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07. Audit-Fiscal Year Ended 6/30/95CITY OF KALISPELL, MONTANA TABLE OF CONTENTS Fiscal Year Ended June_30.1.9.95 Organization Independent Auditor's Report General Purpose Financial Statements: Page 2 Combined Balance Sheet - All Fund Types Account Groups, and Discretely Presented Component Unit 3-4 Combined Statement of Revenues, Expenditures, and Changes in Fund 5 Balances - All Governmental Fund Types Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual - General, Special Revenue, Debt Service, and Capital Projects Fund Types 6-7 Combined Statement of Revenues, Expenses, and Changes in Retained Earnings - All Proprietary Fund Types and Discretely Presented Component Unit 8 Combined Statement of Cash Flows - All Proprietary Fund Types and Discretely Presented Component Unit 9 Notes to Financial Statements 10-33 Independent Auditor's Report on Supplemental Information and Supplemental Schedules 34 Supplemental Schedules: Schedule of Federal Financial Assistance 35 Significant Provisions of Sewer Revenue Bond Ordinances and Required Information 36-38 Schedule of Assets, Liabilities and Fund Equity - Sewer Fund 39 Schedule of Revenues, Expenses and Changes in Retained Earnings - Sewer Fund 40 Schedule of Cash Flow - Sewer Fund -1- 41 CITY OF KALISPELL, MONTANA TABLE OF CONTENTS - cant, Fiscal Year Ended June 30 1395- cont. Page Independent Auditor's Report on Compliance Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards 42 Independent Auditor's Report on the Internal Control Structure Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards 43-44 Independent Auditor's Report on the Internal Control Structure Used in Administering Federal Financial Assistance Programs. 45-47 Independent Auditor's Report on Compliance with Specific Requirements Applicable To Major Federal Financial Assistance Programs 48 Independent Auditor's Report on Compliance with the General Requirements Applicable to Federal Financial Assistance Programs 49 Independent Auditor's Report on Compliance with Specific Requirements Applicable to Nonmajor Federal Financial Assistance Program Transactions 50 Independent Auditor's Report on Other Compliance, Financial and Internal Accounting Control Matters 51-52 Independent Auditor's Report on Prior Audit Report Recommendations 53 CITY OF KALISPELL, MONTANA ORGANIZATION Fiscal Year Ended June 30,_1995 Mr. Douglas Rauthe Mayor CITY COUNCIL 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. Amy Robertson Finance Director Ms. Heidi Ulbricht City Judge -I- u u 0 n L L u d d u u u 0 Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S Russell - Missoula, MT 59801 •543-8174 1103 S. Main - Kalispell, JVT 59901 - 756-6879 INDEPENDENT AUDITOR'S REPORT City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, 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 perforin 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, 1995, 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. ! (oldwicL, Anning anal _LJawney March 27, 1996 -2- Stan Nordwick, CPA - Robert K Denning, CPA - Kim M. Downey, CPA - Nancy S Everson, CPA CITY OF KALISPELL, MONTANA COMBINED BALANCE SHEET - ALL FUND TYPES, ACCOUNT GROUPS, AND DISCRETELY PRESENTED COMPONENT UNIT ASSETS Cashlinvestments Taxes/assessments 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 tong -term debt Fixed assets TOTAL ASSETS LI.ADI..L.1T.1.1_"ND FUNO.EQUtTY Liabilities: Short-term payables Due to other funds Advance from other funds Other short-term payables 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 June 30, 1995 PROPRIETARY GOVERNMENTAL FUND TYPES FUND TYPES Internal Service 509,533 4,875 24,453,236 74,254 $__237,865 $ _ $__ 29,692,916 $ 588.662 $ 83,492 $ 222,301 $ 692 $ - $ 123,694 $ 10,180 - 14,272 6,455 3,072 - - - - - 21,274 - - - 27,319 377,961 3,650,880 142,931 - -_- 461,453 3,887,453 150,078 3,072 7,373,705 ________._.58j73 - 4,117,819 - - 5,601,424 529,889 172,176 816,185 1,223,318 1,438,239 87,787 1,395,494 2,254,42A 87,787 (3,072) __ 22,319,211 529,889 $ 1,856,947 $_6141,877 $ 237865 $ _ $_ 29,692,916 $ 58662 See accompanying Notes to Financial Statements Ma Special Debt Capital General Revenue Service Projects Enterprise $ 1,310,549 $ 2,044,924 $ 82,702 $ $ 4,736,237 $ 221,956 416,739 142,931 40,213 156,005 3,234,141 692 326,750 17,344 - 6,455 - 21,274 - - - 127,369 397,165 5,885 540 2,450 48,908 - - - 135,940 Internal Service 509,533 4,875 24,453,236 74,254 $__237,865 $ _ $__ 29,692,916 $ 588.662 $ 83,492 $ 222,301 $ 692 $ - $ 123,694 $ 10,180 - 14,272 6,455 3,072 - - - - - 21,274 - - - 27,319 377,961 3,650,880 142,931 - -_- 461,453 3,887,453 150,078 3,072 7,373,705 ________._.58j73 - 4,117,819 - - 5,601,424 529,889 172,176 816,185 1,223,318 1,438,239 87,787 1,395,494 2,254,42A 87,787 (3,072) __ 22,319,211 529,889 $ 1,856,947 $_6141,877 $ 237865 $ _ $_ 29,692,916 $ 58662 See accompanying Notes to Financial Statements Ma CITY OF KALISPELL, MONTANA COMBINED BALANCE SHEET -ALL FUND TYPES, ACCOUNT GROUP, AND DISCRECETELY PRESENTED COMPONENT UNIT - CONT. June 30, 1995 Fund Equity: Contributed capital - 12,599,968 12,599,968 Investment in general fixed assets 10,221,382 10,221,382 10,221,382 Retained earnings: Reserved - 4,117,819 - 4,117,819 Unreserved 6,131,313 68,346 6,199,659 Fund Balance: Reserved 988,361 - 988,361 Unreserved _2,746,272 _ - 2,746,272 Total Fund Equity _ rn 10,,221382 __ �� 36,805,115 4 68,346 (36,873.461 TOTAL LIABILITIES AND FUND EQUITY $� 331,675_ $ 10,221,382 $ 2,692,407 $ 51,763,731 $_76 867 $ 5 E 840 598 See accompanying Notes to Financial Statements -4- TOTALS PROPRIETARY TOTALS FIDUCIARY PRIMARY COMPONENT REPORTING, FUND TYPES ACCOUNT GROUPS GOVERNMENT UNIT ENTITY General General _ --t<alispell - Trust And Fixed tong -Term (MEMORANDUM Parking (MEMORANDUM Agency Assets Debt_ ONLY Commission ONLY ASSETS Cash/investments $ 331,675 $ $ $ 9,015,620 $ 66,565 $ 9,082,185 Taxeslassessments receivable - 821,839 - 821,839 Other receivables 3,717,588 3,717,588 Due from other funds 23,799 23,799 Advance to other funds - 21,274 21,274 Due from other govemments 530,159 530,159 Prepaid expenses - 56,233 56,233 Inventories 135,940 135,940 Amount available in debt service funds 87,787 87,787 87,787 Amount to be provided for retirement of general long-term debt 2,604,620 2,604,620 - 2,604,620 Fixed assets 10,221,382 34,748,872 10,302 34,759,174 TOTAL ASSETS $_331,675 $_ 10 221 3$2. $692,497 $__ X1,763,731 $75 867 $ 51,840 598 LIABtLITIE.S-ANC),_F,UND-EQ.V,ITY Liabilities: Short-term payables $ 331,675 $ $ $ 772,034 $ 4,660 $ 776,694 Due to other funds - 23,799 - 23,799 Advance from other funds 21,274 21,274 Other short-term payables 27,319 27,319 Deferred revenue 4,171,772 4,171,772 Long-term liabilities _ _ 2,692,407 9,942,418 _ 3,861 __,_A946,279 Total Liabilities 931,675 2,692,407 14,958,616 8,521 14,967,137 Fund Equity: Contributed capital - 12,599,968 12,599,968 Investment in general fixed assets 10,221,382 10,221,382 10,221,382 Retained earnings: Reserved - 4,117,819 - 4,117,819 Unreserved 6,131,313 68,346 6,199,659 Fund Balance: Reserved 988,361 - 988,361 Unreserved _2,746,272 _ - 2,746,272 Total Fund Equity _ rn 10,,221382 __ �� 36,805,115 4 68,346 (36,873.461 TOTAL LIABILITIES AND FUND EQUITY $� 331,675_ $ 10,221,382 $ 2,692,407 $ 51,763,731 $_76 867 $ 5 E 840 598 See accompanying Notes to Financial Statements -4- S f r W Q Q UjN Oo- � F - Q z � J z W W Xag W z W ,6 W 7 D U' W f wa LL Q F - z W 2 H C] W z m O 0 z LU 2 z a LU Q 0 Vtn wr-r-(o 00 N M t(] 0 0 0 —�(D 0© f W 2 v3 E co i va O co O O s to I -Eh W + (DM N N T ,- tet' r` 00 _mc �snto w �w0 � U > 0) M - � to LO W CL y O 0 -t N cq 61) (p 0 (D co (D r- N -181m �E �m�r-4 21m, ni M Di ni . 06E moi' i OeN}t7D0ha�nMj � 'V (`> to for 07t -I r-�. 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N X Q 11 J_ U) OL W-0 € N �2) 0ro� sn (u Co —ECL c (Dow) -sO)O o ma- ai � b= �W(vaS?�oani" 0 CL 0 _(DCtil-10co 0 � �-- N M s co,( W ? 0 o rn cc cr rn V i M co cc (7? t h m 33 I 3 j 1E € I E vi 4 c) 0 (N N d1 CTf j 1 ' 4) tn C3 f N M00 .