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04. Audit Fiscal Years Ended 6/30/91 and 6/30/92CITY OF KALISPELL, MONTANA Fiscal Years Ended June 30, 1991 and 1992 CITY OF KALISPELL, MONTANA TABLE OF CONTENTS Page Organization 1 Fiscal Year Ended June 30 1991 Independent Auditor's Report 2 - 3 Financial Statements 4 Combined Balance Sheet - All Fund Types and Account Groups 5 Combined Statement of Revenues, Expenditures, and Changes in Fund 6 Balances - All Governmental Fund Types Combined Statement of Revenues, Expenditures, and Changes in Fund 7 - 8 Balances - Budget and Actual - General, Special Revenue, Debt Service, and Capital Projects Fund Types Combined Statement of Revenues, Expenses, and Changes in Retained 9 Earnings - All Proprietary Fund Types Combined Statement of Cash Flows - All Proprietary Fund Types 10 Notes to Financial Statements 11-36 Independent Auditor's Report on Supplemental Information and 37 Supplemental Schedule Independent Auditor's Report on Supplemental Information 38 Supplemental Schedule 39 Schedule of Federal Financial Assistance 40 Fiscal Year Ended June 30 1992 Independent Auditor's Report 41-42 Financial Statements 43 Combined Balance Sheet - All Fund Types and .Account Groups 44 Combined Statement of Revenues, Expenditures, and Changes in Fund 45 Balances - All Governmental Fund Types i CITY OF KALISPELL, MONTANA TABLE OF CONTENTS - cont. Paae Fiscal Year Ended June 30 1992 - cont Combined Statement of Revenues, Expenditures, and Changes in Fund 46 - 47 Balances - Budget and Actual - General, Special Revenue, Debt Service, and Capital Projects Fund Types Combined Statement of Revenues, Expenses, and Changes in Retained 48 Earnings - All Proprietary Fund Types Combined Statement of Cash Flows - All Proprietary Fund Types 49 Notes to Financial Statements 50-74 Independent Auditor's Report on Supplemental Information and 75 Supplemental Schedule Independent Auditor's Report on Supplemental Information 76 Supplemental Schedules 77 Schedule of Federal Financial Assistance 78 Significant Provisions of Sewer Revenue Bond Ordinances and 79-81 Required Information Sewer Fund - Schedule of Assets, Liabilities and Fund Equity 82 Schedule of Revenuers, Expenses and Changes in Retained 83 Earnings - Sewer Fund Schedule of Cash Flogs - Sewer Fund 84 Independent Auditor's Compliance Report Based on an Audit of 85-86 General Purpose Financial Statements Single Audit Combined Report on Internal Control Structure 87-90 Single Audit Opinion on Compliance With Specific Requirements 91-92 Applicable to Major Federal Financial Assistance Programs Single Audit Report on Compliance With the General Requirements 93-94 Applicable to Federal Financial Assistance Programs CITY OF KALISPEL.L, MONTANA TABLE OF CONTENTS - cont. Pane Single Audit Report on Compliance With Specific Requirements Applicable 95 to Nonmajor Federal Financial Assistance Program Transactions Schedule of Findings and Questioned Costs Independent Auditor`s Report on Other Compliance, Financial, and 97-93 Internal Accounting Control Matters Independent Auditor's Report on Prior Audit Report Recommendations 99 CITY OF KALISPELL, MONTANA ORGANIZATION Fiscal Years Faded June 30 1991 and 1992. Mr. Douglas Rauthe Mayor CITY COUNCIL Mr. Gary Nystul Members Mr. Cliff Collins Ms. Barbara Moses Mr. Fred Buck Mr. Jim Atkinson Mr. Lauren Granmo Mr. M. Duane Larson Ms. Pamela Kennedy CITY OFFICIALS Mr. Bruce Williams City Manager Mr. Glen Neier Attorney Mr. Addison Clark Chief of Police Mrs. Amy Robertson Finance Director Mrs. Francis Willis City Judge Mr. Bolo Babb Water/Sewer/Garbage Collector -1- CITY OF KALISPELL, MONTANA Fiscal Year Ended June 30, 1991 DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RAC1CcT, GOVERNOR 1424 NINTH AVENUE SATE OF MONTANA (406) 444-3010 PO BOX 200501 INDEPENDENT AUDITOR'S REPORT I -ELENA, MONTANA 59620-0501 To the Honorable Mayor and City Council City of Kalispell Kalispell, MT 59903 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the year ended .lune 30, 1991, as listed in the table of contents. These general purpose financial statements are theresponsibility of the City's management. Our responsibility is to express an,opinion on these general purpose financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standard and 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 general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The City has not maintained adequate records relating to fixed assets of the general fixed assets account group and the enterprise funds. Accordingly, we were unable to satisfy ourselves as to the fixed assets balances of the general fixed assets account group amounting to $7,729,083, the fixed assets balances and the related depreciation expense of the enterprise and internal service funds amounting to $14,519,916, $557,016, $55,191, and $10,897, respectively. In our opinion, except for the effects of such adjustments, if any, as might have been necessary had we been able to examine the fixed assets described in paragraph three, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Kalispell, Montana, at June 30, 1991, and the results of its operations and the cash flows of its proprietary fund types for the year then ended, in conformity with generally accepted accounting principles. f'1: DONALD L. DOOLEY August 5, 1993 Bureau Chief -3- CITY OF KALISPELL, MONTANA FINANCIAL STATEMENTS Fiscal Year Ended June 30, 1991 me —5— Ar,n �rr ONrrrm�,< i.s ep e7e- -� �ce vo«»i�rny omam nm CimrW r=ri iri .ri r�.�3a7�7 r - Z O C v m fY v If1 r in .- v t73 C � J Q m�mmu�nm xnm r r-v�cocl `ako v m use m m romvEv m wt�ran mco rm mk- mmE 'W w m car.r>oinrnc��'ingEDP O =m I raj Ir ib C`k O V n n M fQ (") I�€ N [V fR SY} fz IQ m r m H epi r H v r" N ed r: m V5 N)- 1• gv � !H 1 rn m A H E 3 H n N� o v to ac" �ma+p r�i v c oo i o p L7 ocr ei en m co C7 � I rn �N� F [n us to En in 0 O ......... . a€ c o m a r ca ti ca jtthh�= d�LLN r Ai V1 - I }=f M tlY H H H h zaLU I j d M -III r . , . c m . cs • =R c Z Qi " m lL N N N Hct } sit c,ai,_ v at OmI m z pct © Q, k mji WS c� W ML N M CL r pf (N�pp !fir {per! 0LU -1 - i m e�E { s i �aR' E fA r • • �1 N H f9 H �i��s VS iL uj y rMmv+a lq �'ir3 z N N N N N N N F lS€ pi�{{ W rmF m m vi en ;s,•�e; Q U N N N N N 'c4 N � n9 cca oo 9 Ali mI � � m �'+ � r rd n c �;�.• c Alii �{ f t C a O m G mn >? m Z m co d'Z'mU ❑A m �'"Q Z ir" Z a 9 m tL 2 2 Q 'r 22,5 M m"mt 2n 2 rr��LU 6, �yy cp p C cmo� A» �,3m LLJ Ir Uc a �u _ _ Q °NJct�tn n�"rco•cc CNy �4 rte.- z—u�m„O®� C v ammmmmaoa�o�'� �cmce v �ar�aaa m EE EE UFOO❑O.QQQQOS4 �g m ..a�OO.� 1iUcffL''�'e.''�� SA —5— to LU U Q a z z LU U' Q U � Z i a 0UJZCO L U) In i - Z Z :n 0. w —1 x m w a 0►ja =) N LL JU 0 w 2 w Q a >v m 0 Q NNMMCA rL'3M t wmr-MNit O C'n w N0q 1�CAh CT e}' C) ce) N N r- LO Z M Cp a �Lp� m q "C' Ri N 9 p � c3 N I� � M to C7 ��tocow C CDN�C1?NMN1- c�7 W C Lo r fR Vi . p E t�'3 CChp f C3 ` Ec�p m CCL �- cv CL Lti 1C3 Ql E� N •- N Z � � Lj- �m r—M0 co Z iq NCO&Mto N ? 2 a G�3C�NN�� CD 0 CC aoca�M�MlppnppCaC��e�e��lCeCepp�� NQC�113 t'9 CD Ca cR`ao€gso r M 690 G�p 10 -co h r M;i.n t�t�3 t{o� m11 cr C`7C'C�d'O) NC th Cf3 1n C*) En C'�3 � CA to N 000-0Q 1NDNDtpN CNA wt -0 N M r- V r to v to 0 0) LQ cA030 mCV ��ua Eta �- l+3 4A to CS L? 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{ 1 0 m m � r— 00 U U 1!i U �Oo a em oa U O O1-- F- m ® N U L Ci CL O V tl pci00f— 0 Er 69. 44 ' i1 F'1 m C., N N'� rn rn c E U 3 CLS M UJ m LLT = C m U- CL CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30, 1991 Operating Revenues: Charges for Services Miscellaneous Revenues Special Assessments Internal Services Total Operating Revenues Operating Expenses: Personal Services Supplies Purchased Services Fixed Charges LosslBad Debt Expenses Depreciation Total Operating Expenses Operating Income (Loss) Non -Operating Revenues (Expenses): Interest Debt Service Interest Expense Total Non -Operating Revenues (Expenses) Net Income (Loss) Before Extraordinary Items Extraordinary Loss on Refunding of Bonds Net Income (Loss) Add depreciation on fixed assets acquired with capital grants Increase (Decrease) in Retained Earnings Retained Earnings - July 1, 1990 - As Previously Reported Restatements Retained Earnings - July 1, 1990 - As Restated Retained Earnings - June 30, 1991 See accompanying Notes to Financial Statements -9- TOTALS (MEMORANDUM PROPRIETARY FUND TYPES ONLY) Internal Enterprise Service June 30, 1991 $ 2,311,691 $ - $ 2,311,691 48,553 - 48,553 207,037 - 207,037 - 29,199 29,199 $ 2,567,281 $ 29,199 $ 2,596,480 $ 816,105 $ 5,181 $ 821,286 112,189 1,904 114,093 275,689 5,696 281,385 254,798 - 254,798 28,898 - 28,898 557,016 10,897 567,913 $ 2,044,695 $ 23,678 $ 2,068,373 $ 522,586 $ 5,521 $ 528,107 $ 105,545 $ - $ 105,545 (187,810) (3,923) (991,733) $ (82,265) $ L3,923) $ (86,188) $ 440,321 $ 1,598 $ 441,919 (63,036) - (63,036) $ 377,285 $ 1,598 $ 378,883 234,280 - 234,280 $ 611,565 $ 1,598 $ 613,163 $ 6,951,246 $ $ 6,951,246 53,299 - (53,299) $ 6,897,947 $ 0 $ 6,897,947 $ 7,509,512 $ 1,598 $ 7 511.110 CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30, 1991 Cash Flews from Operating Activities: Cash received from customers Cash received from assessments Cash received from hookups/miscellaneous sources Cash payments to suppliers for goods/services Cash payments to employees for services Cash from other operating revenues Net Cash Provided by Operating Activities Cash Flows from Noncapital Financing Activities: Operating grants received Cash payments for grants Loans to other funds Contract paid by developer Net Cash Provided by Nonoapital Financing Activities Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets Principal paid on revenue bonds and contracts Interest paid on revenue bonds and contracts Proceeds from settlement Proceeds from contracted debt Decrease in due from other governments Proceeds from sale of revenue bonds Loss on Bond Refunding Capital contributed by capital projects fund Capital contributed by developer Capital contributed by government Net Cash Provided by Capital and Related Financing Activities Cash Flows from Investing Activities: Interest on investments Decrease in interest receivable Purchase of sidewalk and curb warrants Redemption of sidewalk and curb warrants Net Cash used in Investing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at July 1, 1990 Cash and Cash Equivalents at June 30, 1991 Reconciliation of Operating Income to Net Gash Provided by Operatt N Activities: TOTALS PROPRIETARY FUN© TYPES 5,521 (MEMORANDUM ONLY) Adjustments to reconcile operating income Internal to net cash provided by operating activities: - Enterprise Senv"tce ,lune 30, 1991 June 30, 1990 $ 2,196,016 $ 29,199 $ 2,225,215 $ 1,665,234 213,972 (53299) 10,923 Change in assets and liabilities-* 213,972 450,228 48,553 - (33,478) 48,553 80,375 (685,710) Decrease in assessments receivable (5,181) - (690,891) (577,191) (825,001) (43,034) (12,225) (43,034) (837,226) (723,638) - 0 18,579 0 26,007 $ 947,830 $ 11,793 $ 959,623 $ 921,015 (8,896) 1,112 Net Cash Provided by Operating Activities $ 347,830_ $ $ $ 015 $ 0 $ 15,945 - 0 (89,945) 0 137,855 0 6,485 $ $ $ 0 $ 70.340 $ (1,400,746) $ (66,088) $ (1,466,834) 3 (1=845,865) (843,378) (5,493) (848,871) (112,849) (153,769) (2.435) (156,204) (189,722) - 0 95,000 - 71,014 71,014 0 - 0 51,131 2,815,000 2,815,000 0 (63,036) (63,036) 0 16,916 16,916 0 22,920 - 22,920 0 928,783 928,783 552.277 3 1,322,690 $, . (3,002) $ 1,319,688 $ 1,454,028 3 105,545 $ S 105,545 $ 132,459 0 1,995 (21.823) - (21,$23) (18,471) 11,819 11,819 9.500 $ 95,541 $ 4 $ 95,541 $ 125,483 $ 2,366,061 $ 8,791 $ 2,374,852 $ (333,190) 1,570,816 0 1,570,816 1,944,006 $ 3,936,8TT $_8 791 $ 3,945,668 5,.._., 1 570 816 Reconciliation of Operating Income to Net Gash Provided by Operatt N Activities: Operating Income $ 522.586 3 5,521 $ 528,107 $ 421,260 Adjustments to reconcile operating income to net cash provided by operating activities: - Depreciation 557,016 10,897 567,913 526,704 Provision for uncoliectable accounts (53,299) - (53299) 10,923 Change in assets and liabilities-* Increase in accounts receivable (33,478) 242 (33,236) (37,276) Decrease in assessments receivable 6,835 - 6,935 3,083 Increase in inventory (43,034) - (43,034) (23,370) Increase in accounts payable - 0 18,579 Increase in prepaid expenses - (4,867) (4,867) 0 Decrease in compensated absences (8,896) - (8,896) 1,112 Net Cash Provided by Operating Activities $ 347,830_ $ 11,793_ $ 959 623 $_921 015 Noncash investing, capital, and financing activities: 1. The City issued revenue bonds to refund debt issued in 1983. The $785,300 proceeds was used to purchase U.S_ government securities that were deposited into an irrevocable trust for the defeasance of $740,000 of outstanding revenue bond principal and $45,300 of interest. 2. The City recorded $290,451 due from E. P.A., as contributed capital in the S r Fund. 3. The City transferred contributions from a capital projects fund and recorded developer contributions in the amount of $31,332 to the Sewer Fund. 4. The City enterered into a short-term contract of $141,694 for a mobile video system for the Sewer Fund_ See accompanying Notes to Financial Statements -10- CITY OF KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS June 30, 1991 1. Summa of Significant Accounting Policies The following is a summary of the City's significant accounting policies: Reporting Entity The City is governed by an elected Mayor and City Council. The general purpose financial statements include all funds, account groups, boards, commissions, and authorities which meet the criteria embodied in GASB Cod. Sec. 2100, "Defining the Reporting Entity." Such criteria are manifestation of oversight responsibility (financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters), scope of public service (benefit to the City and/or its residents, conducted within the geographic boundaries of the City, and generally available to its citizens), and special financing relationships. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for within a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. The following types of funds and account groups are maintained by the City: GOVERNMENTAL. FUNDS General Fund - Used to account for all financial resources except those required to be accounted for in other funds. Special Revenue Funds - Used to account for the proceeds of special revenue sources (other than for major capital projects) that are legally restricted to expenditures for specific purposes. Capital _Projects Funds - Used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). Debt Service Funds - Used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. -11- -Summary of Significant„ Accounting Policies - cont , PROPRIETARY FUNDS Enterprise Funds - Used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges, or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Funds - Used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, on a cost reimbursement basis. FIDUCIARY FUNDS Trust and Agency Funds - Used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These may include (a) expendable trust funds, (b) nonexpendable trust funds, (c) pension trust funds and (d) agency funds. FIXED ASSET'S AND LONG-TERM LIABILITIES General Fixed Assets Account Group - Used to account for the fixed assets of the City which are not accounted for in proprietary funds. General Long -Term Debt Account Group - Used to account for all long-term debt of the City except that accounted for in the proprietary funds. Basis of Accounting and Measurement Focus The modified accrual basis of accounting is followed by all governmental and expendable trust funds. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, that is when they become both measurable and available. Available means when collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. In applying the susceptible to accrual concept under the modified accrual basis, the following revenue sources are deemed both measurable and available: earnings on investments, real estate and personal property taxes, assessments, federal and state grants and -12- 1. Summa of Significant Accounting Policies - coat. and subsidies, and charges for current services. Revenue sources not susceptible to accrual include licenses and permits, fines and forfeitures and certain other miscellaneous revenues, which are not considered measurable until received. The City records real and personal property taxes and assessments levied for the current year as revenue. Taxes and assessments receivable remaining unpaid at year-end and not expected to be collected soon enough thereafter to be available to pay obligations of the current year were recorded as deferred revenue, with a corresponding reduction in revenues, as required by generally accepted accounting principles. In addition, prior period delinquent taxes and assessments collected in the current period were recorded as revenue in the current period as required by generally accepted accounting principles. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Most expenditures are measurable and are to be recorded when the related liability is incurred except for unmatured principal and interest on general and special assessment long-term debt which are reported only when due, cost of accumulated unpaid vacation and sick leave which are reported as expenditures in the period in which they will be liquidated with available financial resources rather than in the period earned by employees, and inventory costs which are reported as expenditures when purchased rather than when consumed. