1. IntroductionCITY OF
AUDITED ANNUAL FINANCIAL REPORT
FISCAL YEAR 2009 July 1, 2008 - June 30, 2009
CITY OF KALISPELL
ANNUAL FINANCIAL REPORT
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letterof Transmittal............................................................................................................................................ 2-4
ElectedOfficials.................................................................................................................................................... 5
FINANCIAL SECTION
Management's Discussion and Analysis.............................................................................................................
6-15
IndependentAuditor's Report...........................................................................................................................16-17
Basic Financial Statements:
Government -wide Financial Statements:
Statementof Net Assets.......................................................................................................................
18
Statementof Activities.........................................................................................................................
19
Fund Financial Statements:
Balance Sheet — Governmental Funds................................................................................................
20
Reconciliation of the Balance Sheet — Governmental Funds to the Statement of Net Assets ........
21
Statement of Revenues, Expenditures, and Changes in Fund Balances — Governmental Funds..
22
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances -
Governmental Funds to the Statement of Activities.....................................................................
23
BalanceSheet — Proprietary Funds....................................................................................................
24
Statement of Revenues, Expenses, and Changes in Net Assets — Proprietary Funds .....................
25
Statement of Cash Flows — Proprietary Funds..................................................................................
26
Statement of Fiduciary Net Assets — Fiduciary Funds......................................................................
27
Notesto the Financial Statements............................................................................................................
28-56
Required Supplementary Information:
Single Audit Section:
Schedule of Expenditures of Federal Awards...................................................................................
57
Notes to the Schedule of Expenditures of Federal Awards...............................................................
58
Budgetary Comparison Schedule — General and Major Special Revenue Funds ...........................
59
Schedule of Funding Progress and Employer Contributions — Other Post -Employment
HealthcareBenefits..........................................................................................................................
60
Report on Compliance and on Internal Control over Financial Reporting based on an
Audit of Financial Statements Performed in Accordance with Government
AuditingStandards.........................................................................................................................
61-62
Report on Compliance with Requirements Applicable to Each Major Program and Internal
Control over Compliance in accordance with OMB Circular A-133.........................................
63-64
Schedule of Findings and Questioned Costs.......................................................................................
65-66
Report on other Compliance, Financial, and Internal Accounting Control Matters .....................
67
Report on Prior Audit Report Recommendations.............................................................................
68
Supplementary Information:
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet — Nonmajor Governmental Funds..........................................................
69-76
Combining Statement of Revenues, Expenditures and Changes in Fund Balances —
Budget and Actual - Nonmajor Governmental Funds...................................................................
77-93
Budgetary Comparison Schedule —
MajorDebt Service Fund.................................................................................................................
94
Combining Balance Sheet — Nonmajor Enterprise Funds................................................................
95
Combining Statement of Revenues, Expenditures, and Changes in Net Assets — Nonmajor
EnterpriseFunds..............................................................................................................................
96
Combining Statement of Cash Flows — Nonmajor Enterprise Funds ..............................................
97
MISCELLANEOUS STATISTICS................................................................................................................... 98
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The City f Kalispell
Incorporated 1892
Telephone (406) 758-7700
FAX (406) 758-7758
Post Office Box 1997
Kalispell, MT 59903-1997
December 9, 2009
To the Honorable Mayor, members of the City Council, and Citizens of the City of Kalispell, Montana:
State law requires that all general-purpose local governments publish within six months of the close of each fiscal year a
complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and
audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants.
Pursuant to that requirement, the annual financial report for the City of Kalispell, Montana for the fiscal year ended June
30, 2008, is submitted for your review.
The Finance Office prepared this report. Responsibility for the accuracy and completeness of the presented data, including
all disclosures, rests with the City. We believe the data, as presented, is accurate in all material aspects; that it is presented
in a manner designed to fairly set forth the financial position and results of operations of the City as measured by the
financial activity of its various funds; and that all disclosures necessary to enable the reader to gain an understanding of the
City's financial affairs have been included.
GAAP require that management provide a narrative introduction, overview, and analysis to accompany the basic financial
statements in the form of Management's Discussion and Analysis (MD&A). This letter of transmittal is designed to
complement MD&A and should be read in conjunction with it. The City of Kalispell's MD&A immediately precedes the
City's basic financial statement within this report.
Reporting Entity and Services Provided
The City of Kalispell, incorporated in 1892, is located in the western part of the state, which is considered to be one of the
top growth areas in the state. The City of Kalispell is empowered to levy a property tax on both real and personal properties
located within its boundaries. It also is empowered by state statute to extend its corporate limits by annexation, which
occurs periodically when deemed appropriate by the governing council.
The City of Kalispell is operated under the council-manager form of government. Policy -making and legislative authority
are vested in a governing council consisting of the mayor and eight other members. The governing council is responsible,
among other things, for passing ordinances, adopting the budget, appointing boards, and hiring the City Manager. The City
Manager is responsible for carrying out the policies and ordinances of the governing council, and for overseeing the day-to-
day operations of the City. The council is elected on a non -partisan basis. Council members are elected by district to serve
four-year staggered terms, with four council members elected every two years. The mayor is elected at large for a four-year
term.
All significant operations of the City, as defined by the National Council of Governmental Accounting, Statement #3, have
been included in the accompanying financial statements. The City provides a full range of municipal services including
police, fire, building safety, planning and zoning, city court, parks and recreation, streets, community development and
general administrative services. The City also operates as Enterprise funds: water, sewer, solid waste, and an airport.
