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12. Audit-Fiscal Year Ended 6/30/00CITY OF KALISPELL, MONTANA TABLE OF CONTENTS Fiscal Year Fended Jane 30, x000 �'...:. Organization Independent Auditor's Report 2-3 General Purpose Financial Statements Combined Balance Sheet - All Fund Types, Account Groups, and Discretely Presented Component Unit 4-5 Combined Statement of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types Combined Statement of Revenues, Expenditures, and Changes in Fund Balances . Budget and Actual - General, Special 7-8 Revenue, Debt Service, and Capital Projects Fund Types Combined Statement of Revenues, Expenses, and Changes in Retained Earnings - All Proprietary Fund Types and 9 Discretely Presented Component Unit Combined Statement of Cash Flows - All Proprietary Fund Types and Discretely Presented Component Unit 10 Notes to the Financial Statements 11-44 Single Audit Section 45 Schedule of Expenditures of Federal Awards 46 Basis of Presentation 47 Independent Auditor's Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of 48-49 Financial Statements Performed in Accordance With Government Auditing Standards CITE' OF KALISPELL, MONTANA FABLE OF CONTENTS - cont, Pave Independent Auditor's Report on Compliance With Requirements Applicable to Each Major Program and, Internal 50-51 Control Over Compliance in Accordance With OMB Circular A-133 Schedule of Findings and. Questioned Costs Independent Auditor's Report on Other Compliance, Finanacial, and Internal Accounting Control Matters 56 Independent Auditor's Report on Prior Audit Report Recommendations -11- 57 William E. Boharski Donald Counsell Ron Van Natta Fred Loistiko Dale Haan Claris Kukulski Glen Neter Frank Ganger Ted Waggoner Amy Robertson Heidi Ulbricht James Hansz Michael Baker Susan Moyer CITY OF KALISPELL FLATHEAD COUNTY, MONTANA ORGANIZATION Fiscal Year Ending June 30, 2000 Ward I Ward I Ward II Ward II Mayor Jim Atkinson Ward III Randy Kenyon Ward III M. Duane Larson. Ward IV Douglas Scarff Ward IV City Manager Attorney Police Chief Fire Chief Finance Director City Judge Public Works Director Parks Director Community Development Director Denning, Downey & .Associates, U, CERTIFIED PUBLIC ACCOUNTANTS 1740 US. ttvy 93 South, Suite 101- Kalispell, YT59901- 756-0$79 INDEPENDENT AUDITOR'S REPORT City Manager, Mayor, and City Council City of Kalispell Flathead County Kalispell, Montana We have audited the general-purpose financial statements of City of Kalispell, Flathead County, Montana, as of and for the year ended June 30, 2000, as listed in the table of contents. These general-purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing ilae 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 as of June 30, 2000, 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, In accordance with Government Auditing Standards, we have also issued our report dated March 26, 2001, on our consideration of the City's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. .2. Our audit was performed for the purpose of forming an opinion on the general-purpose financial statements of the City, taken as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, .focal Governments, and Non -Profit Organizations, and is not a required pail of the general-purpose financial statements. Such information 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. 20nahj' 200)49 ��Jmod6j' CPA PC, March 261 2001 CITY OF KALISPELL, FLATHEAD COUNTY, MONTANA COMBINED BALANCE SHFET-ALL Ft1.ND'rYPFS AND ACCOUNT GROUPS June 30, 2000 Proprietary Primary ConTomilt rteporfittg Ci9L�fl1p3�I11G�lil1 Ty S FC44twry Funds &ba AccoUmGwiip Q41SC= LL Etlllly General General Totals Totals General Special Debt Capital Enlerprise Internal Tmstand Fixed bong -term (Memorandum (Memoranduar Fund Revenue Service Pro eels Funds Service Agency Assets Debt only) only) ASSES ANLO 558,159 363,385 363,385 565,300 Assets: 1,386,345 1,386,345 510,693 510,693 Cashllnvestments $ 755,527 $ 3,973,395 S 35,860 S 97,000 S 8,276,954 S 746,207 $ 88,923 S Receivables: 1,553,312 1,553,312 31,506 31,506 Taxes 142,317 361,076 4,766 SpecialAssess€uents 290 54281 248,673 58,141 Accounts 194,481 370,819 Dn€efrom other govermettls 219,414 581,973 9,443 .500,000 75,515 Due from other funds 2,373 500,000 8,320 Dire from other rganizations 22,213 Advance to other funds 40,000 75,000 - Inventmies 102,549 Loans receivable 1,.)53,312 Accrued Interest Receivable 15,342 16,164 Ptepaid cspenses 56,113 832 Fixed assets (net of accumulated depreciation, where applicable) 25,816,365 65,580 17,895,046 Dthtr deks $ - S 13,973,866 $ 65,645 $ 14,039,511 558,159 558,159 363,385 363,385 565,300 10,880 576,180 1,386,345 1,386,345 510,693 510,693 22,213 22,213 115,010 115,000 102,544 102,549 1,553,312 1,553,312 31,506 31,506 56,945 56,945 43,776,991 12,151 43,789,142 Amount Available in Debi funds 61,469 61,469 61,469 Amount to be provided for retirement of general long -tern debt 4,454,324 4,454,324 4,454,324 Total Assets and otlwdebits S 1,404,402 $ 7,194,705 S 323,226 $ 597,000 $ 34,700,343 S 812,619 $ 88,423 S 17,&95,046 $ 4,515,793 S 67 532,057 S 88,676 $ 67,620,733 See aecompanying Notes to FiaancU SWements -4- CITY OF KALISPELL, FLATHEAD COUNTY, MONTANA COMBINED BALANCE SHEET -AIA, FUND TYPES AND ACCOUNT CROUPS June 30, 2000 .g. Proprietary Primary Component Reporting �9.VeMOtrrnal_Purrd_1' uy,,es EwWhIds Fiduciary Account Groups f4w= Lw� General General Totals Totals General Special Debt Capital Enterprise Internal Trust and Fixed Long -tem (Memorandum (NemoraHm LIABILITIES, EQUITY & OTHER CREDITS Fund Revenue Service Projects Funds Service A enc Assets Debt only) only) Liabilities, Accounts payable S 78,534 S 140,215 S S 97,000 S 247,174 S 4,293 S 88,923 S $ S 656,139 S 4,637 S 660,776 Aecruedpayable 31,334 578 31,912 31,912 Purchase contract - 27,751 27,'151 27,751 Retainage payable 5,173 5,173 5,173 Due to ocher funds 8,320 502,373 510,693 510,693 Advances to other funds 115,000 I €5,000 115,000 Estima(ed liability for claims 53,437 53,437 53,437 Deferred revenue 387,088 1,970,668 253,437 - - 2,611,193 2,611,193 1.01100teirnliabilities 6,692,183 4,515,793 11,207,976 3,975 11,211051 Total Liabilities S 496,956 S 2,259,385 S 261,757 S 599,373 S 6,939,357 5 57,730 $ 88223 S S 4;519,793 $ 15 219,274 $ 8,612 $ 15,227,886 liquity and ober credits: lnvestmantingeneralfixed asse(s S S S $ S $ S - S 17,895,046 $ $ 17,895,046 S $ 17,895,046 Contributed capital 13,459,683 544 13,460,227 13,460,227 Retained earnings: Designated for replacement 337,485 51,339 388,824 388,824 Reserved 0,129,534 6,129,534 6,1.29,534 Unreserved 7,834,284 703,006 8,537,290 8,537,290 Fund Balances: Reserved 40,000 222,006 61,469 323,475 323,475 (inresc€vcd 867,446 4,713,314 (2,373) 5,578,387 80,064 5,659,451 Total l:,quityandother credits S 907,446 S 4,935,320 S 61,469 S 2,373 S 27,760,986 S 754,889 S $ 17,895,046 S S 52,312,763 $ 80,064 $ 52,392,847 Total Liabilites and Fund liquity $ 1,404,402 $ 7,194,705 S 323,226 S 597,000 $ 34,700,343 S 812,619 S 88,923 $ 17,895,046 $ 4,515,793 $ 67,532,057 $ 88,676 S 67,620,733 See accompanying Notes to Financial Statements .g. CITY OF KALISPELL, FLATHEAD COUNTY, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FIND TYPES H Taxesiassessments licenses and permits Intergovernmental Charges for services Fines and forfeitures Miscellaneous revenue Investment earnings Total Revenues EXPENDITURES General government Public safety Public works Culture and recreation f lousinglcomnwnity development Miscellaneous Capital outlay Debt service Total Expenditures Excess (I)el: cieney) of Revenues Over Expenditures Other Financing Sources (Uses): Proceeds of general fixed asset disposition Proceeds of general long-term debt Operating transfer in Operating transfers (out) '.total Other Financing Sources (uses) Excess (Deficiency) of revenues and Other Sources Over Expenditures and Other Uses Fund Balances -July 1,1999 -as previously repotted Restatements Fund Balancus- July 1,1999 -as restated Residual equity transfers Fund Balances- June 30, 2000 See accompanying Notes to the Financial Statements For Fiscal Year Ended June 30, 2000 PRIMARY GOVERNMENT GOVERNMENTAL FUND "TYPES TOTALS Special Debt Capital (MEMORANDUM General Revenue Service flro'ects ONLY S 1,628,440 S 3,283,266 $ 138,723 $ $ 5,050,429 133,920 325,397 339 459,656 1,426,886 1,140,498 3,648 500,000 3,071,032 850,018 13,614 - 863,632 379,517 287,432 340,438 379,517 52,019 57,270 289,694 109,289 74,329 282,044 43,568 399,941 $ 4,545,1.29 $ 5,102,089 S 186,278 S 500,000 S 10,333,496 835,638 S 100,873 S $ 5 936,511 2,377,843 964,484 3,342,327 544,172 854,154 1,398,926 607,518 115,842 723,360 2,019,148 2,019,148 540 286,892 287,432 340,438 1,026,044 3,004,142 4,370,624 7,189 289,694 202,921 499,804 $ 4,713,938 $ 5,657,131 $ 202,921 $ 3,004,142 S 13,578,132 $ 168,809 $ 555,042) $ 16,643) $ (2,504,142) $ (3,244,636). - $ 324,954 S S $ 324,954 87,603 122,382 2,501,769 2,711,754 183,281 183,281 40,505 (142,776) (183,281) $ 47,098 $ 487,841 $ S 2,501,769 $ 3,0311,708 $ 121,711 $ 67,201) $ 16,643 S 2,373) j____�207,92K) S 1,029,157 $ 5,531,638 $ 78,112 $ $ 6,638,907 5,667 5,667 $ 1,029,157 $ 5,537,305 $ 78,112 S S 6,644,574 (534,783) (534,783) S 907,446 S 4,935,321 S 61,469 $ 2,373 $ 5,901,863 '6. CITY OF KALISPELL, FLATHEAD COUNTY, MONTANA COMBINED STATEMENT OF REVENUES,EXPENDITLIRES, AND CHANCES IN FUND BALANCES-13111DGET AND ACTUAL GENERAL„ SPECIAL, REVENUE, DEBT SERVICE AND CAPITAL, PROJECTS FUND TYPES For Fiscal Year Ended June 30, 2000 Otlrer Financing Sources (Uses) Proceeds of general fixed asset disposition GENCRALFUND - S SPECIAL, REVENUE FUNDS 43,133 Proceeds of general long-term debt 87,603 87,603 Varaince 122,382 (2,700,248) Varaince Budget After 162,328 Favorable BudgetAiier Operating transfers (out) Favorable (40,505) transfers Actual llnPavorablu _ ttansfers Actual (Unfavorable) 47,098 S REVFNI,S 487,841 $ (2,656,210) ,... Taxeslassessurertts $ 1,607,058 $ 1,628,440 $ 21,382 $ 3,333,129 S 3,283,266 S (49,863) Lieensesand perntiB 125,095 1.33,920 8,825 245,000 325,397 80,397 Intcrgovetumental 1,316,300 1,426,886 110,586 1,377,639 1,140,498 (237,147) Charges for services 854,777 850,018 (4,759) 15,351 13,614 (1,737) Files acrd 1[066tures 386,782 379,517 (7,265) 5,537,305 Residual equity transfers Miscelianconsremule 40,477 52,019 11,542 159,298 57,270 (102,028) hmstment earnings 83,940 74,329 9,61.1 250,152 282,044 31,892 TotalRevcnue $ 4,414,429 S 4,545,129 $ 130,700 $ 5,380,569 S 5,102,089 $ 278,480) EXIMU$ Current: General Government $ 849,220 $ 835,638 $ 13,582 s 103,714 $ 100,873 $ 2,841 Public Safety 2,382,459 2,377,843 4,616 1,037,484 964,484 71,000 Public Works 557,080 544,772 12,308 1,505,197 854,155 651,042 Culture and Recmation 610,512 607,518 2,994 136,344 115,842 20,502 IlousinglComm,Developmcut 2,204,182 2,019,148 185,034 6liscellaueaus 1,550 540 1,010 317,145 286,892 30,493 Capital outlay 342,827 340,438 2,389 6,457,921 1,026,044 5,431,877 Debt Service 7,189 7,189 307,423 289,694 17,729 Total l xpeudifares $ 4,750,837 $ 4,713,938 S 36,899 $ 12,069,610 5 5,657,132 5 6,412,478 Excess (Ucficiency)ofReventtesOver Expenditures 3 336,408 $ 168,809 $ 167,599 $ (6,689,041) $ (555,043) $ 6,133,998 Otlrer Financing Sources (Uses) Proceeds of general fixed asset disposition $ - $ - S S 281,821 $ 324,954 $ 43,133 Proceeds of general long-term debt 87,603 87,603 