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. The accrual basis of accounting is utilized by the proprietary funds. Under the accrual basis of accounting, revenues are recorded when earned and expenses when incurred. The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental and expendable trust funds are accounted for on a spending or "financial flow" measurement focus. This means that only current assets and liabilities are generally included in their balance sheets. Governmental and expendable fund type operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. -13- 1. Summary of Significant Accounting Policies - cont. All proprietary funds are accounted for on a cost of services or „capital maintenance" measurement focus. This means that all assets and liabilities (whether current or noncurrent) associated with this activity are included on their balance sheets. Their reported fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. Budgets and Budgetary Accounting An annual appropriated operating budget is adopted each fiscal year for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds on the modified accrual basis. A non-binding management budget is adopted for the Enterprise and Internal Services Funds. The final budget is legally enacted by the City Council, on the second Monday in August, after holding public hearings as required by State statutes. The operating budgets cannot be increased except for a public emergency which could not have been reasonably foreseen at the time of adoption of the budget. Budget appropriation transfers may be made between the general classifications of salaries and wages, maintenance and operation and capital outlay. Encumbrances All appropriations, except for construction in progress, lapse at the end of the fiscal year. The City does not utilize a formal. encumbrance accounting system. Fixed Assets All purchasedfixed assets are valued at cost where historical records are available and at estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Improvements are capitalized and, in proprietary funds, depreciated over the remaining useful lives of the related fixed assets. General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in governmental funds, and the related assets are reported in the general fixed assets account group. Assets in the general fixed assets account group are not depreciated. -14- 1. Summary of Significant Accounting Policies - coat. Public domain ("infrastructure") general fixed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized, as these assets are immovable and of value only to the government. Fixed assets purchased or acquired by proprietary fund types are recorded in the individual fund making the purchase. Any fixed assets donated specifically for an enterprise fund are also recorded in that individual fund. depreciation on proprietary fund fixed assets is provided over their estimated useful lives on the straight-line method. The useful lives of these assets have been estimated as follows: Buildings 20-50 years Improvements other than buildings 10-50 years Machinery and equipment 5-20 years Vehicles and heavy equipment 5-20 years Sewer lines and pump stations 10-50 years Interest is capitalized on proprietary fund assets acquired with tax-exempt debt. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds over the same period. Taxes and Assessments An allowance for uncollectible accounts was not maintained for real and personal property taxes and special assessments receivable. The direct write-off method is used for these accounts. Ente rise Accounts Receivable Reserves for estimated uncollected accounts receivable are maintained for the water, sewer and ambulance enterprise funds. Accounts receivable are reported as a net of uncollectable accounts. The reserves for uncollectables on June 30, 1991, were as follows: Water $ 2,732 Sewer 4,240 Ambulance 10.286 Total $ 7.258 _15- 1. Summary of Significant Accounting Policies - cont. Inventories Inventories of materials and supplies for governmental fund types are expensed at the time of purchase. Inventories of materials and supplies on hand are not maintained. Inventories were not, however, considered material. The enterprise fund inventory of materials and supplies was valued at a combination of cost and replacement cost. Inventories are offset by a reserve of equity. Vacation and Sick Leave Liabilities incurred because of unused vacation and sick leave accumulated by employees which is payable upon termination are included in the financial statements. The liability for unused vacation and sick leave for governmental fund employees is recorded in the general long-term debt account group. Expenditures for these liabilities are recognized when paid. The liability for unused vacation and sick leave for proprietary fund employees is recorded as a long-term liability in the proprietary funds. The expenses were recorded when the liability was incurred as required by generally accepted accounting principles. Long -Term Debt Unmatured general long-term debt of the City, including special assessment debt for which the government is obligated in some manner, is recorded in a separate, self -balancing set of accounts, the General Long -Term Debt Account Group. Long-term debt of the proprietary funds is reported as a liability in the specific fund making the debt service payments. For more information on the long-term debt of the City, see Note 7. Contributed Capital Enterprise fund contributions from grants, customers, special improvement districts and other outside sources restricted for capital acquisition or construction are reported as contributed capital. Depreciation on assets acquired from contributions is reflected in the statement of revenue, expenses, and changes in retained earnings. The amount of depreciation applicable to assets acquired through contribution from grants, entitlements, and shared revenues is transferred to the related contribution account instead of retained earnings. Enterprise fund resources received from grants, entitlements, or shared revenues which may be utilized for operations or for either operations or capital acquisition or construction are reported as 'non-operating" revenges. R&I 1. Summary of Significant Accounting Policies - cont. Interfund Transactions Interfund transactions consisting of identified services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as revenue in the fund performing the services. Transactions which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of the expenditures in the fund that is reimbursed. Advances between funds are accounted for in the appropriate Interfund receivable and payable accounts. Cash and Cash E uivalents The City considers for purposes of the statement of cash flows, all investments of the proprietary fund types with an original maturity date of three months or less to be cash equivalents. Comparative Data Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the City's financial position and operations. However, comparative (i.e., presentation of prior year totals by fund type) data have not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. Total Columns on Combined Statements Total columns on the Combined Statements are captioned Memorandum Only to Indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 2. Property Taxes Property tax levies are set in August in connection with the budget process, and are based on taxable values listed as of January 1 for all property located in the City. Taxable values are established by the State Department of Revenue based on market values. A revaluation of all property is required to be completed on a periodic basis. Taxable value is defined by State statute as a fixed percentage of market value. -17- 2. Pro a Taxes - cont. Real property taxes and special assessments are generally billed in October and are payable 50% by November 30 and 50% by May 31. After these dates, taxes and assessments become delinquent and become a lien on the property. Personal property is assessed and personal property taxes are billed throughout the year, with a significant portion generally billed in May, June and July. Personal property taxes are based on levies set, during the prior August. These taxes become delinquent 30 days after billing. Taxes and assessments that become delinquent are charged interest at the rate of 516 of 1 % per month plus a penalty of 2%. Real property on which -taxes and assessments remain delinquent and unpaid may be sold at tax sales. In the case of personal property, the property is to be seized and solei after the taxes become delinquent. The City is permitted by State statutes to levy taxes up to certain fixed limits for various purposes. The taxes levied by the City for the year ended June 30, 1991, were within the legal limits. The tax levies were based upon a taxable value of $15,703,078. Current tax collections for the year ended June 30, 1991, were approximately 73% of the amount levied. 3. Deficit Fund Balances The following Special Revenue Funds had deficit fund balances at June 30, 1991: Airport Fund - $1,976 - The deficit arose in the fiscal year ended June 30, 1985, when certain capital improvements at the airport were made. Proceeds from the sale of land were intended to fund the improvements, however, the City was not able to sell the land, resulting in the deficit fund balance. The deficit has been reduced from $202,431 to its current amount and should be completey eliminated within two years. Parking Fund - $8,417 - The deficit arose because the cost of maintaining the leased parking lots exceeded the revenue received. The deficit was eliminated by an equity transfer to the General Fund during fiscal year ended June 30, 1992. The following debt Service Funds had deficit fund balances at June 30, 1991: 1981 Sidewalk and Curb $ 5,659 1982 Sidewalk and Curb $ 266 1983 Sidewalk and Curb $ 855 1984 Sidewalk and Curb $ 8,370 1985 Sidewalk and Curb $ 7,728 1986 Sidewalk and Curb $ 1,714 1987 Sidewalk and Curb $ 3,364 -18- 3. Deficit Fund Balances - cont. S.I.D. Number 313 $ 3,429 S.I.D. Number 326 $ 2,591 S.I.D. Number 328 $ 28,762 S.I.D. Number 333 $ 76,368 S.I.D. Number 334 $ 5,632 S.I.D. Number 335 $ 588 S.I.D. Number 336 $ 385 S.I.D. Number 337 $ 1,474 Lighting District Number 1 $ 8,239 Lighting District Number 2 $ 2,340 These deficits were caused by a short -fall in anticipated revenue and will be eliminated as delinquent assessments are collected or as loans are made from the Revolving Fund. 4. Budget OverdraftsNariances A significant favorable budget to actual variance in the amount of $165,620 occurred in the tax revenue source in the special revenue funds as a result of tax revenue collections being estimated conservatively. Significant favorable budget to actual variances existed in the public works, housing and community development, and capital outlay expenditure categories in the amounts of $177,287, $550,909, and $284,249, respectively, in the special revenue funds. These variances relate primarily to the tax increment fund in which all funds are appropriated for street projects whether such projects will be undertaken during the year or not. A significant favorable budget to actual expenditure variance in the amount of $330,855 occurred in the capital projects funds primarily because a construction project was not completed as anticipated in the fiscal year. A significant unfavorable budget to actual variance existed in the tax/assessment revenue source in the debt service funds in the amount of $143,126. This variance relates primarily to S.I.D. Numbers 328 and 333. Assessments were budgeted at $92,399 and $83,775, respectively, however, collections were only $61,953 and $24,775, respectively. 5. Cash and Investments The City maintains a cash and investment pool for all funds under the control of the City Treasurer. In addition, investments are separately held for several of the funds. Cash and investments may include cash and cash items, demand, time, savings and fiscal agent deposits; investments in the State Short -Term Investment Pool (S.T.I.P.), direct obligations of the United States Government and securities issued by agencies of the United States; repurchase agreements; and registered warrants. M . Cash and Investments - cont The composition of cash and investments on June 30, 1991, was as follows: Cash on Hand $ 250 Petty Cash 500 Cash in Banks: Demand Deposits 137,139 Savings Deposits 167,635 Time Deposits 95,833 Performance Bonds 102,506 Sidewalk and Curbs - Bonds 83,009 State Short -Term Investment Pool (S.T.I.P.) 4,347,400 Repurchase Agreements 2,453,000 Variable Annuity Life Insurance Company (VALIC): Deferred Compensation Plan 107.804 Total per Balance Sheet $ 77 4.9.5 ,076 Deposits - At year-end, the carrying amount of the City's deposits was $400,607, and the bank balance was $524,473. These deposits include demand, time,and savings deposits. Of the bank balance, $213,395 was covered by Federal depository insurance, and $311,078 was uninsured and uncollateralized. This uninsured and uncollateralized portion was fully covvered by collateral held by the financial institutions or by their trust departments or agents, but not in the City's name. Montana statutes require that the City obtain securities for the uninsured portion of the deposits as follows: 1. securities equal to 50% of such deposits if the institution in which the deposits are made has a net worth to total assets ratio of 6% or more, or 2. securities equal to 100% of the uninsured deposits if the institution in which the deposits are made has a net worth to total assets ratio of less than 6%. The State statutes do not specify in whose custody or name the collateral is to be held. The amount of collateral held for City deposits at June 30, 1991, exceeded the amount required by State statutes. Investments - As noted above, statutes authorize the City to invest in direct obligations of the United States Government and securities issued by agencies of the United States, repurchase agreements, and the State Short -Terra Investment Pool (S.T.I.P.). These investments are_ in addition to time and savings deposits, which are included in deposits above. The City's investments are categorized below to give an indication of the level of risk assumed by the City at June 30, 1991. _20_ 5. Cash and Investments - cont Category 1 - Includes investments that are insured, registered, or for which the securities are held by the City or its agent in the City's name. Category 2 - Includes uninsured and unregistered investments for which the securities are held by the financial institution's, broker's or dealer's trust department or agent in the City's name. Category 3 - Includes uninsured and unregistered investments for which the securities are held by the financial institution, broker or dealer,or by its trust department or agent but not in the City's name. -Category Carrying Market 1 2 3 Vale Value Repurchase Agreements S 12,543,000 S 2,543,000 S 2,543,000 Investment in State Short -Term Investment Pool (S.T.I.P.) 4,347,400 4,347,400 Total InvestMents 5 5,.8 11400 $ 8_,_90,400 In addition, funds placed in a deferred compensation plan by City employees were held and invested by the Variable Annuity Life Insurance Company (VALIC). Funds in the plan at .lune 30, 1991, amounted to $107,804. 6. Fixed Assets A summary of changes in general fixed assets follows: Balance Balance July 1. 1990 Additions Deletions June 30 1991 Land $ 1,527,392 $ 5 $ 1,527,392 Buildings 3,284,245 66,614 82,344 3,268,515 Improvements Other Than Buildings _ 1,033,466 42,314 1,075,780 Machinery and Equipment 1,827,236 142,688 112,528 1,857,396 Construction Work in Progress 20,347 20.347 0 Total $7,692,686 S 251,616 $ 215.219 $ 7 729,083 A summary of proprietary fund type property, plant, and equipment at June 30, 1991, follows: -21- • Fixed Assets - cont. 19 Internal Services $ 66,088 10,897 $ 55 191 Interest cost and capitalized interest for the enterprise funds for the year ended June 30, 1991, were as follows: Total Interest Cost Incurred $ 33,656 Interest Capitalized $ 11,642 Long -Term Debt The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1991: General Obligation Bonds (1) Revenue Bonds (2) Special Assessment Bonds (1) Urban Renewal Bonds (1) - Loan slContracted Debt (1) (3) Compensated Absences Payable (1) (2) Total Balance Enterprise Land $ 245,369 Machinery and Equipment 902,902 Contruction Work in Progress 2,205,931 Source of Supply 347,709 Pumping Plant 533,856 Treatment Plant 3,840,226 Transmission and Distribution 9,072,568 General Plant 532,566 Storm Sewer 2,959,624 Total $ 20,640,751 Less Accumulated Depreciation 6,120,835 Not $ 14,519,916 19 Internal Services $ 66,088 10,897 $ 55 191 Interest cost and capitalized interest for the enterprise funds for the year ended June 30, 1991, were as follows: Total Interest Cost Incurred $ 33,656 Interest Capitalized $ 11,642 Long -Term Debt The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1991: General Obligation Bonds (1) Revenue Bonds (2) Special Assessment Bonds (1) Urban Renewal Bonds (1) - Loan slContracted Debt (1) (3) Compensated Absences Payable (1) (2) Total Balance Balance . July 1, 1990 Additions Reductions June 30, 1991 S 445,000 S $ (30,000) S 415,000 2,260,000 2,815,000 (835,000) 4,240,000 396,092 21,923 (72,718) 345,197 1,820,000 (9,000) 1,730,000 32,838 71,014 (45,759) 58,093 498,169 70,655 568,824 5.452,099 2 978.592 - (992,4771 $ 7 357.114 (1) Reported in general long-term debt account group. (2) Reported in enterprise fund. (3) Reported in internal service fund, Bonded Debt Bonds payable at June 30, 1991, are comprised of the following individual issues: -22- 7m Lona -Term Debt - cont, 1. General Obligation Bonds Revenue Bonds Final Outstanding Annual Issue Interest Term of maturity Bonds June 30, Serial Purpose Date Rate Bond Date Issued 1991 Payment Bruck Hauser Pool 4/1/85 8.3-9.25% 15 yrs 2600 5550 000 5415,040 varies General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. $28,960 is available in the Debt Service Fund to service the general obligation bonds. 2. Revenue Bonds FinaL Outstanding Annual Issue Interest Term of maturity Bonds June 30, Serial Purpose Date nate Bond Date issued 1991 Payment 1972 Seger Plant 1/1/72 5.5% 20 yrs. 1992 S 200,000 S lo'co0 $10,400 1975 Storm Sewer 7/1/75 6.75% 20 yrs. 1995 445,000 245,000 varies 1985 Sewer Lines 5/1/86 7'% 20 yrs. 2o5 1,300,000 1,170,000 varies 1991 Sewer System Refunding Bonds 4/15/91 varies 20 yrs. 2011 2.815,000 2,815,000 varies Total 54.760.000 54,240.00i3 Revenue Bonds are directly related to and expected to be paid from the Sewer Fund. Significant provisions of the bond ordinances relating to the issuance of sewer system revenue bonds and other required information was presented in the Sewer Fund audit report issued August 6, 1532. 