-• 0) cc co q (W") i q( occ3 V N Q c O r' V") � Q1 � O 0 ((,, (O() r (W r co u s rn (A N N tl C4 cli {N �w (V N N O M — s} m ` 0b 00 rY 0y co 'I -01 — CO fp 0 t c(D j 0 (O O 0 coo V) N Q to t~ C7 C I Q, C cm i° o CL n c� _T a x g m w w l m 0) C LU 7 �- w Qxk y o CD Q) R3 U3 N Ci C N O C N UC7 O) © c � r::E LU v W CL �+ 0 Z CL (�� w a 42 (D uEi c 0 Z Q af w 0C CITY OF KALISPELL, MONTANA COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES AND DISCRETELY PRESENTED COMPONENT UNIT Fiscal Year Ended June 30, 1995 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income Adjustments to reconcile income to net cash provided by operating activities: Depreciation Change in assets and liabilities: Increase in assessments receivable Decrease in accounts receivable Increase in due from other governments Decrease in inventories Increase in compensated absences payable Decrease in prepaid expenses Decrease in short-term payables Change in short-term portion of long term debt Net cash provided by operating activities 388,449 100,553 489,002 TOTALS PROPRIETARY TOTALS 27,466 PROPRIETARY 890 PRIMARY COMPONENT REPORTING (7,135) FUND TYPES GOVERNMENT UNIT ENTITY 4,488 - 4,488 (540) Kalispell (540) - (540) Internal (Memorandum Parking (Memorandum 9,567 Enterprise_ Service only) Commission ons) Cash Flows from Operating Activities: 2,631 2,631 - 2,631 (146,356) Cash received from customers $ 3,261,097 $ - $ 3,261,097 $ 127,362 $ 3,388,459 Cash received from hookups 347,330 - 347,330 - 347,330 Cash received from assessments 228,263 1 649,491 228,263 228,263 Cash payments to suppliers (1,259,395) (642,592) (1,901,987) (32,868) (1,934,855) Cash payments to employees (1,087,732) - (1,087,732) (85,022) (1,172,754) Cash from other operating revenues - 717,595 717,595 - 717,595 Cash received from fund transfers 75,453 75,453 - 75,453 Net Cash Provided by Operating Activities 1,489,563 150,456 1,640,019 9,472 1,649,491 Cash Flaws from Capital and Related Financing Activities: Principal paid on revenue bonds (145,000) (145,000) - (145,000) Interestaid on revenue bonds (256,470) (256,470) (256,47(5) Principalpaidon notes/loans (13,304) (15,321) (28,625) W (28,625) Interest paid on notes/loans (2,256) (1,760) (4,016) - (4,016) Principal paid on State Revolving fund loan (138,000) (138,000 (138,000) Interest paid on State Revolving fund loan (146,720) (146,720) - (146,720) Acquisition and construction of capital assets (353,163) (32,881) (386,044) (8,243) (394,287) Capital contributed by City 159,821 - 159,821 159,821 Disposition of fixed assets 10,850 - 10,85€5 10,850 Interest paid on interfund loan advance - (790) (790) - (790) Principal paid on interfund loan advance -_._.._.. . - - - (8,509) 8,50� (8,509) Net Cash Used from Capital and Related Financing Activities: (884,242) (59,261) (943,503 - (8,243 (951,746) Cash Flows from Investing Activities: Interest on investments 201,480 24,595 226,075 2,474 228,549 Purchase of sidewalk and curb warrants (28,513) - (28,513) - (28,513) Redemption of sidewalk and curb warrants 13,714 13,714 13,714 Net Cash Provided from Investing Activities 186,681 24,595 211,276 _ - 2,474 213,750 Net Increase in Cash and Cash Equivalents 792,002 115,790 907,792 3,703 911,495 Cash and Cash Equivalents at July 1, 1994 3,869,999393,743 4,263,742 32,863 4,296,605 Cash and Cash Equivalents at June 30, 1995 $ 4 S62 009 $ 509 533 $ ._ 5,171,534 $ 36,566200,100 Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income Adjustments to reconcile income to net cash provided by operating activities: Depreciation Change in assets and liabilities: Increase in assessments receivable Decrease in accounts receivable Increase in due from other governments Decrease in inventories Increase in compensated absences payable Decrease in prepaid expenses Decrease in short-term payables Change in short-term portion of long term debt Net cash provided by operating activities 388,449 100,553 489,002 6,831 495,833 1,227,636 27,466 1,255,102 890 1,255,992 (7,135) (7,135) - (7,135) 4,488 - 4,488 - 4,488 (540) - (540) - (540) 9,567 _ 9,567 - 9,567 20,359 - 20,359 1,545 21,904 - 2,631 2,631 - 2,631 (146,356) 19,806 (126,550) 206 (126,344) (6,905) --- __.._ -- -- (6,905) -- 6905) 1 489,563 - 150 456 _ _ -- -1,64019_ 9 472 ------ 1 649,491 Noncash, Noncash, Investing, capital, and financing activities: 1. Developers contributed $720,220 in fixed assets to the water and sewer funds. See accompanying Notes to Financial Statements M CITY OF KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS June 30, 1995 Summary of Significant Accounting Policies The following is a summary of the City's significant accounting policies: Reporting Entily The City is a primary government as defined by GASB Cod. Sec. 2100. 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 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 Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for within a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. The following types of funds and account groups are maintained by the City: Governmental Funds General, Pun - Used to account for all financial resources except those required to be accounted for in other funds. _10_ Summary of Significant Accounting Policies - cont. 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 Projects Funds - Used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). Deb tService 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 Enterorise 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 AgengyTunds_- Used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These may include (a) expendable trust funds, (b) nonexpendable trust funds, (c) pension trust funds and (d) agency funds. FIXED ASSETS AND LONG-TERM LIABILITIES General Fixed Assets Account Group - Used to account for the .fixed assets of the City which are not accounted for in proprietary funds. General Long -Term Debt Account Group - Used to account for all long -terra debt of the City except that accounted for in the proprietary funds. -11- 1. Summary of Significant Accounting Policies - cont. Basis of Accounting and Measurement 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 -terra 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 fund type operating statements present increases (revenue and other financing sources) and decreases (expenditures and other financing uses) in net current assets. SIN Summary of Significant Accounting Policies - cont. All proprietary funds are accounted for on a cost of services or "capital maintenance" measurement focus. This means that all assets and liabilities (whether current or non-current) associated with this activity are included on their balance sheets. Their reported fund equity (net total assets) is segregated into contributed capital and retained earnings components. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in net total assets. Budgets and Budgetary Accounting An annual appropriated operating budget is adopted each fiscal year for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds on the modified accrual basis. A non-binding management budget is adopted for the Enterprise and Internal Services Funds. The final budget is legally enacted by the City on the second Monday in August after holding public hearings as required by State statutes. The operating budgets cannot be increased except for a public emergency which could not have been reasonably foreseen at the time of adoption of the budget. Budget appropriation transfers may be made between the general classifications of salaries and wages, maintenance and operation and capital outlay. The City recognized certain commitments related to purchase orders and executory contracts as expenditures for budgetary purposes. In addition, a reserve for encumbrances was established for the commitments to indicate that these amounts will not be available for the ensuring year's budget, but will be used to liquidate portions of the current year's budget. Encumbrances All appropriations, except for construction in progress, lapse at the end of the fiscal year. The City utilizes an encumbrance accounting in certain instances, as described in the preceding note. Encumbrance accounting, which is an extension of the budgetary accounting in the General Fund, Special Revenue Funds, and Capital Projects Funds, enables the City to record purchase orders, contracts, and other commitments for the expenditure of monies in order to reserve that portion of the applicable appropriation. Encumbrances at year-end are reflected as reservations of fund balances since they do not constitute expenditures or liabilities. -13- 1.Summary of Significant Accounting,Policies - cant. Fixed Assets All purchased fixed assets are valued at cost where historical records are available and at estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Improvements are capitalized and, in proprietary funds, depreciated over the remaining useful lives of the related fixed assets. General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in governmental funds, and the related assets are reported in the general fixed assets account group. Assets in the general fixed assets account group are not depreciated. Public domain ("infrastructure") general fixed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized, as these assets are immovable and of value only to the government. Fixed assets purchased or acquired by proprietary fund types are recorded in the individual fund making the purchase. Any fixed assets donated specifically for an enterprise fund are also recorded in that individual fund. Depreciation on proprietary fund fixed assets is provided over their estimated useful lives on the straight-line method. The useful lives of these assets have been estimated as follows: Buildings 20-50 years Improvements other than buildings I0-50 years Machinery and equipment 5-20 years Vehicles and heavy equipment 5-20 years Sewer lines and pump stations 10-50 years No interest was capitalized for the year ended June 30, 1995. Taxes and Assessments An allowance for uncollectible accounts was not maintained for real and personal property taxes and special assessments receivable. The direct write-off method is used