2,822,630 122,382 (2,700,248) Operating transfer in 162,328 163,233 905 Operating transfers (out) (40,505) (40,505) 122,728 122,728 Total Other Financing Sources(Uses) $ 47,098 S 47,098 S 5 3,144,051 $ 487,841 $ (2,656,210) Excess (Deficiency) of Reveuncs and Other Sources Over Expenditures and Other Uses $ (289,310) $ (121,71 I) $ 167,599 $ 3,544,990) $ 67,202) $ 3,477,788 Fund Balauces-luly 1,1999 -as previously reported $ 1()29,157 $ 5,531,638 Restatements 5,667 Fund Balances• July 1,1999 -as restated S 1,029,157 S 5,537,305 Residual equity transfers 534,783 Fund Balances• June 30, 2000 $ 907,446 $ 4,935,320 sce uccompollying Notes to flit 19 'Iwai Statements -1' CITY OF KALISPELL, FLA'f11LAD COUNTY, MONTANA Excess(1)6cieney) of Revenues Over Expenditures Other Financing Sources (Uses): Prom& of geueral Exec asset disposition Proceeds of general long-term debt Operating transfer inn Operating transfers (out) Total Other Finaucinng Sources (Uses) Excess (Deficietncy) of Revenues and Other Sources Over Expenditures and Other Uses Fund Balauces•July 1,1999•as previously reported Restatc€uents Fund Batanccs-,4dy 1,1999•as restatcd Residual equity transl'ets Fuud Balances- Juue :30, 2000 $au uccompaiymg Notes to Ute Financial Stalemai $ 105,008 S (16,643) $ 88,165 $ 2525,000) $ 2,504,142) $ 20,958 $ $ $ $ 2,525,000 S 2,501,769 $ {2:1,231) $ -$ - $ - $ 2,525,000 $ 2,501,769 $ 23,231 $ 105,W8 $ 16,643) $ 88,365 $ $ 2,373) $ 2,373 $ 78,112 $ S 79,112 $ $ 61,469 •8- COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES -BUDGET AND ACTUAL GENERAL, SPECIAL REVENUE, DEBT SERVICE AND CAPITAL PROJECTS FUND TYPES For Fiscal Year F,uded Juue 30, 2000 DEBT SERVICF FUNDS CAPITAL 11ROJEC7 FUNDS Varaince Varainec DudgatAlien Favorable BnndgetAfter Favorable REVEME transfers Acmal UmNvorable transfers Actual Unfavorable Taxc0ssessmeuts S 95,871 $ 138,723 $ 42,952 S $ $ Licenses andpennits 150 339 189 tntergoverumfltal 3,107 3,648 541 500,000 500,000 Charges for services Francs and forfeitures Miscellanaous revenue Invesmrenteanuings 500 43,668 43,068 Total Rovenue $ 99,628 $ 186,278 $ 86,650 $ 500,000 $ 500,000 S l'�XE'ENllI'CLIRBS Ctnrrent: General Govemmcnt $ $ $ $ $ $ Public Safely Public Works 25,004 25,000 Culture aid Recreation Housing Comm. Development Miscellaacous Capitaloulluy 3,000,000 1,004,142 (4,142) Debt Service 204,636 202,921 1,715 Total Expeuditures $ 204,636 S 202,921 $ 1,715 $ 1,025,000 S 3,004,142 $ 20,859 Excess(1)6cieney) of Revenues Over Expenditures Other Financing Sources (Uses): Prom& of geueral Exec asset disposition Proceeds of general long-term debt Operating transfer inn Operating transfers (out) Total Other Finaucinng Sources (Uses) Excess (Deficietncy) of Revenues and Other Sources Over Expenditures and Other Uses Fund Balauces•July 1,1999•as previously reported Restatc€uents Fund Batanccs-,4dy 1,1999•as restatcd Residual equity transl'ets Fuud Balances- Juue :30, 2000 $au uccompaiymg Notes to Ute Financial Stalemai $ 105,008 S (16,643) $ 88,165 $ 2525,000) $ 2,504,142) $ 20,958 $ $ $ $ 2,525,000 S 2,501,769 $ {2:1,231) $ -$ - $ - $ 2,525,000 $ 2,501,769 $ 23,231 $ 105,W8 $ 16,643) $ 88,365 $ $ 2,373) $ 2,373 $ 78,112 $ S 79,112 $ $ 61,469 •8- CITY OF KALISPELL, FLATHEAD COUNTY, MONTANA COMBINING STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN RETAINED EARNINGS ALI, PROPRIETARY FUND TYPES For Fiscal Year Ended Jane 30, 2000 OPERATING EXPENSES Personal services S 1,521,029 S $ PRIMARY COMPONENT REPORTING Supplies PROPRIETARY FUND TYPES GOVERNMENT' UNIT ENTITY 94,259 Purchased services 678,290 TOTALS 1,532,581 TOTALS 1,550,156 ENTERPRISE INTERNAL (MEMORANDUM 23,895 (MEMORANDUM OPERATING REVENUES FUNDS SERVICE ONLY) 415,754 ONLY) Charge for services S 4,269,731 S $ 4,269,731 $ 58,692 S 4,328,423 Hookup fees 308,41.6 1,497,374 308,416 - 308,416 Miscellaneous 2,355 56 2,411 5,382,747 S 2,411 Special assessments 258,538 $ 391,058 $ 258,538 - 255,338 Fines & forfeitures - - 64,202 64,202 Internal services 828,233 828,233 - 828,233 TOTAL, OPERATING REVENUES $ 4,839,040 S 828,289 $ 5,667,329 $ 122,894 S 5,790,223 OPERATING EXPENSES Personal services S 1,521,029 S $ 1,521,029 S 65,669 S 1,586,698 Supplies 85,497 7,445 92,942 1,317 94,259 Purchased services 678,290 854,291 1,532,581 17,575 1,550,156 Building materials 23,895 108,428 S 23,895 161 $ 23,895 Fixed chgs./Admin transfers 397,375 18,379 415,754 6,019 421,773 Loss'bad debt 244,522 244,522 244,522 Depreciation 1,497,374 54,650 1,552,024 5,258 1,557,182 TOTAL, OPERATING EXPENSES $ 4,447,982 S 934,765 $ 5,382,747 S 95,838 S 5,478,585 Operating Income (loss) $ 391,058 $ (1.06,476) S 284,582 $ 27,056 $ 311,638 NON-OPERATING REVENUE(EXPENSE) Interest revenue S 477,126 $ 42,698 $ 519,824 $ 867 S 520,691 Intergovernmental revenue $ 1,175,573 S 65,730 65,730 $ 27,21.7 $ 65,730 Debt service interest (353,57.1) - (353,571) (706) (354,277 Total Non -Operating Revenues (Expenses) $ 123,555 $ 108,428 S 231,983 $ 161 $ 232,144 NET INCOME $ 514,613 S 1,952 S 516,565 $ 27,217 S 543,782 Add depreciation on fixed assets acquired with capital grants S 660,960 $ 12,292 S 673,252 S - $ 673,252 Increase in Retained Earnings $ 1,175,573 S 14,244 $ 1,189,817 $ 27,21.7 $ 1,217,034 Retained earrings - July 1,1999 -as previously reported $ 13,130,230 $ 740,101 S 13,870,331 S 88,767 $ 13,959,098 Restatements/prior period adjustments 4,500 4,500) 35,920) (40,420) Retained Earnings -July 1, 1999 - as restated $ 13,1.25,730 $ 740,101 S 13,865,831 $ 52,847 $ 13,918,678 Retained earnings -June 30, 2000 S 14,301,303 $ 754,345 $ 15,055,648 $ 80,064 $ 15,135,712 See accompanying notes to financial statements -9- CITY OF KALISPELL, FLATHEAD COUNTY, MONTANA COMBINED STATEMENT OF CASH FLOWS ALL PROPRIETARY FUND TYPES June 30, 2000 Cash Flows From Capital and Related Financing Activities Acquisition and Construction of Capital Assets S (588,540) S (31,998) S (620,538) S (1,037) $ TOTALS COMPONENT TOTALS 248,000 248,000 248,000 (Memorarfim0111y) UN1'I' (MenrorxldumOnly) (439,000) ENTERPRISE INTERNAL Primary Proprietary Reporting 65,730 FINDS SERVICE Government $ 1,133,112 S 33,732 $ Entity Cash flows from Operating Acitivies: 530,767 Net Increase in Cash and Cash Equivalents $ 1,343,294 $ 53,274 $ 1,396,568 $ 27,714 $ Cash Received From Custotners $ 3,953,616 $ $ 3,953,616 $ 114,569 S 4,068,185 Cash Received from Assessments 705,308 16,707 705,308 16,707 705,308 Cash Payments to Suppliers for goods & services (1,176,798) (851,389) (2,028,167) (24,268) (2,052,455) Cash Payments to Employees for Services (1,523,343) 3,126 (1,523,343) (64,026) (1,587,369) Cash received from Internal Services Decrease (Increase) in Prepaid Maintenance 828,233 828,233 111 828,233 Cash From Other Operating Revenues 24,411 24,411 8,325 32,730 Net Cash Provided by Operating Activities S 1,983,194 $ 23,156 $ 1,960,038 $ 34,600 ,$ 1,994,638 Cash Flows From Capital and Related Financing Activities Acquisition and Construction of Capital Assets S (588,540) S (31,998) S (620,538) S (1,037) $ (621,575) Board of Investment Loans 248,000 248,000 248,000 Principal Paid on Revenue Bonds, Contracts & leases (439,000) (439,000) (439,000) Interest Paid on Revenue Bonds, Contracts & leases (353,572) (353,572) (706) (354,278) Proceeds from other governments 65,730 65,730 65,730 Net Cash Used for Capital and Related Financing Activities $ 1,133,112 S 33,732 $ 1,099,380 $ 1,743 $ 1,101,123 Cash Flows From Investing Activities Interest on Investments $ 477,127 $ 42,698 S 519,825 S 867 $ 520,692 Advance to other fund net of repayment 6,010 6,010 ((,,010) 284,582 $ Purchase of longterminvastments (1,769) (1,769) (1,769) Redemption of long term investments 11,844 - 11,844 Depreciation 5 11,844 Net Cash Used in Investing Acrivitics $ 493,212 S 42,698 $ 535,910 $ (5,1431 $ 530,767 Net Increase in Cash and Cash Equivalents $ 1,343,294 $ 53,274 $ 1,396,568 $ 27,714 $ 1,424,282 Cash and Cash Equivalents at July 1, 1999 $ 6,891,725 $ 692,933 $ 7,584,658 $ 37,931 $ 7,622,589 Cash and Cash Equivalents at June 30, 2000 $ 9,235,N9 S 746,207 $ 8,981,226 S 65,645 S 9,046,871 Reconciliation of Operating Income to Net Cash provided by operations: Operatinglncome S 391,058 $ (106,476) 5 284,582 $ 27,056 $ 311,638 Adjustments to Reconcile Income to net eash provided by operations; Depreciation 5 1,497,374 S 54,650 S 1,552,024 $ 5,258 $ 1,557,282 Bad Debt Expense 198,489 191,489 198,489 Decrease(increase)inAccounts Receivable (t26,491) (126,491) (601) (127,092) Decrease (Increase) in Assessmnts Receivable 16,707 16,707 16,707 Decrease (Increase) in Inventory 5,243 1,243 5,243 Increase (Decrease) in Accounts Payable 3,126 122 3,248 22 3,270 Decrease (Increase) in Prepaid Maintenance 111 111 Ill Decrease (Increase) in Estimated Liabilities 28,437 28,437 2,265 30,702 Increase (Decrease) in Compensated Absences 2,312 2,312 600 (1,712 Net(ashProvided byOperating Activities $ 1,983,194 S 23,156 $ 1,960,038 $ 34,600 5 1,994,638 See accompanying notes to financial statements -10- CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS If.1NE 30, 2000 1, Summary of Si nifrcant Accountirr Policies The following is a summary of the City of Kalispell`s significant accounting policies: Reporting Entity The City is governed by an elected Mayor and City Council, The City is considered a primary government because it is a general purpose local government. Further, it meets the following criteria: (a) It has a separately elected governing body (b) It is legally separate and (c) It is fiscally urdependent from the State and other local governments. The accompanying general-purpose financial statements include all funds, account groups, agencies, boards, commissions and authorities which meet the criteria for inclusion in the City's financial report, These criteria include financial accountability, appointment of a majority of the secondary government and the financial benefit or burden derived by the primary government from a secondary government. 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, The City appoints the governing body of the Parking Commission, The Parking Conmrission runs a variety of metered and leased parking areas downtown which are owned by the City. They also issue tickets for parking violations inn the parking district downtown. The component unit is reported in a separate column to emphasize it is legally separate from the City. Measurement Focus, Basis of Accounting 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 are used to account for the City's general government activities, Gover7mrental fund types use the flow of current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual. (Le., when they are "measurable and available `) " Measurable" means the amount of the transaction can. be determined and "available" means collectible within the current period or soon enough thereafter to pay liabilities of the current period, The City considers all revenues available if they are collected within 60 days after year-end. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general long- term debt which is recognized when due, and certain compensated absences and claims and judgements which are recognized when the obligations are expected to be liquidated with expendable available financial resources. CITY OF KALISPELL NOTES TO FINANCIAL, STATEMENTS LUNE 3012000 1. Summary of Si nificant Accountin Policies-cou't. Real and personal property taxes (excluding motor vehicle taxes), special assessments, charges for current services, and interest earnings are susceptible to accrual. Other receipts and taxes become measurable and available when cash is received by the City and are recognized as revenue at that time. 