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06. Audit-Fiscal Year Ended 6/30/94CITY OF KALISPELL, MONTANA TABLE OF CONTENTS Page Fiscal Year Ended June 30, 1994 Organization 1 Independent Auditor's Report 2 - 3 Financial Statements 4 Combined Balance Sheet - All Fund Types and Account Groups 5 - 6 Combined Statement of Revenues, Expenditures, and Changes 7 in Fund Balances - All Governmental Fund Types Combined Statement of Revenues, Expenditures, and Changes 8 - 9 in Fund Balances - Budget and Actual - General, Special Revenue, Debt Service, and Capital Projects Fund Types Combined Statement of Revenues, Expenses, and Changes 14 in Retained Earnings - All Proprietary Fund Types Combined Statement of Cash Flows - All Proprietary Fund Types 11 Notes to Financial Statements 12-34 Independent Auditor's Report on Supplemental Information 35 and Supplemental Schedules Independent Auditor's Report on Supplemental Information 36 Supplemental Schedules Schedule of Federal Financial Assistance 37 38 Significant Provisions of Sewer Revenue Bond Ordinances and 39-41 Required Information Schedule of Assets, Liabilities and Fund Equity - Sewer Fund 42 Schedule of Revenues, Expenses and Changes in Retained 43 Earnings - Sewer Fund Schedule of Cash Flows - Sewer Fund 44 0 CITY OF KALISPELL, MONTANA TABLE OF CONTENTS - cont. Independent Auditor's Report on Compliance Based on an Audit of 45 General Purpose Financial Statements Single Audit Combined Report on Internal Control Structure 46-49 Single Audit Report on Compliance With the General Requirements 50 Applicable to Federal Financial Assistance Programs Single Audit Report on Compliance With Specific Requirements Applicable 51 to Nonmajor Federal Financial Assistance Program Transactions Independent Auditor's Report on Other Compliance, Financial, and 52 Internal Accounting Control Matters Independent Auditor's Report on Prior Audit Report Recommendations 53 CITY OF KALISPELL, MONTANA ORGANIZATION Fiscal Year Ended June 30,_ 1994. Mr. Douglas Rauthe Mayor CITY COUNCII. Mr, Gary Nystul Members Mr. Cliff Collins Ms, Barbara Moses Mr. Dale Haarr 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. Array Robertson Finance Director Ms. Heidi Ulbricht City Judge -1- CITY OF KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT Fiscal Year Ended June 30, 1994 -2- Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 1103 S. Main • Kalispell, MT 59901 • 756-6879 2801 S. Russets + Missoula, MT 59801 • 543-8174 INDEPENDENT AUDITOR'S REPORT 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 year ended June 30, 1994, 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; 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 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, 1994, 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. As discussed in Note 1 to the financial statements, the City changed its method of reporting for component units as required by Governmental Accounting Standards Board Statement No. 14 "The Financial Reporting Entity". March 31, 1995 �+- NORDWICK, DENNING ANb DOWNEY Certified Public Accountants -3- Stan Nordwick, CPA • Robert K. Denning CPA* Kim M. Downey CPA • Nancy S. Hamilton CPA CITY OF KALISPELL, MONTANA FINANCIAL STATEMENTS Fiscal Year Ended June 30, 1994 _4_ CITY OF KALISPELL, MONTANA COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 1994 ASSET Cashlinvestments Taxeslassessments receivable Other receivables Due from other funds Advance to other funds Due from other governments Prepaid expenses Inventories Amount available in debt service funds Amount to be provided for retirement of general long-term debt Amount to be provided from special assessments Fixed assets TOTAL ASSETS LIAE31LITIES AND FU UITY Liabilities: Short-term payables Due to other funds Advance from other funds Deferred revenue Long-term liabilities Total Liabilities Fund Equity: Contributed capital investment in general fixed assets Retained earnings: Reserved Unreserved Fund Balance: Reserved Unreserved Total Fund Equity TOTAL LIABILITIES AND FUND EQUITY See accompanying Notes to Financial Statements GOVERNMENTAL FUND TYPES PROPRIETARY FUND TYPES $ 118,278 $ 1,054,502 $ 9.333 $ - $ 270,050 $ 9,322 11,200 9.572 _ 29,783 208,016 3,695,005 132,784 - 7,532,861 24,714 $ 326,294 $ 4,749,507 $ 153,317 $ 9,572 $ 7,802,911 $ 63,819 $ _ $ - $ - $ - $ 12,252,078 $ 3,207,577 - 5,795,032 406,269 29,783 183,827 1,235,570 1,977,904 61.001 (9,572) $ 1,265,353 $ 2,161,731 $ 61,001 $ (9,572) $ 21,254,687 $ 406,269 $ 1.591,647 $ 6,911,238 $ 214,318 $ 0 $ 29,057,598 $ 470,068 Special Debt Capital Internal General Revenue Service Projects Enterprise Service $ 1,258,198 $ 3,047,874 $ 63,417 $ $ 3,929,433 $ 393,743 208,016 375.582 132,784 33,078 3,319,423 2,333 - 331,238 9,572 11,200 29,783 - 86,078 123,317 4,584 45,042 - 7,506 _ 145,507 24,618,342 68,839 $ 1,591,647 $6,911,238 $ 214,318 $ 0 $ 29,057,598 $ 470,088 $ 118,278 $ 1,054,502 $ 9.333 $ - $ 270,050 $ 9,322 11,200 9.572 _ 29,783 208,016 3,695,005 132,784 - 7,532,861 24,714 $ 326,294 $ 4,749,507 $ 153,317 $ 9,572 $ 7,802,911 $ 63,819 $ _ $ - $ - $ - $ 12,252,078 $ 3,207,577 - 5,795,032 406,269 29,783 183,827 1,235,570 1,977,904 61.001 (9,572) $ 1,265,353 $ 2,161,731 $ 61,001 $ (9,572) $ 21,254,687 $ 406,269 $ 1.591,647 $ 6,911,238 $ 214,318 $ 0 $ 29,057,598 $ 470,068 CITY OF KALISPELL, MONTANA COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 1994 M PROPRIETARY FIDUCIARY PRIMARY COMPONENT REPORTING FUND TYPES ACCOUNT GROUPS GOVERNMENT UNIT ENTITY General General TOTALS Kalispell TOTALS Trust And Fixed Long -Term (MEMORANDUM Parking (MEMORANDUM Agency Assets Debt ONLY) Commission ONLY) $ 291,111 $ $ $ 8,983,776 $ 62,862 $ 9,046,638 _ - 749,460 - 749,460 _ 3,652,994 3,652,994 _ 20,772 20,772 - 29,783 29,783 _ - - 213,979 213,979 - - 52,548 52,548 - 145,507 - 145,507 - 61,001 61,001 - 61,001 2,338,727 2,338,727 2,338,727 _ 94,056 94,056 94,056 9,143,687 - 33,830,868 1,292 33,832,160 $ 291,111 $ 9,143,687 $ 2,493,784 $ 50.173,471 $ 64 154 $ 50,237,625 $ 291,111 $ $ - $ 1,752,596 $ 2,797 $ 1,755,393 _ - 20,772 20,772 _ - - 29,783 - 29,783 _ - 4,035,805 - 4,035,805 _ - 2,493,784 10,059 ,359 2,316 10,053,675 $ 291,111 $ 0 $ 2,493,784 $ 15,890,315 $ 5,113 $ 15,895,428 $ _ $ $ - $ 12,252,078 $ - $ 12,252,078 - 9,143,687 - 9,143,687 - 9,143,687 _ - - 3,207,577 - 3,207,577 _ - - 6,201,301 59,041 6,260,342 - - 213,610 - 213,610 - - 3,264,903 - 3,264.903 $ 0 $ 9,143,687 $ 0 $ 34,283,156 $ 59,041 $ 34,342.197 $ 291,111 $ 9143687 $ 2,493,784 $ 50,173,471 $ 64154 $ 50,237,625 M CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL. FUND TYPES For Fiscal Year Ended June 30, 1994 REVENUES Taxes/special assessments Licenses and permits intergovernmental revenue Charges for services Fines and forfeitures Miscellaneous revenues Investment and royalty earnings Total Revenues EXPENDITURES Current: General government Public safety Public works Culture and recreation Housing and community development Miscellaneous Capital outlay Debt service Total Expenditures Excess (Deficiency of Revenues Over Expenditures Other Financing Sources (Uses): Proceeds of general long-term debt Operating transfers in Operating transfers(out) Transfers Out to Component Unit Total Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Sources REPORTING Over Expenditures and Other Uses $ 84,240 $ ENTITY $ 30,114 GOVERNMENTAL FUND "TYPES $ TOTALS $ Special Debt $ (2,147) $ 3,875,711 Capital (MEMORANDUM General Revenue Service 8,310 Projects ONLY) $ $ 1,429,788 $ 2,401,747 $ 123,972 $ - $ 3,955,547 447,940 4,035 272 (359,776) - 452,247 1,192,177 607,610 5,455 $ - 1,805,242 732,928 276,379 - 2,180 1,011,487 457,545 - - - 457,545 31,596 200 _ - 31,796 64,122 440,080 1,618 - 545,820 $ 4,356,096 $ 3,730,051 $ 131,317 $ 2,180 $ 8,219,644 $ 695,296 $ 273,986 $ - $ - $ 969,282 2,080,247 516,011 - - 2,596,258 815,043 683,993 - 309 1,499,345 406,879 47,107 - - 453,986 - 398,686 - - 398,686 - 274,686 101,203 - 375,889 52,643 264,811 - - 317,454 955,351 1,443,506 - 14,408 1,613,265 $ 4,205,459 $ 3,902,786 $ 101,203 $ 14,717 $ 8,224,165 $ 150,637 $ (172,735) $ 30,114 $ (12,537) $ (4,521) $ - $ - $ - $ 5,112 $ 5,112 - 166,397 - - 166,397 (66,397) (100,000) - - (166,397) - (53,004) - - (53,000) $ (66,397) $ 13,397 $ 0 $ 5,112 $ (47,888) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ 84,240 $ (159,338) $ 30,114 $ (7,425) $ (52,409) Fund Balances - July 1, 1993 - as previously reported $ 1,181,113 $ 2,674,168 $ 22,577 $ (2,147) $ 3,875,711 Restatements - 6,677 8,310 - 14,987 Fund Balances- July 1, 1993 - as restated $ 1,181,113 $ 2,680,845 $ 30,887 $ (2,147) $ 3,890,698 Residual equity transfers - (359,776) - - (359,776) Fund Balances - June 30, 1994 $ 1,265,353. $ 2,161,731 $001 . $ (9,572) $ 3,478,513 See accompanying Notes to Financial Statements -7- CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE, DEBT SERVICE AND CAPITAL PROJECTS FUND TYPES For Fiscal Year Ended June 30, 1994 See accompanying Notes to Financial Statements GENERAL FUND SPECIAL REVENUE FUNDS Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) REVENUES Taxes/special assessments $ 1,317,000 $ 1,429,788 $ 112,788 $ 2,409,988 $ 2,401.747 $ (8,241) Licenses and permits 361,220 447,940 86,720 3,100 4,035 935 Intergovernmental revenue 1,075,251 1,192,177 116,926 1,219,786 607,610 (612,176) Charges for services 759,636 732,928 (26,708) 254,360 276,379 22,019 Fines and forfeitures 442,000 457,545 15,545 - - - Miscellaneous revenues 33,500 31,596 (1,904) 27,000 200 (26,800) Investment and royalty earnings 59,555 64.122 4,567 407,934 440,080 32,146 Total Revenues $ 4,046,162 $ 4,356,096 $ 307,934 $ 4,322,168 $ 3,730,051 $(592,177) EXPENDITURES Current: General government $ 724,940 $ 695,296 $ 29;644 $ 284,568 $ 273,986 $ 10,582 Public safety 2,144,076 2,080,247 63,829 537,342 516,011 21,331 Public works 838,290 815,043 23,247 727,012 683,993 43,019 Culture and recreation 436,039 406,879 29,160 47,675 47,107 568 Housing and community development - - - 1,274,152 398,686 875,466 Miscellaneous 53,140 52,643 497 289,750 264,811 24,939 Capital outlay 237,673 155,351 82,322 2,941,048 1,443,506 1,497,542 Debt service - - - 275,601 274,686 915 Total Expenditures $ 4,434,158 $ 4,205,459 $ 228,699 $ 6,377,148 $ 3,902,786 $ 2,474,362 Excess (Deficiency of Revenues Over Expenditures $ 385,996) $ 150,637 $ 536,633 $ 2,054,980 $� (172,7 $ 1,882,245 Other Financing Sources (Uses): Proceeds of general long-term debt $ - $ - $ - $ - $ - $ - Operating transfers in - - 166,397 166,397 0 Operating transfers(out) (66,397) (66,397) 0 (100,000) (100,000) 0 Transfer out to component unit - (53,000) (53,000) 0 Total Other Financing Sources (Uses) $ (66,397] $ 06,397] $ 0 $ 13,397 $ 13,397 $ 0 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ (452,393) $ 84,240 $ 536,633 $ 2,041,583 $ (159,338] $ 1,882,245 Fund Balances - July 1, 1993 - as previously reported $ 1,181,113 $ 2,674,168 Restatements - 6,677 Fund Balances - July 1, 1993 - as restated $ 1,181,113 $ 2,680,645 Residual equity transfers {359,77 Fund Balances - June 30, 1994 $ 11,265 353 $ 2.161,731 See accompanying Notes to Financial Statements CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE, DEBT SERVICE AND CAPITAL PROJECTS FUND TYPES - cont, REVENUES Taxes/special assessments Licenses and permits Intergovernmental revenue Charges for services Fines and forfeitures Miscellaneous revenues Investment and royalty earnings Total Revenues EXPENDITURE Current: General government Public safety Public works Culture and recreation Housing and community development Miscellaneous Capital outlay Debt service Total Expenditures Excess (Deficiency of Revenues Over Expenditures Other Financing Sources (Uses): Proceeds of general long-term debt Operating transfers in Operating transfers(out) Transfer out to component unit Total Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses Fund Balances - July 1, 1993 - as previously reported Restatements Fund Balances - July 1, 1993 - as restated Residual equity transfers Fund Balances - June 30, 1994 See accompanying Notes to Financial Statements For Fiscal Year Ended June 30, 1994 DEBT SERVICE FUNDS CAPITAL PROJECTS FUNDS Variance Variance Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ 105,870 $ 123,972 $ 18,102 $ $ - $ 275 272 (3) - 3,365 5,455 2,090 - - - 50,000 2,180 (47,820) 700 1,618 918 - - $ 110,210 $ 131,317 $ 21,107 $ 50,000 $ 2,180 $ (47,820) 2,000 309 1,691 _ - 48,000 14,408 33,592 105,967 101,203 4,764 - - - $ 105,967 $ 101,203 $ 4,764 $ 50,000 $ 14,717 $ 35,283 $ 4,243 $ 30,114 $ 25,871 $ 0 $ (12,537) $ (12,537 $ _ $ $ - $ 0 $ 5,112 $ (5,112) $ 0 $ 5,112 $(5,112) 0 $ 0 $ $ 0 $ 4,243 $ 30,114 $ 25,871 $ $ 22,577 8,310 $ 30,887 $ 61,001 0 $ (7,425) $____(17,W $ (2,147) $ (2,147) $___C9,572 CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30, 1994 See accompanying Notes to Financial Statements swell PRIMARY COMPONENT REPORTING PROPRIETARY FUND TYPES GOVERNMENT UNIT ENTITY TOTALS Kalispell TOTALS Internal (MEMORANDUM Parking (MEMORANDUM Enterprise Service ONLY) Commission ONLY) Operating Revenues: Charges for services $ 2,918,612 $ - $ 2,918,612 $ 36,928 $ 2.955,540 Miscellaneous revenues 150,656 - 150,656 - 150,656 Special assessments 231,297 - 231,297 - 231,297 Intemal services - 769,670 769,670 - 769,670 Total Operating Revenues $ 3,300,565 $ 769,670 $ 4,070,235 $ 36,928 $ 4,107,163 Operating Expenses: Personal services $ 1,078,271 $ $ 1,078,271 $ 44,266 $ 1,122,537 Supplies 117.889 6,206 124,095 677 124,772 Purchased services 447,202 460,996 908,198 4,410 912,608 Fixed charges 360,100 5,605 365,705 9,805 375,510 Losses/bad debt expenses 49,268 - 49,268 49,268 Depreciation 1,153,510 20,806 1,174,316 69 1,174,385 Total Operating Expenses $ 3,2061240 $ 493,613 $ 3,699,853 $ 59,227 $ 3,759,080 Operating Income(Loss) $ 94,325 $ 276,057 $ 370,382 $ (22,299) $ 348,083 Non -Operating Revenues(Expenses): Fines and forfeitures $ - $ - $ 0 $ 29,948 $ 29,948 Interest 141,128 10.568 151,696 - 151,696 Transfer in from primary government - - 0 53,000 53,000 Debt service interest expense (420,370) (3,316) (423,686) - (423,686) Total Non -Operating Revenues(Expenses) $ (279,242) $ 7,252 $ (271,990) $ 82,948 $ (189,042) Income (Loss) before extraordinary items $ (184,917) $ 283,309 $ 98,392 $ 60,649 $ 159,041 Extraordinary loss on disposal of asset $ (31,202) $ - $ (31,202) $ - $ (31,202) Net Income(Loss) $ (216,119) $ 283,309 $ 67,190 $ 60,649 $ 127,839 Add depreciation on fixed assets acquired by capital grants $ 497,445 $ - $ 497,445 $ - $ 497,445 Increase(Decrease) in Retained Earnings $ 281,326 $ 283,309 $ 564,635 $ 60,649 $ 625,284 Retained Earnings - July 1, 1993 - As Previously Reported $ 8,800,515 $ 122,960 $ 8,923,475 $ 0 $ 8,923,475 Restatements (79,232) - (79,232) (1,608) (80,840) Retained Earnings - July 1, 1993 - As Restated $ 8,721,283 $ 122,960 $ 8,844,243 $ (1,608) $ 8,842,635 Retained Earnings - June 30, 1994 $ 9�O02 609,. $ 406,269 $ 9,408,878 $ fi9,041 $ 9,467,919 See accompanying Notes to Financial Statements swell CITY OF KAUSPELL, MONTANA COMBINED STATEMENT OF GASH FLOWS -ALL PROPRIETARY FUND TYPES AND SIM)LAR TRUST FUNDS Cash Flows from Operating Activities: Cash received from customers Cash received from assessments Cash received from hookups Cash payments to suppliers for good and services Cash payments to employees for services Cash received from fund transfers Cash from other operating revenues 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 Principal paid on interfund loan advance Capital contributed by developers Capital contributed by city Capital grants Disposition of fixed assetldemolition Net Cash Used from Capital and Related Financing Activities Cash Flows from Noncapital Financing Activities: Operating transfer from primary government Not Cash Provided by Noncapital Financing Activities Cash