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03. Audit Fiscal Years Ended 6/30/89 and 6/30/90CITY OF KALISPELL KALISPELL. MONTANA Fiscal Years Ended June 30, 1989 and 1990 CITY OF KALISPELL KALISPELL, MONTANA TABLE OF CONTENTS Page Organization Fiscal Year Ended June 30, 1989 Independent Auditor's Report 2-21 Financial Statements 5 Combined Balance Sheet - All Fund Types and Account Groups 6-7 Combined Statement of Revenues, Expenditures, and Changes in Fund 8-9 Balances - All Governmental Fund Types Combined Statement of Revenues, Expenditures, and Changes in Fund 10-11 Balances - Budget and Actual - General, Special Revenue, Debt Service, and Capital Projects Fund Types Combined Statement of Revenues, Expenses, and Changes in Retained 12 Earnings - All Proprietary Fund Types Combined Statement of Cash Flows - All Proprietary Fund Types 13-14 Notes to Financial Statements 15-46 Independent Auditor's Report on Supplemental Information 47 and Supplemental Schedules Independent Auditor's Report on Supplemental Information 48 Supplemental Schedule 49 Schedule of Federal Financial Assistance 50-51 Fiscal Year Ended June 30, 1990 Independent Auditor's Report 52-53 Financial Statements 54 Combined Balance Sheet - All Fund Types and Account Groups 55-56 i CITY OF KALISPELL KALISPELL. MONTANA TABLE OF CONTENTS - cont. Fiscal Year Ended June 30, 1990 - cont. 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 Revenue, Debt Service, and Capital Projects Fund Types Combined Statement of Revenues, Expenses, and Changes in Retained Earnings - All Proprietary Fund Types Combined Statement of Cash Flows - All Proprietary Fund Types Notes to Financial Statements Independent Auditor's Report on Supplemental Information and Supplemental Schedules Independent Auditor's Report on Supplemental Information Supplemental Schedule Schedule of Federal Financial Assistance Independent Auditor's Compliance Report Based on an Audit of General Purpose Financial Statements Report on the Internal Control Structure in Accordance With Government Auditing Standards Single Audit Opinion on Compliance With Specific Requirements Applicable to Major Federal Financial Assistance Programs Single Audit Report on Compliance With the General Requirements Applicable to Major Federal Financial Assistance Programs Single Audit Report on Compliance With Requirements Applicable to Nonmajor Federal Financial Assistance Program Transactions Independent Auditor's Report on Internal Controls (Accounting and Administrative) - Based on a Study and Evaluation Made as a Part of an Audit of the General Purpose Financial Statements and the Additional Tests Required by the Single Audit Act ii Page 57-58 59-60 61 62-65 66-97 98 99 100 101-103 104 105-111 112 113 114 115-119 CITY OF KALISPELL KALISPELL, MONTANA TABLE OF CONTENTS - cont. Page Independent Auditor's Report on Other Compliance, Financial, and 120-123 Internal Accounting Control Matters Independent Auditor's Report on Prior Audit Report Recommendations 124-126 iii CITY OF KALISPELL KALISPELL, MONTANA ORGANIZATION Fiscal Year Fiscal Year Ended June 30, 1989 Ended June 30, 1990 Mr. John "Ed" Kennedy Mayor Mr. Roger Hopkins CITY COUNCIL Mr. Roger Hopkins Mr. Gary Nystul Mr. Gary Nystul Mr. John Gunnerson Mr. Sandy Schindler Ms. Barbara Moses Mr. John Gunnerson Mr. Fred Buck Ms. Clare Hafferman Mr. Jim Atkinson Mr. Jim Atkinson Mr. Lauren Granmo Mr. Noel Furlong Mr. M. Duane Larson Mr. Wayne Saverud Mr. Noel Furlong CITY OFFICIALS Mr. Glen Neier Attorney Mr. Glen Neier Mr. Addison Clark Chief of Police Mr. Addison Clark Mr. Don Halver Clerk/Treasurer Mrs. Amy Robertson Mrs. Francis Willis City Judge Mrs. Francis Willis Mr. Ken Hammer Water/Sewer/Garbage Mr. Ken Hammer Collector M CITY OF KALISPELL KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT Fiscal Year Ended June 30, 1989 im DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406)444-3010 INDEPENDENT AUDITOR'S REPORT To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 HELENA, MONTANA 59620 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the year ended June 30, 1989, as listed in the table of contents. These general purpose financial statements are the responsibility of the City of Kalispell's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The City of Kalispell has not maintained adequate records relating to fixed assets of the general fixed assets account group and the Enterprise Funds. Accordingly, we were unable to satisfy ourselves as to the fixed assets balances of the general fixed assets account group amounting to $7,508,212 and the fixed assets balances and the related depreciation expense of the Enterprise Funds amounting to $11 841 515 and $503,193, respectively. In our opinion, except for the effects of such adjustments, if any, as might have been necessary had we been able to examine the fixed assets described in paragraph three, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Kalispell, Montana, at June 30, 1989, 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. -3- 'AN EQUAL OPPORTUNITY EMPLOYER- INDEPENDENT AUDITOR'S REPORT - cont. As discussed in Note 1 n. , to the financial statements, the City of Kalispell has presented a statement of cash flows for the year ended June 30, 1989, rather than a statement of changes in financial position. June 27, 1991 DONALD L. DOOLEY Bureau Chief By:_.A&A, &4"d STAN NORD14ICK Audit Section Supervisor CITY OF KALISPELL KALISPELL, MONTANA FINANCIAL STATEMENTS Fiscal Year Ended June 10. 