'lane 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. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met, Expenditure driven grants are recognized as revenue when the qualifying expenditures Have been incurred and all other grant requirements have been met. General Fund is the City's primary operating fund. It accounts for all financial resources except those required to be accounted for in other funds. Special Revenue Funds used to account for the revenue sources that are legally restricted to expenditures for specific purposes. Capital Project Funds used to account for financial resources for the acquisition or constructiou of capital facilities (other than those financed by proprietary funds). Debt Service Funds used to account for the accumulation, of resources for, and payment of, general long terra debt principal, interest and related costs. PROPRIETARY FUNDS are accounted for on the flow of economic resources measurement focus and use the accrual. basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. The City has elected not to apply FASB pronouncements issued after November 30, 1989. Enterprise Funds used to account for operations (a) that are financed and operated in a manner similar to private business enterprises . where the intent of the governing body is that costs 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 account for the financing of goods or services provided by one departrrrent to other City departments on a cost reimbursement basis. 12 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS J1JNE 30, 2000 L Summary of Significant Accounting Policies - con't, FIDUCIARY FUNDS account for assets held by the government as an agent on behalf of others, Trust and A enev Funds used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments and/or other funds, These may include (a) expendable trust funds, (b) non expendable trust funds, (c) pension trust funds and (d) agency funds, FIXED ASSETS AND LONG-TERM LIABILITIES General Fixed Assets Account Grou used to account for the fixed assets of the City which are not accounted for in proprietary funds or in trust funds. General Long -Term Debt Account Grou used to account for all long term debt of the City except that accounted for in the proprietary or trust funds. Bud ets and Budgetary Accounting An operating budget is ado to 4,:e al year for the General Fund, Special Revenue Funds, Debt Service Funds, Capital Projects Funds, Enterprise Funds and Internal Service Fundsi, which is a basis of accounting not iu accordance with generally accepted accounting principles The final budget is legally enacted by the City Council, on the second Monday in August after holding public hearings as required by State statutes. Budget appropriation transfers may be made between the general classifications of salaries and wages, maintenance and operation and capital outlay, Reported budget amounts represent the originally adopted budget as amended by resolution of the City Council. It is management's responsibility to see that the budget is followed to the budgetary line item, The City Council may amend a final budget when shortfalls in budgeted revenues require reductions in approved appropriations to avert deficit spending; when savings result from unanticipated adjustments in projected expenditures; when unanticipated state or federal monies are received; or when a public emergency occurs which could not have been foreseen at the time of adoption. The procedure to amend the budget in total can be made only after the City prepares a resolution, notice is published of a public hearing, and a public hearing is held in accordance with state law. Encumbrances All appropriations lapse at the end of fiscal year, The City has chosen not to use encumbrance accounting. Receivables and Pa ables Advances between funds are offset by a fund balance reserve account in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources, CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 I, Summary of Significant Accounting Policies - coni, 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 extend asset lives are not capitalized. Improvements are capitalized and, in the proprietary funds, depreciated over the remaining useful lives of the related assets. Ile City records contributions to enterprise from City, federal and state sources for property acquisitions as contributed capital. 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 or infrastructure fixed assets are excluded from the general faxed assets account group. Public domain or infra -structure assets include roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, lighting systems and similar assets that are immovable and of value only to the governmental 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 has been provided for the property, plant and equipment of the proprietary funds using the straight line method. The useful lives of these assets have been estimated as follows: Buildings 20-50 years Improvements Other than buildings 10-50 years Machinery, vehicles and equipment 5-20 years Water and Sewer limes, pump stations 10-50 years Taxes and assessments An allowance for uncollectible accounts was not maintained for real and personal property taxes and special assessments. The direct write-off method is used for these accounts. Enterprise Accounts Receivable A reserve for estimated uncollectible accounts receivable is maintained for the Water Fund, Sewer Fund and the Ambulance Fund. The reserve balances are as follows for June 30, 2004: Water $ 4,845 Sewer $ 10,951. Ambulance $131,699 14 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS NNE 30, 2000 I. Summary of Significant Accounting Policies - con't, Inventories and Prepaid Items Inventories for materials and. supplies for governmental fund types are expended at the time of purchase. Enterprise Fund Inventory of materials and supplies are valued at cost. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items. Vacation and Sick heave It is the City's policy and state law to permit employees to accumulate a limited amount of earned but unused vacation benefits, which will be paid to employees upon separation from City service. Employees are allowed to accumulate and carry over a maximum of two times their annual accumulation of vacation, but no more than 90 days into the new calendar year. There is no restriction on the amount of sick leave that may be accumulated. Upon separation, employees are paid 100 percent of accumulated vacation and 25 percent of accumulated sick leave. The liability associated with governmental fund -type employees is reported in the general long-term debt account group, while the liability associated with proprietary fund -type employees is recorded in the respective fund. Deferred Revenues Deferred revenue results when asset recognition criteria have been met and when revenue recognition criteria have not been met. These pertain to the net uncollected property tax and other receivables and are classified as Deferred Revenues on the combined balance sheet. Lm.: 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. 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. Fund E uif Reservations of fund balance represent amounts that are not appropriable or are legally segregated for a specific purpose. Reservations of retained earnings are limited to outside third -party restrictions. The proprietary funds contributed capital represents equity acquired through capital grants and capital contributions from developers, customers or other funds or governments, CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 1. Summar of Significant Accounting Policies - con't. 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, entitlement, and shared revenues is transferred to the related contribution account instead of retained earnings. Enterprise Fund resources received from grants, entitlement or shared revenues which may be used for operations 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 band performing the services. Transactions which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of the expenditures in the fund that is reimbursed. Advances between funds are accounted for in the appropriate Interfund receivable and payable accounts. Cash and Cash Equivalents The City considers for the purposes of the statement of cash flows, all investments of the proprietary fund types, except for investments in sidewalk and curb warrants to be cash equivalents. Investments are carried at cost, which approximates fair value. 16 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 L Summary of Significant Accounting Policies - con't. Total Columns on Combined Statements Total columns on the Combined Statements are captioned Memorandum Only to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation, Interfund eliminations have not been made in the aggregation of this data. 2. Property Taxes The City's real estate property tax is levied on the assessed value listed as of January I for all real property located in the City. Assessed values are established by the State Department of Revenue based on market value. 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. The City is permitted by State statutes to levy taxes up to certain fixed limits for various purposes. The taxes levied by the City for the year ended lune 30, 2000 were within legal limits. The tax levies were based upon a taxable value of $ 21,338,655. Taxes are due in two equal installments on November 30 and May 31 of each fiscal year. The tax billings are considered past due after the due dates are subject to penalty and interest charges. 3. Deficit Fund Balances The following bunds had deficit fund balances at June 30, 2000; Special Revenue Funds: Airport $ 576 Airport Tif District 50,532 Istea 1,783 Debt Service Funds: 1993 Sidewalk & Curb $ 383 1995 Sidewalk & Curb $ 559 1996 Sidewalk & Curb $ 262 1997 Sidewalk & Curb $ 10 SID 337 $ 5,155 Ca ital�Pra'ectt Funds: 4290 Sidewalk Construction $ 2,373 The deficits in the Debt Service funds were caused by a shortfall in anticipated revenue and will be eliminated as delinquent assessments are collected. Sidewalk construction will be reimbursed by homeowner or sale of warrants. Airport Tif district anticipates $98,000 revenue from developer which is due but contested. 17 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS NNE 30, 2000 4. R*et Variances Significant favorable budget to actual variances existed in the General Fund due to increased gaming revenue. An unfavorable variance in intergovernmental revenue in special revenue funds related to the timing of the ISTEA grant. Budget was carried forward to the next fiscal year. Unfavorable revenue variance in Special Revenue fund for Airport Tif relates to a developer agreement —revenue classified as miscellaneous. Favorable variances exist in the Tax Increment Capital Improvements and Public Works budgets in the Downtown Tax Increment Fund due to projects yet to be completed. ISTEA funds were unexpended and carried over causing a positive variance, classified as capital outlay. S. Cash in Treasur (Investments Cash in Treasury may include cash and cash items; demand, time, savings and fiscal agent deposits; investments in the State Short-term Investment Pool (S11R); direct obligations of the United States Government; and repurchase agreements. The composition of Cash in Treasury on lune 30, 2000, was as follows: Deposits -at year end, the carrying amount of the City's deposits was $183,504 and the bank balance was $189,247. 