3. Tax Increment Urban Renewal Bonds In December 1985, the City issued $2,100,000 in Tax increment Urban Renewal bonds pursuant to Title 7, Chapter 15, Parts 42 and 43, MCA, and pursuant to the bond resolution adopted by the Kalispell City Council. These Series 1985 Bonds are considered to be special obligations of the City payable solely from tax increment generated by the area. The City has irrevocably pledged and appropriated the tax increment to the payment of the Series 1985 Bonds which have a first lien on all tax increment revenue generated by the area. The Series 1985 Bonds do not constitute a general obligation of the City or pledge the ad valorem taxing power of the City. Although the long-term liability created by the issuance of the bonds is considered a fund -specific liability, it is reported as a liability in the general long-term debt account group as required by generally accepted accounting principles. At June 30, 1951, there was $123,046 available in the Tax Increment Special Revenue Fund to service these bonds. -23- 7. Lona -Term Debt - cont. Special assessment bands are secured by a lien on the assessed properties. The primary source of repayment is the assessments levied against the benefiting properties. However, the City is liable, to an extent, for repayment of these special assessment bands. The City is authorized by State law to establish and has established a revolving fund to ensure the payment of debt service on the bonds in the event that assessed property owners are in default. At .lune 30, 1991, a material delinquent special assessment receivable was as follows: S.I.D. No. 328 .$46,820 $52,335 is available in the Debt Service Fund to service the special assessment funds. -24- Final Outstanding Issue Interest Terse of Maturity Bonds June 30, Aral Purpose Date Rate 8otx1 Date Issued 1991 P. ay7en Tax Increment 12/85 6.25-9.5% 16 yrs 7/1/2002 52,100,000 $1,730,000 varies 4. Special Assessment Bands (S.I.D.) Final Outstanding Issue Interest Term of Maturity Bonds June 30, ArrKLal Purpose Date Rate Bond Date Issued 1991 I3 S.I.D. No. 328 711/79 8.7% 20 yrs. 1999 S 300,000 S 120,000 varies S.I.D. No. 334 111/82 14.5% 10 yrs. 1992 14,000 1,000 varies S.I.D. No. 335 11/1/82 12.0% 10 yrs. 1992 15,00 3,000 vcries S.I.D. No. 336 12/1/86 12.0% 10 yrs. 1994 4,500 1,500 varies S.I.D. No. 337 12/1/86 7.74% 15 yrs. 2002 110,000 90,000 varies Light Construction No.1 12/1/82 12.0% 10 yrs. 1992 75,000 9,000 varies Light Construction No.2 11/26/84 12.0% 8 yrs. 1992 28,500 3,000 caries 1983 Sidewalk and Curb 2/1/84 10.0% . 8 yrs. 1991 6,500 1,000 varies 1984 Sidewalk and Curb 3/5185 12.0% 8 yrs. 1992 45,COO 12,000 varies 1985 Sidewalk and Curb 12/3/85 10.0% 8 yrs. 1993 44,600. 16,600 varies 1986 Sidewalk and Curb 12/31/86 9.0% 8 yrs. 1994 20,987 8,488 varies 1987 Sidewalk and Curb 12/31/87 12.0% 8 yrs. 1995 31,275 15,275 varies 1988 Sidewalk and Curb 1/1189 12.0% 8 yrs. 1996 37,411 29,411 arrims 1989 Sidewalk and Curb 113/90 10.5% 8 yrs. 1998 15,818 14,000 varies 1990 Sidewalk and curb 1/15/91 10.0% 8 yrs. 1999 14,600 14,500 varies Meridian Sidewalk and Curb 1/15/91 11.0% 8 yrs. 1998 7,322 6.423 varies Total 5770,513 $345,197 Special assessment bands are secured by a lien on the assessed properties. The primary source of repayment is the assessments levied against the benefiting properties. However, the City is liable, to an extent, for repayment of these special assessment bands. The City is authorized by State law to establish and has established a revolving fund to ensure the payment of debt service on the bonds in the event that assessed property owners are in default. At .lune 30, 1991, a material delinquent special assessment receivable was as follows: S.I.D. No. 328 .$46,820 $52,335 is available in the Debt Service Fund to service the special assessment funds. -24- 7. Long -Term Debt - cont. Loans/Contracted Debt Origination Interest Due Principal Outstanding Purpose Date Rate Term Date Amount June 30, 1991 Computer(2) 8177/90 varies 5 yrs. 8/15/95 $ 71,014 $ 52,907 Phone System(1) 9111/87 varies 3 yrs. 8/15/90 39,077 5,186 Total 488,890 110,091 $ 58,093 (1 ) Reported in general long-term debt account group. 1996 (2) Reported in Internal Service Fund. 398,303 1997-2001 286,322 Compensated Absences Pa able Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund 51,234 General Long -Term Debt Account Group 517,5 Total $ 568 824 Requirements to Amortize Debt The annual requirements to amortize all long-term debt outstanding, except compensated absences payable, as of June 30, 1991, including interest payments of $4,925,331, were as follows Annual Requirements to Amortize Long -Term Debt June 30 1991 special Assessnent Bonds S 90,579 74,295 60,968 49, 336 48,85 538,9=57 10'M sC9 Contracted Debt S 5,360 16,420 16,420 16,420 9,754 $ 4.73,5 3 64,374 -25- Urban Rene,.mt S 252,6955 254,93 256,085 258,195 260,156 1,23,SSS M,8t $ 2,858=433 Totals S 729,526 955,888 8M, 826 792,964 �j +787,193 3,A° J,©31 2,315,852 1,278,269 259,062 S 11 713 6M21 General Year Ending obligation Revenue jurve 30,� Bands Bonds 1992 $ 67,143 3 313,749 1993 69,358 - 540,900 1994 66,453 488,890 1995 68,523 402,730 1996 70,!383 398,303 1997-2001 286,322 1,985,199 2002-2006 2,022,312 2007-2011 1,278,269 2012 T ...... 259,062 Total $ 627.911 S 7.689.414 special Assessnent Bonds S 90,579 74,295 60,968 49, 336 48,85 538,9=57 10'M sC9 Contracted Debt S 5,360 16,420 16,420 16,420 9,754 $ 4.73,5 3 64,374 -25- Urban Rene,.mt S 252,6955 254,93 256,085 258,195 260,156 1,23,SSS M,8t $ 2,858=433 Totals S 729,526 955,888 8M, 826 792,964 �j +787,193 3,A° J,©31 2,315,852 1,278,269 259,062 S 11 713 6M21 7. Long -Term Debt - cont. Advance Refunding of Long -Term Debt On April 15, 1991, the City issued $2,815,000 in revenue bonds with an average interest rate of 7.18% to advance refund $740,000 of outstanding 1983 revenue bonds with an average interest rate of 10.08% and to finance construction of the new wastewater treatment plant facilities. The net proceeds of $785,300 (after payment of underwriting fees, insurance, and other issuance costs totalling $20,683) of the revenue bond sinking fund monies were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the revenue bonds. As a result, the revenue bonds are considered to be defeased and the liability for those bonds has been removed. Although the advance refunding resulted in the recognition of an accounting loss of $63,036 for the fiscal year ended June 30, 1991, the City in effect reduced its aggregate debt service payments by approximately $122,000 over the next 10 years and obtained an economic gain (difference between the present values of the old and new debt payments) of $94,700. 8. State -Wide Retirement Plans All City employees participate in one of the following cost sharing multiple -employer retirement plans. All of the retirement plans also provide death and disability benefits, with amounts determined by the State of Montana. Public -Employees' Retirement System P.E.R.S. All employees other than police officers and firemen, that work more than the equivalent of 120 working days per fiscal year are required by State law to participate in P.E.R.S. Employees who retire (1) at or after age 60 with five years of creditable service, (2) at -or after age 65 regardless of years of service, or (3) with 30 or more years of creditable service are entitled to a retirement benefit, payable monthly for the life of the member and/or beneficiary. The benefit amount is the number of years of creditable service divided by 56, and multiplied by the final compensation. The final compensation is a member's highest average annual compensation during any three consecutive years of membership service. Benefits fully vest after five years of service. Vested employees may retire at age 50 or with 25 years of service and receive reduced benefits. Munici al Police Offers' Retirement System M.P.O.R.S. City police officers are covered under the M.P.0.R.S. A member may retire with a retirement benefit after completing at least ten years of membership service and reaching age 50, or twenty years of membership service regardless of age. The retirement benefit, payable monthly for life, is based on the following formulas: -26- 8. State -Wide Retirement Plans - cont. 1. For members hired prior to July 1, 1977: 50% X Base Salary + 1 % X Years of Service over 20 (Maximum benefit is 60% of Final Average Salary) 2. For members hired after July 1, 1977: 2.5% X Final Average Salary (FAS) X + 1 % X FAS X Years of Service over 20 (Maximum benefit is 60% of FAS) Firefighters' Unified Retirement System (F.U.R.S.) City firefighters are covered under the F.U.R.S. A member may retire with a service retirement after both completing ten years of membership service and attaining minimum service retirement age of 50. The retirement benefit, payable monthly for life, is based on the following formulas: 1. For members hired before July 1, 1981: 50% X Final Monthly Compensation (FMC) + 1 % X Years of Service over 20 X FMC (Maximum benefit is 60% of FMC) 2. For members hired on or after July 1, 1981: 2% X Years of Service (30 years maximum) X Final Average Salary (FAS) (Maximum benefit is 60% of FAS) For members hired prior to July 1, 1981, benefits are calculated based on FMC which is the regular monthly salary (excluding overtime, holiday pay, shift differentials, compensatory time payments, and payments in lieu of sick leave) last received by the member. For members hired on or after July 1, 1981, benefits are calculated based on FAS which is the average of the member's regular monthly pay during the last 36 months of service. The City's total payroll for the fiscal year was $3,986,901. Required employee, employer, and State contribution rates and the covered payroll amounts for each plan are as follows: P.E.R.S. M.P.0.R.S. Covered Payroll 1,600,345 $ 65'1,739 Employee 6.3% 6 - 7.5% Employer 6.417% 13.02% State 15.06% -27- F.U.R.S $ 560,631 6% 13.02% 22.98% 8. State -Wide Retirement Plans - cont. The City's contribution requirement for the fiscal year ended June 30, 1991, including additional contributions from employees, were as follows: P. E. R. S. M.P.0.R.S. F.U.R.S. Employer $ 102,694 $ 84,856 72,994 Employee 100,822 42,798 33,638 Additional Employee __ 6,277 970 Total $ 209 ,79.3 $ 128,fi24 $ 10.6632 The City's contribution requirement compared to total contribution requirements for all participating employers was less than 1 % for P.E.R.S., and was 6% for M.P.O.R.S., and 5% for F.U.R.S. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be in the future as a result of employee service to date. The measure, which is the actuarial present value of a plan's projected benefits, is intended to help users assess a plan's funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. The plans do not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation for the City's plans, as a whole were as follows: Pension Benefit Obligation Net Assets Available (At Cost) Unfunded Pension Benefit Obligation Years Needed to Amortize Past Service Costs P_E.R.S. $1,173,852,092 $ 919,474,377 $ 254,377,175 21.76 WRZi1 � $ 75,950,883 F.U.R.S. $ 93,743,568 $ 37,702,694 $ 38,237,828 $ 38, 248,189 26.19 $ 55,505,740 33.54 This information was determined through an actuarial update at June 30, 1991, and an actuarial valuation at July 1, 1990. Ten year historical trend information is presented in the .lune 30, 1991, annual report. All information can be obtained from the Montana Department of Administration. M 9. Local Retirement Plans Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of benefits under the plan), subject only to the claims of the City's general creditors. Participants' rights under the plan are equal to those of general creditor of the City in an amount equal to the fair market value of the deferred account for each participant. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prurient investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. Investments are managed by the plan's trustee with no specific restrictions on the investment options. The plan assets of $107,804 are recorded in an agency fund at June 30, 1991, as required by generally accepted accounting principles. 10. Amounts Dug From and Due To Other Governments The amounts clue _ from and due to other governments consist of the following: Due From Other Governments. General Fund - Due from County Special Revenue Fund: Tax Increment Fund - Due from State Tax Increment Fund - Due from County Comprehensive Insurance Fund - Due from County Retirement Fund - Due from County Special Street Maintenance Fund -Due from State Health Insurance Fund - Due from County Total Special Revenue Fuad $ 102,016 49,888 184,725 16,815 18,298 7,973 34,463 $312.162, 10. Amounts Due From and Due To Other Governments - cont. Debt Service Fund: 1984 Sidewalk and Curb Fund - Due from Norwest Bank 720 Enterprise Fund: Sewer Fund - Due from E.P.A. $290,451 11. Amounts Due From and To Other Funds Due from other funds and due to other funds consist of the following: Receivable Fund Payable Fund Amount General Fund S.I.D. Revolving $ 7,619 General Fund Parking Fund 8,417 Tax Increment Fund S.I.D. Number 328 79,595 S.I.D. Revolving 1983 Sidewalk and Curb 1,000 S.I.D. Revolving 1984 Sidewalk and Curb 8,332 S.I.D. Revolving 1985 Sidewalk and Curb 7,791 S.I.D. Revolving 1986 Sidewalk and Curb 2,936 S.I.D. Revolving 1987 Sidewalk and Curb 3,605 S.I.D. Revolving 1988 Sidewalk and Curb 957 S.I.D. Revolving 1989 Sidewalk and Curb 2,198 S.I.D. Revolving S.I.D. Number 328 67,811 S.I.D. Revolving S.I.D. Number 313 3,175 S.I.D. Revolving S.I.D. Number 333 42,915 S.I.D. Revolving S.I.D. Number 334 4,328 S.I.D. Revolving S.I.D. Number 335 588 S.I.D. Revolving S.I.D. Number 336 455 S.I.D. Revolving S.I.D. Number 337 1,500 S.I.D. Revolving Lighting District Number 1 7,638 S.I:D. Revolving Lighting District Number 2 2,591 S.I.D. Revolving S.I.D. Number 326 2,591 S.I.D. Revolving 1981 Sidewalk and Curb 5,160 S.I.D. Revolving 1982 Sidewalk and !Curb 121 Total $ 261,080 12. Restricted Cash investments The following restricted cash/investments were held by the City as of June 30, 1991. These amounts are reported within the cash/ investment account on the Combined Balance Sheet. -30- 12. Restricted Cash Investments - cont. Description Amount Special Revenue Fund: 28,642 Community Development Fund - Interest Subsidy $ 81,704 Tax Increment Fund: 1,452,630 Sinking and Interest 123,046 Interest Subsidy - Commercial Loans 55,324 Bond Proceeds 228,000 Interest Subsidy - Residential Program 3,605 UDAG Repayment Fund: 17,597 Rehabilitation Grants 41,960 Community Development Loan and Grant 24,987 Southwest Kalispell Project - Interest Subsidy 100,689 Community Emergency 10,524 Total Special Revenue Funds . _669,839 Enterprise Fund: Water - Investment $ 2,500 Sewer - Replacement and Depreciation 28,642 Sewer - Reserve for Operations 51,000 Sewer - Construction 1,452,630 Sewer - Sinking and Interest 55,633 Sewer - Contingency 532,073 Sewer - Capital Improvement 675,968 Sewer - Storm Sewer 80,176 Solid Wast - Replacement and Depreciation 17,597 Total Enterprise Funds 2,_896,219 Trust and Agency Funds: VALIC 457 Deferred Compensation Fund S 107,804 Performance Bond - Bond Held 16,989 Total Trust and Agency Funds $ '12793 Restricted Cash/investments $ 3,090,_851 13, Fund Equ%_y Reserved retained eamings/fund balances of the City June 30, 1991, consisted of: 11clie 13. Fund, Equity,-,. cont. Special Revenue Fond: Water Tax Increment Fund: Total Reserved for Sinking and Interest $ 123,046 Reserved for Interest Subsidy 55,324 Reserved for Bond Proceeds 228,000 Reserved for Rehabititation and Grants 3,605 Community Development Fund: 51,000 Reserved for Interest Subsidy 81,704 UDAG Loan Repayment: 101,194 Reserved for Interest Subsidy 100,689 Reserved for Loan and Grants 24,987 Reserved for Rehabilitation and Grants 41,960 Reserved for Community Emergency 10,524 Total Special Revenue Funds 669.839 Enterprise Fund: Water Water: Total Reserved for Inventory $ 174,029 Sewer: $ 5,937,606 Reserved for Replacement and Depreciation 28,642 Reserved for Construction 1,934,791 Reserved for Operations 51,000 Reserved for Capital Improvement 675,968 Reserved for Storm Severer 101,194 Reserved for Sinking and Interest 55,633 Reserved for Contingency 532,073 Garbage 22,920 Reserved for Replacement and Depreciation 17,597 Total Enterprise Funds 3;=570,927 14. Changes -in Contributed Ca tml A schedule of changes in contributed capital is presented below: 9CYA Water Sewer Total Contributed Capital - July 1, 1990 $ 622,159 $ 5,315,447 $ 5,937,606 Add: Capital Grants 1,219,234 1,219,234 Special Improvement Districts: Developer Contribution 22,920 22,920 Capital Projects Fund Contribution 8,504 8,412 16,916 Deduct: Depreciation on assets acquired via capital grants 1.6,379 _ 217.901 23,4,280 Contributed Capital - June 30, 1991 $ 61.4,284 $ 6 34_w12 $ 6,92.396 9CYA 15, Restatements During the current fiscal year, adjustments relating to prior years' transactions were made to the fund balance and retained earnings accounts. The following is a schedule of such adjustments: Fund Amount Reason for Adjustment Special Revenue Fund: Airport Fund $ 768 To adjust interest accruals Enterprise Fund: Ambulance Fund $(53,299) To write off accounts receivable 16. Residual Equity Transfers Residual equity transfers are made to transfer the remaining equity balance of a discontinued fund to another fund. Transfers made during the year consist of the following: Fund Receiving Transfer Fund Receiving Transfer Amount S.I.D. Revolving S.I.D. No. 302 $1,868 S.I.D. Revolving S.I.D. No. 324 $6,032 Water Fund Sykes Area Capital Projects $8,504 (1) Sewer Fund Sykes Area Capital Projects $8,412 (1) (1) These transfers were properly recorded as contributed capital -government additions in the water and sewer funds. Therefore, residual equity transfers in and out do not agree in the financial statements. 17. Segment Information For EnteEprise Funds The City maintains four enterprise funds which provide water, sewer, solid waste and ambulance services. Segment information for the year ended June 30, 1991, was as follows: operating Revenues Depreciation Expense operating Income or (Loss) Net Intone or (Loss) Current Capital: contributions Plant, Property and Equipment: Additions Deletions Net Working Capital Total Assets Bonds and other Long -Term Liabilities: Payable from operating Revenue Total Equity S 13,572 S 4,264,258 $ 12,466 S 938 S 4,291,E $4,886,475 S 9,739,836 5573,369 $122,228 $14,471,9W -33- Sot id Total Vater Sesser Waste Ambulance Enterprise Fund Fund Fund Funs! funds S 774,355 S 1,298,969 S252,577 $241,380 S 2,567,2.