Flows from Investing Activities: Interest on Investments Investment in certificates of deposit 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, 1993 Cash and Cash Equivalents at June 30, 1994 Reconciliation of Operating Income to Net Cash Provided by Operating Activfties: Operating Income Adjustments to reconcile income to net cash provided by operating activities: Depreciation Bad Debt Expense Changes in assets and liabilities: Decrease(Incfease) in accounts receivable Decrease(Increase) in assessments receivable Decrease(Increase) in inventory lneresse(Decrease) in accounts payable Increase(Decrease) in short-term contract payable Decrease(increase) in prepaid expense Increase(Decrease) in estimated liabilities Increase(Decrease) in compensated absences Net Cash Provided by Operating Activities Fiscal Year Ended June 30, 1994 94,325 $ 276,057 $ 1,153,510 20,806 49,267 PROPRIETARY (86,977) - 8,500 PRIMARY COMPONENT REPORTING PROPRIETARY FUND TYPES GOVERNMENT UNIT ENT)TY (333) 2,520 Totals Kalispell Totals Internal (Memorandum Parking (Memorandum Enterprise Service only) Commission only) $ 2,773,152 $ $ 2,773,152 s 66,876 $ 2,8A0,028 237,827 237,827 237,827 150,656 150,656 159,656 (914,235) (472,812) (1,387,047) (12,732) (1,399,779) (1,078,604) (1,078,604) (42,921) (1,121,525) 81,506 81,506 81,506 60,454 688,164 748,616 748,618 _ $ 1229,250 $ 296,858 $ 1,526,108 $ 11,223 $ 1,537,331 $ (2,706,859) $ (19,327) $ (2,726,177) $ (1,360) $ (2,727,537) (363,669) (14,615) (378.284) (378,284) (507,143) (3,126) (510,269) (510,259) (8,511) (8,511) (8.511) 1,553,552 1,553,552 1,553,552 359,776 359,776 359,776 $12,934 512,934 512,934 (23,450) (23,450) (23,450) $ (1,174,850) $ (45,579) $ (1,220,429) $ (1,360) $ (1,221,789) $ - $ - $ 0 $ 53,000 $ 53,000 $ 0 $ 0 $ 0 $53,000 $ 53,000 $ 145,883 $ 10,599 $ 156,482 $ - $ 156,482 0 (30,900) (30,000) (5,113) (5,113) - (5,113) 11,583 - 11,583 11,583 $ 152,353 $ 90,599 $ 162,952 $ (30,000) $132,952 $ 206,753 $ 261,878 $ 468,631 $ 32,863 $ 501,494 $ 3,663,246 $ 131,865 $ 3,795,111 $ 0 $____3,795,1 11 $ 3 869,999 $ 393,743 $_ 4,263,742 $ 32,863 $_ - 4i2; 605 94,325 $ 276,057 $ 1,153,510 20,806 49,267 8,500 (86,977) - 8,500 2,797 20,221 (7,955) (2,332) 21,245 (3,821) (2,332) 1,296 (333) 2,520 - 1,296 (333) $ 1.229,250 $ 296,858 370,382 $ 7,649 $ 378,031 1,174,316 69 1,174,385 49,267 49,267 (86,977) (86,977) 8,500 8,500 (7,955) (7,955) 17,424 2,797 20,221 (2,332) (2,332) 2,524 2,520 1,296 1,296 (333) 708 375 $ 1,526,108_ $ 11223 $ 1537331 Noncash investing, capita(, and financing activities: 1, The difference between the beginning and ending due from EPA in the amount of $512,934 was recorded as contributed capital in the Sewer Fund, 2. The City demolished a building valued at $73,825, that belonged to the Sewer Fund. The undepreciated cost of $25,839 plus the cost of the demolition of $23,450 was recorded as a loss of $31,202 and contributed capital was reduced by $18,087. See accompanying Notes to Financial Statements -11- CITY OF KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS June 30, 1994 Summary of Significant Acc9unting Policies The following is a summary of the City's significant accounting policies: Reporting_Enti1a: During the year ended June 30, 1994, the City implemented Governmental Accounting Standards Board (GASB) statement No. 14 "The Financial Reporting Entity" This statement defines the financial reporting entity as the primary government, as well as its component units, which are legally separate organizations for which the elected officials of the primary government are financially accountable. The Governmental Accounting Standards Board has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization's governing body and (1) the ability of the City to impose its will on that organization or (2) the potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the City. As required by generally accepted accounting principles, these financial statements present the City of Kalispell (the primary government) and its component unit. The component unit is included in the City's reporting entity because of the significance of its operational or financial relationship with the City, as described above. The discretely presented component unit, the Kalispell Parking Commission, is a legally separate organization of the City, but the City is financially accountable, or the relationship with the City is such that exclusion would cause the financial statements to be misleading or incomplete_ The City appoints the governing body of the Parking Commission. The Parking Commission runs a variety of metered and leased parking areas downtown which are owned by the City. They also issue tickets for parking violations in the parking district downtown. The component unit is reported in a separate column to emphasize it is legally separate from the City. Fund Ac ountin 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: -12- S mm f Significant Accounting Policies - cont. 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 expendable trusts or for major capital projects) that are legally restricted to expenditures for specific purposes. Capital Proiects 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 and trust 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. 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 the 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 ASSETS AND LONG-TERM LIABILITIES Qeneral Fixed Assets Account Group - Used to account for the fixed assets of the City which are not accounted for in proprietary funds or in trust funds. -13- 1. Summary f Significant Aegglinting Policies - c n. Cleneral L n -Terns Debt AcrQunt Group - Used to account for all long-term debt of the City except that accounted for in the proprietary funds or trust funds. Basis of Accounting and Megsurement Focus The modified accrual basis of accounting is followed by all governmental 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 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 recorded 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 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 type operating statements present increases (revenue and other financing sources) and decreases (expenditures and other financing uses) in net -14- 1. Summary of Significant Accounting Policies -cont. Vacation and Sick Leave - _cont. 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_ Cad tal 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. Interfund Transactions nterfund 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 expenditures in the fund that is reimbursed. Advances between funds are accounted for in the appropriate interfund receivable and payable accounts. Cash and Cash Equivalents 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. -17- SunimaEy ofi nific n Accounting Policies - cont. T tal 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 operation, or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. lnterfund eliminations have not been made in the aggregation of this data. 2. ProuejU 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. As 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. 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 assessment 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 se* 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 I% 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 (and its charter) to levy taxes up to certain fixed limits for various purposes. The taxes levied by the City for the year ended June 30, 1994 were within the legal limits. The tax levies were based upon a taxable valuation of $19,093,874. Current tax collections for the year ended June 30, 1994 were approximately 85% of the amount levied. Deficit Fund Balances The following Debt Service Funds had deficit fund balances at June 30, 1994: 1985 Sidewalk and Curb $5,184 1986 Sidewalk and Curb 1,502 1987 Sidewalk and Curb 5,913 1990 Sidewalk and Curb 1,599 1991 Sidewalk and Curb 518 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. Deficit Fund Balances - cant. The 1994 Sidewalk and Curb Capital Projects Fund had a deficit fund balance of $9,572 at June 30, 1994. 