In addition, the City presents financial data for two component units on the combined statements. The Kalispell Parking
Commission is a discretely presented proprietary type component unit. The Downtown Business Improvement District is a
discretely presented governmental type component unit.
The annual budget serves as the foundation for the City of Kalispell's financial planning and control. All departments of the
City of Kalispell are required to submit requests for appropriation to the City Manager. The City Manager uses these
requests as the starting point for developing a proposed budget. The City Manager then presents this proposed budget to the
council for review. The council is required to hold public hearings on the proposed budget and to adopt a final budget. The
appropriated budget is prepared by fund, function, and department. Budget -to -actual comparisons are provided in this
report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general
fund and any major special revenue fund, the comparison is part of the basic financial statements.
Accounting System and Budgetary Control
The City's accounting records for general governmental operations are maintained on a modified accrual basis. Under this
method, revenues are recorded when measurable and available; expenditures are recorded when services or goods are
received and the liabilities are incurred. Accounting records for enterprise funds are recorded on the accrual basis. Under
this method, revenues are recorded when the services are performed; expenditures are recorded when the goods or
services are received and the liabilities are incurred.
In developing the City's accounting system, consideration is given to the adequacy of internal accounting controls.
Internal controls are designed to provide reasonable assurance regarding the safeguarding of assets and the accuracy and
reliability of accounting data used for preparing financial data and maintaining accountability for assets.
Budgetary control is maintained by an annual appropriation system. The Mayor and Council evaluate the budget
proposals of the various City departments to determine the appropriate level of the operating and public service programs.
After giving due consideration to the input received from the citizens, the City Council adopts the budget. The budget is
controlled through an on line accounting system. The control is decentralized to the point that individual department
heads are responsible for expending within budgetary limits.
Cash Management
The City's demand deposits are interest bearing money market accounts. The City also utilizes the Statewide Investment
Pool (S.T.I.P), and obligations of the U.S. Treasury for cash temporarily idle during the year. Rates of return vary based on
markets.
Insurance
The City joined other Montana cities and towns to form a self-insurance pool offering worker's compensation and liability
coverage. On October 1, 2004, MMIA established, and the City joined, the Employee Benefits Program for its members,
providing a more affordable health and dental insurance option for members to offer their employees.
Postemployment Benefits
The City of Kalispell provides pension benefits for substantially all of its full-time employees. These benefits are provided
through the Montana Public Employees' Retirement System (PERS); Municipal Police Officer's Retirement System
(MPORS): and the Firefighters' Unified Retirement System (FURS). The City of Kalispell has no obligation in connection
with employee benefits offered through this plan beyond its matching contributions. Additional information on the City of
Kalispell's pension arrangements can be found in the notes to the financial statements.
Prospects for the Future
Since November 1986 and the passage of Initiative 105, which limited certain property taxes to the 1986 levels, the ability
of the City to raise revenue for basic services is increasingly difficult. Then, the legislature, with SB 184, lowered tax rates
forcing the City to increase mill levies to maintain the same level of revenue. The City's cash reserves in most funds vary
between 10% and 20% of appropriations. State law allows for reserves of 50%. Reserves provide for cash flow between tax
revenue receipts to keep the City from having to borrow funds for operations. Additional revenues generated by increased
taxable valuation come with the additional costs of an increased service area. The City of Kalispell's Police and Fire
Departments, Courts system, Building Department, Public Works and Parks have felt the increased pressure from the influx
of people to Flathead County. These pressures impact the budgets of all departments. The outlook for the City of Kalispell
is to continue providing basic services while looking for additional ways to fund the increasing costs of those services.
Acknowledgments
In conclusion, I am able to report that, although the general fund is struggling to deal with the increased cost associated with
the City's growth, overall the City of Kalispell is in good financial condition. I wish to express my thanks to Amy
Robertson and Deb Deist of the finance department as well as the administrative staff of the various departments. Without
your help and input this report would not be possible. I would also like to give recognition to the mayor, governing council,
and the city manager for their consistent support for maintaining the highest standards in the management of the City of
Kalispell's finances.
In accordance with Section 7-6-4111, MCA I hereby transmit the City of Kalispell Annual Financial Report as of June 30,
2009 for the fiscal year then ended.
Date
11
Res ctfully submitted,
Rick Wills
Assistant Finance Director
CITY OF KALISPELL
ANNUAL FINANCIAL REPORT
JUNE 30, 2009
ELECTED OFFICIALS
Manager/Council form of Government
Mayor Pamela B. Kennedy 12/2009
Council members:
Kari Gabriel
Ward I
12/2011
Jim Atkinson
Ward III
12/2009
Robert Hafferman
Ward I
12/2009
Randy Kenyon
Ward III
12/2011
Wayne Saverud
Ward II
12/2011
M. Duane Larson
Ward IV
12/2011
Hank Olsen
Ward II
12/2009
Tim Kluesner
Ward IV
12/2009
Other City Officials:
City Manager
Myrt Webb
Attorney
Charles Harball
Police Chief
Roger Nasset
Acting Fire Chief
Dan Diehl
Finance Director
Amy Robertson
City Treasurer
Deb Diest
City Judge
Heidi Ulbricht
Public Works Director
James Hansz
Parks Director
Michael Baker
Community Development Director
Kellie Danielson
Planning Director
Tom Jentz
Human Resource Director
Terry Mitton
Assistant Finance Director
Rick Wills
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