'Mese deposits include demand and time deposits. Df the bank balances, all were covered by Federal Depository Insurance or was covered by securities held by the pledging financial institutions trust department or agent in the City's name. The $ 65,495 belonging to the Parking Commission, a component unit of the City, was completely 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 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%, State statutes do not specify in whose custody or name the collateral is to be held. The amount of collateral held for the City deposits at lune 30, exceeded the amount required by State statutes. The City held no investments subject to risk categorization as of lune 30, 2000. 18 Prim�o_v't, Commmeni Re ortin Enti Cash on hand $ 56,815 $ 150 $ 56,%5 Cash in Banks: demand deposits 133,557 44,878 178,435 time deposits 49,947 20,617 70,564 Bidders bonds 1,000 - 1,000 Bonds/Warrants 41,833 - 41,833 STIP $13,690,714 - 13 690 714 Total $13,973,86665,645 $14,039,511 Deposits -at year end, the carrying amount of the City's deposits was $183,504 and the bank balance was $189,247. 'Mese deposits include demand and time deposits. Df the bank balances, all were covered by Federal Depository Insurance or was covered by securities held by the pledging financial institutions trust department or agent in the City's name. The $ 65,495 belonging to the Parking Commission, a component unit of the City, was completely 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 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%, State statutes do not specify in whose custody or name the collateral is to be held. The amount of collateral held for the City deposits at lune 30, exceeded the amount required by State statutes. The City held no investments subject to risk categorization as of lune 30, 2000. 18 CITY OF KA.LISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 5. Cash in Treasurylinvestments- can't. Governmental Accounting Standards Board (GASB) Technical Bulletin No. 94-1 requires governmental entities participating in an investment pool to disclose certain types of securities held in the pool. As noted above the City invests in Short -Term Investment Pool managed by the State of Montana. This pool contains two types of investments required to be disclosed, which are Asset -hacked Securities and Variable Rate (Floating Bate) securities. Amounts (unaudited) invested by STIP in each type as of lune 30, 2000, were as follows: Amounts invested by the City in STIP may be redeemed at any date at the carrying value on that date. According to GASB Statement No, 31, Accounting and Financial Reporting for Certain Investments and External Investment Pools, STIP is considered and External investment pool. STIP is also classified as a "2a7 -like" pool. A 2a7 -like pool is an external investment pool that is not registered with the Securities and Exchange Commission (SEC) as an investment company, but has a policy that it will, and does, operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. If certain conditions are met, 2a7 -like pools are allowed to use amortized cost rather than fair value to report net assets to compute unit values. The Board of Investments has adopted a policy to treat STIP as a 2a7 -like pool. Audited financial statements for the State of Montana's Board of Investments are available at 555 Fuller Ave, in Helena, Mt. 19 Cates % Asset-backed 381,789,007 28.85 Variable Rate 61,925,774 4.68 Other Securities 879.562,526 66.47 Total 1,323,277,307 109.00 Amounts invested by the City in STIP may be redeemed at any date at the carrying value on that date. According to GASB Statement No, 31, Accounting and Financial Reporting for Certain Investments and External Investment Pools, STIP is considered and External investment pool. STIP is also classified as a "2a7 -like" pool. A 2a7 -like pool is an external investment pool that is not registered with the Securities and Exchange Commission (SEC) as an investment company, but has a policy that it will, and does, operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. If certain conditions are met, 2a7 -like pools are allowed to use amortized cost rather than fair value to report net assets to compute unit values. The Board of Investments has adopted a policy to treat STIP as a 2a7 -like pool. Audited financial statements for the State of Montana's Board of Investments are available at 555 Fuller Ave, in Helena, Mt. 19 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 6. Property, Plant and Equipment A summary of changes in general fixed assets follows: The City Council approved a new capitalization policy for fixed assets, Resolution #4452. The policy establishes a minimum cost of $2,000.00 and an expected life of 5 years. Additions do not include capital outlay expenditures for public domain or infrastructure asset acquisitions. The new policy was implemented in fiscal 1999, Financial Accounting Standards Board (FASB) Statement No. 34 - Capitalization of interest - requires that interest expenditures incurred during construction of assets be capitalized. During fiscal 2000, no interest costs were capitalized. A summary of proprietary fund type property, plant, and equipment at June 30, 2000 follows: July 1. 1999 Additions Deletions June 30, Land $ 1,604,686 $ 270,430 $ (101,683) $ 1,773,433 :Buildings 7,166,034 2,126,798 1,619,431 9,292,832 Improvements other than buildings 3,257,141 219,989 3,477,1.30 Machinery & equipment 2,918,815 578 Q9g14S 263 3,351,651 TOTAL$1.4__,946 676 $ 319,55„316 $ 246946 $17,895 046 The City Council approved a new capitalization policy for fixed assets, Resolution #4452. The policy establishes a minimum cost of $2,000.00 and an expected life of 5 years. Additions do not include capital outlay expenditures for public domain or infrastructure asset acquisitions. The new policy was implemented in fiscal 1999, Financial Accounting Standards Board (FASB) Statement No. 34 - Capitalization of interest - requires that interest expenditures incurred during construction of assets be capitalized. During fiscal 2000, no interest costs were capitalized. A summary of proprietary fund type property, plant, and equipment at June 30, 2000 follows: 20 Enterprise Internal Component unit Funds Service Parkin Cornet. Hand $ 248,063 Machinery & equipment 1,619,431 $ 210,643 $ 37,107 Construction in progress 220,134 Source of supply 347,709 Pumping plant 1,431,656 Treatment plant 14,579,942 Transmission & distribution 17,132,155 General plarrubuildings 1,536,196 Storm sewer system 4,107,913 Total $$ 41� 210,643 371.07 Less Accum. Depreciation (15,406,834) (145 063 (24,956) Net 25 816 36565.580 12151. 20 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 7. Long-term Debt The following is a summary of long term debt transactions of the City for the fiscal year ended June 30, 2000, (1) Long-term debt account group (2) Reported in enterprise fund (3) Reported in internal service fund (4) Reported on Proprietary Component Unit Bonded debt: Bonded. Debt at June 30, 2000 are comprised of the following individual issues: 2. Revenue Bonds: Revenue bonds are directly related to and expected to be paid from the Proprietary Fund. Balance Interest Tenn of Balance Bonds June 30, 1999 Additions Reductions June,..e 30, 2000 (1) G.O. Bonds $ 55,000 - $ (55,000) $ 0 (1)(2) Revenue Bonds 3,785,000 2,645,000 (270,000) 600,000 (2) SRF Loan-WWI"P 2,952,000 - (169,000) 2,783,000 (1) Special Assessments 28800 3,456 (28,632) 262,904 (1) Urban Renewal Bonds 655,000 1991 WWTP-refunding (200,000) 455,000 (1) Contract Debt/loans 255,024 339,267 (11,983) 582,306 (1, 3, 4) Compensated Absences 937 570 34 093 (2,924) 968,739 Total $ 8,927,674 $ 3,021,816 $ ML53911,211,951 6.21% (1) Long-term debt account group (2) Reported in enterprise fund (3) Reported in internal service fund (4) Reported on Proprietary Component Unit Bonded debt: Bonded. Debt at June 30, 2000 are comprised of the following individual issues: 2. Revenue Bonds: Revenue bonds are directly related to and expected to be paid from the Proprietary Fund. 21 Issue Interest Tenn of Final Bonds Outstanding Annual Purpose Date Rate Bonds Maturi issued June 30, 2000 P st'))�i�=;; ��< , 12199 varies 3yrs 2002 $ 145,000 $ 145,000 varies 1996 Water Bons "°" 6196 5,5% 15yrs 2011 $1,06000 $ 855,000 varies 1991 WWTP-refunding 4191 7.18% 20yrs 2011 $2,815,000 $1,975,000 varies 1997 Sewer -refunding 5197 5,08% 9yrs 2006 $ 925,000 $ 685,000 varies 6.21% 10yrs 2010 $2,500,000 $2,500,000 000 $339,350 Total Revenue Bonds` 7 4450006160 000 21 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 7.1on -term Debt -can't The Board of Investments loan for the Stream Project has interest rates dependent on the creation of jobs. Stream International, Inc. is a computer Support center anticipating creating over 500 new jobs for the Kalispell area, The Loan of $2,500,000 to the City is for the purchase of 60,000 sq, ft of the old Gateway West Mall. The area is being rehabilitated. as part of a Westside Urban Renewal District (TIF) project T'he Stream organization is leasing the property bacls. Extensive enhancements were provided to entice this company to come to Kalispell. The County Port Authority has also committed $125,000 per year toward the debt service. This loan has a first lien on the Tax Increment of the District. The Port will be managing the physical property. 