for these accounts. -14- 1. Summarv. of Sienificant AccountinL- Policies - cont. Enterprise Account Receivable Reserves for estimated uncollected accounts receivable are maintained for the water, sewer and ambulance enterprise funds. Accounts receivable are reported as net of uncollectible accounts. Reserves for uncollectible accounts on June 30, 1995, were as follows: Water $ 4,550 Ambulance 31,863 Sewer 8,660 Total $45,081 Inventories Inventories of materials and supplies for governmental fund types are expensed at the time of purchase. Inventories of materials and supplies on hand are not maintained. inventories were not, however, considered material. Materials and supplies inventories in the Water Enterprise Fund were valued at a combination of cost and replacement cost on the FIFO basis. Inventories were expensed on the purchase method. Vacation and Sick Leave Liabilities incurred because of unused vacation and sick leave accumulated by employees which is payable upon termination are included in the financial statements. The liability for unused vacation and sick leave for governmental fund employees is recorded in the general long-term debt account group. Expenditures for these liabilities are recognized when paid. The liability for unused vacation and sick leave for proprietary fund employees is recorded as a long-term liability in the proprietary funds. The expenses were recorded when the liability was incurred as required by generally accepted accounting principles. Long -Term Debt Unmatured general long-term debt of the City, including special assessment debt for which the government is obligated in some manner, is recorded in a separate, self -balancing set of accounts, the General Long -Term Debt Account Group. Long-term debt of the proprietary funds, including enterprise -related special assessment debt, is reported as a liability in the specific fund making the debt service payments. For more information on the long-term debt of the City, see Note 7. Contributed Capital Enterprise Fund contributions from grants, customers, special improvement districts and other outside sources restricted for capital acquisition or construction are reported as contributed capital. Depreciation on assets acquired from contributions is reflected in the statement of revenue, expenses, and changes in retained earnings. The amount of depreciation applicable to assets acquired through contribution from grants, entitlements, and shared revenues is transferred to the related contribution account instead of retained earnings. -15- 1. Summary of Significant Accounting Policies - cont, 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 Interfund transactions consisting of identified services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as revenue in the fund performing the services. Transactions which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of expenditures in the fund that is reimbursed. Advances between funds are accounted for in the appropriate interfund receivable and payable accounts. Application of FASB to Proprietary Funds In September 1993, GASB issued Statement No. 20 which requires proprietary activities to apply all applicable GASB pronouncements as well as FASB pronouncements, APB opinions and Accounting Research Bulletins issued on or before November 30,1989, unless these conflict with or contradict GASB pronouncements. Governments have an option of whether or not to apply FASB pronouncements issued after that date to their proprietary activities. In accordance with GASB 20, management has elected not to apply FASB pronouncements issued after November 30, 1989. Cash and Cash Equivalents The City considers for purposes of the statement of cash flows all investments of the proprietary fund types, except for investments in sidewalk and curb bonds and the certificate of deposit in the amount of $30,000 held for the Parking Commission Fund, to be cash equivalents. Total Columns on Combined Statements Total columns on the Combined Statements are captioned Memorandum Only to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operation, or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 2. Property Taxes Property tax levies are set in August in connection with the budget process, and are based on taxable values listed as of January 1 for all property located in the City. Taxable values are established by the State Department of Revenue based on market values. A revaluation of all property is required to be completed on a periodic basis. Taxable value is defined by State statute as a fixed percentage of market value. -16- 2. PropeM Taxes - cont. Real property taxes and special assessments are generally billed in October and are payable 50% by November 30 and 50% by May 31. Atter 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 set during the prior August. These taxes become delinquent 30 days after billing. Taxes and assessments that become delinquent are charged interest at the rate of 515 of 1 % per month plus a penalty of 2%. Real property on which taxes and assessments remain delinquent and unpaid may be sold at tax sales. In the case of personal property, the property is to be seized and sold after the taxes become delinquent. The City is permitted by State statutes 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, 1995, were within the legal limits. The tax levies were based upon a taxable valuation of $19,391,590. Current tax collections for the year ended June 30, 1995, were approximately 83% of the amount levied. 3. Deficit Fund Balances The following funds had deficit fund balances at June 30, 1995. Debt Service Funds: Amount 1987 sidewalk and curb $ 4,122 1990 sidewalk and curb $ 2,114 1991 sidewalk and curb $ 532 1992 sidewalk and curb $ 203 Capital Projects Fund: 1995 sidewalk and curb $ 3,072 The deficits in the Debt Service Funds were caused by a short -fall in anticipated revenue and will be eliminated as delinquent assessments are collected. The deficit in the Capital Projects Fund will be eliminated upon the sale of bonds. 4. _Budget Variances A significant favorable budget to actual variance occurred in the intergovernmental revenue source of the General Fund in the amount of $110,218. This variance resulted primarily from the City receiving $75,000 more from video machine apportionment than anticipated. A favorable budget to actual variance of $1,313,583 and an unfavorable budget to actual variance of $528,952 occurred in the housing and development and capital outlay expenditure categories, respectively, and primarily in the Tax Increment Fund, a special revenue fund. The variances occurred because amounts for parking lots and tennis courts were budgeted for in housing and community development rather than as capital outlay and expenditures were properly reported as capital outlay. -17- 5. Cash and Investments The City maintains a cash and investment pool for all funds under the control of the 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. The composition of cash and investments on June 30, 1995, was as follows: Cash on Hand Petty Cash Cash in Banks: Demand Deposits Savings Deposits Time Deposits Primary Component Government Unit $ 97,983 $ - 800 80 239,354 36,485 14,697 - - 30,000 State Short -Term Investment Pool (S.T.I.P.) 8,327,951 Variable Annuity Life Insurance Company (VALIC) 259,441 Bidder's Bonds Sidewalk and Curb Bonds Total per Balance Sheet 1,159 - 74.235 $ 9.015,620 $�� 665 Total Reporting Entit $ 97,983 880 275,839 14,697 30,000 8,327,951 259,441 1,159 74.235 Deposits - At year-end, the carrying amount of the City's deposits was $254,051, and the bank balance was $355,316. These deposits include demand and savings deposits. Of the bank balance, $114,698 was covered by Federal Depository Insurance and $240,618 was covered by securities held by the pledging financial institution's trust department or agent in the City's name. Deposits of the Parking Commission Component Unit were fully covered by Federal Depository Insurance. 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, 1995, 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. 