`31 S 122,501 S 382,386 S 41,553 S 10,576 S 557,016 S 152,131 S 269,458 S 70,166 S 30,831 S 522,586 S 171,264 $ 92,470 S 82,47€: S 31,081 S 377,285 S 8,504 S 1,250,566 S 1,259,070 S 125,173 S 1,698,502 5113,244 S 1,935,915 S 35,733 S 4,728 $ 9,072 S 49,533 S 565,636 S 406,907 $270,845 $103,619 $ 1,347,07 $4,179,263 $14,640,953 5536,E $129,962 $19,437,012 S 13,572 S 4,264,258 $ 12,466 S 938 S 4,291,E $4,886,475 S 9,739,836 5573,369 $122,228 $14,471,9W -33- 18. County Provided Services The City is provided various financial services by Flathead County, The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. 19. Joint Ventures Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. Cily-Counly Health Department The City -County Health Department is operated under an interlocal agreement between Flathead County and the City of Kalispell. The Department operates under the supervision and control of the City -County Health Board. The Board consists of seven members, six of whom are appointed by the Board of County Commissioners. The City of Kalispell levied 3.75 mills in support of the City - County Health Department for the fiscal year ended June 30, 1991. County -Wide Administrative Board The CitKalispell .., ,. y of Kalis ellp along with Flathead County, the City of Columbia Falls, and the City of Whitefish, participate in a County -wide Administrative Board (CAB) that was established by an interlocal agreement in December 1979. The CAB was formed for the purpose of coordinating all land use planning, subdivision reviews and approval, and zoning application and enforcement in Flathead County, as well as to assist in annexation by the cities. The Board consists of four members, the Mayor of each of the three cities and the Chairman of the Flathead County Board of County Commissioners. The CAB is financed by a tax levied by each of the parties to the interlocal agreement in proportion to the expected benefits that each party shall receive during the ensuing fiscal year. The financial activities of the CAB are accounted for by Flathead County. The City's share of CAB's assets, liabilities, and equity was not readily available. insurance Coverag-e Effective July 1, 1987, the City joined with other Montana cities and towns to form a self-insurance pool (named the Montana Municipal Insurance Authority) offering workers' compensation and liability coverages. Initial liability limits of $1,500,000 per participant, and Workers' Compensation coverage of $5,000,000 in excess of $500,000 for each accident and aggregate coverage of $5,000,000 in excess of $3,033,532 were obtained through the insurance pool. The Authority is govemed by a Board of Directors consisting of thirteen officials from participating cities and towns. At June 30, 1991, the Authority had one hundred and three members in its liability program and eighty-one members in its Workers' Compensation program. -34- 19. Joint dentures - cont. In August 1986, the pool issued $6.25 million in tax exempt: bonds to fund the liability program's reserves. Also, in September 1990, the pool issued $7,385,000 in tax exempt bonds to fund the Workers' Compensation program's reserves. The City signed a note with the Authority for $241,773, its pro rata share of the debt, of the Liability and Workers' Compensation programs, in order to help secure the bonds. Most of the debt service on the bonds is expected to be paid through interest earnings on bond proceeds and other funds of the Authority. The City has, therefore, elected not to record this potential liability as a long-term liability in its accounting records and report it as such in its financial statements. Audited financial statements for the Montana Municipal Insurance Authority for the fiscal year ending June 30, 1991, disclosed the following: Assets Current Liabilities Long -Term Debt Unpaid Claims Liabilities Fund Balances Total Liabilities and Fund Balance Revenues Expenses Excess Revenue (Expense) Liability Workers' Insurance Compensation $ 13.144,313 $ 14&_ q7 959 $ 728,574 6,362,893 3,830,000 2,222,846 $ 13, 144,313 $ 3,284,499 2,695,420 $ 589,079 $ 601,959 7,385,000 6,581,000 $ 14:567,959 $ 4,278,833 432781833 $ -0- 20. Pending,Litigation There was no pending or threatened litigation or unasserted claims or assessments against the City at June 30, 1991. 21. Loans Receivable On June 29, 1984, the City entered into an agreement with Kalispell Center Limited Partnership (KCLP) whereby funds received by the City under an Urban Development Action Grant were loaned to KCLP to help fund the Kalispell Center Mall project. The total amount loaned to KCLP was $3,336,928. The balance of the loan receivable at June 30, 1991, was $3,081,295 and is recorded in the Urban Development Action Grant Loan Repayment Fund, a Special Revenue Fund. Loan repayments to the City began in April 1987. The repayment schedule calls for monthly principal and interest payments of $21,096.95 on the first day of each month. The term of the loan is 25 years. Interest was deferred for the first year but will accrue at 6% per annum for years 2 through 4, then at 9% for the reamining 21 years of the loan. -35- 21. Loans Receivable - cont, A loan was made from the Tax Increment Special Revenue Fund to the 2nd Avenue Vilest Professional Building, a partnership, in the amount of $67,000 on December 30, 1985. The loan was made for. the purpose of acquiring real property for development as a parking lot. The term of the loan is fifteen years at 5% interest for the first five years. For years 6 through 15 the interest rate will accrue at the rate paid on U.S. Treasury bills as of the 15th day of .January of the year in which the payments are due.. The repayment schedule calls for a monthly principal and interest payment of $530 each month for the first five years of the loan. The balance of the loan receivable of $48,261 was recorded in the Tax Increment Fund. -36- CITY OF KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1991 -37- CITY OF KALISPELL, MONTANA SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1991 m DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICOT, GOVERNOR 1424 NINTH AVENUE - STATE OF MONTANA (406) 444-3010 PC) BOX 20€3501 IU -=A , MONTANA 59620-0501 INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION To the Honorable Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, for the year ended June 30, 1991, and have issued our report thereon dated August 5, 1993. In our report, our opinion was qualified because the City had not maintained adequate records relating to the fixed assets of the general fixed assets account group and the proprietary fund types. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and 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 general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the City, taken as a whole. The accompanying Schedule of Federal Financial Assistance for the year ended June 30, 1991, is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in this schedule has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. DONALD L. DOOLEY August 5, 1993 150:31 'S t.�.: ✓.:+'« �13P�f?iiiiYl e�i�:,�p-'�JYC�:;+ Bureau Chief CITY OF KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT Fiscal Year Ended June 34, 1992 m J m ® ' E OE m ms m`m o ; `m o tas m ��II} �¢ � t1¢� m E $ $ $ -.¢}E m Ca;�� aCasssE- (moo o mm�" �» 0.m E car or ¢ �rt E -emus amt®R to 0-• o m a 7 E E E E a o �" n 2 .. 2 E M CL E' sco cmEEEE� cpm cpm o ff = `o a 9� Q n do o ca :2, c g o tri L7 a� c E � is m ar se Cvaa?aw n C�amsEO,u L cE w«r®_d m as nmiRm u r- 00 i sn flin vi o to "D 0 0 v!aIL r c3 c3 u a —40— m Cl C3 00 0 a m N N m N Cl` r r N Ld iii V! V! t9 V! VY p©Q © p ¢ O E i 00 � € O O MAOI- CS C' O C] V 1�3 yam„ [n w- O m Irl bl 0 7 CO t£f t7 m 0, co Q Q L H 64 H M 1A Vf V? m �� Q000 sM� © N to t0 tQo to OI ' j O v U i N 1i1 CC7 Vi d! !A Vl 01 V! 603 Y! O O o m oEm 'n, o? rF N to Q _ O t(3 tohppC/7 to eoo3R 15 F tnF 03 O1 IN 40 to Nh i`7 N m C, N (vrt71 (6 rtl7 �. t 6�J !1) ✓f FSCD wi�j t/) ✓i Mi N�� . w LQ oz = CLI 3 7 A N N V �¢' {i7 t Z j O N O 5� to O h h U g z� E n av$ mN m Ln €c 0- Uj V! N M . M 49 Vk 4$ Mk > Y Wo 0 LL 03t7 r (V r n CD (n �� am o a p? 999C? cot mto _ LU U�t3 999 999 Q SS U C] E>_ U � N m©- tp pQpp(p�pp °r v u E;. tD tG tfi CD tfi v v NN -NN tL2E i q wco J m ® ' E OE m ms m`m o ; `m o tas m ��II} �¢ � t1¢� m E $ $ $ -.¢}E m Ca;�� aCasssE- (moo o mm�" �» 0.m E car or ¢ �rt E -emus amt®R to 0-• o m a 7 E E E E a o �" n 2 .. 2 E M CL E' sco cmEEEE� cpm cpm o ff = `o a 9� Q n do o ca :2, c g o tri L7 a� c E � is m ar se Cvaa?aw n C�amsEO,u L cE w«r®_d m as nmiRm u r- 00 i sn flin vi o to "D 0 0 v!aIL r c3 c3 u a —40— DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICOT, GOVERNOR 1424 NINTH AVENUE STATE OF MONTANA (406) 444-3010 PO BOX 2005131 HELENA, MONTANA 59620-0501 INDEPENDENT AUDITOR'S REPORT To the Honorable Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the year ended June 30, 1992, as listed in the table of contents. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and 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 general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Kalispell, Montana, at June 30, 1992, and the results of its operations and the cash flows of its proprietary fund types for the year then ended, in conformity with generally accepted accounting principles. DONALD L. DOOLEY August 5, 1993 Bureau Chief -42- a v EO UAL O ,y f 7 E:VFPLOYER CITY OF KALISPELL, MONTANA FINANCIAL STATEMENTS Fiscal Year Ended June 30, 1992 -43- i U mmUnommww $ niao�rnc+ ira c. 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V3 fR mico LN" r , C'�/1 69 0 0 of n n ranij m ` C) cc 69 fA t4 403 t0 0 f to ifs V� o crto� Ln co Itr M m co � N CN 0/ 69 € 40% r r 1 oI Fi7''V..giH€ Ni {D dd 69 6R! 69 i tFr v3 sn' re, � ui 6A HE 69 is 75 K v E w m !ti C LL m m Q z rn c c . ca CL E 0 U m w 0 0 z v � m 3 CZ [U 47 N 5 ?. oed c c G w� Cmmac7a� U ®o. LL m m CL O a 00!-© is 75 K v E w m !ti C LL m m Q z rn c c . ca CL E 0 U m w CITY OF KALISPELL COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30,1992 PROPRIETARY FUND TYPES TOTALS (MEMORANDUM ONLY) Interna[ Enterprise Service June 30, 1992 June 30, 1991 Operating Revenues: Charges for Services $ 2,831,186 $ $ 2,831,186 $ 2,311,691 Miscellaneous Revenues 74,115 74,115 48,553 Special Assessments 201,802 201,802 207,037 Internal Services - 41,848 41,848 29,199 Total Operating Revenues $ 3,107,103 $ 41,848 $ 3,148,951 $ 2,596,480 Operating Expenses_ Personal Services Supplies Purchased Services Fixed Charges Loss[Bad Debt Expenses Depreciation Total Operating Expenses Operating Income (Loss) Non -Operating Revenues (Expenses); Interest Debt Service Interest Expense Gain(Loss) on Asset Disposal Total Non -Operating Revenues (Expenses) Net Income (Loss) Before Extraordinary Item Extraordinary Loss on Refunding of Bonds Net Income (Loss) Add depreciation on fixed assets acquired with c apw grams Increase (Decrease) in Retained Earnings Retained Earnings - July 1, 1991 - As Previously Reported Restatements Retained Earnings - July 1, 1991 - As Restated Retained Earnings - June 30, 1992 See accompanying Notes to Financial Staters $ 855,968 $ 142,930 3,505 288,625 12,389 314,058 2,935 27,683 $ 973,385 581,916 14,642 $ 2,211,180 $ 33,471 $ 895,923 $ 8,377 $ 855,968 14&,435 301,014 316,993 27,683 596,558 $ 2,244,651 $ 904,300 $ 821,286 114,093 281,385 254,798 28,898 567,913 $ 2,068,373 $ 528,107 $ 100,739 $ 45 $ 100,784 $ 0 (240,995) (3,760) (244,755) (191,733) (19,964) - 19,964 0 $ (160,?2-jo $ (3,715) $ (163,935) $ (191,733) $ 735,703 $ 4,662 $ 740,365 $ 336,374 - 0 (63,036) $ 735,703 $ 4,662 $ 740,365 $ 273,338 233,020 - 233,020 $ 968,723 $ 4,662 $ 973,385 $ 7,509,512 $ 1,598 $ 7,511,110 (17,099) - (17,099) $ 7,492,413 $ 1,598 $ 7,494,011 $ 8.461,136 $ 6.260 $ 8.467.396 -48-- 234,280 $ 507,618 $ 6,951,246 X53,299) $ 6,897,947 $ 7,405,565 CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30, 1992 Cash Flows from Operating Activities: Cash received from customers Cash received from assessments Cash received from hookupsimiscellaneous sources Cash payments to suppliers for goods/services Cash payments to employees for services Net Cash Provided by Operating Activities Cash Flows from Capital and Related Financing Activities. Acquisition and construction of capital assets Principal paid on revenue bonds and contracts interest paid on revenue bonds and contracts Proceeds from loan1contracted debt Proceeds from sale of revenue bonds Loss on bond refunding Capital contributed by governmental funds Capital contributed by developer Capital contributed by government Net Cash Used for Capital and Related Financing Actives Cash Flows from Investing Activities: Interest on investments Purchase of sidewalk and curb warrants Redemption of sidewalk and curb warrants Net Cash Provided by investing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at July 1, 1991 Cash and Cash Equivalents at June 30, 1992 PROPRIETARY by Operating Activities: FUND TYPES TOTALS MEMORANDUM ONLY) $ 895,923 $ internal 895,923 $ 528,107 Enterprise Serrvice June 30, 1992 June 30, 1991 $ 2,773,303 $ 41,848 $ 2,815,151 $ 2,225,215 209,117 249,117 213,972 74,115 581,916 74,115 48,553 (767,473) (12,330) (779,803) (690,891) (821,549) (3,5 (825,054) (837,226) $ 1,467,513 $ 26,013 $ 1,493,526 $ 959,623 (13,101) (33,236) Decrease in assessments receivable 7,315 $ (8,831,737) S (10,047) $ (8,841,784) S (1,466,834) (179,403) (13,578) (192,981) (848,871) (274,715) (4,279) (278,994) (156,204) 3,952,400 - 3,952,400 71,014 - - 0 2,815,000 - - 0 (63,036) 242,158 - 242,158 16,916 - 0 22,920 2,872,256 - 2,872,255 928,783 $ (2,219,04 $ (27,904) $ (2,246,945) S 1,319,688 $ 100,739 $ 45 $ 100,784 $ 105,545 (3,360) - (3,360) (21,823) 15,600 - 15,600 11,819 S 112,979 $ 45 $ 113,024 $ 95,541 $ (638,549) $ (1,846) $ (640,395) $ 2,374,852 3,936,877 8,791 3,945,668 1,570,816 $ 3,298,328 $ fi,945 $ 3,305.273 3945,668 $ , Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 895,923 $ 8,377 $ 895,923 $ 528,107 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 581,916 14,642 581,916 567,913 Provision for uncollectable accounts (17,099) - (17,099) (53,299) Change in assets and liabilities: Increase in accounts receivable (13,101) - (13,101) (33,236) Decrease in assessments receivable 7,315 - 7,315 6,935 Increase in inventory (2,727) - (2,727) (43,034) Decrease in accounts payable (19,133) 1,778 (19,133) 0 Increase in compensated absences 34,419 - 34,419 (8,896) Increase in prepaid expenses - - 0 (4,867 Net Cash Provided by Operating Activities $ 1,467 513 $====241797 $ 1.467.513 S 959.623 Noncash investing, capital, and financing activities~ 1. The City recorded $375,557 due from E.PA, as capital in the Sewer Fund. 2. The City transferred contributions from governmental funds in the amount of $24,590 to the Water Fund and $217,568 to tiv Sewer Furl_ 3. The Water and Sewer Funds disposed of obsolete equ#wmit The undepreciated cost of the equipment was recorded as loss in the Water Fund of $20,096, and a gain of $132 in d* Sewer Fund_ see accompanying Notes to Financial Statements -49-- NOTES TO FINANCIAL STATEMENTS June 30, 1992 1. Summary of Significant Accounting Policies The following is a summary of the City's significant accounting policies: Reporting Entity The City is governed by an elected Mayor and City Council. The general purpose financial statements include all funds, account groups boards, commissions, and authorities which meet the criteria embodied in GASB Cod. Sec. 2100, "Defining the Reporting Entity." Such criteria are manifestation of oversight responsibility (financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters), scope of public service (benefit to the City and/or its residents, conducted within the geographic boundaries of the City, and generally available to its citizens), and special financing relationships. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for within a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. The following types of funds and account groups are maintained by the City: GOVERNMENTAL FUNDS General Fund - used to account for all financial resources except those required to be accounted for in other funds. Special Rgvenue Funds -- Used to account for the proceeds of special revenue sources (other than for major capital projects) that are legally restricted to expenditures for specific purposes. Capital Projects Funds - Used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). Debt Service Funds - Used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. -50- 1. Summary of Significant Accounting Policies PROPRIETARY FUNDS Enterprise_ Funds - Used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - wrhere the intent of the governing body is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. Internal Service Funds - Used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the City, on a cost reimbursement basis. FIDUCIARY FUNDS Trust gnd Agency _Funds - Used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These may include (a) expendable trust funds, (b) nonexpendable trust funds, (c) pension trust funds and (d) agency funds. FIXED ASSETS AND LONG-TERM LIABILITIES General Fixed Assets Account Grou - Used to account for the fixed assets of the City which are not accounted for in proprietary funds. General„ Long Term Deb# Account Group - Used to account for all long-term debt of the City except that accounted for in the proprietary funds. Basis of Aqc6untinq and Measurement Focus The modified accrual basis of accounting is followed by all governmental and expendable trust funds. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, that is when they become both measurable and available. Available means when collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. In. applying the susceptible to accrual concept under the modified accrual basis, the following revenue sources are deemed Doth measurable and available: earnings on investments, real estate and personal property taxes, assessments, federal and state grants and subsidies, and charges for current services. Revenue sources not susceptible to accrual include licenses and permits, fines and forfeitures and certain other miscellaneous revenues, which are not considered measurable until received. -51- 1. Summary of Significant Accounting Policies The City records real and personal property taxes and assessments levied for the current year as revenue. Taxes and assessments receivable remaining unpaid at year-end and not expected to be collected soon enough thereafter to be available to pay obligations of the current year were recorded as deferred revenue, with a corresponding reduction in revenues, as required by generally accepted accounting principles. In addition, prior period delinquent taxes and assessments collected in the current period were recorded as revenue in the current period as required by generally accepted accounting principles. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures:) rather than expenses. Most expenditures are measurable and are to be recorded when the related liability is incurred except for unmatured principal and interest on general and special assessment long-term debt which are reported only when due, cost of accumulated unpaid vacation and sick leave which are reported as expenditures in the period in which they will be liquidated with available financial resources rather than in the period earned by employees, and inventory costs which are reported as expenditures when purchased rather than when consumed. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. The accrual basis of accounting is utilized by the proprietary funds. Under the accrual basis of accounting, revenues are recorded when earned and expenses when incurred. The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental and expendable trust funds are accounted for on a spending or Ofinancial flow" measurement focus. This means that only current assets and liabilities are _generally included in their balance sheets. Governmental and expendable fund type operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. All proprietary funds are accounted for on a cost of services or "capital maintenance" measurement focus. This means that all assets and liabii"ities (whether current or noncurrent) associated with this activity are included on their balance sheets. Their reported fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. -52- .y.. .....t ..m. a e ....r.... .. Public domain ("infrastructure") general fixed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized, as these assets are immovable and of value only to the government. Fixed assets purchased or acquired by proprietary fund types are recorded in the individual fund making the purchase. Any fixed assets donated specifically for an enterprise fund are also recorded in that individual fund. Depreciation on proprietary fund fixed assets is provided over their estimated useful lives on the straight-line method. The useful lives of these assets have been estimated as follows: Buildings 20-50 years Improvements other than buildings 10-50 years Machinery and equipment 5-20 years Vehicles and heavy equipment 5-20 years Sewer lines and pump stations 10-50 years Interest is capitalized on proprietary fund assets acquired with tax-exempt debt. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds over the same period. Taxes and Assessments An allowance for uncollectible accounts was not maintained for real and personal property taxes and special assessments receivable. The direct write-off method is used for these accounts. Enterprise Accounts Receivable Reserves for estimated uncollected vllected accounts receivable are maintained for the water, sewer and ambulance enterprise funds. Accounts receivable are reported as net of uncollectables accounts. The reserves for uncollectibles on June 30, 1992, were as follows: Water 2,732 Sewer -4,240 Ambulance 16 739 Total 23,711 Inventories Inventories of materials and supplies for governmental fund types are expensed at the time of purchase. Inventories of materials and supplies on hand are not maintained. Inventories were not, however, considered material. -53- 1. Summary of Si nificant Accountin Rolicies The Enterprise Fund inventory of materials and supplies was valued at combination of cost and replacement cost. Inventories are offset by a reserve of equity. Vacation and Sick Leave Liabilities incurred because of unused vacation and sick leave accumulated by employees which is payable upon termination are included in the financial statements. The liability for unused vacation and sick leave for governmental fund employees is recorded in the general long-term debt account group. Expenditures for these liabilities are recognized when paid. The liability for unused vacation and sick leave for proprietary fund employees is recorded as a long-term liability in the proprietary funds. The expenses were recorded when the liability was incurred as required- by generally accepted accounting principles. Long -Term Debt Unmatured general long-term debt of the City, including special assessment debt for which the government is obligated in some manner, is recorded in a separate, self -balancing set of accounts, the General Long -Term Debt Account Group. Long-term debt of the proprietary funds, including enterprise -related special assessment debt, is reported as a liability in the specific fund making the debt service payments. For more information on the long-term debt of the City, see Note 7. Contributed _Ca .tom Enterprise Fund contributions from grants, customers, special improvement districts and other outside sources restricted for capital acquisition or construction are reported as contributed capital. Depreciation on assets acquired from contributions is reflected in the statement of revenue, expenses, and changes in retained earnings. The amount of depreciation applicable to assets acquired through contribution from grants, entitlements, and shared revenues is transferred to the related contribution account instead of retained earnings. Enterprise Fund resources received from grants, entitlements, or shared revenues which may be utilized for operations or for either operations or capital acquisition or construction are reported as "non-operating revenues. IPM 1. Summary of significant►ccounting Policies Interfund Transactions Interfund transactions consisting of identified services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as revenue in the fund performing the services. Transactions which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of the expenditures in the fund that is reimbursed. Advances between funds are accounted for in the appropriate interfund receivable and payable accounts. Cash and Cash Egu valents The City considers for purposes of the statement of ' cash flows, all investments of the proprietary fund types with an original maturity date of three months or less to be cash equivalents. Comparative Data Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the City's financial position and operations. However, comparative (i.e., presentation of prior year totals by fund type) data have not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. Total Columns on Combined Statements Total columns on the Combined Statements are captioned Memorandum Only to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 2. Property_ Taxes Property tax levies are set in August in connection with the budget process, and are based on taxable values listed as of January 1 for all property located in the City. Taxable values are established by the State Department of Revenue based on market values. A revaluation of all property is required to be completed on a periodic basis. Taxable value is defined by State statute as a fixed percentage of market value. -55- 2. Property Taxes - cont. Real property taxes and special assessments are generally billed in October and are payable 50% by November 30 and 50% by May 31. After these dates, taxes and assessments became delinquent and become a lien on the property. Personal property is assessed and personal property taxes are billed throughout the year, with a significant portion generally billed in May, June and July. Personal property taxes are based on levies set during the prior August. These taxes become delinquent 30 days after billing. Taxes and assessments that become delinquent are charged interest at the rate of 5/6 of 1 % per month plus a penalty of 2%. Real property on which taxes and assessments remain delinquent and unpaid may be sold at tax sales. In the case of personal property, the property is to be seized and sold after the taxes become delinquent. The City is permitted by State statutes to levy taxes up to certain fixed limits for various purposes. The taxes levied by the City for the year ended June 30, 1992 were within the legal limits. The tax levies were based upon a taxable value of $16,346,409. Current tax collections for the year ended June 30, 1992, were approximately 76% of the amount levied. 4. Deficit Fund Balances The Airport Special Revenue Fund had a deficit fund balance of $591 at June 30, 1992. The deficit once at $202,431, has been steadily decreased and should be eliminated in the next fiscal year. The following Debt Service Funds had deficit fund balances at June 30, 1992: 1983 Sidewalk and Curb $ 1,445 1984 Sidewalk and Curb $ 9,692 1985 Sidewalk and Curb $ 10,081 1986 Sidewalk and Curb $ 1,758 1987 Sidewaik and Curb $ 5,021 1988 Sidewalk and Curb $ 1,126 1989 Sidewalk and Curb $ 317 1990 Sidewalk and Curb $ 1,704 S.I.D. Number 313 $ 1,581 S.I.D. Number 333 $ 57,009 S.I.D. Number 334 $ 5,242 S.I.D. Number 335 $ 880 S.I.D. Number 336 $ 1,186 S.I.D. Number 337 $ 2,772 Lighting District Number 1 $ 6,818 Lighting District Number 2 $ 1,793 -56- 4. Deficit Fuad Balances - cont. These deficits were caused by a short -fall in anticipated revenue and will be eliminated as delinquent assessments are collected or as loans are made from the Revolving Fund. The 1992 Sidewalk and Curb Construction Fund had a deficit fund balance of $6,174 at June 30, 1992. This deficit was caused by the assessments being billed in the year subsequent to the construction and will be eliminated when the assessments are collected. 4. Budget Overdraftslyariances Special Revenue Funds A significant unfavorable budget to actual variance occurred in the intergovernmental revenue source in the amount of $326,254. The variance was primarily caused by the City only receiving $93,323 in CDBG grant proceeds when $375,000 was budgeted for. Significant favorable budget to actual variances existed in the housing and community development and capital outlay expenditure categories in the amount of $685,198 and $1,075,965, respectively. These variances relate mostly to the Tax Increment Fund. The City did not begin or complete as many street projects as was anticipated in the budget. Capital Projects Funds A significant unfavorable budget to actual variance existed in the charges for services revenue source in the amount of $39,288 because collections of charges for services for sidewalks and curbs were less than anticipated. A significant favorable budget to actual variance existed in the capital outlay expenditure category in the amount of $112,249, due primarily to a construction project budget in excess of the expenditures for the project. Debt Service Funds The debt service funds had a total budget overdraft of $59,991 primarily because tax deed property for S.I.D. Numbers 328 and 333 was sold and the proceeds used to call debt without properly increasing budgetary authority as prescribed by Section 7-6-4235, MCA. An unfavorable budget to actual variance in the amount of $109,981 occurred in the tax/assessment revenue source because the collection of assessments was less than anticipated for S.I.D. Number 328. PYA 5. Cash and Investments The City maintains a cash and investment pool for all funds under the control of the City Treasurer. In addition, investments are separately held for several of the funds. Cash and investments may include cash and cash items; demand, time, savings and fiscal agent deposits; investments in the State Short -Term Investment Pool (S.T.I.P.); direct obligations of the United States Government and securities issued by agencies of the United States; repurchase agreements; and registered warrants. The composition of cash and investments on June 30, 1992, was as follows: Cash on Hand $ 35,822 Petty Cash 800 Cash in Banks: Demand Deposits 244,936 Savings Deposits 203,456 Time Deposits: 671,677 Sidewalk and Curbs - Bonds 70,769 State Short -Term Investment Pool (S.T.I.P.) 2,023,900 Repurchase Agreements 4,000,000 Variable Annuity Life Insurance Company (VALIC): Deferred Compensation Plan 137,912 Total per Balance Sheet $ 7.389.272 Deposits - At year-end, the carrying amount of the City's deposits was $1,120,069, and the bank balance was $1,302,237. These deposits include demand, time,and savings deposits. Of the bank balance, $200,322 was covered by Federal depository insurance, and $1,101,915 was uninsured and uncollateralized. This uninsured and uncollateralized portion was fully covered by collateral held by the financial institutions or by their trust departments or agents, but not in the City's name. MAI 5. Cash and Investments - cont. Montana statutes require that the City obtain securities for the uninsured portion of the deposits as follows: 1. securities equal to 50% of such deposits if the institution in which the deposits are made has a net worth to total assets ratio of 6% or more, or 2, securities equal to 100% of the uninsured deposits if the institution in which the deposits are made has a net worth to total assets ratio of less than 6%. The State statutes do not specify in whose custody or name the collateral is to be held. The amount of collateral held for City deposits at June 30, 1992, exceeded the amount required by State statutes, Investments - As noted above, statutes authorize the City to invest in direct obligations of the United States Government and securities issued by agencies of the United States, repurchase agreements, and the State Short -Term Investment Pool (S.T.I.P.). These investments are in addition to time and savings deposits, which are included in deposits above. The City's investments are categorized below to give an indication of the level of risk assumed by the City at June 30, 1992. Catego - Includes investments that are insured, registered, or for which the securities are held by the City or its agent in the City's name. Category 2 - Includes uninsured and unregistered investments for which the securities are held by the financial institution's, broker's or dealer's trust department or agent in the City's name. Category 3 - Includes uninsured and unregistered investments for which the securities are held by the financial institution, broker or dealer,or by its trust department or agent but not in the City's name. Category Carrying Market 1 2 3 Value Value Repurchase Agreements $ 4:000.000 S 4,000,000 S 4,000,000 Investment in State Short -Term Irnrestmmt Pool (S.T.I.P.) 2,M,9M 2,023,900 Total Investments S 6,M3 900 S 6 02_, X900 In addition, funds placed in a deferred compensation plan by City employees were held and invested by the Variable Annuity Life Insurance Company (VALIC). Funds in the plan at June 30, 1992, amounted to $137,912. 6. Fixed Assets A summary of changes in general fixed assets follows: Balance Balance July _1, 1991 Additions deletions June 30, 1992 Land $ 1,527,392 $ 63,213 $1,590,610 Buildings 3,268,515 3,268,515 Improvements Other Than Buildings 1,075,780 1,075,780 Machinery and Equipment 1,857,396 191,354 23,963 2,024.787 Total $ 7,729,083 $ 25545,72 $ 23 963 $ 7,959.692 -59- :I VA Fixed Assets _-Cont. A summary of proprietary fund type property, plant, and equipment at June 30, 1992, follows: Enterprise Land $ 245,369 Machinery and Equipment 950,452 Contruction Work in Progress 10,199,987 Source of Supply 347,709 Pumping Plant 596,599 Treatment Plant 3,840,226 Transmission and Distribution 9,269,952 General Plant 712,282 Storm Sewer 3.175,386 Total 29,337,962 Less Accumulated Depreciation 6,655,184 Net $ 22,682,778 1-9 Internal Services 77,099 $ 77,099 25,539 $ 51,560 Interest cost and capitalized interest for the enterprise funds for the year ended June 30, 1992, were as follows: Total Interest Cost Incurred 182,394 Interest Capitalized 132,382 Long -Term debt The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1992: (1) Reported in general long-term debt account group. (2) Reported in enterprise fund. (3) Reported in internal service fund. E1 --fill Balance Balance July 1. 1991 Additions Reductions June 30 1992 General Obligation Bands (1) $ 415,000 $ 130,000) $ 385,000 Revenue Bonds (2) 4,240,000 (175,000) 4,065,000 Special Assessment Bonds (1) 345,197 3,360 (166,203) 182,357 Urban Renewal Bonds (1) 1,730,000 (95,000) 1,635,000 Loans/Contracted Debt (1) (3) 58,093 119,745 (18,764) 159,074 Compensated Absences Payable (1) (2) 568,824 (391-169) 529,655 State Revolving Fund Loan (2) 0 3,913,425 3.913„425 Total $7 357 i 1 $4,036.530 $(524,133} $10.869,511 (1) Reported in general long-term debt account group. (2) Reported in enterprise fund. (3) Reported in internal service fund. E1 --fill 7. Long -Term Debt - cont. Bonded Debt Bonds payable at June 30, 1992, are comprised of the following individual issues: 1. General Obligation Bonds Revenue Bonds Final Outstanding Annual Issue Interest Term of Maturity Bonds June 30, Serial Purpose Date Rate Bond Date Issued 1992 payment Bruck Hauser Pool 4/1/85 8.3-9.25% 15 yrs 2000 $550.000 S38S,000 varies General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. $22,828 is available in the Debt Service Funds to service the general obligation bonds. 2. Revenue Bonds Final Outstanding Annual Issue Interest Term of Maturity Bonds June 30, Serial Purpose Date Rate Bond Date Issued 1992 Payment 1976 Sewer Plant 1/1/76 5.75% 20 yrs. 1996 S 445,000 $ 210,0031 varies 1986 Storm Sewer 6/1/86 7.0% 20 yrs. 2006 1,30€1,000 1,135,000 varies 1991 Sewer System Refunding Bonds 4/15/91 varies 20 yrs. 2011 2,815.0[30 2 � 7n. varies Total 54,560.000 S4,i165.000 Revenue Bonds are directly related to and expected to be paid from the Sewer Fund. The significant provisions of the bond ordinances relating to the issuance of Sewer System Revenue Bonds and the financial statements and other schedules required by those ordinances are presented as supplemental information on pages 79 - 84. 