3. Tax Increment Urban Renewal Bonds: In December, 1985, the City issued $2,100,000 in Tax Increment Urban Renewal Bonds pursuant to Title 7, Chapter 15, Parts 42 and 43 MA 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 group as required by generally accepted accounting principles. At lune 30, 2000 there was $2,092,314 available in the Tax Increment Special Revenue Fund to service these bonds. Issue Interest Term of Final Bonds Outstanding Annual Punrase Date Rate BondsMaturity Issued. June 30, 2000 Wit, Tax Increment 12185 6.25-9.5% 16 yrs 7101102 W00,000 J455 000 varies State Revolvingfund 1xx Nove111bei 1991, the City entered into an agreement with the State Revolving Fund (SRF) to borrow funds to partially finance the construction of a wastewater treatment plant facility. This obligation is to be repaid from the operating income of the Sewer Fund. Interest Rate SRF Loan 4% Amount Term Borrowed 20 yrs. LaL3_,425 425 22 Outstanding June 30, 2000 2 783 000 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 7. Long-term Debt-con't 4, Special Assessment Bonds: Special assessment bonds are secured by a lien on the assessed properties. The primary source of repayment is the assessments levied against the benefiting properties. However, the City is liable, to an extent, for repayment of these special assessment bonds. The City is authorized by State law to establish and has established a revolving fund to ensure the payment of debt service on the bonds in the event that assessed property owners default. Loans/Contracted Debt: Origination Interest Due Principal Outstanding Purpose Date Rate Term Date Amount June 30, 2000 General Iona Term Debt Grouo of Accounts: Board of !lousing 3/01195 Issue Interest Term of Final Bonds Outstanding Annual Purpose Date Rate Bonds Maturi Issued lune 30, 2000 P nat, SID 337 -sewer 12101/86 7,74% 15 yrs. 2002 $ 110,000 $ 20,000 varies SID 341 -sewer 09191195 6.06% 15 yrs, 2011 100,000 65,000 varies SID 342 -sewer 11101195 6.34% 15 yrs, 2011 209,000 135,000 varies 1992 Walk & Curb 01102193 7.0% 8 yrs. 2001 9,103 3,000 varies 1993 Walk & Curb 01104194 6,0% 8 yrs. 2002 5,112 730 varies 1994 Walk & Curb 12131/86 8.5% 8 yrs. 2093 28,513 10,500 varies 1995 Walk & Curb OIJ02/96 8.5% 8 yrs. 2004 22,823 11,408 varies 1996 Walk & Curb 01102197 8.5% 8 yrs. 2005 12,148 7,591 varies 1997 Walk & Curb 10101198 8.0% 8 yrs. 2006 8,572 6,430 varies 1998 Walk & Curb 01101199 7.75% 8 yrs. 2007 1,687 1,475 varies 1999 Walk & Curb 01/01/00 8.50% 8 yrs 2008 1,769 1,769 varies Total Special Assessment Bonds $ 508.727 262 903 Special assessment bonds are secured by a lien on the assessed properties. The primary source of repayment is the assessments levied against the benefiting properties. However, the City is liable, to an extent, for repayment of these special assessment bonds. The City is authorized by State law to establish and has established a revolving fund to ensure the payment of debt service on the bonds in the event that assessed property owners default. Loans/Contracted Debt: Origination Interest Due Principal Outstanding Purpose Date Rate Term Date Amount June 30, 2000 General Iona Term Debt Grouo of Accounts: Board of !lousing 3/01195 6% 30yr 2101125 $ 271,000 $250,710 The Board of Housing loan is paid from the proceeds of the rents on the Courtyard Apartments per the agreement with NW Montana Human Resources. Board of Investment loan 311911999 5.6% 3 yrs 2115/2002 $ 26,282 $ 18,613 Snow blower Board of Investment loan 212512000 5.6% 7 yrs 211512007 $ 122,382 $ 122,382 Road Grader Board of Investment loan 211512000 5.6% 5 yrs 2/1512005 $ 87,603 $ 87,603 Fire Truck Enterprise Funds: 23 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 Board of Investment loan 3/1012000 varies 7yrs 2/1512007 $1031000 103,000 Loader Total Loans S07 267582 308 7. Long-term Debt -can't. Revenue Bond Requirements Si niheant ProViSiODS of the 1996 Water System Revenue Bonds are as follows. Debt Service Account Monthly an amount equal to not less than 116 of the interest due within the next six months and 1112 of the principal to become due within the next twelve months shall be credited to the debt service account, Reserve Account The City shall keep in the reserve account an amount equal to the lesser of 10% of the original principal or the maximum amount of principal and interest requirements. Pro e Insurance 'The City will cause all buildings, properties, fixtures, and equipment to be kept insured in amounts that are ordinarily carried. Liability Insurance The City will carry insurance against liability of the City and its employees. Rates and Char es Net revenues will be at least equal to 125% of the maximum principal and interest requirements for all future fiscal years. The City complied with the above revenue bond requirements. 24 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 7. I ooq-term Debt -cont. Significant provisions 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. The City complied with this provision. 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. The City complied with this provision. 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, or operation, maintenance and current repair of the system and its facilities, and shall include administrative expenses of the City relating solely to the system, premiums for insurance on the properties, labor and the cost of materials and supplies used for current operation and for maintenance, and charges for the accumulation of appropriate reserve for current expenses which are not recurrent monthly but may reasonably be expected to be incurred in accordance with sound accounting practices. Such expenses shall not include any allowance for depreciation or renewals or replacements of capital assets of the system and shall not include any portion of the salaries 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. The City complied with this provision. 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. 25 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 7. Lon -ted rm debt -coni. 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 of the 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 die 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 the 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: 5,978 Amount of cash on hand in each account of the Sewer System at the end of the fiscal year: Unrestricted Cash $ 975,843 Sewer Operating Reserve 106,500 Replacement 1,094,271 Sewer Capital Improvement 1,064,973 Replacement and Depreciation 41,934 Replacement and Depreciation — Evergreen 1,447,521 Storm Maintenance 650,919 Sewer Sinking and Interest 918 Bond Reserve 686,437 Total JL069,316 26 CITY OF KALISPELL NOTES TO FINANCIAL, STATEMENTS JUNE 30, 2000 7, Lou -term Debt-con'ta S ule of Insurance Policies lune 30, 2000 y ana Municipal Insurance Authority z Videlity bond coverage has a $5,000,000 limit for employee and computer fraud. The fidelity bond also covers messengers with a $1,000,000 y 'limit, The bond coverage includes a $5,000 deductible. Expires July 1, 2000. Property Insurance. Blanket building policy with $25,000,000 limit and a $2,500 deductible per event. Boiler and machinery policy witlr $50,000,000 and a $2,000 deductible. Expires July 1, 2000. 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 July 1, 2000. 27 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS June 30, 2000 SEWERFUND SCHEDULE OF ASSETS, LIABILITIES, AND FUND EQUITY June 30, 2000 ASSETS Cash/investments Taxeslassessments receivable Accounts receivables Due from County Fixed assets (Net of accumulated depreciation) TOTAL ASSETS LIABILITIES AND FUND EQUITY Liabilities; Short-term payables Long-term liabilities Total Liabilities Fund Equity: Contributed capital Retained earnings: Reserved Unreserved Total Fund Equity TOTAL LIABILITIES AND FUND EQUITY M $ 6,069,316 26,222 159,403 32,877 17,742,861 4,030,729 $ 179,326 5,561,974 6,741,300 10,165,681 5,137,348 2,986,400 18,19,429 $ 24,030,729 CITY OF KALISPELL, MONTANA NOTE TO THE FINANCIAL STATEMENTS June 30, 2000 SEWER FUND SCHEDULE OF REVENUES, EXPENSES AND CHANGES IN RETAINED EARNINGS For the fiscal year ended June 30, 2000 Operating Revenues: Charges for services $ 2,405,410 Special assessments 255,021 Total Operating Revenues 2,660,431 Operation Expenses: Personal services 557,179 Supplies 38,830 Purchased services 430,156 Fixed charges 200,274 Building materials 4,509 Losses/bad debt expenses 2,106 Depreciation 1,145,436 Total Operating Expenses _ 2,378,490 Operating Income 281,941 Non -Operating Revenues (Expenses): Interest 359,789 Debt service interest expense (303,187) Total Non -Operating Revenues (Expenses) 56,602 Net Income 338,543 Add depreciation on fixed assets acquired by contributions 563,671 Increase in Retained Earnings 902,214 Retained Earnings - July 1, 1999 7,224,534 Restatements (3,000) Retained Earnings - June 30, 2000 $ 8123 748 .2gµ CITY OF KALISPI L NOTES TO FINANCIAL STATEMENTS June 30, 2000 SEWER FUND - STATEMENT OF CASH FLOWS Fiscal Year Ended June 30, 2000 Cash flows .from Operating Activities: S 281,941 Cash received from customers $ 2,398,066 Cash received from assessments 257,014 Cash payments to suppliers (677,840) Cash payments to employees (562,820) Net cash provided by operating activities 1,414,420 Cash flows from Capital and related financing activites: (7,344) Acquisition and construction of capital assets (I 97,341) Hoard of Investment loan proceeds 68,667 Principal paid on revenue bonds and contracts (384,000) Interest paid on revenue bonds (303,188) Net cash used for capital and related financing activities (815,862) Cash flows from investing activities: Interest on Investments 359,790 Purchase of Sidewalk and Curb warrants (1,769) Proceeds of redemption of S & C Warrants 11,844 Net cash used in investing activities 369,865 Net increase in cash and cash equivalents 968,423 Cash and cash equivalents at beginning of year 5,058,959 Cash and cash equivalents at end of year S 6,027,382 Reconciliation of operating income to net cash provided by operating activites: Operating Income S 281,941 Adjustments to reconcile operating income to net cash provided by operating acitivities: Depreciation $ 1,145,436 Bad debt expense 2,106 Change in assets and liabilities: Increase in accounts receivable (7,344) Decrease in assessments receivable 1,993 Decrease in accounts payable (4,071) Decrease in compensated absences payable (5,641) 1,132,479 Net cash provided by operating activities $ 1,414,420 Non-cash transactions: Assets were contributed by developers of $484,267 and $59,092 from Tax Increment Districts. -30- CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 7, Long-term Debt -cont, Si niflcant rovisions of Series 2000 Westside Urban Renewal Tax Increment .Bond Deserve Account The City shall keep in the reserve account an amount equal to the maximum amount of principal and interest due on all outstanding bonds of the Westside Tax Increment District in the then current or any future fiscal year. OlS Bond Max Principal and Debt Due in any future fiscal year $339,350 City's Reserve $ 0 The City is not in compliance with the above requirement. Pled ed Revenues The City shall generate revenues from: l) interest repayment of a loan to Steam International, 2) user fee equal to Stream's Montana corporation license tax, 3) revenues generated from the Westside Tax Increment District, and 4) $125,000 from Flathead County Economic Development Authority levy that will be sufficient to pay Che principal thereof and interest thereon when due, During fiscal year 2000, the total bond payments due equaled $68,606. The Port Authority contributed $25,384. Westside Tax Increment District generated $239,157. The City is in compliance with the above requirement. SOLID WASTE REVENUE BOND REQUIREMENTS Significant provisions of the 1999 Solid Waste System Revenue Bonds are as follows, Debt Service Account Monthly an amount equal to not less than 116 of the interest due within the next six months and 1112 of the principal to become due within the next twelve months shall be credited to the debt service account. Total Required $42,609 City's Reserve $ 0 CITY OF KALISI EII NOTES TO FINANCIAL STATEMENTS NNE 30, 2000 The City is not in compliance with the above provision. 7, Lon -terms Debt -cont, Reserve Account The City shall keep in the reserve account an amount equal to the lesser of 10% of the original principal or the maximum amount of principal and interest requirements. Total Required Reserve $14,5000 City's Reserve $ 0 The City is not in compliance with the above provision. Rates and Charles Net revenues will be at least equal to 125% of the maximum principal and interest requirements for all future fiscal years. 