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 4verdraftsNaariances General Fund Significant favorable budget to actual variances occurred in the taxes/special assessments and intergovernmental revenue sources in the amount of $112,788 and 116,926, respectively. The variances were primarily the result of delinquent tax collections and an increase in the video machine apportionment revenue over the prior year. Special Revers e Funds A significant unfavorable budget to actual variance occurred in the intergovernmental revenue source in the amount of $612,176. The variance was caused by the CDBG programs starting late in the fiscal year. Consequently, the City did not receive the entire grant proceeds as anticipated in the budget. Significant favorable budget to actual variances occurred in the housing and community development and capital outlay expenditure categories in the amounts of $875,466 and $1,497,542, respectively. The City did not begin or complete as many street projects as were anticipated in the budget for the Tax Increment Fund. Debt Service Funds A significant favorable budget to actual variance occurred in the taxes/special assessments revenue source in the amount of $18,102 due to bonds being paid off in several Sidewalk and Curb and S.I.D. Funds, however, the City is still collecting delinquent taxes in these funds. Cal tal Projects Funds A significant unfavorable budget to actual variance existed in the charges for services revenue source in the amount of $47,820 because collections of charges for services for sidewalks and curbs were less than anticipated. Significant favorable budget to actual variances existed in the public works and capital outlay expenditure categories in the amounts of $1,691 and 33,592, respectively because anticipated expenditures were not made. Cash and Investments The City maintains a cash and investment pool for all funds under the control of the In addition, investments are separately held for several of the funds. Treasurer 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. -19- 5. Cash and Investments - cant.. The composition of cash and investments on June 30, 1994, was as follows: Cash on Hand Petty Cash Cash in Banks: Demand Deposits Savings Deposits State Short -Term Investment Pool (S.T.I.P.) Sidewalk and Curb Bonds Bidders Bond Variable Annuity Life Insurance Company(VALIC) Deferred Compensation Plan Total per Balance Sheet $ 65,721 880 156,115 90,782 8,439,977 59,434 25,000 20&729 $9.046.638 Deposits - At year-end, the carrying amount of the City's deposits was $246,897, and the bank balance was $287,914. These deposits include demand and savings deposits. Of the bank balance, $161,285 was covered by Federal Depository Insurance and $126,629 was covered by collateral held by the pledging bank's agent in the City's name. Of the balances reported above $63,032 belonged to the Parking Commission, a component unit of the City. This balance was completely covered by Federal Depository Insurance. The carrying balance was $62,174 and the bank balance was $63,032. 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 as June 30, 1994, equaled or 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 held no such investments except for S.T.I.P. Participants in pooled investments are exempt from classifying such investments in categories of credit risk, as required by GASB Statement Number 3, because the pool faces the custodial risk, not the individual participant. 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, 1994, amounted to $208,729. -20- 6. Fixed Assets Enterprise jfltgmW Service Land $ 245,369 A summary of changes in general fixed assets follows: Machinery and Equipment 1,117,649 117,733 Construction Work in Progress Balance Source of Supply Balance July 1. 1993 Additions Deletions June 30, 1994 Land $1,590,610 $ 353,830 $ $1,944,440 Buildings 3,293,515 219,558 Stora Sewer 3,513,073 Improvements Other Than Buildings 1,081,649 21,260 $ 117,733 1,102,909 Machinery and Equipment 2,185,893 327,584 41,438 2,472,039 Construction Work in Progress 32.916 111.226 _ 32.916 111,226 Total $8 184 583 $1.033.458 $ 7354 $9 143- 687 A summary of proprietary fund type property, plant, and equipment at June 30, 1994 follows: The fixed assets of the Parking Commission, a discretely presented component unit, consisted only of equipment in the amount of $1,292. T Lang -Term Debt Enterprise jfltgmW Service Land $ 245,369 $ Machinery and Equipment 1,117,649 117,733 Construction Work in Progress 157,507 Source of Supply 347,709 Pumping Plant 596,599 July L 1993 Treatment Plant 13,886,053 June 30, 1994 Transmission and Distribution 11,582,555 $ General Plant 1,166,498 Revenue Bonds(2) Stora Sewer 3.308.381 140,000 Total $32,408,320 $ 117,733 Less Accumulated Depreciation 7,789,978 48 894894 Net $24.618.342 $ 68839 The fixed assets of the Parking Commission, a discretely presented component unit, consisted only of equipment in the amount of $1,292. T Lang -Term Debt The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1994: Balance Balance July L 1993 Additions Reductions June 30, 1994 General Obligation Bonds(]) $ 355,000 $ $ 45,000 $ 310,000 Revenue Bonds(2) 3,850,000 140,000 3,710,000 Special Assessment Bonds(]) 155,992 5,112 25,182 135,922 Loans/Contracted Debt (1)(2)(3) 138,774 42,403 96,371 Compensated Absences Payable(1)(2)(4) 626,044 58,672 334 684,382 Urban Renewal Bonds(]) 1,530,000 115,000 1,415,000 State Revolving Fund Loan(2) 3.835.000 133,000 3.701000 Total $10490.810 $_63.784 $ 50-0919 $TO.053.675 -21- T Lon -Terra Debt - cont. (1) Reported in general long-term debt account group (2) Reported in Enterprise Fund (3) Reported in Internal Service Fund (4) Reported in Proprietary Component Unit Banded Debt Bonds payable at June 30, 1994 are comprised of the following individual issues: 1. General Obligation Binds Final Outstanding Annual Issue Interest Bond Maturity Bonds June 30 Serial Pur se Date Rate Term Date Issued 1994 Payment Refunding Bond -Pool 4/93 2.8-5.1% 7 yrs. 2000 $ 385 000 $ 310,,,,,000 varies General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. $19,135 is available in the Debt Service Funds to service the general obligation bonds. 2. Revenue Bonds 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 39 through 46. -22- Final Outstanding Annual Issue Interest Bond Maturity Bonds June 30 Serial purpose Date Rate Term Date Issued 1994 Payment 1976 Sewer Plant 1/1176 6.75% 20 yrs. 1996 $ 445,000 $ 115,000 varies 1986 Storm Sewer 6!1186 7.0% 20 yrs 2006 1,300,000 1,045,000 varies 1991 Sewer System Refunding Bonds 4115/91 varies 20 yrs. 2011 1815,000 D,000 $2.550.000 varies Total $4 560000 $3 710.000 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 39 through 46. -22- 7. Long -Term Debt - cont. 3_ Special Assessment Bonds (S.I.D.) Final 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 the 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. $42,000 is available in the special assessment debt service funds, including $45,519 in the Revolving Fund to service the special assessment long -terra obligations. 4. 