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, 1995, amounted to $259,441. The S.T.I.P. investments are categorized to give an indication of the level of risk assumed by the City. -18- 5. Cash and Investments - cont Category I - Includes investments that are insured, registered, or for which the securities are held by the City or its agent in the City's name. Category 2 - Includes uninsured and unregistered investments for which the securities are held by the financial institution's, broker's or dealer's trust department or agent in the City name. Category 3 - Includes uninsured and unregistered investments for which the securities are held by the financial institution, broker or dealer, or by its trust department or agent but not in the City's name. June 30 199 _ Category Carrying Market 1 2 3 Value Value (S.T.I.P.) $7,848,261 $479,690 $8,327,951 $8,327,951 The City's S.T.I.P. investments included as of June 30, 1995, 14.86% or $1,237,533 of asset- backed securities and 17.86% or $1,487,372 of variable rate (floating rate) securities. These securities require disclosure by Governmental Accounting Standards Board (GASB) Technical Bulletin No. 94-1. Asset-backed Securities are collateralized by non -mortgage assets pledged by the insurer. Asset- backed securities have one or more forms of credit enhancement to raise the quality of the security. Examples of credit enhancement include, but are not limited to, letter of credit, reserve fund, or senior/subordinate arrangements. Variable Rate loatin -Rate Securities provide many advantages of short-term bonds because they are designed to minimize the investor's interest rate risk. As with variable rate loans issued by banks, the interest rate paid by the issuer of these securities will usually remain at or near par because their interest rates are reset to maintain a current market yield. STIP's floating rate securities float to either the 91 day US treasury bill or the London Interbank Offering Rate (LIBOR), which is similar to the European federal funds rate. The carrying value and market value of the State's STIP portfolio was virtually the same balance. 6. Fixed Assets A summary of changes in general fixed assets follows: Balance July 11994 Additions Deletions Land $ 1,944,440 $ 50,712 $ 262,720 Buildings Improvements Other Than Buildings Machinery and Equipment Construction Work in Progress Total 3,513,073 1,043,524 - 1,102,909 261,443 - 2,472,039 101,503 69,289 Balance June 30. 1995 $ 1,732,432 4,556,597 1,364,352 2,504,253 11L226 54,665 102,143 63.748 $ 9.143,687 $ 1,511,847 $ 434.152 $ 10,221.382 -19- 6. Fixed Assets - cont, A summary of proprietary fund type property, plant, and equipment at June 30, 1995, follows: Proprietary Internal Component Enterprise Service Unit_ Land $ 245,369 $ - $ - Machinery and Equipment 1,143,536 150,614 11,261 Construction Work in Progress 151,908 - - Source of Supply 347,709 - - Pumping Plant 596,599 - - Treatment Plant 14,018,277 - - Transmission and Distribution 12,412,545 - - General Plant 1,181,605 - - Storm Sewer 3,358.609 - - Total Total $ 33,456,157 $ 150,614 $ 11,261 Less Accumulated Depreciation 9,002,921 76.360 959 Net S 24,453,236 $ 74,254 $ 10,302 7. Long -Term Debt The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1995: Balance Balance July 1. 1994 Additions Reductions June 30, 1995 General Obligation Bonds(1) $ 310,000 $ - $ 45,000 $ 265,000 Revenue Bonds(2) 3,710,000 - 145,000 3,565,000 Special Assessment Bonds(1) 135,922 28,513 20,201 144,234 Loans/Contracted Debt(1) (2)(3) 96,371 271,000 62,103 305,268 Compensated Absences Payable(1)(2)(4) 684,382 128,395 - 812,777 Urban Renewal Bonds (1) 1,415,000 - 125,000 1,290,000 State Revolving Fund Loan (2) 3.702 00 - 138,000 - 3,564,000 Total 10.053,675 427 908 535,3Q4 $ 9,9461279 (1) Reported in general long-term debt account group (2) Reported in Enterprise Fund (3) Reported in Internal Service Fuad (4) Reported in Proprietary Component Unit -20- 7. Lori -T rm Debt - cont. Bonded Debt Bonds payable at June 30, 1995, were comprised of the following individual issues: 1. General Obligation Bonds Outstanding Issue Interest Bond Bonds June 30 Annual PuLpose Date Rate Term I sued1__ 995 Payment Pool -Refunding Bond 4/93 2.8-5.1% 7 yrs. $385,000 $265,000 Varies General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. $30,067 was 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 System Revenue Bonds and the financial statements and other schedules required by those ordinances are presented as supplemental information on pages 37 through 42. 3. Special_ Assessment Bonds (S.I.W Outstanding Issue Interest Bond Bonds June 30 Annual Purpose Date Rate Term Issued 1995 Pa,met 1976 Sewer Plant 1/176 6.75% 20 yrs. $ 445,000 $ 60,000 $60,000 1986 Storm Sewer 6/1/86 7.00% 20 yrs 1,300,000 1,000,000 Varies 1991 Sewer System 12% 8 yrs 31,275 2,275 Varies 1988 Sidewalk and Curb Refunding Bonds 4/15/91 Varies 20 yrs 2.815.000 1505,000 Varies Total 10.5% 8 yrs 15,818 $4,560,000 $ 3.565 p00 1990 Sidewalk and Curb 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 System Revenue Bonds and the financial statements and other schedules required by those ordinances are presented as supplemental information on pages 37 through 42. 3. Special_ Assessment Bonds (S.I.W Outstanding Issue Interest Bond Bonds June 30 Annus P.. mose Date Rate Term Issued __- 1995. _ Payme S.I.D. No. 337 1211186 7.74% 15 yrs $110,000 $ 70,000 Varies 1987 Sidewalk and Curb 12/31/87 12% 8 yrs 31,275 2,275 Varies 1988 Sidewalk and Curb 111189 12% 8 yrs 37,411 12,411 Varies 1989 Sidewalk and Curb 113190 10.5% 8 yrs 15,818 6,000 Varies 1990 Sidewalk and Curb 1/15/91 10% 8 yrs 14,600 7,300 Varies Meridian Sidewalk and Curb 10/1/90 11% 8 yrs 7,322 2,822 Varies 1991 Sidewalk and Curb 111192 8% 8 yrs 3,360 2,533 Varies 1992 Sidewalk and Curb 1/2/93 7% 8 yrs 9,103 8,000 Varies 1993 Sidewalk and Curb 1/4194 6% 8 yrs 5,112 4,380 Varies 1994 Sidewalk and Curb 8.5% 8 yrs �2 ,513 28,513 Varies Total $262.514 $_144 234 -21- 7. Long -Term Debt- cont. 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 may be liable, to an extent, for repayment of these special assessment bonds. The City is authorized by State law to establish and has established a revolving fund to ensure the payment of debt service on the bonds in the event that assessed property owners are in default. $13,357 is available in the special assessment debt service funds and $44,363 in the Revolving Fund to service the special assessment long-term 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. Issue Interest Bond Bonds Outstanding P=ose Date Rate Term Issued .lune 30,1995 Tax Increment 12/85 6.25-9.5% 16 yrs. $2,10O,OOt1 $ 1,290;000 Loans/Contracted Deb Origination Interest Due Principal Purpose Date Rate Term Date Amount Sweeper(1) 1/17/92 varies 5 yrs 2/15/97 $ 80,770 Courtyard Apts.(1) 3/1/95 6% 3 yrs 2/1/2025 271,000 Total $351,770 (1) Reported in general long-term debt account group. -22- Annual Pa ern Varies Outstanding .lune 30.1995 $ 35,355 269,913 $ 305,268 7. Longjerm Debt - cont. Compensated Absences Payable Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund $121,011 General Long -Term Debt Account Group 687,905 Kalispell Parking Commission 3.861 Total $812777 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, 1995, $3,913,425 had been borrowed from the SRF. Interest Amount Outstanding Purpose Rate Terra Borrowed June 30, 1995 Wastewater Treatment Plant 4% 20 yrs 3 913 425 $ ____ 3,564,000 Requirements to Amortize Debt The annual requirements to amortize all long-term debt outstanding, except compensated absences payable, as of June 30, 1995, including interest payments of $4,615,821, were as follows: Annual Reauirements to Amortize Lona -Term Debt June 30. 1995 -23- General Special Year Ending Obligation Revenue Assessment Contracted Urban SRF June 30 Bonds Bonds Bonds Debt Renewal Payable Totals 1996 $ 62,542 $ 404,973 $ 42,174 $ 38,028 $ 260,195 $ 285,140 $ 1,093,052 1997 60,418 406,498 38,269 38,336 257,595 285,320 1,086,43 1998 63,167 410,685 28,000 19,497 258,945 285,260 1,065,5 1999 60,555 408,640 23,457 19,497 258,765 284,960 1,055,87 2000 57,805 405,709 20,167 19,497 262,025 285,400 1,050,6 2001-2005 2,024,525 39,798 97,485 541,025 1,426,060 4,128,893 2006-2010 1,479,893 97,485 1,424,590 3,001,9 2011-2015 268,125 97,485 712,860 1,078,4 2016-2020 97,485 97,485 2021-2025 W988 90.9 Total $ 304.487 $5,809,048 $191,865 $615 78 $1.838,550 $4_.989,590 $13;749.3 __ -23- 8. ate -Wide Retirement PIa s Substantially all full-time City employees are eligible for one of three retirement plans: Montana Public Employees' Retirement System (PERS); Municipal Police Officer's Retirement System (MPORS); and the Firefighters' Unified Retirement System (FURS). The plans are established by State law and administered by the State of Montana. The plans are cost-sharing multiple -employer defined benefit plans that provide retirement, disability and death benefits to plan members and beneficiaries. The City had a total payroll of $3,978,084 for fiscal year 1995, of which $3,678,978 was covered by PERS, MPORS, or FURS. Contribution rates for the plans are required and determined by State law. The contribution rates, expressed as a percentage of covered payroll for the fiscal year ended June 30, 1995, were: The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for all three plans. That report may be obtained by writing to Public Employees Retirement Division, P.O. Box 200131, Helena, MT 59620-0131 or by calling 1-406-444-3154. The City's contributions for the years ending June 30, 1993, 1994, and 1995, as listed below was equal to the required contributions for each year. PERS.- PERS, MPORS FURS Employee 6.70% 7.8-10.5% 6.00% Employer 6.70% 14.36% 13.02% The Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for all three plans. That report may be obtained by writing to Public Employees Retirement Division, P.O. Box 200131, Helena, MT 59620-0131 or by calling 1-406-444-3154. The City's contributions for the years ending June 30, 1993, 1994, and 1995, as listed below was equal to the required contributions for each year. PERS.