrestricted amounts in demand deposits and the State Treasurer s Investment Pool. Receivables Accounts receivable of the enterprise fund represent the amounts due from customer utility accounts. The governmental funds report taxes and other fees collected at the Village, County and State level as receivables. All trade and tax receivables are shown net of an allowance for uncollectible. Property Taxes An enforceable legal claim to taxable property arises on January 1 in the year of levy. Taxes are due on November 10 and May 10 and are collected by the Colfax County Treasurer. Taxes not paid within 30 days are declared delinquent. The Village records all delinquent property taxes not collected within 60 days of year-end as deferred revenue in the fund financial statements. All property taxes received after the 60-day period are accrued in the governmentwide financial statements. Capital Assets Capital assets, which include property, plant, equipment, improvements, and water and sewer system, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The Village defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. 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. Pursuant to the implementation of GASB Statement No. 34, the historical cost of infrastructure assets, (retroactive to 1979) are included as part of the governmental capital assets reported in the government-wide statements. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the asset 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 business-type activities is included as part of the capitalized value of the assets constructed. 28
Property, improvements, equipment, and water and sewer systems are depreciated using the straight-line method over the following useful lives: Assets Years Permanent Buildings 45 Land Improvements 20 Vehicles 6 Computer Equipment 5 Other Furniture and Equipment 5-20 Compensated Absences Qualified employees are entitled to accumulate annual leave, which includes vacation and sick days, according to a graduated leave schedule of ten days to twenty days per year, depending on length of service. Employees may accumulate annual leave and carry that leave forward from calendar year to calendar year. Upon termination, employees will be paid for a maximum of 360 hours of accrued annual leave. Deferred Inflows of Resources In addition to liabilities, the statement of financial position reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The Village has two types of items, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable property taxes and unavailable grant revenues. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. Long-term Obligations In the government-wide financial statements and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Fund Balances In the fund financial statements, governmental funds report aggregate amounts for five classifications of fund balances based on the constraints imposed on the use of these resources. The nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form prepaid items or inventories; or (b) legally or contractually required to be maintained intact. The spendable portion of the fund balance comprises the remaining four classifications: restricted, committed, assigned, and unassigned. Restricted fund balance. This classification reflects the constraints imposed on resources either (a) externally by creditors, grantors, contributors, laws or regulations of other 29
governments; or (b) imposed by law through constitutional provisions or enabling legislation. Committed fund balance. These amounts can only be used for specific purposes pursuant to constraints imposed by formal resolutions or ordinances of the Village council the government s highest level of decision making authority. Those committed amounts cannot be used for any other purpose unless the Village council removes the specified use by taking the same type of action imposing the commitment. This classification also includes contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned fund balance. This classification reflects the amounts constrained by the Village s intent to be used for specific purposes, but are neither restricted nor committed. The Village council has the authority to assign amounts to be used for specific purposes. Assigned fund balances include all remaining amounts (except negative balances) that are reported in governmental funds, other than the General Fund, that are not classified as nonspendable and are neither restricted nor committed. Unassigned fund balance. This fund balance is the residual classification for the General Fund. It is also used to report negative fund balances in other governmental funds. Net Position Net position represents the difference between assets and liabilities. Net investment in capital assets, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed on the use either through the enabling legislations adopted by the Village or through external restrictions imposed by creditors, grantors, or laws and regulations of other governments. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. Recently Issued and Adopted Accounting Pronouncements In March 2012, the GASB issued Statement 65, Items Previously Reported as Assets and Liabilities. GASB 65 establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities. This Statement is effective for periods beginning after December 15, 2012. GASB 65 has been adopted for the year ending June 30, 2014. GASB Statement No. 68, Accounting and Financial Reporting for Pensions, becomes effective in the fiscal year ending June 30, 2015. The new standard will substantially change accounting and financial reporting for the Village s participation in the Public Employees Retirement System (PERA), a cost sharing multiple-employer defined benefit retirement plan. The new standard will require the Village s financial statements that use the economic resources 30