125% of Maximum Debt $68,264 Net Revenues $67,299 The City is not in compliance with the above provision. Com eusated Absences Pa able Compensated absences payable, which represent vacation, sick leave and compensatory time earned by employees which is payable upon termination, were as follows. Enterprise Funds General Long Term Debt Group of Accounts $146,183 Parking Commission $ 1,222 $ 818,581 Total $968 739 32 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 7. Lan -term petit -can't, Requirements to amortize debt The annual requirements to amortize all long-term debt outstanding, except compensated absences payable, as of lune 30,1999, including interest payments are as follows: 8, State -Wide Retirement Plans 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 $5,201,281 for FY00, of which $4,499,736 is covered by PERS, MPORS, or FURS. Component Unit payroll was $45,094 for the Parking Commission. 33 Special Urban Fiscal Revenue Assessment Contracted Renewal IF Year Bands Bonds Debt Bonds O Totals 2001 866,966 591090 90,157 258,225 285,580 1,560,018 2002 864,140 53,940 87,404 282,800 284,480 1,572,764 2003 861,499 40,489 78,137 285,120 1,265,245 2004 842,041 40,170 78,127 285,440 1,245,778 2005 846,985 35,458 77,983 285,440 1,245,866 2006-2010 3,909,807 103,541 174,339 1,424,640 5,61.2,327 2011-2015 373,825 97,485 1,814,598 2,285,908 2016-2020 97,485 - 97,485 2021-2025 9 4L5 - 97,485 Total $8 5�3 332,688 8878 6Q2 L541025 14 665 29814,982 876 Total Principal $6,160,000 $ 262,904 $582,308 $ 455,000 $ 2,783,000 $10,243,212 Total Interest , 2 405 26369 784296 294 86,025 1,882 298 4,739,664 Total $8,565,263 JL2,688 L1602 541025$4,665,298 U4182876 8, State -Wide Retirement Plans 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 $5,201,281 for FY00, of which $4,499,736 is covered by PERS, MPORS, or FURS. Component Unit payroll was $45,094 for the Parking Commission. 33 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 3012000 S. State -Wide Retirement Plans- cont, 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, 2000, were: PERS MPORS FURS Employee 6.9% 11% 9.5%-10.7% Employer 6.8% 14,41% 14.36% 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. 0. Box 200131, Helena, Mt.58620-0131 or by calling 1.406-444-3154, The City's contributions for the years ending June 30, 1998, 1999, and 2000, as listed below, were equal to the required contributions for each year. PERS MPORS FURS Component unit PENS 1998 $158,377 $ 135,930 $112,195 $ 3,990 1999 $164,757 $ 141,716 $113,580 $ 2,514 2000 $183,961 $ 153,004 $ 87,523 $ 3,066 9, 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, 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 n additional costs to the insurance program, There are no other post -employment benefits provided by the City. 34 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS NNE 30, 2000 10. Amounts due to and from other Funds/Advances Due from County: for May tax collections$16 Amounts due to and from, other funds consist of the following: General Fund Advance from General Fund4� 0,000 Advance to Airport TIF Advance from UDAG $7000 Advance to Westside TIF Due from: Ca ital Projects: Health Insurance Fund Due from: Sidewalk Construction JZ,373 Due to: General Fund 4188 Stream Construction5$ 00,000 Due to: UDAG Special Revenue (note: Stream Construction interim financing .-CDBG grant due) Due From: Debt Service Due to: SID Revolving Fund 1992 S&C Fund 83 1993 S&C Fund 544 1994 SK Fund 63 1995 S&C Fund 586 1996 S&C Fund 305 1997 SK Fund 75 SID 337 6,664 SID & S&C total8 320 11. Amounts due from other Governments/Entities Due from County: for May tax collections$16 201 General Fund 219,414 Comprehensive Insurance 30,239 Retirement Fund 42,903 Health Insurance Fund 55,132 Tax Increment Fund 276,523 Decorative Lights 707 Street Maint, Fund 30,716 35 Tax Increment Airport Tax Increment Westside Light Maint, Fund SID Funds G.O. Bond Fund Solid Waste Storm Sewer Maialt. 40 000 $75,000 S-8-,320 11,289 59,041 5,279 4,471 4,972 42,638 32,877 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS OE 30, 2000 11. Amounts due from other GovernmentsfEntities --con't. Due from other Governments. L20,144 Due from other Entities: U2.213 County -Drug Enforcement Grant 10,568 Due from other funding -Samaritan 16,547 State- for ISTEA 6,929 Due from Pacific Power 5,666 State -- Gas Tax 24,794 Justice -Resource Officer Grant 12,134 Justice -Universal Grant 12,500 MDOT-Law Enforcement Grant 3,219 CDBG 500,000 12. Restricted CashInvestments The following Restricted Cash/Investments were held as of June 30, 2000: Special Revenue Funds E=rise se Funds Community Development -Rehab Int. Subsidy $ 2,464 Water - Sinking & Interest $ 2,800 Community Development - Courtyard Reserve 21,496 - Bond. Reserve 106,000 Tax Increment 2180 - Bond Reserve 123,046 - Replacement 780,837 'fax Increment 2188- Mall Bldg Reserve 5,000Sewer - Operating Reserve 106,500 Special Revenue Funds Total1�„ 52,006 - Replacement 2,541,792 - Sinking & Interest 918 Debt Service Funds Contingency 686,437 SID 341 $ 5,000 Capital Improvement 1,106,907 SID 342 L0 450 Storer Sewer 694,794 Debt Service Total 15 4S0 Ambulance Replacement -designation 103,430 Garbage - Replacement -designation 234,055 Enterprise Total hl 64 470 36 Agency Funds Bidders Bonds 1000 Internal Service Fund Data Processing EL3.39 replacement designation CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS NNE 30, 2000 13, T'und E uit Reserves and/or Designations of the City at June 30, 2000 consisted of; General - advances $ 40,000 Special Revenue Funds, Reserve far Replacement Tax Increment - Reserve for Bond Contingency $ 123,046 Tax Increment - Mall Bldg Reserve 5,000 Community Development - Interest Subsidy 2,464 Community Development - Courtyard Reserve 21,496 UDAG - advances 70,000 Special Revenue Funds Total $ 222,006 Debt Service: Reserve for Bond Contingency $ 61,469 Internal Service: Designated for Replacement LLI339 14. Clean es in Contributed Ca ital A schedule of changes in contributed capital is presented below; WATER Contributed Capital 7!1/99 $3,318,763 Add: Contributions 72,528 Depreciation on assets acquired by grants/contributions J__27,289 Total Contributed Capital 6/3012000 $ 3 2 94 002 /ante tiseFun& Water Reserve for Revenue Bond $ 106,000 Reserve for Sinking & Interest 2,800 Reserve far Replacement 780,837 Reserve for Inventory supplies 102,549 Sewer Reserve for Operations 106,500 Reserve for Replacement -Sanitary 1,094,271 Reserve for Revenue Bond 686,437 Reserve for Sinking & Interest 918 Reserve for Capital ImprovfWWTP 1,106,907 Reserve for Replacement/WWTP 1,447,521 Reserve for Storm Sewer 694,794 Ambulance - Designated for Replacement 103,430 Garbage - Designated for Replacement 234 055 Enterprise Funds Total 6.467 019 SEWER DATA PROC, TOTAL $10,185,992 $12,836 $13,517,591 543,360 615,888 563 6712 292673 252 $ 10,]65 681 S 544 8134,60, 227 15. Prior Period Ad'ustments During the current fiscal year, adjustments relating to prior year transactions were made to the following funds: Fund Amount Reason for Adju�rent Water ($1,500) correct hookup revenue due to Village Greens Sewer Sewer Fund ($3,000) correct hookup revenue due to Village Greens Sewer Parking Commission ($35,920) uncollectable accounts receivable (Component Unh) 37 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS OE 30, 2000 Courtyard Maintenance $5,667 to correct prior year balance sheet error (Special Revenue Fund) 16. Residual Equiq Transfers Residual Equity transfers are made to transfer the remaining equity balance of a discontinued fund to another fund, bund makinu Transfer Fund receiving Transfer Amount Fund t es and total net transfers; SID Revolving SID Revolving 110 (1) Debt Service 0 1990 S & C SID Revolving (327) 1991 S & C SID Revolving 217 An Equity transfer of $522,435 & $12,348 from the Tax Increment Special Revenue funds is recorded in the Enterprise funds as Contributed capital for the assets constructed with Urban Renewal funds. 17. Segment Informatiou for Enterprise Funds The City maintains four Enterprise Funds which provide water, sewer, garbage and ambulance services, Segment information for 6130199 was as follows: Operating Revenue Depreciation expense Operating Income (foss) Net Income (loss) Current Capital: Contributions Plant, Property & Equip; Additions Deletions Net Working Capital Total Assets Long-term Liabilities: Payable from Operating Revenues Total Equity WATER SEWER AMBULANCE GARBAGE TOTAL 1,084,322 2,660,431 660,707 433,580 4,839,040 249,825 1,145,436 34,378 67,735 1,497,374 141,721 281,941 (27,836) (4,768) 391,058 17803 338,544 (19,034) 17,100 514,613 72,528 543,360 0 0 615,888 290,677 961,209 9,316 324,772 1,585,974 23,393 138,757 18,817 0 180,967 1,684,900 6,108,542 328,858 514,504 8,636,804 9,202,721 24,030,729 439,998 1, 032,895 34,7001343 926,348 5,561,974 32,896 170,965 6,692,183 8,234,975 18,289,429 390,369 846,213. 27,760,986 38 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 1.8, County Provided Services The City of Kalispell is provided various financial services by flathead County. The County serves as cashier and treasurer for the City for tax 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. The County charges the City for fees associated with City Special Assessments, 19. Joint Ventures Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. Citgourity Health lle artment - is operated under an interlocal agreement between. flathead County and The City of Kalispell. The Department operates under the supervision and control of the City -County Health Board, The Board consists of seven members, six of whom are appointed by the Board of County Commissioners, The County taxed the property owners directly for the City's contribution for the fiscal year ended June 30, 2000 at an equivalent rate of mills, County -wide Administrative Board The City of Kalispell along with flathead County, the City of Columbia falls, and the City of Whitefish, participate in a Countywide 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 ensuing fiscal year. The financial activities of the CAB are accounted for by Flathead County, The City's contribution for CAB for FY00 was $74,732. Courtyard Apartmen0orthwest Mont.ana -Hum an Resources The City entered into an agreement wih 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 Horne Grant and CDGB funds, NWMHR has built 16 units also. 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, 2000 the equity in the fund was $42,484. The debt payments on the mortgage are paid from the proceeds of the rents by NWMHR. The principal balance is recorded ori 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, 2000 is $250,710 39 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS ANE 30, 2000 20. Risk Mannement 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, ix., errors and omissions, d) environmental damage, e) workers' compensation, i.e. employee injuries, and f) medical insurance costs of employees. A variety of methods are 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 statewide 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. Given the lack of coverage available, the City has no coverage for potential losses from environmental damages. Effective July 1, 1987 The City of Kalispell joined with other Montana cities to form the Montana Municipal Insurance Authority, a self-insurance pool offering Worker's Compensation and Liability Coverage. 