- MPORS FURS 1993 $127,167 $ 98,958 $81,174 1994 $140,333 $111,088 $87,261 1995 $142,036 $121,329 $92,979 9. Local Retirement Plans Deferred Compensation Plans 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. In addition, the City Manager participated in the International City Manager's Association (IMCA) Retirement System. This plan was also created in accordance with Internal Revenue Code Section 457. To be eligible to particiapate in the ICMA Retirement Corporation deferred compensation plan the individual must be employed by a local government which has appointed the corporation to administer its deferred compensation plan. The plan permits participating employees to defer a maximum of 25 percent of their total salary or $7,500 per year, whichever is less. -24- 9. Loeal Retirement Plans --cont. All amounts of compensation deferred under the plans, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of benefits under the plan), subject only to the claims of the City's general creditors. Participants' rights under the plan are equal to those of general creditor of the City in an amount equal to the fair market value of the deferred account for each participant. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prudent investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. Investments are managed by the plan's trustees with no specific restrictions on the investment options. The assets of $259,441 for the two plans, including $7,884 in the 1CMA plan, are recorded in an agency fund at June 30, 1995, as required by generally accepted accounting principles. 10. Post Employment Health Insurance Benefits Terminated employees may remain on the City's health insurance plan for up to 18 months if they pay the monthly premiums. This benefit is required under federal C.O.B.R.A. law. Retirees may remain on the City's health plan as long as they wish, provided they pay the monthly premiums. State law requires the City to provide this benefit. There are no other post -employment benefits provided by the City. No cost can be estimated for the above benefits, although there is the probability that there are higher medical costs for retirees which would result in additional costs to the insurance program. 11. Amounts Due From and Due to Other Governments The amounts due from and due to other governments consist of the following: Due From Other Governments: General Fund: Due from State of Montana $ 23,180 Due from Flathead County $104J89 Total $ l?9369 Special Revenue Fund: Due from State of Montana $ 53,150 Due from Flathead County $34. 4,015 Total $=397,=1=65 _ Debt Service Fund: Due from Flathead County $ 5 085 Enterprise Fund: Due from State of Montana $ 540 -25- 12. Amours Due From and To Other Funds Amount Due from other funds and due to other funds consist of the following: Receivable Fund Payable Fund Amount General Fund Sidewalk & Curb Construction $ 3,072 General Fund Drug Enforcement 14,272 SID Revolving 1987 Sidewalk & Curb 3,506 SID Revolving 1990 Sidewalk & Curb 2,224 SID Revolving 1991 Sidewalk & Curb 522 SID Revolving 1992 Sidewalk & Curb 203 Total $23� 13. Restricted Cash/Investments The following restricted cash/investments were held by the City as of June 30, 1995. These amounts are reported within the cash/investment account on the Combined Balance Sheet. Descri tin Amount Special E&venue Funds: 908,814 Community Development: 55,000 Rehab Intertest Subsidy $ 9,685 Community Development: 701,363 Courtyard Reserve 1,189 Tax Increment: 467,340 Bond Reserve 123,046 UDAG Loan Repayment: 72.768 Interest Subsidy 1823 Total $.137.743 Entemrise Fund: Water - Replacement Account $ 413,345 Sewer - Replacement & Depreciation 908,814 Sewer - Reserve for Operations 55,000 Sewer - Sinking & Interest 2,955 Sewer - Contingency 701,363 Sewer - Capital Improvement Account 1,246,569 Sewer - Storm Sewer 467,340 Ambulance - Replacement & Depreciation. 41,555 Garbage - Replacement & Depreciation 72.768 Total $3 939 709 Trust and Aaencv Fund: VALIC - Deferred Compensation Fund $ 251,557 ICMA 7,884 Bidders Bond ___12,599 Total $ 272.040 WS 14. Fund Eauity Reserved retained earnings/fund balances of the City at June 30, 1995, consisted of-. General Fund: Reserved for Encumbrances Reserved for Advance to Internal Service Fund Total Special Revenue Funds: Tax Increment Fund Reserved for Encumbrances Reserved for Bond Contingency Community Development Fund Reserved for Interest Subsidy Reserved for Courtyard Reserve UDAG Loan Repayment Fund Reserved for Interest Subsidy Reserved for Encumbrances Gas Tax Fund Reserved for Encumbrances Lawrence Park Fund Reserved. for Encumbrances Total Enterprise Funds: Water: Reserved for Replacement and Depreciation Reserved for Inventory Reserved for Encumbrances Sewer: Reserved for Replacement and Depreciation Reserved for Operation Reserved for Storm Sewer Reserved for Capital Improvements Reserved for Sinking and Interest Reserved for Future Debt Ambulance: Reserved for Replacement and Depreciation Garbage: Reserved for Replacement and Depreciation Total -27- $150,903 21,273 171176 511,022 $ 123,046 9,685 1,189 3,823 5,875 131,692 29.853 $ 81_ 6.85 $ 413,345 135,940 40,249 908,814 85,000 469,262 1,246,569 2,955 701,363 41,555 72,768 $4 1 15. Changes in Contributed Capita A schedule of changes in contributed capital is presented below: Contributed Capital July 1, 1994 Add: Developers Contributions Grant -Lawrence Park water line Tax Increment Contributions _ Water Sewer Total $1,839,608 $10,412,470 $12,252,078 500,665 219,555 720,220 36,252 36,252 24,923 98,646 123,569 Deduct: Depreciation on assets acquired by grants 35,521 496,630 532,15.1 Contributed Capital June 30, 1995 $2,365 927 $10 2-x.34 041. $12,599.968 16. Restateurents During the current fiscal year, the following adjustments relating to prior years' transactions were made to the fund balance and retained earnings accounts. Fund Amount Reason for Adjustment General Fund $(43,798) To correct revenue for protested taxes returned to property owner. SID Number 337 8,550 To correct expenditures Data Processing 411 To correct expenditures 17. Residual Equity Transfer The City made equity transfers from the Tax Increment Fund in the amount of $98,646 for the 2nd St. East sewer line rehab project and for $24,923 for the Avenue of the Arts water line. The Lawrence Park Grant Fund contributed $36,252 for a water line built within the park. Fund Ma.ina Transfer S.I.D. Revolving (2) S.I.D. Revolving (2) S.I.D. Number 328 (2) Lawrence Park (1) Tax Increment Fund (1) Tax Increment Fund (1) Fund 1yi2es and total net transfers: (1) Special Revenue Fund (2) Debt Service Fund (2) Debt Service Fund (3) Enterprise Fund Fund Receiving Transfer Amount 1985 Sidewalk & Curb (2) $ 4,278 1986 Sidewalk & Curb (2) $ 2,169 S.I.D. Revolving (2) $ 816 Water Fund (3) $ 36,252 Water Fund (3) $ 24,923 Sewer Fund (3) $ 98,646 $(159,821) $ 7,263 $ (7,263) $ 159,821 (a) The transfers to the enterprise funds were recorded as contributed capital. Therefore, residual equity transfers in and out do not net to zero on the financial statements. -28- 18. Segment Information, For Enterprise Funds The City maintains four enterprise funds which provide water, sewer, ambulance, and garbage services. Segment information for the year ended June 30, 1995 was as follows: 19. County Provided Services The City is provided various financial services by Flathead County. The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. 20. Risk Management The City faces a considerable number of risks of loss, including a) damage to and loss of property and contents, b) employee torts, c) professional liability, i.e., errors and omissions, d) environmental damage, e) workers compensation, i.e. employee injuries, and f) medical insurance costs of employees. A variety of methods is used to provide insurance for these risks. Commercial policies, transferring all risks of loss, except for relatively small deductible amounts are purchased for property and content damage and professional liabilities. The City participates in two state-wide public risk pools operated by the Montana Municipal Insurance Authority, for workers compensation and for tort liability coverage. Employee medical insurance is provided through a privately -administered, self-insured plan. And, given the lack of coverage available, the City has no coverage for potential losses from environmental damages. -29- Water Sewer Ambulance Garbage Fund Fund Fund Fund Total Operating Revenues $ 1,029,002 $ 2,279,441 $ 387,681 $ 268,475 $ 3,964,599 Depreciation, Expense $ 184,447 $ 969,090 $ 13,004 $ 61,095 $ 1,227,636 Operating Income or (Loss) $ 129,175 $ 258,130 $ 51,659 S(50,515) $ 338,449 Net Income (Loss) $ 169,566 $ 5,124 $ 54,284 $(44,491) $ 184,483 Current Capital: Contributions $ 561,840 $ 318,201 $ - $ - $ 880,041 Plant, Property and Equipment: Additions $ 707,358 $ 468,622 $ 7,538 $ 19,872 $ 1,203,390 Deletions $ 24,023 $ 130,007 $ 1,523 $ - $ 155,553 Net Working Capital $ 600,838 $ 348,525 $ 166,812 $ 60,102 $ 1,176,277 Total Assets $ 6,599,281 $22,355,878 $ 249,515 $ 488,242 $29,692,916 Long- Term Liabilities: Payable from Operating Revenues $ 28,793 $ 7,168,769 $ 27,108 $ 25,341 $ 7,250,011 Total Equity $ 6,503,697 $15,142,807 $ 212,112 $460,595 $22,319,211 19. County Provided Services The City is provided various financial services by Flathead County. The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. 