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, 1994, there was $123,046 available in the Tax Increment Special Revenue Fund to service these bonds. -23- Issue Interest Term of Maturity Bonds Outstanding Annual Purpose Date Rate _Band Date Issued June 301994 Pavment S.I.D_ No. 337 12/1186 7.74% 15 yrs. 2002 $110,000 $ 75,000 varies 1986 Sidewalk and Curb 12%31/86 9.0% 8 yrs. 1994 20,987 3,488 varies 1987 Sidewalk and Curb 12/31/87 12% 8 yrs. 1995 31,275 3,275 vanes 1988 Sidewalk and Curb 111/89 12% 8 yrs. 1996 37,411 16,411 varies 1989 Sidewalk and Curb 1/3/90 10.5% 8 yrs. 1998 15,818 8,000 varies 1990 Sidewalk and Curb 1/15/91 10% 8 yrs. 1999 14,600 9,100 varies Meridian Sidewalk and Curb 10/1/90 11% 8 yrs_ 1998 7,322 3,723 varies 1991 Sidewalk and Curb 2/1/92 8% 8 yrs. 2000 3,360 2,813 varies 1992 Sidewalk and Curb 1/2/93 7% 8 yrs. 2001 9,103 9,000 varies 1993 Sidewalk and Curb 1/4/94 6% 8 yrs. 2002 5.112 5,112 varies Total $254988 $135922 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 the 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. $42,000 is available in the special assessment debt service funds, including $45,519 in the Revolving Fund to service the special assessment long -terra obligations. 4. 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, 1994, there was $123,046 available in the Tax Increment Special Revenue Fund to service these bonds. -23- 7. Long -Term Debt - coat. Issue Interest u o e Date Rate ax Increment 12185 6.25-9.5% L Aans/C!2ntracjed Debt Origination PurpQse Date Computer(3) 8/17190 Sweeper(1) 1/17/92 Ambulance(2) 5/1192 Total Jgne 30 1994 Final Term of Maturity Bonds Outstanding Annual Bond Date I ped�, 1994 Payment 16 yrs. 711!2002 $2 100 000 $ 1.415.000 varies Interest Due Principal Outstanding Rate Term Date Amount Jgne 30 1994 varies 5 yrs. 8/15185 $ 71,014 $ 24,714 varies 5 yrs. 2/15/97 80,770 51,448 varies 3 yrs. 8/15/95 38,,975 20;209 $190.759 $ 9i_371 (1) Reported in general long-term debt account group (2) Reported in Enterprise Fund (3) Reported in Internal Service Fund Comunsated Absences Payable Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund $ 100,652 General Long -Term Debt Account Group 581,414 Kalispell Parking Commission 2.316 Total $=684,=3 82 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, 1994; $3,913,425 had been borrowed from the SRF. Interest Amount Outstanding pu. moose Rate Term Borrowed Jung 30, 1994 Wastewater Treatment Plant 4% 20 yrs. $3 91. - S 3.702000 Requirements jo Amortize Debi The annual requirements to amortize all long-term debt outstanding, except compensated absences payable, as of June 30, 1994, including interest payments of $4,854,670, are as follows: -24- 7. Long -Tera Debt - cant. Annual Requirements to Amortize Long; Term Debt ^^ June 30. 1994 General Special Urban State Year Ending Obligation Revenue Assessment Contracted Renewal Revolving June 30 Bond Bonds Bonds Debt Bonds Fund Loan Totals 1995 $ 59,297 $ 399,614 $ 33,418 $ 48,937 $ 256,195 $ 284,720 $ 1,082,181 1996 62,543 404,973 32,978 34,764 260,195 285,140 1,080,54 1997 60,417 406,497 32,170 18,839 257,595 285,320 1,060,83 1998 63,168 410,686 22,131 258,945 285,260 1,040,190 1999 60,555 408,641 17,927 258,765 284,960 1,030,841 2000-2004 57,805 2,024,783 41,245 803,050 1,426,020 4,352,90 2005-2009 1,620,545 1,425,680 3,046,225 2010-2014 532.925 997.260 1-530-181 Total $363.785 $6.208,664 $179.869 $102,540 $2094.745 $5,274,30 $14.223.96 41 Advance Refunding of Long -Term Debt In prior years, the City defeased $385,000 of Series 1985 general obligation 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, 1994, $30,000 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 PER 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 the Public Employees' Retirement System(PERS). 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 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. Municipal Police Officer's Retirement Svstem(MPORS) City police officers are covered under the Municipal Police Officers' Retirement System (MPORS). 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: -25- 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(FURS) City firefighters are covered under the Firefighters Unified Retirement System (FURS). 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: 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 $5,234,805. 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, 1994, were as follows: PERS PERS MPORS FURS Covered Payroll $2,056,254 $ 773,591 $ 670,210 Employee 6.7% 7.8/9.0!10.5©/© 6.00% Employer 6.7% 14.36% 13.02% State 15.90% 23.27% The City's contribution requirement for the fiscal year ended June 30, 1994, were as follows: PERS hUORS FURS Employer $ 140,333 $ 111,088 $ 87,261 Employees 140.333 74.502 40,213 Total $ 28Q666 $_ 185.590 $127.474 -26- 8. State -Wide Re it went Plans - cont. The contribution requirement compared to total contribution requirements for all participating employers was less than 1% for RE.R-S., 5.8 % 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 PERS MPORS FURS $1,475,985,705 $ 89,084,876 $ 114,341,739 1,202,063,252 52,229,557 51,542,659 273,922,453 36,855,319 60,251,881 21.76 26.19 33.54 This information was obtained through an actuarial valuation at June 30, 1994. Ten year historical trend information is presented in the Tune 30, 1994, annual reports. All information can be obtained from the Montana Department of Administration. 9- Local Re it m nt 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 trade 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 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. -27- 9. Local Retirement PI ns - cont. Investments are managed by the plan's trustee with no specific restrictions on the investment options. The plan assets of $208,729 are recorded in an agency fund at June 30, 1994, 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 Uther Governments: General Fund: Due from Flathead County S==86 078 Special Revenue Fund_ Due from Flathead County $123.317 Debt Service Fund: Due from Flathead County $ 4.584 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 Sidewalk and Curb Construction $ 9,572 S.I.D. Revolving Fund 1985 Sidewalk and Curb 4,272 S.I.D. Revolving Fund 1986 Sidewalk and Curb 900 S.I.D. Revolving Fund 1987 Sidewalk and Curb 3,296 S.I.D. Revolving Fund 1990 Sidewalk and Curb 2,224 S.I.D. Revolving Fund 1991 Sidewalk and Curb 508 Total $20 12. Restricted Cash/inv_e tmen S The following restricted cash/investments were held by the City as of June 30, 1994. These amounts are reported within the cash/investment account on the Combined Balance Sheet. Des ri tin Amount Special Revenue Fund: Tax Increment Fund: Sinking and Interest $ 123,046 Community Development Fund: Interest Subsidy 57,061 UDAG Repayment Fund: Interest Subsidy 3.720 Total Special Revenue Funds: $,183.827 -28- 12. Restricted Cash/Investments - cant.. Enterprise Fund: Water - Replacement and Depreciation $ 263,345 Sewer - Construction 121,793 Sewer - Sinking and Interest 62,117 Sewer - Bond Reserve 701,362 Sewer - Replacement and Depreciation 59,434 Sewer - Operating 80,000 Sewer - Replacement and Depreciation 499,579 Sewer - Capital Improvement 935,789 Sewer - Storm Maintenance 389,150 Ambulance - Replacement and Depreciation 41,555 Garbage - Replacement and Depreciation 17.768 Total Enterprise Funds:$=3,17 ._ 1892 Trust and Agency Fund: _ 17,768 VALIC 457 Deferred Compensation Fund $� 208.729 13_ Fund Equity_ Reserved retained earnings/fund balances of the City at June 30, 1994 consisted of: General Fund: Reserved for Advance to Internal Service Fund $ Special Revenue Fund: Tax Increment Fund: Reserved for Sinking and Interest $ 123,046 Community Development Fund:. Reserved for Interest Subsidy 57,061 UDAG Loan Repayment Fund: Reserved for Interest Subsidy 3,720 Total Special Revenue Funds $ 183,827 Enterprise Fund: Water: Reserved for Inventory $ 145,507 Reserved for Replacement and Depreciation 263,345 Sewer: Reserved for Construction 559,574 Reserved for Operations 80,000 Reserved for Capital Improvement 935,789 Reserved for Storm Sewer 400,560 Reserved for Sinking and Interest 62,117 Reserved for Revenue Bond 701,362 Ambulance: Reserved for Replacement and Depreciation 41,555 Solid Waste: Reserved for Replacement and Depreciation _ 17,768 Total Enterprise Funds $ 3 207 577 -29- 14. Changes in Contributed Capital A schedule of changes in contributed capital is presented below: Water Sewer Total Contributed