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 revenue was insufficient to cover the debt service. The City's share is $201,445 for liability and $281,715 for Workers' Compensation to finance the necessary insurance reserves. Based on the plan's current financial position, the City doesn't expect to make any payment on these notes. Separate financial statements are available from the Montana Municipal Insurance Authority, 21. Health Insurance In October 1993, The City established an internal service fund for the City's self-insured health insurance plan. The plan is administered by Blue Cross/Blue Shield of Montana. The City pays premiums recommended by Blue Cross into the City Health Fund. The claims are submitted weekly by Blue Cross and paid out of this fund. The City pays the total monthly premium for all full-time employees 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 a total of $200 maximum family deductible. Generic prescription drugs are 100% covered. Dental claims are paid 100% if the dentist is a participating Blue Cross dentist, otherwise 80% of the claims are paid. A "stop- loss" policy has been purchased to cover any claims that 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, 1999 $ 25,000 Claims incurred 821,504 Claims paid 793,067 Claims payable, lune 30, 2000 S3 437 40 CITY OF KALISPELL NOTES TO FINANCIAL, STATEMENTS JUNE 30, 2000 22, Pending Litiatian 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 that may cover all or part of the damages, Accordingly, no provision has been made in the financial statements for these contingent liabilities. Damages requested Potential of Doss Grey vs. City of Kalispell $ 50,000 unknown Broad vs, City of Kalispell not stated remote NuPac vs. City of Kalispell $70,000 remote KPA vs, City of Kalispell $2,868 possible Storli vs. City of Kalispell not stated remote Squires vs. City of Kalispell $149,000 possible City of Kalispell vs. Flathead Valley Al.ano Club not stated remote 23, Loans Receivable Tax Increment Fund Loan to the 2nd Avenue West Professional Building, a partnership, in the amount of $67,000 dated Dec. 30, 1985, Interest will accrue at the rate of 5% for the first 5 years, For years 6 through 15 the interest rate will accrue at the rate paid on US. Treasury Bills as of the 15th day of January of the year in which said payments are due. The loan is authorized pursuant to Title 7, Chapter 15, Parts 42 and 43, MCA and an ordinance #933 enacted by the City of Kalispell creating the Kalispell Downtown Redevelopment Plan. The City is authorized to eliminate and prevent the spread of blight by encouraging the redevelopment of land by private enterprise. The loan is for the acquisition of real property for development as a parking lot. Original. Loan amount $ 67,000 June 30, 2000 balance $ 3,642 March 1, 1999 the City entered into a loan with the Center Street Plaza. $70,529. The term of the loan is 15 years at a rate of 3%. Original Loan amount $ 70,529 June 30, 2000 balance $ 65,778 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 Fust Federal. The City's loan is 41 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 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. Ile maximum amount of a private lender loan cannot exceed $20,000 per property with a ten-year pay back. 23. Loans Receivable -cont, 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 has $ 193,719 recorded as loans receivable as of June 30, 2000 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 $ 36,900. The above mentioned loans are offset with deferred revenue accounts. Uncollected taxes receivables in governmental funds are offset with deferred revenue accounts as explained in the "basis of accounting" The City entered into a 20 year redevelopment loan at 5% with. Big Sky Manor using UDAG funds in August 1999, Original Loan amount $ 124,000 June 30, 2000 balance $ 12149 The City entered into a 20 year redevelopment loan @ 6% with United Way in January 2000. Original Loan amount $133,500 June 30, 2000 balance $132,040 On March 5, 2000, the City entered into a 10 loan with Stream, Inc. at 11% as part of the package to bring Stream Jobs to Kalispell. The interest earnings are to be split with 5,6% committed to the debt service fund to pay off the Stream Bonds. The remaining 5.9% interest and the principal will be returned to the UDAG fund. Original Loan amount $1,000,000 June 30, 2000 balance $1,000,000 24. City Court Contracts Receivable Contracts receivable for the City Court have been booked as an asset on the balance sheet of the General Fund. The contracts are offset with deferred revenue as required by GAAP accounting. The estimated collectible receivable is $194,451. 42 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS NNE 30, 2000 25. Component unit -Kalis ell Parking Commission The Kalispell City Council passed Resolution 4103, a Resolution of intention to create Special Parking District #2 on June 21, 1993, Also passed was Resolution 4104, a resolution of intention to provide for funding the cost of maintaining, operating, repairing, and improving Special. Parking Maintenance District #2 and Resolution 4105, a Resolution declaring the need for a Parking Commission to function in the City of Kalispell and declaring a jurisdictional area wherein said Parking Commission is authorized to function, The Mayor and. City Council appointed the Board of Directors composed of City residents who operate businesses within the district. It is the intention of the City of Kalispell that the downtown business community manages the parking for the downtown district. The Parking Commission opened their doors on February 1st 1994. The City transferred $53,000 ur Fiscal 1994 to the district as start up money, no further City funds have been given to the district, It is intended that the Parking Commission be operated as an Proprietary type fund and has been classified as such in the City's financial statements. 26. Stream International Flathead County Economic Development Authority, Flathead County and the City of Kalispell entered into an inter -local agreement to purchase 59,000 square feet of the Gateway West Mall for $15 million and sign a ten-year lease with Stream International, Ltd, The City of Kalispell agreed to acquire the property by issuing a $2.5 million tax increment urban renewal bond. The City then conveyed the property to the Authority as "tenants in common The County through the Authority became vested with an undivided 37% interest in the property with the City vested with the remaining 63% interest. As a result of this conveyance, the Authority recognized its portion of the building and the related debt on their books. The Authority is responsible for the operation maintenance of the property during the term of the initial ten-year lease. The Authority is also responsible for the carrying of property insurance against the property. The City has agreed to reimburse the Authority for its proportionate share of these costs. The Authority has agreed to levy up to two nulls or $156,000 for the term of the bond, and has pledged $125,000 of the revenue generated each year to be remitted to the City of Kalispell in two equal installments of $62,500 that will be used toward the retirement of the tax increment bond. 'Ile Authority shall also set up and contribute $3,000 to a building reserve fund each year of the lease. The reserve will be used for any repair or construction work deemed necessary ur maintaining the property, The City issued the tax increment bonds in its name and agrees to be punctual in all debts payments, and will keep all proper records and meet all necessary requirements of the bond resolution. The City shall also set up and contribute $5,000 to a building reserve fund for each year of the lease. 'Ric reserve will be used for any repair or construction work deemed necessary in maintaining the property. The Authority shall manage this building reserve. The City has pledged the following revenues towards the repayment of the $2.5 million bond: 1. Half of the interest revenues generated from a million dollar loan to Stream ($3$,000 per year). 2. An annual user fee that will be paid by Stream to the City equal to the amount of Stream's Montana corporate license tax obligation. 3. Tax increment money generated from the Westside Tax Increment District until the City reaches their share of the debt payment or $214,350. 4. The Authority's annual contribution of $125,000. 43 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS JUNE 30, 2000 The County has agreed that it will approve the Authority's levy for an ad valorem property tax of up to two mills on all taxable property in the County, until the tax increment bond is paid. Within 180 days of the payment in full of the Bond, either the Authority or the City may give notice to each other of intent to purchase the property. The purchase price to be paid will be equal to the total debt service paid by the other party. The Authority has the first option of buying the property from the City. If neither the Authority nor the City want to purchase the property outright, then the City has granted American Capital a right of first refusal to the purchase the property. The proceeds from the sale of the property shall be distributed based the equity interest each entity holds, 44 SINGLE AUDIT SECTION 45- CITY CF KALISPELL FLATHEAD COUNTY, MONTANA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For Fiscal Year Ended June 30, 2000 ((,S OeuartmentefCnmmarr.,g Direct. Public Works and Development Facilities Total U.S. Department of Commerce Total Federal Financial Assistance 11.360 05-01413354 $ 600,000 $ -46- - $ 540,009 $ 2,500,009 $ 3,000,090 $ - $ 540,000 $ 2,500,000 $ 3,000,069 $ 22,452 91�4,3�69 2,575,481 3,498,10,,,3 Federal Pase-Through Program or Beginning Ending Federal GrantorlPass•Through CFDA Grantor's Award Balance Federal Match( Balance GranlorlPrn ramTitle Number Number Amount July, Revenue Other Ex e�_ndltures June 11,1100 U�.Radi�t�e Dlrecl' Community Oriented Policing Services - HinngAward 16710 1999UMWX2849 S 150,000 $ 9,614 $ 52,500 $ 27,247 $ 85,548 5 3,813 CommunilyOnenledPolicingServices - In Scrod Award 16.710 1999SHWX0664 125,000 41,611 40,837 774 Law Enforcement BlockGranl 16.592 2000.1-e•VX-0343 9,073 3,873 1,159 8,720 1,612 Passed through Flathead County Drog Control and Syslems Grant • Formula Grant 16 579 NIA NIA 7,828 35,180 12,250 48,902 6,356 Total U$. Department ofJushco $ 17,442 13$,364 40,656 184,001 12,455 Passed through the Montana Department of Transpodalion. Traffic Safety Project - Radar Gun 20.600 410-00.6498.06 g 3,500 $ $ 3,219 $ $ 3,219 $ Highway TraficSafely • Troop Grant 20.600 99-03.07.02 8,600 1,523 31468 1,523 3,468 Highway Traffic Safety• Kalispell Occupant Protection 20.600 00.03.07-03 15,000 13,213 13,213 Highway TraffieSafaty 20600 41099.04-03-03 9,100 612 612 Air Quality Equipment Project 20.205 CM002{363) 253,906 84,266 11,309 95,575 Community TransporialiooEnhaneementProgram (CTEP)-LawroncePadrTrail4 20.205 STPE 6709(l 51 167,140 18,649 8,159 10,490 Community Transportation Enhancement Program (CTEP) • Lawrence Park Trail € 20.205 STPE 6799(10) 45,056 (5,443) 6,928 1,485 Community TransportationEnhancemantProgram(CTEP)- MeddlanRoadWalk 20.205 STPE 670114) 103,896 (3,383) 1 20,048 197,633 (2,035) Community TransportationEnhancemenlProgram(CTEP)- WoodlandParklll 20.205 STPE 6799(21) 77,623 (4,813 73,911 80,822 (11,724) U,S. Department of Transportation $ 