20. Risk Management The City faces a considerable number of risks of loss, including a) damage to and loss of property and contents, b) employee torts, c) professional liability, i.e., errors and omissions, d) environmental damage, e) workers compensation, i.e. employee injuries, and f) medical insurance costs of employees. A variety of methods is used to provide insurance for these risks. Commercial policies, transferring all risks of loss, except for relatively small deductible amounts are purchased for property and content damage and professional liabilities. The City participates in two state-wide public risk pools operated by the Montana Municipal Insurance Authority, for workers compensation and for tort liability coverage. Employee medical insurance is provided through a privately -administered, self-insured plan. And, given the lack of coverage available, the City has no coverage for potential losses from environmental damages. -29- 20. Risk Management - cont. In 1986 the City joined together with other Montana cities to form the Montana Municipal Insurance Authority which established a workers' compensation plan and a tort liability plan. Both public entity risk pools currently operate as common risk management and insurance programs for the member governments. The liability limits for damages in tort action are $750,000 per claim and $1.5 million per occurrence with a $7,500 deductible per occurrence. State tort law limits the City's liability to $1.5 million. The City pays an annual premium for its employee injury insurance coverage, which is allocated to the employer funds based on total salaries and wages. The agreements for formation of the pools provide that they will be self-sustaining through member premiums. The tort liability plan and workers' compensation program issued bonds in the amount of $4.41 million and $7.610 million, respectively, to immediately finance the necessary insurance reserves. All members signed a contingent note for a pro rata share of this liability in case operating revenues were insufficient to cover the debt service. The City's share is $201,445 for liability and $281,715 for workers compensation. Based on the plans's current financial position, the City doesn't expect to make any payments on these notes. Separate financial statements are available from the Montana Municipal Insurance Authority. 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 and their dependents. Vision is optional and paid by the employee. The plan pays 80% of the medical claims after the $100 deductible for each employee and covered dependent has been satisfied, up to total of $200 maximum family deductible. Generic prescriptions 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. A stop -loss policy has been purchased to cover any claims which exceed $75,000 per individual or aggregate claims of 115% of claims projected by Blue Cross. No individual reached the stop loss amount nor did the City total reach the projected amount. A reconciliation of claims payable follows: Claims payable, June 30, 1994 $ 14,574 Claims incurred 498,175 Claims paid (472,310) Claims payable, June 30, 1995 4 439 -30- 21. Joint Ventures Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. 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 -Council Health Board. The Board consists of seven members, six of whom are appointed by the Board of County Commissioners. The County taxed the property owners directly for the City's contribution for the fiscal year ended June 30, 1995, at an equivalent rate of mills. The operation is accounted for in the County Health Fund and is included in the financial statements of Flathead County. Coun -Wide Administrative Board The City of Kalispell along with Flathead County, the City of Columbia Falls, and the City of Whitefish, participate in a County -wide Administrative Board(CAB) that was established by an interlocal agreement in December 1979. The CAB was formed for the purpose of coordinating all land use planning, subdivision reviews and approval, and zoning application and enforcement in Flathead County, as well as to assist in annexation by the cities. The Board consists of four members, the Mayor of each of the three cities and the Chairman of the Flathead County Board of County Commissioners. The CAB is financed by a tax levied by each of the parties of the interlocal agreement in the proportion to the expected benefits that each party shall receive during the ensuring fiscal year. The financial activities of the CAB are accounted for by Flathead County. The City's contribution for CAB for fiscal year ended June 30, 1995, was $51,744. Cou rd A artments/Northwest Montana Humans Resources The City entered into an agreement with Northwest Montana Human Resources (NWMHR) for a joint venture construction project of the Courtyard Apartments. The City owns 16 units of the apartment complex built with Home Grant and CDGB funds. NWMHR built 8 units and is currently constructing 8 more on the site. The agreement provides for the management of the housing complex for low income housing. All operations and maintenance of the housing complex are managed by Northwest Montana Human Resources. NWMHR maintains a trust fund in the City's name to record the revenues and expenses of the housing complex. As of June 30, 1995, the equity in the fund was $19,004. The debt payments on the mortgage are paid from the proceeds of the rents by NWMHR. The principal balance is recorded on the City's books in the Long-term Debt Group of Accounts. The original amount of the loan was $271,000. The balance as of June 30, 1995, was $269,913. -31- 22. 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 loaned to KCLP was $3,336,928. The balance of the loan receivable at June 30, 1995, was $2,811,116 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 a 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 $30,469 was recorded in the Tax Increment Fund as of June 30, 1995. 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 (now - Glacier Bank) of Montana, the lender, must provide the total funds required for the purchase and rehabilitation of the housing unit. At the time the bank loans are closed with the borrower, the proceeds of the City's loan will be deposited into the borrower's 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 days after the Lender's loan (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 loan of up to $25,000 with a varying interest rate (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 $341,792 recorded as loans receivable as of June 30, 1995, in the Community Development Loan Revolving Fund. Housing loans leveraged with Tax Increment Funds are recorded in the Tax Increment Fund in the amount of $50,764. The above mentioned loans are offset with deferred revenue accounts. -32- 23. Significant Commitments Significant construction contracts and other commitments entered into but incomplete at fiscal year-end included the following: Total $ 830 24. Pending Litigation 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 Lence vs. City of Kalispell $ 90,000 -33- Amount __ Project General Fund $ 25,677 Lawrence Park 44,710 2 police cars 78,960 Overlay contract Total $ 149,347 Tax Increment Fund $ 169,813 High School parking lot project 67,800 Avenue of the Arts 49,307 1st St. East project 56,500 Tennis court project 68,089 Overlay contract 97,500 2nd St. Sewer line Total $ 509,009 Gas Tax Fund $ 131,692 Overlay contract Water Fund $ 6,399 Engineering Well Water Fund 33,850 Test Well Total 40,249 Total $ 830 24. Pending Litigation 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 Lence vs. City of Kalispell $ 90,000 -33- Nordwick, 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 SUPPLEMENTAL INFORMATION AND SCHEDULES To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, and have issued our report thereon dated March 27, 1996. 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,A udits 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 taken as a whole. The accompanying supplemental information schedules as listed in the table of contents for the year ended June 30, 1995, 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. Y (orLicL, _Cbenninq anal 2)owney March 27, 1996 -34- Stan Nordwick, CPA - Robert K. Denning, CPA - Kim M. Downey, CPA • Nancy S. Everson, CPA w U z Zrn Q Q z a z z z w J EL z t w w LL � r O U U - A tll i U yr I 64 M 40 C,04 La a U)�z Q i of -0 p Ei o m U ZL, c oc�im Vi mim m � uWi 3 N NES c.1JPii m� h q rn i -i eM- ai air o vi a o ri *-10!