measurement focus and accrual accounting to recognize a liability for the Village s proportionate share of PERA s net pension liability, to recognize pension expense, and to report deferred outflows of resources and deferred inflows of resources related to pensions, for their proportionate shares of PERA s collective pension expense and collective deferred outflows of resources and deferred inflows of resources. 2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgetary Information The Village follows these procedures in establishing the budgetary data reflected in the financial statements: 1. Prior to June 1, the Village Clerk-Treasurer submits to the Village 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 based on previous year s history. Public hearings are conducted at the Village Hall to obtain taxpayer comments. Prior to July 1, the budget is legally enacted through passage of an ordinance. 2. The Village Clerk-Treasurer is authorized to transfer budgeted amounts between departments within any fund; however, any revisions that alter the total expenditures of any funds must be approved by the Village Council and New Mexico State Department of Finance, Division of Local Governments. That is, expenditures in each fund may not exceed the budgeted appropriation for that fund. 3. Formal budgetary integration is employed as a management control device during the year for the Governmental and Enterprise Funds. 4. Encumbrances are not reported in the budgets or financial statements. 5. The level of classifications detail in which expenditures or expenses may not legally exceed appropriation for each budget is in fund total. Appropriations lapse at year end. 6. Budgets for Governmental and Enterprise Funds are adopted on a basis not consistent with generally accepted accounting principles. Throughout the year the accounting records are maintained on the non-gaap basis of cash receipts and disbursements. Accordingly, certain revenues and the related assets are recognized when paid rather than when the obligation is incurred. The financial statements are presented on the modified accrual basis of accounting. Budgetary comparisons presented for Governmental and Enterprise Funds in this report are on the non-gaap budgetary basis and actual (cash basis). 3. DETAILED NOTES ON ALL FUNDS Deposits and Investments The Village invests its funds in accordance with state statutes which require that financial institutions pledge collateral consisting of approved federal or state securities whose market value is equal to at least 50% of the deposits in excess of FDIC insurance coverage. In accordance with 31
state statutes, the Village may have deposits only in financial institutions, federal direct obligations, or the New Mexico State Treasurer s Local Government Pooled Investment Plan. Cash and Investments Balance Per Bank June 30 International Bank Checking Accounts Operating 476,546 Add Deposits In Transit Less Outstanding Checks Balance Per Books June 30 $ $ 240 $ 71,674 $ 405,112 Emergency Response 794 - - 794 CDBG 100 - - 100 Fire 64,618-5,036 59,582 First National Bank Checking Accounts Enchanted Eagle Park 2,866 - - 2,866 Beautification 992 - - 992 State of New Mexico Investment Accounts LGIP Fund 173,382 - - 173,382 Reserve Contingencies Fund 95 - - 95 Total Cash in Banks $ 719,393 $ 240 $ 76,710 $ 642,923 As Reported in the Financial Statements: Equity in Cash Cash $ 389,925 Restricted Cash 79,521 Investments 173,477 $ 642,923 In accordance with Section 6-10-17, NMSA 1978 compilation, deposits of public monies are required to be collateralized. Pledged collateral is required in amounts in aggregate equal to one half of the amount of uninsured public money in each account during the fiscal year. Securities which are obligations of the State of New Mexico, its agencies, institutions, counties, or municipalities or other subdivisions are accepted as security at par value; all other securities are accepted as security at market value. No security is required for the deposit of public money that is insured by the Federal Deposit Insurance Corporation. 32
First International National Bank Bank Total Amount on Deposit in Bank $ 542,058 $ 3,858 $ 545,916 FDIC Coverage ( 250,000) ( 6,577) $( 256,577) Total uninsured public funds 292,058 ( 2,719) 289,339 Collateral pledged: Held by pledging bank's trust department not in the Village's name International Bank FHLB NON CBL, 9/12/14 CUSIP #313370IS8 ( 125,337) - ( 125,337) FNMA CBI, 8/25/15 CUSIP #3136FPBB2 ( 102,344) - ( 102,344) FNMA, 12/20/18 CUSIP #3136G12K4 ( 48,547) - ( 48,547) Uninsured and uncollateralized $ 15,830 $( 2,719) $ 13,111 Collateral requirement (50% of uninsured funds) $ 146,029 $( 1,360) $ 144,670 Pledged collateral 276,228-276,228 Over (under) collateralized $ 130,199 $ 1,360 $ 131,559 Custodial Credit Risk - Deposits Custodial credit risk is the risk that in the event of a bank failure, the Village s deposits may not be returned. The Village does not have a deposit policy for custodial credit risk. As of June 30, 2014, $289,339 of the Village s bank balance of $545,916 was exposed to custodial credit risk. Investments The Village invests excess cash in the State Treasurer Local Government Investment Pool. The Pool s investments are valued at fair value based on quoted market prices as of the valuation date. The New Mexico State Treasurer Investment Pool is not registered with the SEC. Section 6-10-10.I, NMSA 1978, empowers the State Treasurer, with the advice and consent of the State Board of Finance, to invest money held in the short-term investment fund in securities that are issued or backed by the United States Government or by its departments or agencies and are either direct obligations of the United States Government or agencies sponsored by the United States Government. The LGIP investments are monitored by the same policies and procedures that apply to all other state investments. The pool does not have unit shares. Per 6-10-10.1 F, NMSA 1978, at the end of each month all interest earned is 33
distributed by the State Treasurer to the contributing entities in amounts directly proportionate to the respective amounts deposited in the fund and the length of time the amounts were invested. Participation in the fund is voluntary. At June 30, 2014 the Village had $173,382 invested in the LGIP which is AAA rated with a 84-day weighted average maturity to final and $95 in the reserve contingencies fund which is not rated and is considered a nonperforming asset. Receivables Receivables as of year-end for the Village s individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Governmental Funds Marina Non- Joint Solid General Way Major Utility Waste Total Receivables: Customer $ - $ - $ 9,966 $ 21,019 $ 23,527 $ 54,512 Taxes Gross receipts 13,899-2,956 739 370 17,964 Property 8,754 - - - - 8,754 Lodgers' - 3,301 - - 3,301 Other governments 4,365 328,714 29,008 - - 362,087 Gross receivables 27,018 328,714 45,231 21,758 23,897 446,618 Less: allowance for uncollectibles - - 5,604 5,157 5,773 16,534 Net total receivables $ 27,018 $ 328,714 $ 39,627 $ 16,601 $ 18,124 $ 430,084 34