Capital -July 1, 1993 $ 695,190 $10,159,091 $10,854,281 Add: Special Improvement Districts: City Contributions 344,076 15,700 1,553,552 Developers Contributions 822,600 730,952 359,776 Deduct: Depreciation on assets acquired via capital grants 22,258 475,187 497,445 Disposition of asset 18.086 18.086 Contributed Capital - June 30, 1994 $1,83%608 608 $10 412 470_ $12 22 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: to transfer the remaining equity balance of a discontinued fund to another fund. Transfers made during the year consist of the following: Comprehensive Insurance $ 9,095 To correct prior year prepaid expense Drug Enforcement L2-418) Record prior year expenditures Total $ 6.677 S.I.D. 335 (2) Debt Service Fund: S11). Revolving (2) S.I.D. 336 (2) S.I.D. 337 $�,8 310 Correct assessment bond costs Enterprise Fund: Light No. 2 (2) S1D. Revolving (2) Water (22,251) Correct beginning balance in inventory Sewer (8,310) Correct assessment bond costs Sewer (1) Correct prior year grant revenue Ambulance L48,670) To write-off accounts receivable Total $ 79 232 Enterprise Component Unit: Kalispell Parking Commission $ 1 608 To establish compensated absence liability transferred from the City 1.6. Rgsidn&I EquiIj 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 Making, Transfer Fund Receiving Tranafer Amount S.I.D. Revolving (2) 1984 Sidewalk and Curb (2) $ 6,217 S.I.D. Revolving (2) S.I.D. 335 (2) $ 1,034 S11). Revolving (2) S.I.D. 336 (2) S 1,083 S.I.D. 333 (2) S.I.D. Revolving (2) $ 4,308 Light No. 2 (2) S1D. Revolving (2) $ 1,473 Tax Increment (1) Water Fund (3) $344,076 (a) Tax Increment (1) Sewer Fund (3) $ 15,700 (a) -30- 16. Residual Equily Transf r - cont. (1) Special Revenue Fund $( 359,776) (2) Debt Service Fund 14,115 (2) Debt Service Fund (14,115) (3) Enterprise Fund 359,776 (a)The transfers to the enterprise funds were recorded as contributed capital. Therefore, residual equity transfer in and out do not net to zero on the financial statements. 17. SegMent information For Enterprise Francis The City maintains four enterprise funds which provide water, sewer, solid waste and ambulance services. Segment information for the year ended June 30, 1994 was as follows: Total Water Sewer Ambulance Solid Waste Enterprise Find Fund Fund Fund Funds Operating Revenues $ 854,872 $ 1,794,783 $ 383,250 $ 267,660 $ 3,300,565 Depreciation Expense $ 164,092 $ 922,970 $ 12,153 $ 54,295 $ 1,153,510 Operating Income or (Loss) $ 110,058 $ (20,502) $ 43,810 $ (39,041) $ 94,325 Net Income (Loss) $ 129,215 $ (358,252) $ 44,809 $ (31,891) $ (216,119) Current Capital: Contributions $ 1,166,676 $ 746,652 $ 0 $ 0 $ 1,913,328 Plant, Property and Equipment: Additions $ 1,388,903 $ 1,132,372 $ 2,526 $ 130,132 $ 2,718,562 Deletions $ 25,468 $ 101,986 $ 0 $ 0 $ 127,454 Net Working Capital $ 452,279 $ 232,397 $ 198,365 $ 114,273 $ 997,314 Total Assets $ 5,774,393 $22,476,223 $ 279,101 $ 527,881 $ 29,057,598 Bonds and Other Long - Term Liabilities: Payable from Operating Revenues $ 24,417 $ 7,443,625 $ 43,574 $ 21,245 $ 7,532,861 Total Equity $ 5,697,454 $14,819,482 $ 232,665 $ 505,086 $21,254,687 1 S. Counly Provided Service 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 of the County. -31- 19. Joint Ven r s Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. Montana Municipal Insurance Authority The City participates in the Montana Municipal Insurance Authority (MMIA). The Authority was organized to provide a Workers' Compensation risk retention program and to establish a liability insurance coverage program to Montana cities and towns who wish to participate. The Authority was created August 20, 1986, by execution of an Interlocal Agreement. The Authority is governed by a Board of Directors consisting of thirteen officials from participating cities and towns_ The Authority issued 6.25 million in tax exempt bonds in August 1986, to fund its liability program's reserves. In March 1993, the Authority issued $4,410,000 to advance refund certain series of the 1986 bonds. Also on September 1, 1990, the Authority issued $7,610,000 in tax exempt bonds to fund the Workers' Compensation program's reserves. The City has signed notes with the Authority for $201,445 and $281,715, respectively, its pro rata share of 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. If MMIA's net revenues are not sufficient to make debt service payments on its bonds, the City is obligated to make additional insurance premiums to guarantee the required bond payments. Separate financial statements are available from the MMIA. City-Corrarty 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 Pascal year ended June 30, 1994. The operation is accounted for in the County Health Fund and is included in the financial statements of Flathead County. our► - ide 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 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 the CAB's assets, liabilities, and equity was not readily available. The City's contribution for CAB for fiscal year ended June 30, 1994 was $51,744. -32- 20. Pendinz Li i ation The following is a list 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 Cervantes vs City of Kalispell $ 180,000 Jackson vs City of Kalispell 75,000 21. Health Insurance In October 1993, the City established an internal service fund for the City's self insured health insurance plan. The plan is administered by Blue Cross/Blue Shield of Montana. The City pays premiums recommended by Blue Cross into the City Health Fund. The claims are submitted weekly by Blue Cross and paid out of this fund. The City pays the total monthly premium for all full-time employees, except for the optional vision coverage available. The plans pays 80% of the medical claims after the $100 deductible for each employee and covered dependent has been satisfied, up to a total of $200 maximum family deductible. Generic prescription drugs are 100% covered. Dental claims are paid 100% if the dentist is a participating Blue Cross dentist, otherwise 80% of the claims are paid by the plan. The District has contracted with an independent organization to administer the program. 22. Significant fjQnstruction Commitments and/or Other Contingencies Contracts entered into but incomplete at fiscal year end included the following: Fund AMunt Company Project Tax Increment $ 196,048 NW Building High School Project Tax Increment 6,675 Sitescape High School Project Tax Increment 13,259 Sitescape Avenue of the Arts Tax Increment 1,020 Native -way Depot ParkResttooms Tax Increment 60,169 Nativeway Depot Park Restrooms Tax Increment 19,282 Bob Ross Contractor ADA Projects Tax Increment 59,935 Missoula Sheet Metal City Hall Roof Tax Increment 1,440 Miller Levine Architect City Hall Reroof Tax Increment 412,290 Pack and Company Sykes/6th Ave. Project Gas Tax 67,000 Pack and Company Overlay Project UDAG 38,800 Thomas, Dean and Hoskins South Woodland Water 27,500 Thomas, Dean and Hoskins Well Sewer 23,268 various contracts WWTP repairs WWTP Construction 120,369 final contracts WWTP digester roof Total $10405 5 -33- 23. Loans Receivable On June 20, 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 leaned to KCLP was $3,336,928. The balance of the loan receivable at June 30, 1994, was $2,887,998 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 calls for monthly principal and interest payments of $27,807 on the first day of each month. The term of the loan is 25 years. Interest accrues at 9% per annum for the remaining 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 and 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 current repayment schedule calls for a monthly principal and interest payment of $496 each month. The balance of the loan receivable of $35,015 was recorded in the Tax Increment Fund, The City entered into a community development program which includes funding from a community development block grant, to make available to