` m W ,co E O i e m i € kl 1LQ O n 0 N fp q Cp 13 car' pp 6i O rn 4i{�{ n w': o©€ c+ n u} StNn �Ii Vi mim m � uWi 3 N NES zy i� [Ef sv c 69 O w 1LQ O n 0 N fp q Cp 13 IQ 17 N r o ri ui N C7 7 c 6i O rn 4i{�{ 0 0 � f0'1 V tl�l u} N a� E N€ uNi Vi mim m � uWi 3 0 sv c O O w 1LQ O n 0 N cs Vi ni 17 IQ 17 N r o ri ui N C7 7 c 1`07 2� a� E b 4 N � N rlR rnrn �� u fn fn j C � � x 'o OD m N N m u~j 00 00 ep Ufl 0O m p, v'v vi <- ui r 00 NN w d w.0 C? L C l 3 m p a} CL m E c B LN c lffi C 9j 'yZS L1 l0 A3 V2 EL �O E R O m S c S" Q E N E E 2 w y u fl Iy _ y .'3 Ictlii c m o E Lg$ Z Sc c �a o mi E m c ur v� c v o E'} E5 .L c CL on E dmsTod 3 3 c w o- d co c rg a1{ m« Q Ty, Ty, ,s a p E O p ' —c ca O °FLi s� •� O ttl N mz �° c ca E E� M. L7 L' a. a Lis LEEL^ 2t1 Q0-0- � U "l7 E d 2 E D L.i d m v a ! � 1 W N MOX 1- vx,m0 m� vi coo -- «a raa 6a �€L a t° t° z m z -35- SIGNIFICANT 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. Total Reserve Bond Balance $701,362 Maximum Requirement 691.514 Excess balance $ 9.549 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 $1,739,037 Storm Sewer Assessment 229,624 Miscellaneous and Hookup Fees 310 780 Total Operating Revenue $2,279,441 Less: Operating Expense (Before Depreciation) L052,221 Available for Debt Service $1.227220 Maximum Debt Service $ 691,814 Coverage 177% 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 as shall the salaries and 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, 1995, of $1,052,221 divided by 12 = $87,655. The Sewer Operating Reserve balance of $85,000 was under funded by $2,685. -36- 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 of 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 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: 5118 Amount of cash on hand in each account of the Sewer System at the end of the fiscal year: Sewer Operating S 255,292 Sewer Capital Improvement 623,031 Sewer Revenue Reserve 701,362 Replacement and Depreciation 834,579 Sewer Revenue Bond Account 2,955 Sewer Operating Reserve 85,000 Storm Sewer Maintenance Reserve 467,340 Sewer Bond Reserve Investments 74,235 Total $ SIN Schedule of Insurance Policies June 30, 1995 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 519196. A $5,000 public employees blanket faithful performance bond expires 6/30195, with an additional indemnity for city accountant, city court judge, assistance 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 $21,419,799 and a $1,000 deductible. Expires 2116/96. 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 7/1/95. -38- CITY OF KALISPELL, MONTAINA SEWER FUND SCHEDUI_w& OF ASSETS, LIABILITIES, AND FUND EQUITY June 30, 1995 ASSETS Cash finvest,TIants Taxeslasse 'ssrnents receivable Other receivables Fixed asse's ,,Net of accumulated depreciation) TOTAL ASSETS LIABILITIES. AND ._FUND.EQU__ITY Liabilities: Short-term payables Long-term liabilities Total Liabilities Fund Equity - Contributed capital Retained earrings; Reserved Unreserved Total Fund Equity TOTAL �IA€BILITIES AND FUND EQUITY -39- $ 3,667,333 15,150 122,385 18,551,010 $22355,878 $ 44,302 _ 7,168,769 7,213,071 10,234,041 3,413,963 1,4_94,803 f 5,142,807 221355878 CITY OF KALISPELL, MONTANA SEWER FUND SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS Fiscal Year Ended June 30, 1995 Operating Revenues: Charges for services $ 1,739,037 Miscellaneous revenues 310,780 Special assessments 229,624 Total Operating Revenues 2;279,441 Operating Expenses: Personal services 437,083 Supplies 39,205 Purchased services 374,267 Fixed charges 186,572 Losses/bad debt expenses 6,167 Depreciation 969,090 Building materials 8,927 Total Operating Expenses 2,021,311_ Operating Income 258,130 Non -Operating Revenues (Expenses): Interest 151,853 Debt service interest expense _404,859) Total Non -Operating Revenues (Expenses) (253,006) Net Income 5,124 Add Depreciation on fixed assets acquired by contributions 496,630 Increase in Retained Earnings 501,754 Retained Earnings - July 1, 1994 4,407,012 Retained Earnings - June 30, 1995 $ 4,908,766 ,N CITY OF KALISPELL, MONTANA . 51114".2:111112 SCHEDULE OF CASH FLOWS Fiscal Year Ended June 30, 1995 Cash flows from Operating Activities: Cash received from customers Cash received from assessments Cash received from hookups Cash payments to suppliers Cash payments to employees . Net cash provided by operating activities Cash flows from Capital and related financing activities: $ 1,707,560 228,263 310,780 (777,785) (428,939) 1,039,879 Acquisition and construction of capital assets (119,059) Principal paid on revenue bonds and contracts (283,000) Interest paid on revenue bonds and contracts (404,859) Capital contributed by Tax Increment District 98,646 Net cash used for capital and related financing activities (708,272) Cash flows from investing activities: Interest on investments 151,853 Purchase of sidewalk and curb warrants (28,513) Redemption of sidewalk and curb warrants 13,713 Net cash used in investing activities 137,053 Net increase in cash and cash equivalents $ 468,C58 Cash and cash equivalents at beginning of year $ 3,124,439 Cash and cash equivalents at end of year $ 3593097 Reconciliation of operating income to net cash provided by operating activities: Operating Income $ 258,130 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 969,090 Change in assets and liabilities: Increase in accounts receivable (25,310) Increase in assessments receivable (1,361) Decrease in accounts payable (25,178) Decrease in short-term contract (143,636) Increase in compensated absences payable 8,144 Total 781,749 Net cash provided by operating activities 1 039 879 Noncash, investing, capital, and financing activities: Developers contributed $219,555 in fixed assets to the Sewer Fund -41- Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 •543-8174 1103 S. ,kSain • Kalispell, MT 59901 • 755-6879 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, and have issued our report thereon dated March 27, 1996. 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 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 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, the objective of our audit of the general-purpose financial statements 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 disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. ]""4..a, and _' Aownev March 27, 1996 -42- Stan Nordwick, CPA • Robert K Denning, CPA • Kim M. Downey, CPA • Nancy S. Everson, CPA Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 •543-8.174 1103 S. Main • Kalispell, tuff 59901 • 756-6879 INDEPENDENT AUDITOR'S REPORT ON THE INTERNAL CONTROL STRUCTURE BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, and have issued our report thereon dated March 27, 1996. 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. The management of the City is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that: ■ Assets are safeguarded against loss from unauthorized use or disposition. ■ Transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general-purpose financial statements in accordance with generally accepted accounting principles. 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. -43- Stan Nordwicic, CPA • Robert K. Benning, CPA • Kim M. Downey, CPA • Nancy S. Everson, CPA In planning and performing our audit of the general-purpose financial statements of the City for the year ended June 30, 1995, we obtained an understanding of the internal control structure. With respect to the internal control structure, 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 in order to determine our auditing procedures for the purpose of expressing our opinion on the general-purpose financial statements and not to provide an opinion on the internal control structure. Accordingly, we do not express such an opinion. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the 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 may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. However, we noted other matters involving the internal control structure and its operation that we have reported to the management of the City in our Independent Auditor's Report of Other Compliance, financial and Internal Control Matters on pages 51 and 52 of this audit report. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. I .1j i k, �C lenxin. anU �CJucvrEec� March 27, 1996 Nordwick, Denning chi Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S Russell • Missoula, MT 59801 •543-8174 1103 S Main • Kalispell, Mf' 59901 • 756-6879 INDEPENDENT AUDITOR'S REPORT ON THE INTERNAL CONTROL STRUCTURE USED IN ADMINISTERING FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, and have issued our report thereon dated March 27, 1996. We have also audited the compliance of the City of Kalispell, Montana, with requirements applicable to major federal financial assistance programs and have issued our report thereon dated March 27, 1996. 