3. Tax Increment Urban Renewal Bonds In December 1985, the City issued $2,100,000 in Tax Increment Urban Renewal bonds pursuant to Title 7, Chapter 15, Parts 42 and 43, MCA, and pursuant to the bond resolution adopted by the Kalispell City Council. These Series 1985 Bonds are considered to be special obligations of the City payable solely from tax increment generated by the area. The City has irrevocably pledged and appropriated the tax increment to the payment of the Series 1985 Bonds which have a first lien on all tax increment revenue generated by the area. The Series -61- 7. Long -Term Debt - cont. 1985 Bonds do not constitute a general obligation of the City or pledge the ad valorem taxing power of the City. Although the long-term liability created by the issuance of the bonds is considered a fund -specific liability, it is reported as a liability in the general long-term debt account group as required by generally accepted accounting principles. At .Tune 30, 1992, there was $ 123,046 available in the Tax Increment Special Revenue Fund to service these bonds. Final Outstanding Issue Interest Term of Maturity Bands June 30, .Annual Purpose Date Rate Bond Date Issued 1992 Payment Tax increment 12/85 6.29-9.5%- 16 yrs 7/1/2002 $2,100.fl00 $1-1635.000 varies 4. State Revolving _Fund In November 1991, the City entered into an agreement with the State Revolving Fund (SRF) to borrow up to $4,717,000 to create a wastewater treatment plant and compost facility. This obligation is to be repaid from the operating Income of the Sewer Fund. As of June 30, 1992, $3,913,425 has been borrowed from the SRF. Interest Amount 0uWancling Rate Term Borrowed .lune 30, 1992 SRF Loan 4% 20 yrs. X3,913,425 $3,913,425 5. Special Assessment Bonds (S.I.D.) Final Outstanding Issue Interest Term of Maturity Bonds Jule iii, Anm;al purpose Date Rate Bond Date Issued 1992 Fayment S.I.D. No. 335 11/1/82 12.0% 10 yrs. 1992 $ 15,000 S 1,500 varies S.I.O. No. 336 12/1/86 12.0% 10 yrs. 1994 4,500 500 varies S.I.D. No. 337 12/1/86 7.74% 15 yrs. 2002 110,000 85,000 varies 1984 Sidewalk and Curb 3/5185 12.0% 8 yrs. 1992 45,000_ 8'OW varies 1985 Sidewalk and Curb 12/3/85 10.0% 8 yrs. 1993 44,600 8,600 varies 1986 Sidewalk and Curb 12/31/86 9.0% 8 yrs. 1994 20,987 8,488 varies 1987 Sidewalk and Curb 12/31/87 . 12.0% 8 yrs. 1995 31,275 11,275 series 1988 sidewalk and Curb 1/1/89 12.0% 8 yrs. 1996 37,411 25,411 varies 1989 Sidewalk and Curb 113/90 10.5% 8 yrs. 1998 15,818 12,001 varies 1990 Sidewalk and curb 1/15/91 10.0% 8 yrs. 1999 14,600 12,70 varies Meridian Sidewalk and Curb 10/1/90 11.0% 8 yrs. 1998 7,322 5,523 varies 1991 Sidewalk and Curb 2/92 8.0% 8 yrs. 2000 3,360 3.360 varies Total $34,9 873 3182,357 Special assessment bonds are secured by a lien on the assessed properties. The primary source of repayment is the assessments levied against the benefiting properties. However, -the City is liable, to an extent, for repayment of these special assessment bonds.. The City is authorized by State law to establish and has established a revolving fund to ensure the payment of debt service on the bonds in the event that assessed property owners are in default. -62- 7. Lona -Term Debt - cont. $20,803 is available in the Debt Service Fund to service the special assessment bonds. LoanslContracted Debt Origination Interest Due Principal Outstanding Purpose Date Rate Term Date Amount June 30, 1992 Computer(3) 8117/90 varies 5 yrs. 8/15195 $ 71,014 $ 39,329 Sweeper (1) 1/17/92 varies 5 yrs. 2115/97 80,770 80,770 Ambulance (2) 5/1/92 varies 3 yrs. 8/15/95 38,975 __ 38,975 Total Bonds $ 19Q,.759 X159,474 (1) Reported in general long-term debt account group. S 69,368 (2) Reported in Enterprise Fund, S 50,656 S 26,063 S 254,905 (3) Reported in Internal Service Fund. S 832,265 1994 66,462 Compensated Absences Payable Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund $ 85,653 General Long -Term Debt Account Group 444,002 Total $ 529,655 Requirements to Amortize Debt The annual requirements to amortize all long-term debt outstanding, except compensated absences payable, as of June 30, 1992, including interest payments of $6,316,705 are as follows: Annual Requirements to Amortize Lona -Term Debt 5:jM- 141MUT-0. &M General Special Urban State Year Ending Obligation Revenue Assessment Contracted Renewal Revolving Jane 30, Bonds Bands Bonds Debt Bonds fund loan Totals 1993 S 69,368 S 274,736 S 50,656 S 26,063 S 254,905 S 1511,537 S 832,265 1994 66,462 490,578 38,812 48,993 256,085 286,116 1,987,056 1995 68,522 402,134 28,210 48,993 256,195 286,116 1,090,170 1996 70,083 387,58.3 29,232 35,257 260,195 286,116 1,068,466 1997 72,122 349,798 28,750 18,433 257,595 286,116 1,012,814 1998-2002 214,197 2,052,370 71,141+ 1,320,760 1,430,580 5,089,051 2003-2007 1,886,813 1,430,580 3,317,393 2008-2012 1,342,650 1,430,580 2,773,230 2013-2017 286,116 ____286,116 Total S 560.754 $ 7,186,662 814 SS 24b„ 177,139 $ 6,656 561 &M 7. Long -Term Debt - cont. Advance Refunding of Long -Term Debt In prior years, the City defeased certain revenue bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the City's financial statements. At June 30, 1992, $710,000 of bonds outstanding are considered defeased. 8. State -Wide Retirement Plans All City employees participate in one of the following cost sharing multiple -employer retirement plans. All of the retirement plans also provide death and disability benefits, with amounts determined by the State of Montana. Public Employees' Retirement System P.E.R.S. All employees other than police officers and firemen, that work more than the equivalent of 120 working days per fiscal year are required by State law to participate in P.E.R.S. Employees who retire (1) at or after age 60 with five years of creditable service, (2) at or after age 65 regardless of years of service, or (3) with 30 or more years of creditable service are entitled to a retirement benefit, payable monthly for the life of the member and/or beneficiary. The benefit amount is the number of years of creditable service divided by 56, and multiplied by the final compensation. The final compensation is a member's highest average annual compensation during any three consecutive years of membership service. Benefits fully vest after five years of service. Vested employees may retire at age 50 or with 25 years of service and receive reduced benefits. Munici al Police Officers' Retirement System M.P.O.R.S. City police officers are covered under the M.P.O.R.S. A member may retire with a retirement benefit after completing at least ten years of membership service and reaching age 50, or twenty years of membership service regardless of age. The retirement benefit, payable monthly for life, is based on the following formulas: 1. For members hired prior to July 1, 1977: 50% X Base Salary + 1 % X Years of Service over 20 (Maximum benefit is 60% of Final Average Salary) 2. For members hired after July 1, 1977: 2.5% X Final Average Salary (FAS) X + 1 % X FAS X Years of Service over 20 (Maximum benefit is 60% of FAS) 8. State -Wide Retirement Plans - cont. Firefighters' Unified Retirement S stern F.U.R.S. City firefighters are covered under the F.U.R.S. A member may retire with a service retirement after both completing ten years of membership service and attaining minimum service retirement age of 50. The retirement benefit, payable monthly for life, is based on the following formulas: 1- For members hired before July 1, 1981: 50% X Final Monthly Compensation (FMC) + 1 % X Years of Service over 20 X FMC (Maximum benefit is 60% of FMC) 2. For members hired on or after duly 1, 1981: 2% X Years of Service (30 years maximum) X Final Average Salary (FAS) (Maximum benefit is 60% of FAS) For members hired prior to July 1, 1981, benefits are calculated based on FMC which is the regular monthly salary (excluding overtime, holiday pay, shift differentials, compensatory time payments, and payments in lieu of sick leave) last received by the member. For members hired on or after July 1, 1981, benefits are calculated based on FAS which is the average of the member's regular monthly pay during the last 36 months of service. The City's total payroll for the fiscal year was $4,389,840. Required employee, employer, and State contribution rates and the covered payroll amounts for each plan are as follows: The City's contribution requirement for the fiscal year ended June 30, 1992, including additional contributions from employees, were as follows: Employer Employee Additional Employee Total P.E. R.S. $ 110,838 110,838 T 2.626 $ ?24x302 F. U-R.S, $ 75,581 34,807 $ 110,388, The contribution requirement compared to total contribution requirements for all participating employers was less than 1% for P,E.R.S, and was 6% for M.P.O.R.S. and 5% for F.U.R.S. -65- P.E.R.S. M.P.O. R. S. F.U.R.S. Covered Payroll $ 1,727,256 $ 666,003 $ 580,116 Employee 6,417% 617.518.7% 6% Employer 6.417% 13.02% 13.02°x, State 15.66% 23.27% The City's contribution requirement for the fiscal year ended June 30, 1992, including additional contributions from employees, were as follows: Employer Employee Additional Employee Total P.E. R.S. $ 110,838 110,838 T 2.626 $ ?24x302 F. U-R.S, $ 75,581 34,807 $ 110,388, The contribution requirement compared to total contribution requirements for all participating employers was less than 1% for P,E.R.S, and was 6% for M.P.O.R.S. and 5% for F.U.R.S. -65- 8. State -Wide Retirement Plans - cont. The "pension benefit obligation' is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be in the future as a result of employee service to date. The measure, which is the actuarial present value of a plan's projected benefits, is intended to help users assess a plan's funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. The plans do not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation for the City's plans, as a whole were as follows: Pension Benefit Obligation Net Assets Available (At Cost) Unfunded Pension Benefit Obligation Years Needed to Amortize Past Service Costs 91 P.E.R.S. $1,294,672,261 $ 1,007,708,403 QW0 M.P.0.R.S. F.U.R.S. $ 78,124,304 $ 101, 606,118 $ 41,302,748 $ 42,258,096 $ 36,821,556 $ 59,348,022 26.19 33.54 This information was determined through an actuarial valuation at July 1, 1992. Ten year historical trend information is presented in the .lune 30, 1992, annual report. All information can be obtained from the Montana Department of Administration. Local Retirement Plans Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all incon-te attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of benefits under the plan), subject only to the claims of the City's general creditors. Partioipants` rights under the plan are equal to those of general creditor of the City in an amount equal to the fair market value of the deferred account for each participant. UA 9. Local Retirement Plans - cont. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prudent investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. Investments are managed by the plan's trustee with no specific restrictions on the investment options. The plan assets of $137,912 were recorded in an agency fund at June 30, 1992, as required by generally accepted accounting principles. 10. Amounts Due From and Due To Other Governments The amounts due from and due to other governments consist of the following: Due From Other Governments: General Fund: Due from Flathead County Due from State Total General Special Revenue Fund: Due from Flathead County Due from State Total Special Revenue Debt Service Fund: Due from Flathead County Enterprise Fund: Due from E.P.A Due To Other Governments: Special Revenue Fund: . Due to State -67- $ 124,170 7,000 � 131,170 $ 307,785 227:906 � 535, 691 4126 � 375,557 11. Amounts Due From and To Other Funds Due from other funds and due to other funds consist of the following: Receivable Fund General Fund Tax Increment Fund S.I.D. Revolving Fund S. 1. D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.1. D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund S.I.D. Revolving Fund Payable Fund Amount 1992 Sidewalk and Curb Construction Fund $ 6,174 E.D.A. Grant Fund 177,913 1983 Sidewalk and Curb 1,385 1984 Sidewalk and Curb 8,332 1985 Sidewalk and Curb 7,791 1986 Sidewalk and Curb 1,100 1987 Sidewalk and Curb 3,697 1988 Sidewalk and Curb 957 1989 Sidewalk and Curb 298 1990 Sidewalk and Curb 1,704 S.I.D. 313 1,581 S.I.D. 333 27,915 S.I.D. 334 4,238 S.I.D. 335 587 S.I.D. 336 1,141 S.I.D. 337 2,656 Light District Numberl 7,838 Light District Number2 2.238 Total 1$ 257,545 12. Restricted CashAnvestments The following restricted cashlinvestments were held by the City as of .lune 30, 1992. These amounts are reported within the cash{ investment account on the Combined Balance Sheet. Description Amount Special Revenue Fund: Community Development Fund: Rehabilitation - Interest Subsidy 30,988 Community Development Block Grant - Interest Subsidy 18,567 Tax Increment Fund: Sinking and Interest 123,046 Interest Subsidy - Commercial Loans 87,072 UDAG Repayment Fund: Rehabilitation Grants 79,891 Community Development Loan and Grant 38,209 Southwest Kalispell Project - Interest Subsidy 104,998 Total Special Revenue Funds $ 482,771 M 12. Restricted Cash Investments - cont. Description Amount Enterprise Fund: Water - Investment 500 Water - Replacement and Depreciation 90,000 Sewer - Replacement and Depreciation 107,376 Sewer - Reserve for Operations 55,000 Sewer - Construction 579,198 Sewer - Sinking and Interest 11,352 Sewer - Contingency 731,161 Sewer - Capital Improvement 742,093 Sewer - Storm Sewer 176,193 Solid Wast - Replacement and Depreciation 52,597 Ambulance - Replacement and Depreciation 11,160 Total Enterprise Funds $ 2 ,556,630 Trust and Agency Funds: VALIC 457 Deferred Compensation Fund 137,912 Performance Bond - Bond Heid 3,533 Total Trust and Agency Funds 141,445 Restricted Cash/investments $ 3,180,846 13. Fund Equity Reserved retained earnings/fund balances of the City June 30, 1992, consisted of: Special Revenue Fund: Tax Increment Fund: Reserved for Sinking and Interest $ 123,046 Reserved for Interest Subsidy 87,072 Community Development Fund: Reserved for Interest Subsidy 18,567 Reserved for Loans and Grants 30,988 UDAG Loan Repayment: Reserved for Interest Subsidy 104,998 Reserved for Loan and Grants 38,209 Reserved for Rehabilitation and Grants 79.891 Total Special Revenue Funds $ 482,771 M 13. Fund Equity cont. Enterprise Fund: Water: Reserved for Replacement and Depreciation 90,000 Reserved for Inventory 176,75E Sewer: Reserved for Replacement and Depreciation 107,376 Reserved for Construction 1,866,543 Reserved for Operations 55,000 Reserved for Capital Improvement 737,593 Reserved for Storm Sewer 190,985 Reserved for Sinking and Interest 11,352 Reserved for Contingency 731,162 Garbage: Reserved for Replacement and Depreciation 52,597 Ambulance: Reserved for Replacement and Depreciation 11,160 Total Enterprise Funds 4,(}301524 14. Changes in Contributed Capital A schedule of changes in contributed capital is presented below: Contributed Capital - July 1, 1991 Add: Capital Grants Special Improvement Districts: City Contributions Deduct: Depreciation on assets acquired via capital grants Contributed Capital - June 30, 1992 Water Sewer $614,284 $6,348,112 2,957,361 24,590 217,568 17,349 215.670 621,525 $ 91307,37'1 Total $ 6,962,396 2,957,361 242,158 233,019 $ 9,928,896 15. Restatements During the current fiscal year, the following adjustments relating to prior years' transactions were made to the fund balance and retained earnings accounts. Fund Debt Service Funds: 1982 Sidewalk and Curb Special Light No. 1 Special light No. 2 Total Debt Service Funds Amount Reason for Adjustment 145 To correct deferred revenue 1,192 To correct accrual of debt 540 To correct accrual of debt $ 1.877 Enterprise Funds $ 17 Q�99j. To write-off accounts receivable -70- 16. Residual Equity Transfers Residual equity transfers are made to transfer the remaining equity balance of a discontinued fund to another fund. Transfers made during the year consist of the following: Fund ReceivingTransfer General (1) Parking (2) UDAG loan Repayment (2) Tax Increment (2) S.I.D. Revolving (3) 1981 Sidewalk and Curb (3) 1982 Sidewalk and Curb (3) S.I.D. No. 326 (3) S.I.D. No. 328 (3) Water (5) Sewer (5) Sewer (5) (1) General Fund (2) Special Revenue Fund (3) Debt Service Fund (4) Capital Projects Funds (5) Enterprise Fund Fund Receiving Transfer S.I.D. Revolving (3) General Fund (1) Community Development (2) First Alley West (4) 1980 Sidewalk and Curb (3) S.I.D. Revolving (3) S.I.D. Revolving (3) S.I.D. Revolving (3) S.I.D. Revolving (3) E.D.A. Grant (2) E.D.A. Grant (2) Sykes Area Construction (4) Net $ 35,583 $(185,432) $ (44,000) $ (48,309) $ 242,'158 Amount $ 44,000 $ 8,417 $ 41,671 $ 4,567 $ 688 $ 5,659 $ 121 $ 2,591 $ 57,108 $ 24,590 $173,826 $ 43,742 a. The transfers to the enterprise funds were recorded as contributed capital. Therefore, residual equity transfers in and out do not net to zero on the financial statements. 17. Seament Information For Enterprise Funds The City maintains four enterprise funds which provide water, sewer, solid waste and ambulance services. Segment information for the year ended June 30, 1992, was as follows: Operating Revenues Depreciation Erse Operating income or (Loss) Net Income or (Loss) Current Capital: Contributions Plant, Property and Equipment: Additions Deletions Net Working Capital Total Assets Long -Term Liabilities Payable from Operating Revenue Total Equity S 24,5909 S 3,174,929 S Ambulance Fund $336,911 S 10,522 $ 76,193 $ 76,705 S Total Enterprise Feats $3,107,103 S 581,416 S 895,923 S 735,70 S3,199,519 S 270,87? S 8,451,80f9 Solid Water Sewer Waste Fund Fund Ftrid S 799,076 S 1,719,258 5251,858 S 134,486 S 392,797 S 44,111 S 148,990 S 670,403 S 337 S 143,624 $ 504,826 S 10,548 S 24,5909 S 3,174,929 S Ambulance Fund $336,911 S 10,522 $ 76,193 $ 76,705 S Total Enterprise Feats $3,107,103 S 581,416 S 895,923 S 735,70 S3,199,519 S 270,87? S 8,451,80f9 S 5,630 S 41,920 S 8,770,22? S 709,691 S 2,325 $ S S 73,016 S 540,501 S 242,535 5292,307 $178,334 S 1,253,677 S4,M,424 522,517,280 $554,326 $244,030 $27,606, 060 S 20,132 S 8,004,418 S 19,899 $ 58,604 S 8,103,E 54,254,689 $13,419,592 5533,917 $181,834 S18,3;0,02 -71- 1$. County Provided Services The City is provided various financial services by Flathead County. The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. 