eligible applicants (low -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, a 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 filed in a third -lien position. Repayment of the City loan will not begin until 30 clays after the Lenders' lean (second lien) for construction of the unit has been paid off. The City's loan 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 -determined 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 $347,894 and $48,516 recorded as loans receivable as of June 30, 1994, in the Community Development and Tax Increment Funds, respectively. -34- CITY OF KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION SUPPLEMENTAL SCHEDULES Fiscal Year Ended June 30, 1994 -35- Nordwi,ck, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 • 543-8174 1103 S. Main • Kalispell, MT 59901 • 755-5879 INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL ]INFORMATION 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; for the year ended June 30, 1994, and have issued our report thereon dated .March 31, 1995_ 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; 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 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 3 0, 1994, including the Schedule of Federal Financial Assistance is presented for purposes of additional analysis and is 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 taken as a whole. March 31, 1995 NORDWICK, DENNING AID DOWNEY Certified Public Accountants -36- Stan Nordwick, CPA • R6ert K. Denning CPA• Kim M. Downey CPA • Nancy S. Hamilton CPA CITY OF KALISPELL, MONTANA SUPPLEMENTAL SCHEDULES Fiscal Year Ended June 30, 1994 -37- uj in 44 10 — A93 00hN LSE 4V CL J uJ! fq;; cu ol cu 4) in N: 13 LL (ol ui 0 01 a a1aj M r co, co C 'D < z IT N rIm 0 cx ui LL IL J w 0. LU (D >_ O LL 'T =0 0 Lo U. 06] 17 Lei W E! _j = W_ LLI CL -0U. U_ Ear tO 2 75 ill (D E E tl E LL w, O (D E (D CD E 0C-1 CD 'r<Da `Z5 0 U) -E -0 t 2 2- 9 01 00, ii CA 0) qD: Cc) co, — 0 c 0 r! W.0 Yl E S 7' N :E 15:E E E E OE'l�0' Q =0' F E 0, LZ P -E t 0 CD CLI m: - a- (D =E 0 _ 0 E d) Z) LI - 0 o m W X —38— SIIGNIFCANT PROVISIONS OF SEWER REVENUE BONDS ORDINANCES AND REQUIRED INFORMATION The City will establish a separate revenue bond account into which will be paid each month an amount equal to but 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 $ 1,438,290 Storm Sewer Assessments 231,297 Miscellaneous and Hookup Fees _125,196 Total Operating Revenue $ 1,794,783 Less: Operating Expense (Before Depreciation) 892.315 Available for Debt Service x902,468 Maximum Debt Service $ 701.362 Coverage 128.7% 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. Operating expenses for fiscal year ended June 30, 1994, of $892,315 divided by 12 $74,360. The Sewer Operating Reserve balance $80,000 is adequate. -39- 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 Sewer 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: 4,899 Amount of cash on hand in each account of the Sewer System at the end of the fiscal year: Sewer Operating $ 334,649 Sewer Capital Improvement 935;789 Sewer Revenue Reserve 701,362 Construction Fund 121,793 Replacement and Depreciation 499,579 Sewer Revenue Bond Account 62,117 Sewer Operating Reserve 80,000 Storm Sewer Maintenance Reserve 389,150 Sewer Bond Reserve Investments 59.434 Total $ 3.183.873 ME Schedule of Insurance Policies June 30, 1994 Flathead Association of Independent Insurance Agents St. Paul Property and Liability Insurance provided the fidelity bond coverage. A public official bond in the amount of $50,000, for the finance director expires 5/9/95. A $5,000 public employees blanket faithful performance bond expires 6/30/94, with an additional indemnity for city accountant, city court judge, assistant finance director, city court clerk, personnel specialist, and city water department cashiers of $7,500 each. 2. Property Insurance: Blanket building policy with $18,998,471 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 8/1/94. 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 7/1/94- -41- CITY OF KALISPELL, MONTANA SEWER FUND SCHEDULE OF ASSETS, LIABILITIES, AND FUND EQUITY ASSETS Cash/investments Taxes/assessments receivable Other receivables Fixed assets (Net of accumulated depreciation) TOTAL ASSETS LIABILITIES AND FUND EQUITY Liabilities: Short-term payables Long-term liabilities Total Liabilities Fund Equity: Contributed capital Retained earnings: Reserved Unreserved Total Fund Equity TOTAL LIABILITIES AND FUND EQUITY June 30, 1994 -42- $ 3,183,873 13,789 97,075 19,181,486 $ 22,476,223 $ 213,116 7,443,625 $ 7,656,741 $ 10,412,470 2,739,402 1,667,610 $ 14,819,482 $ 22,476,223_ CIT`( OF KALISPELL, MONTANA SEWER FUND SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Fiscal Year Ended June 30, 1994 Operating Revenues: Charges for services $ 1,438,290 Miscellaneous revenues 125,196 Special assessments 231,297 Total Operating Revenues $ 1,794,783 Operating Expenses: Personal services $ 410,564 Supplies 38,589 Purchased services 286,115 Fixed charges 152,891 Losses/bad debt expenses 4,156 Depreciation 922,970 Total Operating Expenses $ 1,815,285 Operating Loss $ (20,502) Non -Operating Revenues(Expenses): Interest 112,722 Debt service interest expense (419,270) Total Non -Operating Revenues(Expenses) $ (306,548) Loss before extraordinary items $ (327,050) Extraordinary loss on disposal of asset $ (31,202) Net Loss $ (358,252) Add Depreciation on fixed assets acquired by contributions $ 475,187 Increase in Retained Earnings $ 116,935 Retained Earnings - July 1, 1993 - As Previously Reported $ 4,298,388 Restatements (8,311) Retained Earnings - July 1, 1993 - As Restated $ 4,290,077 Retained Earnings - June 30, 1994 $ 4,407,012 —43— CITY OF KALISPELL, MONTANA SEWER FUND SCHEDULE OF CASH FLOWS Fiscal Year Ended .lune 30. 1994 Cash Flows from Operating Activities: Cash received from customers $ 1,442,369 Cash received from assessments 237,827 Cash received from hookups 125,196 Cash payments to suppliers for good and services (453,263) Cash payments to employees for services (411,550) Net Cash Provided by Operating Activities $ 940,579 Cash Flows from Capital and Related Financing Activities: Acquisition and construction of capital assets $ (1,212,789) Principal paid on revenue bonds and contracts (351,000) Interest paid on revenue bonds and contracts (505,850) Disposition of fixed assets (23,450) Capital contributed by city 15,700 Capital grants 1,243,886 Net Cash Used from Capital and Related Financing Activities $ (833,503) Cash Flows from Investing Activities: Interest on investments $ 116,347 Purchase of sidewalk and curb warrants (5,113) Redemption of sidewalk and curb warrants 11,083 Net Cash Used in Investing Activities $ 922,317 Net Increase in Cash and Cash Equivalents $ 229,393 Cash and Cash Equivalents at July 1, 1993 $ 2,895,046 Cash and Cash Equivalents at June 30, 1994 $_ 3,124 439_ Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Loss $ (20,502) Adjustments to reconcile income to net cash provided by operating activities: Depreciation 922,970 Provision for uncollectible accounts 4,156 Changes in assets and liabilities: Decrease in accounts receivable 4,078 Decrease in assessments receivable 6,530 Increase in accounts payable 26,665 Decrease in short-term contract payable (2,332) Decrease in compensated absences (986) Net Cash Provided by Operating Activities $ 940,579 Noncash investing, capital, and financing activities: 1. The difference between the beginning and ending due from EPA in the amount of $512,934 was recorded as contributed capital in the Sewer Fund. 2. The City demolished a building valued at $73,825, that belonged to the Sewer Fund. The undepreciated cost $25,'839 plus the cost of the demolition of $23,450 was recorded as a loss of $31,202 and contributed capital was reduced by $18,087. .a Northwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 • 543-8174 1103 S. Main • Kalispell, MT 59901 • 756-6879 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE 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 year ended June 30, 1994, and have issued our report thereon dated March 31, 1995. 