5,019 $ 272,005 $ 34,825 $ 310,166 $ 104 Passed through Flathead County. Special Program to! the Aging -Tills IIIF 93,043 01.22A -A009 S NIA $ $ 4,006 $ $ 4,000 $ Total U.S. Department of Health and Human Services $ $ 4,000 S 5 4,000 S ((,S OeuartmentefCnmmarr.,g Direct. Public Works and Development Facilities Total U.S. Department of Commerce Total Federal Financial Assistance 11.360 05-01413354 $ 600,000 $ -46- - $ 540,009 $ 2,500,009 $ 3,000,090 $ - $ 540,000 $ 2,500,000 $ 3,000,069 $ 22,452 91�4,3�69 2,575,481 3,498,10,,,3 CITY OF KALISPELL, MONTANA NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Fiscal Year Ended June 30, 2000 Basis of presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of City of Kalsipell, Montana and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the general purpose financial statements. -47- Denning, Downey & Associates, P. C. CERTIFIED PUBLIC ACCOUNTANTS 1740 US Hwy 93 South, Suite 101- Kalispell, AIT59901- 750479 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING RASED ON AN AUDIT" OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS City Manager, Mayor and City Council City of Kalispell Flathead County Kalispell, Montana We have audited the financial statements of City of Kalispell, Flathead County, Montana, as of and for the year ended June 30, 2000, and have issued our report thereon dated March 26, 2001, We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the united States. Cor�nce As part of obtaining reasonable assurance about whether the City's financial statements are free of rnateril al misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion, The results of our tests disclosed an instance of noncompliance that is rewired to be reported under Government Auditing Standards which is described in the accompanying Schedule of Findings and Questioned Costs as item 00-3. Interna l Control Over Financial Reortin In planning and performing our audit, we considered the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. However, we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions, Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the control over financial reporting that, in our judgment, could adversely affect the City's ability to record., process, sur nlmarize and report financial data consistent with the assertions of management in the financial statements. The reportable conditions are described in the accompanying Schedule of Findings and Questioned Costs as items 00.1, 00-2, and 00-4. _4g_ Robert K Denning, CPA - Lim M Downey, CPA Denning, Downey & Associates, P. C. CERTIFIED PUBLIC ACCOUNTANTS 1740 U.S. Hwy 93 South, Suite 101- Kalispell, A47599010 756-6879 A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements 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, Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, of the reportable conditions described above, we consider items 00-1 to be a material weakness. This report is intended solely for the information and use of the City Manager, Mayor and City Council, management, the Montana Department of Commerce, and federal awarding agencies and pass-through entities and is not intended to be and should. not be used by anyone other than these specified parties, Inning, 2owtbe� and Ajocialm, CP -4'6 P C March 26, 2001 _49- RobertL Denning, CPA - Kim A Downy, CPA Denning, Downey & Associates, P. C. CERTIFIED PUBLIC ACCOUNTANTS 1740 U.S. Hwy 93 South, Suite 101- Kalispell, AfT 59901.750.6879 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 City Manager, Mayor, and City Council City of Kalispell Flathead County Kalispell, Montana Compliance We have audited the compliance of City of Kalispell, Flathead County, Montana, with the types of compliance requirements described in the US Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended lune 30, 2000, The City's major federal. programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the City's management. Our responsibility is to express an opinion of the City's compliance based on our audit. We conducted our audit of compliance in accordance with generally accepted auditing standards; the standards applicable to financial audits contained in GovernmentAuditingStandards, issued by the Comptroller General of the United States, aid aMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations, Those standards and OMB Circular A-133 require that we plan and perforin the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City's compliance witli those requirements. In our opinion, the City complied, in all material respects, wish the requirements referred to above that are applicable to each of its major federal programs for the year ended lune 30, 2000. Robert X. Denning, CPA -Clint 41. Dowrtey, CPA Denning, Downey & Associates, P. C. CERTIFIED PUBLIC ACCOUNTANTS 1740 US, Hwy 93 South, Suite 101- Kalispell, M1'S9901- 756-6879 Internal Control Over Com liance The management of the City is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts mid grants applicable to federal programs. In planning and performing our audit, we considered. the City's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing an opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulation, contracts and grants that would be material in relation to a major federal program 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 over compliance and its operation that we consider to be material weaknesses. This report is intended for the information of City Manager, Mayor, and City Council, management, the Montana Department of Commerce, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. March 26, 2001 Robert K Denning, CPA - Kim Al. Downey, CPA City of Kalispell Flathead COUNTY, MONTANA SCHEDULE OF FINDINGS AND QUESTIONED COS'T'S Year Ended June A 2000 Section t - Summary of Auditors' Results Fin ancialStaternents Type of auditor's report issued Unqualified Internal control over financial reporting: Material weakness(es) identified? Yes Reportable condition(s) identified not considered to be material weaknesses? Yes Noncompliance material to financial statements noted? Yes FederalAwards Internal Control over major programs: Material weakness(es) identified? No Reportable condition(s) identified not considered to be material weaknesses? None reported Type of auditor's report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be repolled in accordance with Circular A-133, Section .510(a)? No -52- SCHEDULE OF FINDINGS AND QUESTIONED COS"T"S (Continued) Identification of major programs: CFDA Number Name of Federal Promm, or Cluster 11.300 Public Works and Development Facilities Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? Section 11- Financial Statement Findin s 00-1 ParkiU Commission Condition: 1. All citations were not accounted for, 2. Flow the citation was resolved was not always available, 3. The deposit slip did not indicate what citation the deposit was for. 4. Collectability of delinquent receivables was not determined, Recommendation: $ 300.000 Yes 1. The City should change their system of summarizing citations from a spreadsheet based accounting system to an accounts receivable package in order to provide more accurate financial records of all citations issued. 2. Accuracy of the accounts receivable should be of the highest priority. When accounts receivable records are not accurate there is a chance of billing errors, such as double billings, summons sent for citations already paid and failures to bill. 3. Collection procedures should exist that provide for a system of checks and balances when cash is received. 4. The deposits records did not indicate which person or related citation is being deposited. We recommend that the parking commission indicate on all deposit reports the citation numbers that are included in each deposit. SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 00.2 Cit Com urt Receivables Condition: The City uses a manual card system for tracking court receivables. The system is not self balancing; it does not provide aged receivable reports or summaries of whom have not made payments as agreed upon. Criteria: A good system of internal control should include at a minimum the preparation of aged receivables and be self balancing to ensure that all receivables are collected. Effect, The system of internal controls over court receivables is weakened. Recommendation: The City should consider purchasing or creating a computerized accounts receivables system. 00.3 Revenue Bond Requirements Condition: 1, The City's reserves did not meet the requirements for the westside urban renewal district revenue bonds, (Stream) 2, The City's reserves and rates did not meet the revenue bond requirements of the 1999 Solid Waste System Revenue Bonds, Criteria: 1, Westside Urban Renewal District Revenue Bond (Stream): a) The City is required to keep in reserve an amount equal to the maximum amount of principal and interest due on all outstanding bonds of the Westside Tax increment District. 2, 1999 Solid Waste System. Revenue Bonds: a) A debt service reserve of $42,609 was required for current debt payments. b) A reserve account of 10% of the bonds outstanding, $14,500 is required for future debt payments, c) Net revenues will be at least equal to 125% of the maximum principal and interest requirements. Effect: 1. Total reserve requirements were $339,350. The City had no reserve, 2. The City did not have any reserves for current debt payments. The City did not have any reserves for future debt payments. 125% of maximum future debt was $68,264 and net revenues was $62,299. Recommendation: The City should review all revenue bond requirements before year end and make reserve adjustments as necessary. -54- SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 00-4 Exceeding Bud etAuthorit Condition: The City exceeded it's budget authority in the Courtyard Maintenance, ambulance, and employee health funds. Criteria; 7-6.4234 MCA limits the clerk from paying bills in excess of the budget, Effect: The following funds exceeded their budget authority by the following amounts: Courtyard Maintenance $6,954 Ambulance $177,131 Employee health $21,504 Recommendation: The City should limit making of expenditures or incurring of expenditures to the amount appropriated, Section III - Federal Award Findings and Questioned Costs There were no matters reported, Denning, Downey & Associates, P. C. CERTIFIED PUBLIC ACCOUNTANTS 1740 U.S. Rivy 93 South, ,Suite 101- Kalispell, AIT 59901.756.6879 INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS City Manager, Mayor, and City Council City of Kalispell Flathead County Kalispell, Montana There were no other compliance, financial, or internal accounting matters, 2eilailly, 2ownecv aiad jWdatd, CPJ a P'c March 26, 2001 -56 Robert K Denning, CPA - Nin A Downy, CPA Denning, Downey & Associates, P. C, CERTIFIED PUBLIC ACCOUNTANTS 1710 US 15ivy 93 South, Suite 101 - Kalispell, MT 59901.756-6879 INDEPENDENT AUDITOR'S REPORT ON PRIOR AUDIT" REPORT RECOMMENDATIONS City Manager, Mayor, and City Council City of Kalispell Flathead County Kalispell, Montana The prior audit report contained two recommendations. The actions taken on each are as follows: Action I City Court Receivables Repeated I Kalispell Parking Commission Repeated A)slim' Aufitia� anal .AaciaW' CP -49 PC, March 26, 2001 -57- Hobert K Denning, CPA - ,Kint X Downey, CPA