19. Joint Ventures Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. City -County Health Department The City -County Health Department is operated under an interlocal agreement between Flathead County and the City of Kalispell. The Department operates under the supervision and control of the City -County Health Beard. The Board consists of seven members, six of whom are appointed by the Board of County Commissioners. The City of Kalispell levied 3.75 mills in support of the City - County Health Department for the fiscal year ended June 30, 1992. County -Wide Administrative Board The City of Kalispell along with Flathead County, the City of Columbia Falls, and the City of Whitefish, participate in a County -wide Administrative Board (CAB) that was established by an interlocal agreement in December, 1979. The CAB was formed for the purpose of coordinating all land use planning, subdivision reviews and approval, and zoning application and enforcement in Flathead County, as well as to assist in annexation by the cities, The Board consists of four members, the Mayor of each of the three cities and the Chairman of the Flathead County Board of County Commissioners, The CAB is financed by a tax levied by each of the parties to the interlocal agreement in proportion to the expected benefits that each party shall receive during the ensuing fiscal year. The financial activities of the CAB are accounted for by Flathead County. The City's share of CAB's assets, liabilities, and equity was not readily available. Insurance Coverage Effective July 1, 1987, the City joined with other Montana cities and towns to form a self-insurance pool. (named the Montana Municipal Insurance Authority) offering workers' compensation and liability coverages. Initial liability limits of $1,500,000 per participant, and Workers' Compensation coverage of $5,000,000 in excess of $500,000 for each accident and aggregate coverage of $5,000,ODO in excess of $3,033,532 were obtained through the insurance pool. The Authority is governed by a Board of Directors consisting of thirteen officials from participating cities and towns. At June 30, 1991, the Authority had one hundred and three members in its liability program and eighty-one members in its Workers` Compensation program. -72- 19. Joint Ventures - cont. In August of 1986, the pool issued $6.25 million in tax exempt bonds to fund the liability program's reserves. Also, in September of 1990, the pool issued $7,385,000 in tax exempt bonds to fund the Workers' Compensation program's reserves. The City signed a note with the Authority for $241,773 and $281,715, respectively, its pro rata share of the debt, of the Liability and Workers' Compensation programs, in order to help secure the bonds. Most of the debt service on the bonds is expected to be paid through interest earnings on bond proceeds and other funds of the Authority. The City has, therefore, elected not to record this potential liability as a long-term liability in its accounting records and report it as such in its financial statements. Compiled financial statements for the Liability Insurance Program and audited financial statements for the Workers' Compensation Program for the fiscal year ending .lune 30, 1992, disclosed the following: Assets Current Liabilities Long -Term Debt Unpaid Claims Liabilities Fund Balances Total Liabilities and Fund Balance Revenues Expenses Excess Revenue (Expense) Liability Workers' Insurance Compensation $ 1„3928,298$'15,012,823 5 626,357 $ 552,823 5,828,399 7,135,000 4,692,147 7,325,000 2.781.395 - $ 13,928,298 $ 15,012,823 $ 3,627,823 3.069.274 $ 558,549 5 4,075,816 3_:_905,379 $ 170437 20. Pendinci Liti a'on The following is a Iist of litigation pending against the City and the amount of damages claimed by the Plaintiff. The City Attorney has made no evaluation as to the outcome of each case. The City has liability insurance which may cover all or part of the damages requested. Damages Case Requested Nordgulen vs City of Kalispell $200,000,000 Cervantes vs City of Kalispell $ 180,000 0 ence vs City of Kalispell $ 100,000 Mumalo, VandeVoort et al vs City of Kalispell Unspecified -73- 21. Loans Receivable On June 29, 1984, the City entered into an agreement with Kalispell Center Limited Partnership (KCLP) whereby funds received by the City under an Urban Development Action Grant were loaned to KCLP to help fund the Kalispell Center Mall project. The total amount loaned to KCLP was 43,336,928. The balance of the loan receivable at June 30, 1992, was $3,017,408 and is recorded in the Urban Development Action Grant Loan Repayment Fund, a Special Revenue Fund. Loan repayments to the City began in April 1987. The repayment schedule calls for monthly principal and interest payments of $21,096.95 on the first day of each month. The term of the loan is 25 years. Interest was deferred for the first year but will accrue at 6% per annum for years 2 through 4, then at 9% for the reamining 21 years of the loan. A loan was made from the Tax Increment Special Revenue Fund to the 2nd Avenue West Professional Building, a partnership, in the amount of $67,000 on December 30, 1985. The loan was made for the purpose of acquiring real property for development as a parking lot. The term of the loan is fifteen years at 5% interest for the first five years. For years 6 through 15 the interest rate will accrue at the rate paid on U.S. Treasury bills as of the 15th day of January of the year in which the payments are due. The repayment schedule calls for a monthly principal and interest payment of $530 each month for the first five years of the loan. The balance of the loan receivable of $44,048 was recorded in the Tax Increment Fund. The City entered into a community development programa which includes funding from a community development block grant, to make available to eligible applicants flow -to -moderate income residents) a loan for at least one- half of the required rehabilitation cost. These funds from the City, together with loans from the First Federal Savings Bank of Montana, the lender, must provide the total funds required for the purchase and rehabilitation of the housing unit. At the time the bank loans are closed with the borrower, the proceeds of the City's loan will be deposited into the borrowers' construction account at First Federal. The City's loan is secured by the property, and fled in a third -lien position. Repayment of the City loan will not begin until 30 days after the Lenders' loan (second lien) for construction -of the unit has been paid off. The City's lean is interest free until such time as repayment begins. The maximum amount of a private lender loan cannot exceed $20,000 per property with a ten year pay back. In addition, when an owner -occupant is unable to afford a private lender loan at the pre-deterrrained interest rate agreed to by the City and lender, he or she may qualify for City financing. The City may provide a direct city loan of up to $25,000 with a varying interest rate to as low as zero percent or with a longer amortization period (maximum of fifteen years) or a deferred loan to be repaid simultaneously, at a later date, with a balloon payment, or to be released at the end of ten years. The City had $101,204 recorded as loans receivable as of June 30, 1992. M CITY OF KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT ON SUPPLEMAIT,14L INFORMATION N SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1992 -75- DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICCIT, GOVERNOR 1424 NINTH AVENUE STATE OF MONTANA (406) 444-3010 PO BOX 2(0501 HELENA, MONTANA 59620-0501 INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION To the Honorable Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, for the year ended June 30, 1992, and have issued our report thereon dated August 5, 1993. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and 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 general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of , the City of Kalispell, Montana, taken as a whole. The accompanying supplemental information as listed in the table of contents for the year ended June 30, 1992, including the Schedule of Federal Financial Assistance, are presented for purposes of additional analysis and are not a required part of the general purpose financial statements. The information in these schedules has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements takenzs a whole. f DONALD L. DOOLEY August 5, 1993 Bureau Chief sm 'MW Ezut� EMPLOYER- CITY OF KALISPELL, MONTANA SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1992 -77- N D G m CSC 0 N 'rt to C a m 2 "ll v 7 Q 1f to m s a � o � a LL~ E 'Yi L m ffid � n.Y �a ea fl ! EO E -A tn1 0 i � 8 a.c m eg UE e;�EEa �rn aEO` aen � R. R -E a 2.2E r � � pyo 2E6r�Affi It.. o m 0. aS31'IYDl ®E °= d !a_i i is s m c i1 05 U! H H H w 0 �'S00tiZu Vs H H �m C e°n W � �i�o tiC�7i t 1 co v�t�u .� aw C M ff C�7 I Q3 V N ZA CO C,3 co H H H H HP H H H H Vl `w eo � t C � j •�r �n c v 03 m sA fh H H w w w H H H O U'1 O Lni N in S]�e+]?,, �jt!', m M f0 8 N M f'731t3 -.'N C0� t>7 }} � >• t`jjj N V) `S 8 t N N Lit W NDN C U- lY t �7 w tO w w H w+ to w w H H H N N to 60H H wl7 Y! w N M M p ppw ©p E 7ECL H H H w H N H H A L co N �? rC? ea IR Z N +i ea Q t° I eo Im Q m �Z rn eat U U CJ cw o to m o0 Q Z N m m® r O 6 D —78— P G C � E E v 7 Q � s a � a LL~ E 'Yi L m ffid � n.Y �a ea fl ! EO E -A tn1 0 i � 8 a.c m eg UE e;�EEa �rn aEO` aen � R. R -E a 2.2E r � � pyo 2E6r�Affi It.. o m 0. aS31'IYDl ®E °= d !a_i i is s m c i1 05 1 IL t IL amu~ �'S00tiZu n a = II U� 0! �at C1 R'3 tiC�7i —78— P G C � v 7 t4 m LL~ E 'Yi L m ffid � n.Y �a ffi� ie6ffias m tn1 0 c � 8 Q o= m eg c �rn aEO` aen � R. R -E a 2.2E r � � pyo 2E6r�Affi It.. o m 0. aS31'IYDl ®E °= d !a_i i is s m c i1 05 t IL amu~ �'S00tiZu —78— SIGNIFICANT PROVISIONS OF SEWER REVENUE BOND ORDINANCES AND REQUIRED INFORMATION 1. The City will establish a separate revenue bond account into which will be paid each month an amount equal to not less than the sum of one-sixth of the interest due within the next six months and one -twelfth of the principal due within the next twelve months with respect to all Bonds secured by the ordinance and payable from that account, and into which shall be paid each month additional net revenue equal to one -sixtieth of the maximum amount of principal and interest to fall due within any subsequent fiscal year on all such bonds until a reserve equal to such maximum amount of principal and interest is established, which reserve shall thereafter be maintained. No exceptions were noted. 2. Rates and charges will be made and kept sufficient to provide gross income and revenues adequate to pay promptly the reasonable and current expenses of operating and maintaining the system and to produce in each fiscal year net revenues in excess of such current expenses, equal to 125% of the maximum amount of principal and interest payable from the Revenue Bond Account in any subsequent fiscal year. Cash Flow Coverage Sewer Service Charges 1,455,551 Storm Sewer Assessments 201,842 Miscellaneous and Hookup Fees 61,905 Total Operating Revenue 1,719,258 Less. Operating Expense (Before Depreciation) 656,058 Available for Debt Service S 1,063, 200 Maximum Debt Service 537,405 Coverage S 198% 3. The City shall maintain an Operating Reserve equal to one month's operating expenses. The term "operating expenses$ shall mean current expenses, paid or accrued, of operation, maintenance and current repair of the system and its facilities, and shall include administrative expenses of the City relating solely to the system, premiums for insurance on the properties, labor and the cost of materials and supplies used for current operation and for maintenance, and charges for the accumulation of appropriate reserve for current expenses which are not recurrent monthly but may reasonably be expected to be incurred in accordance with sound accounting practices. Such expenses shall not include any allowance for depreciation or renewals or replacements of capital assets of the system and shall not include any portion of the salaries or wages paid to any officer or employee of the City, except such portion as shall represent reasonable compensation for the performance of duties necessary to the operation of the system. -79- Operating expenses for fiscal year ended June 30, 1992, of $ 656,058 divided by 12 = $54,672. The Sewer Operating Reserve balance of $55,000 is adequate. 4. The City shall, within 120 days after the close of each fiscal year, cause to be prepared and supply to the original purchaser or purchasers of Bonds issued hereunder and the bank or banks designated as agent for the payment of principal of and interest thereon a financial report with respect to the system for such fiscal year as prepared by an independent certified public accountant. The City did not comply with this provision. 5. The audit report shall include the following: a. a statement in detail of the income and expenditures of the system for the fiscal year, identifying capital expenditures and separating them from operating expenditures; b. a balance sheet as of the end of the fiscal year; C. the number of premises connected to the system at the end of the fiscal year; d. the amount on hand in each account of the Sewerage System Fund at the end of the fiscal year; e. a list of the insurance policies and fidelity bonds in force at the end of the fiscal year, setting out as to each the amount thereof, the risks covered thereby, the name of the insurer or surety and the expiration date of the policy or bonds; and f. a determination that the report shows full compliance by the City with the provisions of this ordinance during the fiscal year covered thereby, including proper segregation of the capital expenditure from operating expenses, maintenance of the required balance in the Revenue Bond account, and the receipt of net revenue during fiscal year at least equal to 125% of the maximum amount of principal and interest payable from the Revenue Bond Account in any subsequent fiscal year; or if the report should reveal that the revenues have been insufficient for compliance with this ordinance, or that the methods used in accounting for such revenues were contrary to any provision of this authorizing ordinance, the report of audit shall include full explanation thereof, together with the recommendations for such change in rates or accounting practices or in the operation of the system as may be required. The following are the required disclosures which are not contained elsewhere in the audited financial statements: Number of premises connected to the system at the end of the fiscal year: 4593 :• Amount of cash on hand in each account of the Sewer System at the end of the fiscal year: Sewer Operating $ 810,927 Sewer Capital Improvement 742,093 Sewer Revenue Reserve 660,892 Construction Fund (23,282) Replacement and Depreciation 107,376 Sewer Revenue Bond Account 11,352 Sewer Operating Reserve 55,000 Storm Sewer Maintenance Reserve 176,193 Sewer CD Retainage 602,480 Sewer Bond Reserve Investments 70.269 Total $ 3.213,300 Schedule of Insurance Policies June 30, 1992 Flathead Association of Independent Insurance Agents 1. St. Paul Property and Liability Insurance provided the fidelity bond coverage. A public official bund in the amount of $50,000, for the finance director expires 5/9193. A $10,000 public employees blanket faithful performance bond expires 6130192. 2. Property Insurance: Blanket building policy with $9,704,255 limit and a $1,000 deductible per event. Boiler and machinery policy with $2,000,000 limit and a $250 deductible. Business interruption policy with a $9,000 limit of loss and $3,000 limit monthly indemnity. Expires 811/93. Montana Municipal Insurance Authority: 3. Liability Insurance: $750,000 per occurrence which arises or derives from injury to or death of a single person or damage to property of a single person regardless of number of persons or entities claiming damages. $1,500,000 per occurrence not covered as stated above. A $2,500 deductible applies. Expires 7/1/93- &M CITY OF KALISPELL, MONTANA SEWER FUND SCHEDULE OF ASSETS, LIABILITIES, AND FUND EQUITY June 30, 1992 ASSETS Cash/investments Assessments Receivable Other Receivables Due from Other Governments Fixed Assets (Net of Accumulated Depreciation) TOTAL ASSETS LIABILITIES AND FUND EQUITY Liabilities: Short -Term Payables Long -Term Payables Total Liabilities Fund Equity: Contributed Capital Retained Earnings Reserved Unserved Total Fund Equity TOTAL LIABILITIES AND FUND EQUITY M $ 3,213,300 16, 401 132,920 375,557 18,779,101 $ 22,517,279 $ 1,093,270 8,004,418 $ 9,097,688 $ 9,307,371 3,700,011 412,209 $ 13,419,591 $ 22,517,279 CITY OF KALISPELL, MONTANA SEWER FUND SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Fiscal Year Ended June 30, 1992 Operating Revenues: Charges for Services Miscellaneous Special Assessments Total Operating Revenues Operating Expenses: Personal Services Supplies Purchased Services Fixed Charges Losses/Bad Debt Expenses Depreciation Total Operating Expenses Operating Income Non -Operating Revenues (Expenses): Interest Debt Service Interest Expense Gain on Asset Disposal Total Non -Operating Revenues (Expenses) Net Income Add depreciation on fixed assets acquired by capital grant Increase in Retained Earnings Retained Earnings - July 1, 1991 Retained Eamings - June 30, '1992 MC11 $ 1,465,691 61,765 201,802 $ 1,719,258 $ 325,297 61,871 125,805 140,625 2,460 392,797 $ 1,048,855 $ 670,403 $ 74,927 (240,636) 132 $ (165,577} $ 504,826 215,671 $ 720,497 3,391,723 $_4 112 220 CITY OF KALISPELL, MONTANA - SEWER FUND SCHEDULE OF CASH FLOWS Fiscal Year Ended ,lune 30, 1992 Cash Flows from Operating Activities: $ Cash Received from Customers $ 1,489,356 Cash Received from Assessments 206,528 Cash Received from Hookups 61,625 Cash Payments to Suppliers for Goods and Services (323,343) Cash Payments to Employees for Services (323,561) Cash from Other Operating Revenues 140 Net Cash Provided by Operating Activities $ 1,110,745 Cash Flows from Capital and Related Financing Activities: Acquisition and Construction of Capital Assets $ (7,966,417) Principal Paid on Revenue Bonds and Contracts Provided by Operating Activities: (175,000) Interest Paid on Revenue Bonds and Contracts 392,797 (274,567) Proceeds from Loan/Contracted Debt Change in Assets and Liabilities: 3,913,425 Proceeds from Disposal of Fixed Assets 33,665 1,100 Increase in Due from Other Governments Increase in Accounts Payable (85,106) Contributed Capital 1,736 3,174,929 Net Cash Used for Capital and Related financing Activities $ (1,411,636) Cash Flows from Investing Activities: Interest on Investments $ 74,927 Purchases of Investments (517,716) Redemption of Sidewalk and Curr Warrants 14,600 Net Cash Used in Investing Activities $ (428,189) Net Increase in Cash and Cash Equivalents $ (729,080) Cash and Cash Equivalents at July 1, 1891 3,269,631 Cash and Cash Equivalents at June 30, 1992 $ 2 540.551 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 670,403 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 392,797 Provision for Uncollectable Accounts 2,460 Change in Assets and Liabilities: Decrease in Accounts Receivable 33,665 Decrease in Assessments Receivable 4,726 Increase in Accounts Payable 4,958 Increase in Compensated Absences 1,736 Net Cash Provided by Operating Activities $ 1,110=745 Noncash investing, capital, and financing ams: 1. The City recorded $375,557 due from E.P.A. as contributed capital in the Sevier Fund. 2, The City transferred contributions from governmental funds in the amount of $217,568 to the Sewer Fund_ 3. The disposal of obsolete equipment resulted in a book gain of $132. SIZE DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICOT, G(WZRNOR 1424 N NTH AVENUE IATF OF MONTANA (406) 444-3010 PO BOX 200501 Fri SNA. MONTANA 59620-0501 INDEPENDENT AUDITOR'S COMPLIANCE REPORT BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the years ended June 30, 1991 and 1992, and have issued our reports thereon dated August 5, 1993. In our report for the fiscal year ended June 30, 1991, our opinion was qualified because the City had not maintained adequate records relating to the fixed assets of the general fixed assets account group and the proprietary fund types. We conducted our audit in accordance with generally accepted auditing standards and 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 general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to the City is the responsibility of the City's management. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests indicate that, with respect to the items tested, the City complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those provisions. We noted certain immaterial instances of noncompliance that we have reported to the management of the City in our Independent Auditor's Report on Other Compliance, Financial, and Internal Accounting Control Matters on page 97 and page 98 of this audit report. HAI INDEPENDENT AUDITOR'S COMPLIANCE REPORT BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS - cont. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. jf g DONALD L. DOOLE. August 5, 1993 Bureau Chief na DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICCYT, GOVET-WOR 2424 NINTH AVENUE STATE OF MONTANA ( 406) 444-3010 PO BOX 200501 HELENA, NION-r NA 59620-0 50 1 SINGLE AUDIT COMBINED REPORT ON INTERNAL CONTROL STRUCTURE To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the years ended .lune 30, 1991 and 1992, and have issued our reports thereon dated August 5, 1993. In our report for the fiscal year ended June 30, 1991, our opinion was qualified because the City had not maintained adequate records relating to the fixed assets of the general fixed assets account group and the proprietary fund types. We conducted our audit in accordance with generally accepted auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Circular A-128, Audits of State and Local Governments. Those standards and OMB CircularA-128 require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and about whether the City complied with laws and regulations, noncompliance with which would be material to a major federal financial assistance program. In planning and performing our audit for the years ended June 30, 1991 and 1992, we considered the City's internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the City's general purpose financial statements and on its compliance with the requirements applicable to major federal financial assistance programs and not to provide assurance on the internal control structure. The management of the City is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that: ■ Assets are safeguarded against loss from unauthorized use or disposition. ■ Transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accountirg SINGLE AUDIT COMBINED REPORT ON INTERNAL CONTROL STRUCTURE - cont. ■ Federal financial assistance programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: Accounting Controls: Cash Receipts Billings/Accounts Receivable Mate riallSupplies Inventories Tax /Assessment Revenue and Related Receivables Purchasing/Expenditures General Requirements: Political Activity Davis -Bacon Act Civil Rights Cash Management Relocation Assistance and Real Property Acquisition Federal Financial Reports Allowable Costs/Cost Principles Drug -Free Workplace Act Administrative Requirements Claims for Advances and Reimbursements Amounts Claimed or Used for Matching Payroll Short -Term Liabilities Fixed Assets/Depreciation Cash and Investments Long -Term Debt. Laws and Regulations Speck Requirements: Types of Services Eligibility Matching, Level of Effort, Earmarking Reporting Special Requirements Cost Allocation For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. During the years ended June 30, 1991 and 1992, the City expended 94% and 98%, respectively, of its total federal financial assistance programs under major federal financial assistance programs. SINGLE AUDIT COMBINED REPORT ON INTERNAL CONTROL STRUCTURE - cont, We performed tests of controls, as required by OMB Circular A-128, to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements, general 'requirements, and requirements governing claims for advances and reimbursements and amounts claimed or used for matching that are applicable to each of the City's major federal financial assistance programs, which are identified in the accompanying schedules of federal financial assistance. Our procedures were less in scope than would be necessary to render an opinion on these internal control structure policies and procedures. Accordingly, we do not express such an opinion. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the general purpose financial statements or to administer federal financial assistance programs in accordance with applicable laws and regulations. Fixed Assets (Disclosure) The City of Kalispell had not maintained adequate records relating to the fixed assets of the general fixed assets account group and the proprietary fund types for the fiscal year ended June 30, 1991. As of June 34, 1992, the City had implemented adequate internal accounting control proceduresand established adequatefxed assets records. In addition, a reportable condition concerning the Drug Free Workplace Act has been included in the Schedule of Findings and Questioned Costs. A material weakness is a reportable condition in which the design or operation of the specific internal control; structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited or that noncompliance with laws and regulations that would be material to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. NMI SINGLE AUDIT COMBINED REPORT ON INTERNAL CONTROL STRUCTURE - cont. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, we believe the matter discussed above to be a material weakness as defined above. This condition was considered in determining the nature, timing, and extent of the procedures to be performed in our audit of the City's general purpose financial statements and of its compliance with requirements applicable to its major federal financial assistance programs for the years ended June 30, 1991 and 1992; and this report does not affect our reports thereon dated August 5, 1993. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. August .5, 1993 &M DONALD L. DOOLEY Bureau Chief DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICC2, GOVF NOR 1424 NINTH AVENUE -- STATE OF ONTIANA (406) 444-3010 FO BOX 200501 HELENA, MON--ANA 53624-0501 SINGLE AUDIT OPINION ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the years ended June 30, 1991 and 1992, and have issued our reports thereon dated August 5, 1993. In our report for the fiscal year ended June 30, 1991, our opinion was qualified because the City had not maintained adequate records relating to the fixed assets of the general fixed assets account group and the proprietary fund types. We have also audited the City's compliance with the requirements governing types of services allowed or unallowed, matching, level of effort, or earmarking; reporting; special tests and provisions; claims for advances and reimbursements; and amounts claimed or used for matching that are applicable to each of its major federal financial assistance programs, which are identified in the accompanying schedules of federal financial assistance, for the years ended June 30, 1991 and 1992. The management of the City is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and OMB's Circular A-128, Audits of State and Local Governments. Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the City complied, in all material respects, with the requirements governing types of service allowed or unallowed; matching, level of effort, or earmarking; reporting; special tests and provisions; claims for advances and reimbursements; and amounts claimed or used for snatching that are applicable to each of its major federal financial assistance programs for the years ended June 30, 1991 and 1992. -91- '�,.�,'w�.f-`.:u'�41TYsP.tPiArcrr- SINGLE AUDIT OPINION ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS - cont. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not H . d. i August 5, 1993 DONALD L. DOOLB Bureau Chief -92- DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICOT, GOVYMNOR 1424 NENTH AVENUE STATE (DJE MONTANA (406) 444-3010 PO BOX 200501 HELENA, MONTANA 55620-0501 SINGLE AUDIT REPORT ON COMPLIANCE WITH THE GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the years ended June 30, 1991 and 1992, and have issued our reports thereon dated August 5, 1993. In our report for the fiscal year ended June 30, 1991, our opinion was qualified because the City failed to maintain adequate records relating to the fixed assets of the general fixed assets account group and the proprietary fund types. We have applied procedures to test the City's compliance with the following requirements applicable to each of its major federal financial assistance programs, which are identified in the schedules of federal financial assistance, for the years ended June 30, 1991 and 1992: Political activity, Davis -Bacon Act, civil rights, cash management, relocation assistance and real property management, or federal financial reports, allowable costs/cost principles, Drug -Free Workplace Act, and administrative requirements. Our procedures were limited to the applicable procedures described in the Office of Management and Budget's Compliance Supplement for Single Audits of State and focal Governments. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the first paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those requirements. However, the results of our procedures disclosed immaterial instances of noncompliance with those requirements, which are described in the accompanying Schedule of Findings and Questioned Costs. -93- SINGLE AUDIT REPORT ON COMPLIANCE WITH THE GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS - cont. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. August 5, 1993 DONALD L. DOOLE Bureau Chief DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RAC€CO?`, GOVERNOR 1424 N1NTH AVENUE STATE CSE MONTANA (406) 444-3010 PO BOX 2044501 HELFNA, MON'T'ANA 59620-0501 SINGLE AUDIT REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS To the Honorable City Manger, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the years ended June 30, 1991 and 1992, and have issued our reports thereon dated August 5, 1993. In our report for the fiscal year ended June 30, 1991, our opinion was qualified because the City failed to maintain adequate records relating to the fixed assets of the general fixed assets account group and the proprietary fund types. In connection with our audit of the general purpose financial statements of the City for the years ended June 30 1991 and 1992, and with our consideration of the City's control structure used to administer federal financial assistance programs, as required by Office of Management and Budget Circular A-128, Audits of State and Local Governments, we selected certain transactions applicable to certain nonmajor federal financial assistance programs for the years ended June 30, 1991 and 1992. As required by OMB Circular A-128, we have performed auditing procedures to test compliance with the requirements governing types of services allowed or unallowed that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with these requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those requirements. This report is intended for the information of a matter of public record and its distribution August 5, 1993 M management, However, this report is is not limftd. ; DONALD L. DOOLEY -, Bureau Chief Schedule of Findings and Questioned Costs Drug -Free Workplace Act Policy The City had developed a formai policy to insure compliance with the Drug -Free Workplace Act, however, the policy had not been formally approved and distributed as of June 34, 1992. The adoption of a formal policy is required by federal regulations. The failure to adopt such a policy did not, however, result in any questioned costs in any federal financial assistance program. Recommendation The City should officially adopt a formal policy to insure compliance with the Drug -Free Workplace Act. The contents of the policy should be made known to a# employees. The policy should contain all information required by federal regulations and the Act. Ma DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACICOT, GOVERNOR 1424 NINTH AVENUE STATE OF MONTANA (406)444-3010 PO BOX 200501 HELENA, MONTANA 59620-0501 INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 69901 Immaterial instances of noncompliance along with findings relating to financial or accounting matters, as well as our recommendations, are presented below. Also, other matters involving the internal control structure and its operation that are not considered to be reportable conditions under standards established by the American Institute of Certified Public Accountants are disclosed below for your information, along with our recommendations for improvement where applicable. Exceeding Budgetary Authority During fiscal year ended ,lune 30, 1992, the City sold tax deed property and used the proceeds to redeem outstanding debt without increasing the budgetary authority as prescribed in Section 7-6-4231, MCA. In addition, a budget had not been adopted for the Community Development Fund, a special revenue fund and several debt service funds had budget overdrafts. Section 7-6-4236 (2) states in part, "...the council and every other municipal official shall be limited in the making of expenditures or incurring of liabilities to the amount of such detailed appropriations..." Recommendation The City should limit expenditures or incurring liabilities to the amount of such detailed appropriations of each fund. If budget should require an amendment, the provisions of Section 7-6-4252, MCA, should be followed prior to the incurring of an liability. Further, a budget should be adopted for each governmental fund maintained by the City. Capitalized interest The City of Kalispell capitalized interest in the enterprise funds by closing interest expense and interest revenue to the construction in progress account at year-end. The procedure resulted in an understatement of interest revenue and expense in that not all of the expense and revenue was related to tax exempt borrowing and interest- bearing investments acquired with the proceeds of the tax-exempt borrowings. Financial Accounting Standards Board Statement No. 62 concludes that the amount of interest cost to be capitalized for assets constructed with tax-exempt borrowing is equal to the cost of the borrowing, less interest earned on the related interest- bearing investments acquired with the proceeds of the related tax --exempt borrowings. INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS - cont. Recommendation In the future, the City should only record the excess interest expense on tax- exempt borrowings less the interest revenue earned on investments acquired with the proceeds of related tax-exempt borrowings to the construction in progress account as capitalized interest. Segregation of Duties The Assistant Finance Director is responsible for cash. collections, depositing, reconciling, and posting cash receipts. The failure to segregate such incompatible functions results in a weakening of Internal control procedures. Recommendation The duties of the Assistant Finance Director should be segregated to eliminate total control of the cash functions. The Finance Director could possibly be in charge of reviewing the daily receipts and comparing the receipts to the bank deposit receipts. August 5, 1993 DONALD L. DOOLEY Bureau Chief DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU MARC RACTCOT, GOVERNOR 1424 NINTH AVENUE STATE OF MONTANA (406) 444-3010 PO BOX 200501 HELENA, MONTANA 56620-0501 INDEPENDENT AUDITOR'S REPORT ON PRIOR AUDIT REPORT RECOMMENDATIONS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 The prior audit report contained six recommendations. Of those recommedations, five were implemented and one was partially implemented. The following recommendation was only partially implemented and has been repeated in this audit report. August 5, 1993 Drug -Free Workplace Act w• -AN ESLOPP-_-F UN17"Y EMPLOYER" DONALD L. DOOLEY 1 Bureau Chief r f