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. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. March 31, 1995 NORDWICK, DUNNING AND DOWNEY Certified Public Accountants -45- Stan Nordwick, CPA 0 Robert K. Denning CPA* Kim M. Downey CPA • Nancy S. Hamilton CPA Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 1103 S. Main • Kalispell, MT 59901 • 756-6879 2801 S. Russell * Missoula, MT 59801 •543-8174 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 year ended June 30, 1994, and have issued our report thereon dated March 31, 1995. 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 Circular A-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. In planning and performing our audit for the year ended June 30, 1994, 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 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: IN 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 accounting principles. ■ 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. -46- Stan Nordwick, CPA • Robert K. Denning CPA• Kim M. Downey CPA • Nancy S. Hamilron CPA SINGLE AUDIT COMBINED REPORT ON INTERNAL CONTROL STRUCTURE - cont. For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: Accounting Controls.- Budgets ontrols:Budgets Cash receipts Billing/accounts receivable Tax/assessment revenue and related receivables Purchasing/exp enditures Payroll 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 Cash disbursements Material/supply inventories Short-term liabilities Fixed assets/depreciation Cash/investments Long-term debt Laws and regulations Specific Requirements: Types of services Eligibility Matching, level of effort, earmarking Reporting Special requirements Costs allocations 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 year ended June 30, 1994, the City had no major federal assistance programs and expended 64% of its total federal financial assistance programs under the following nonmajor federal financial assistance program: ■ Community Development Block Grant 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 the City's aforementioned nonmajor federal financial assistance program. Our procedures were less in scope than would be necessary to render an opinion on these internalcontrol structure policies and procedures. Accordingly, we do not express such an opinion. -47- SINGLE AUDIT COMBINED REPORT ON INTERNAL CONTROL STRUCTURE _ cont. 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 corning to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgement, 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. KALISPELL PARKING COMMISSION - INTERNAL CONTROLS The following internal control weaknesses were noted in the Kalispell Parking Commission internal control system: 1. The Director was involved with cash collections, depositing, reconciling and posting cash receipts. Internal control procedures should not allow a person to perform incompatible functions, functions that allow an individual to both perpetuate and conceal errors or irregularities in the normal course of his or her duties. 2. Only one signature was required on checks and the check numbers were not referenced to the payment vouchers. 3. A capitalization policy had not been established for fixed assets. 4. The prenumbered parking permits were not properly accounted for as to permits issued and unissued. Recommendation 1. The duties of the Director should be segregated to eliminate total control of the cash functions. 2. Two signatures should be required on all disbursements and the check numbers referenced to the payment vouchers to indicate payment. 3. The Commission should establish a capitalization policy forfixed assets. 4. A system should be established to account for prenumbered documents. 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. Our consideration of the internal structure would not necessarily disclose all matters in the internal controls 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 that the reportable condition described above is not a material weakness. This condition was considered in determining the nature, timing and extent of the procedures to be performed in our audit of City's general purpose financial statements for the year ended June 30, 1994, and this report does not affect our report thereon dated March 31, 1995. -48- SINGLE AUDIT COMBINED REPORT ON INTERNAL CONTROL STRUCTURE - 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. March 'a 1, 1995 r NORDWICK, DENNING AND DOV4'NEY Certified Public Accountants Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 1103 S. Main • Kalispell, MT 59901 • 756-6879 2801 S. Russell • Missoula, MT 59801 • 543-8174 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 year ended June 30, 1994, and have issued our report thereon dated March 31, 1995. We have applied procedures to test the City's compliance with the following requirements applicable to its federal financial assistance programs, which are identified in the Schedule of Federal Financial Assistance, for the year ended June 30, 1994: ■ Political activity ■ Drug -Free Workplace Act ■ Davis -Bacon Act ■ Administrative requirements ■ Civil rights ■ Federal financial reports 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 Local 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. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. March 31, 1995 NORDWICK, DENNING AND DOWNEY v Certified Public Accountants _5p_ Stan Nordwick, CPA • Robert K. Denning CPA• Kim M. Downey CPA • Nancy S. Hamilton CPA Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 • 543-8174 1103 S. Main • Kalispell, MT 59901 • 756-6879 SINGLE AUDIT REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS 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 year ended June 30, 1994, and have issued our report thereon dated March 31, 1995. In connection with our audit of the general purpose financial statements of the City for the year ended June 30, 1994, 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 year ended June 30, 1994. 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 City had not complied, in all material respects, with those requirements. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. March 31, 1995 s (: (. V 7�% tl�1 U'`►t '^ c. '. v NORDWICK, DENNING AND DOWNBY Certified Public Accountants -51- Stan Nordwick, CPA 0 Robert K. Denning CPA• Kim M. Downey CPA • Nancy S. Hamilton CPA Nordwick, Denning & Doumey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 • 543-8174 1103 S. Main • Kalispell, MT 59901 • 756-6879 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 59901 Immaterial instances of noncompliance along with findings relating to financial or accounting matters, as well as our recommendations, are presented below. CITY COURT CONTRACTS RECEIVABLE The City Court provides that certain fines may be paid in installments on the basis of a contract. The aggregate total of the contracts receivable was not recorded in the City's accounting records. Recommendation The City should consider recording the city court contracts receivable and the related deferred revenue in their accounting records. March 31, 1995 NORDWICK, DENNING AND DOWNEY Certified Public Accountants -52- Stan Nordwick, CPA • Robert K. Denning CPA* Kim M. ,Downey CPA • Nancy S. Hamilton CPA Nordwick, .Denning & Doumey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 • 543-8174 1103 S. Main * Kalispell, MT 59901 + 756-5879 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 two recommendations which were implemented. March 31, 1995 a x` NORDWICK, DENNING AND DOWNEY Certified Public Accountants -53- Stan Nordwick, CPA • Robert K. Denning CPA* Kim M. Downey CPA 0 Nancy S. Hamilton CPA