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, and about whether the City complied with laws and regulations, noncompliance with which would be material to a major federal financial assistance program. In planning and performing our audit for the year ended June 30, 1995, we considered the City's internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the City's general-purpose financial statements and on the City's compliance with requirements applicable to major programs and to report on the internal control structure in accordance with OMB Circular A-128. This report addresses our consideration of internal control structure policies and procedures relevant to compliance with requirements applicable to federal financial assistance programs. We have addressed internal control structure policies and procedures relevant to our audit of the general-purpose financial statements in this audit report on pages ??9. The management of the City is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that: ■ Assets are safeguarded against loss from unauthorized use or disposition. -45- Stan Nordwick, CPA • Robert K Denning, CPA - Kim M. Downey, CPA ► Nancy S Everson, CPA ■ 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, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures used in administering federal financial assistance programs in the following categories. Accounting Controls: Cash receipts Purchasing/expenditures Payroll Fixed assets General Requirements: Political activity Civil rights Cash management Federal financial reports Allowable costs/cost principles Drug -Free Workplace Act Administrative requirements Davis -Bacon Act Claims for Advances and Reimbursements Amounts Claimed or Used for Matching Specific Requirements: Types of services Eligibility Matching, level of effort, earmarking Reporting Special requirements Cost allocation For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation and we assessed control risk. During the year ended June 3€1, 1995, the City expended 83% of its federal financial assistance under the following major federal financial assistance programs: ■ U.S. Department of Housing and Urban Development - Comminty Development Block Grant ■ U.S. Department of Housing and Urban Development - Home Investment Partnerships We performed tests of controls, as required by OMB Circular A-128, to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements, general requirements, and requirements governing claims for advances and reimbursements and amounts claimed or used for matching that are applicable to each of the City's major federal financial assistance programs, which are identified in the accompanying Schedule of Federal Financial Assistance. Our procedures were less in scope than would be necessary to render an opinion on these internal control structure policies and procedures. Accordingly, we do no express such an opinion. Our consideration of the internal control structure policies and procedures used in administering federal financial assistance would not necessarily disclose all matters in the internal control structure that might constitute material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of the internal control structure elements does not reduce to a relatively low level the risk 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. We noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. I /ordcvach, 2)'"ring an� �CJacvr�er� March 27, 1996 -47- Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • Missoula, MT 59801 •543-8174 1103 S Main • Kalispell, MT •756-6879 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSSISTANCE PROGRAMS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, and have issued our report thereon dated March 27, 1996. We have also audited the City's compliance with the requirements governing types of service allowed or unallowed; matching, level of effort, or earmarking; reporting; carry over of grant funds, special tests and provisions; and claims for advances and reimbursements that are applicable to each of its major federal financial assistance program, which are identified in the accompanying Schedule of Federal Financial Assistance, for the year ended June 30, 1995. The management of the City is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit of compliance with those requirements 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 Circular A-128, Audits of State and Local Governments. Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the City complied, in all material respects, with the requirements governing types of services allowed or unallowed; matching, level of effort, or earmarking; reporting; carry over of grant funds, special tests and provisions; and claims for advances and reimbursements that are applicable to each of its major federal financial assistance programs for the year ended June 30, 1995. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. norLich, and _Uou necy March 27, 1996 -48- Stan Nordwick, CPA • Robert K Denning, CPA • Kim M. Downey, CPA • Nancy S. Everson, CPA Nordwick, 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 WITH THE GENERAL REQUIREMENTS APPLICABLE TO FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, and have issued our report thereon dated March 27, 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, 1995: ■Political activity ■Drug -Free Workplace Act ■Civil rights ■Administrative requirements wCash management ■Federal financial reports ■Allowable costs 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 second 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. / /ordivici, _IAnnia9t and aC. wne y March 27, 1995 -49- Stan Nordwick, CPA • Robert K. Denning, CPA • .Kim Al'. Downey, CPA - .Nancy S Everson, CPA Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S Bussell • Missoula, MT 59801 •543-8174 1103 S. Main • Kalispell, MT 59901 - 756-5879 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Montana, as of and for the year ended June 30, 1995, and have issued our report thereon dated March 27, 1996. In connection with our audit of the general-purpose financial statements of the City and with our consideration of the City's internal 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, 1995. As required by OMB Circular A-128, we have performed auditing procedures to test compliance with the requirements governing types of services allowed or unallowed that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with these requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those requirements. This report is intended for the information of management. However, this report is a matter of public record and its distribution is not limited. / lorJu,Li, _)e+aninq an-7)owne y March 27, 1996 -50- Stan Nordwick, CPA • Robert K. Denning, CPA - Kim M. Downey, CPA - Nancy S Everson, CPA Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell • .Missoula, MT 59801 •543-8174 1103 S Main • Kalispell, MT •756-6879 INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana Immaterial instances of noncompliance along with findings relating to financial or accounting matters, as well as our recommendations, are presented below. Also, other matters involving the internal control structure and its operation that are not considered to be reportable conditions under standards established by the American Institute of Certified Public Accountants are disclosed below for your information, along with our recommendations for improvement where applicable. Ambulance Fund Receivables A detailed listing of accounts receivable was not prepared, and the allowance for bad debts was not periodically reviewed for reasonableness. Recommendation The detailed listing of accounts receivable should be balanced to the general ledger monthly and at least annually, the allowance for uncollectible accounts should be adjusted. Reporting Car Allowance Car allowances to the City Manager, Mayor and Director of Community Development were reported to them on a Form 1099 at the end of the calendar year. Recommendation The Internal Revenue Service requires payments under nonaccountable plans to be reported on the Employees W-2 Form. Ci1y Court Receivables A manual system of tracking contracts receivable is used in the City Court. Contracts receivables have increased to a level that considerable hours are required to account for them, Recommendation Internal controls and management control over the contracts receivable functions of the City Court would be greatly improved by upgrading their current manual system to a computerized system. -51- Stan Nordwick, CPA • Robert K. Denning, CPA • Kim M. Downey, CPA • Nancy S. Everson, CPA Courtyard Apartments The City owns 16 units of the Courtyard Apartments. The financial activity for the rental of these units was not recorded in the City's financial statements. The unrecorded activity was not material to the financial statements. Recommendation The City should recognize its share of the revenues and expenses relating to the Courtyard Apartments. i /."k'a, 2) -ening &-Cbowne y March 27, 1996 -52- Nordwick, Denning & Downey CERTIFIED PUBLIC ACCOUNTANTS 2801 S. Russell - Missoula, MT 59801 •543-8174 1103S. Main • Kalispell, AIT 59901 • 756-5879 INDEPENDENT AUDITOR'S REPORT ON PRIOR AUDIT REPORT RECOMMENDATIONS To the City Manager, Mayor and City Council City of Kalispell Kalispell, Montana The prior audit report contained one recommendation which was implemented. l/orcit��ic{z, a( lennin$ and -,C. wne y March 27, 1996 _53_ Stan Nordwick, CPA • Roben K Denning, CPA • Kim M. Downey, CPA • Nancy S. Everson, CPA