1 M CITY OF KALISPELL KALISPELL, MONTANA COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 1989 GOVERNMENTAL FUND TYPES Special Debt Capital General Revenue Service Projects ASSETS Cash/Investments $ 12,733 $ 1,008,843 $ 32,233 $ 39,710 Taxes/Assessments Receivable 920,815 951,895 610,417 - - Other Receivables (Net of Uncollectables) - - 3,253,216 101,791 - - Due from Other Funds - - 96,295 107,018 - Due from Other Governments - - 4,315 - - - Prepaid Expenses - - 21,094 - - - - Inventories Amount Available in Debt Service Funds Amount Available in Special Revenue Funds Amount to be Provided for Retirement of General Long -Term Debt Amount to be Provided from Special Assessments Fixed Assets (Net of Accumulated Depreciation) TOTAL ASSETS LIABILITIES AND FUND EQUITY Liabilities: Short -Term Payables Due to Other Funds Other Short -Term Liabilities Deferred Revenue Long -Term Liabilities Total Liabilities Fund Equity: Contributed Capital Investment in General Fixed Assets Retained Earnings Reserved Unreserved Fund Balance Reserved Unreserved Total Fund Equity TOTAL LIABILITIES AND FUND EQUITY $ 933,548 $ 5 ,335 ,658 $ 851,459 $ 39,710 $ 12,202 $ 320,348 $ 71,744 $ 24,848 - - 46,355 200,787 3,482 - - - - - - 38,785 920,815 4,203,456 610,417 - - $ 933,017 $ 4 ,570 ,159 $ 882,948 $ 67,11 - - 565,391 - - (27,405) 531 200,108 (31 ,489) - - $ 531 $ 765,499 $ (31,489) $ (27,405) $ 9331548 $5 658 $ 851,459 $ 39,710 See accompanying Notes to Financial Statements. -6- PROPREITARY FIDUCIARY FUND TYPES FUND TYPES Assets Trust Enterprise and Agency $ 1,990,739 $ 75,718 58,666 - - 391,035 - - 137,856 - - 205 ,696 - - 95,545 - - 11,841,515 - - $ 14,721,052 $ 75-218 ACCOUNT GROUPS General General Fixed Long -Term Assets Debt - - (31 ,489) - - 123,045 - - 2,923,823 - - 467,116 7,508,212 - - $ 7 ,508 ,212 $ 3 ,2482 ,1495 TOTALS ( MEMORANDUM ONLY) $ 3,159,976 2,541 ,793 3,746,0 42 341,169 210,011 21,094 95,545 (31,489) 123,045 2,923,823 467,116 . 19,34+9 ,727 $ 32 ,947 ,852 $ 135,355 $ 27,099 $ - - $ - - $ 591 ,596 90,545 _ _ _ _ _ _ 341 ,169 18,562 48,619 - - - - 105,966 5,734,688 2,434,647 - - - - 3,482,495 5,917,142 $ 2 ,679 ,109 $ 75,718 $ -0- $ 3 ,482 ,495 $ 12 ,690 ,561 $ 5,614,135 $ _ _ $ _ _ $ _ _ $ 5,614,135 7,508,212 - - 7,508,212 1 ,506,626 - - - - - - 1 ,506,626 14,921 ,1 82 - - - - - - 4,921 ,182 - - - - - - - - 537,986 -- --_ -- -- 169,150 $ 12,041,943 $ -0- $ 7 ,508 ,212 $ -0- $.20,257,291 14,721 ,052 $ 75,718 $ 7,508,212 $ 3,�482,�495 $ 32,9�47,852 CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES Fiscal Year Ended June 30, 1989 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ GOVERNMENTAL FUND TYPES $ (753,583) $ (10,689) Fund Balances - July 1, 1988 - Special Debt General Reported Revenue Service Revenues: $ (20,800) Restatements - - Taxes/Special Assessments $ 1,219,569 $ 1,535,605 $ 1769383 Licenses and Permits 159,153 2,436 311 Intergovernmental Revenue $ (20,800) 329,837 Transfers In (Out) 201,034 1,404 Charges for Services - - 292,684 June 30, 1989 61,809 - - Fines and Forfeitures $ ( 13 489) 213,976 28,112 - - Miscellaneous Revenues 1,253 2246,736 - - Investment and Royalty Earnings 65,893 101,812 12,775 Total Revenues $ 2,282,365 $ 2,177,544 $ 190,873 Expenditures: Current: General Government $ 423,000 $ 95,530 $ - - Public Safety 1,368,873 255,499 - - Public Works 232,121 734,381 - - Public Health 52,887 1,477 - - Culture and Recreation 181,267 35,184 - - Housing and Community Development - - 331,807 - - Miscellaneous 3,464 145,357 - - Capital Outlay 471 627,786 - - Debt Service 1,163 345,970 201,562 Total Expenditures $ 2 ,263 ,246 $ 2 ,572 ,991 $ 201,562 Excess (Deficiency) of Revenues Over Expenditures $ 199119 $ (395,447) $ (10,689) Other Financing Sources (Uses): Proceeds of General Long -Term Debt $ - - $ - - $ - - Operating Transfers In - - 65,702 - - Operating Transfers (Out) - - (423,838) - - Total Other Financing Sources (Uses) $ -0- $ (3581136) $ -0- Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ 19,119 $ (753,583) $ (10,689) Fund Balances - July 1, 1988 - As Previously Reported $ (8,230) $ 1,522,977 $ (20,800) Restatements - - (3,895) Fund Balances - July 1, 1988 - As Restated $ ( 8,230) $ 1 ,519,082 $ (20,800) Residual Equity Transfers In (Out) (10,358) - - - - Fund Balances - June 30, 1989 $ - 531 $765,499 $ ( 13 489) See accompanying Notes to Financial Statements. M GOVERM ENTAL $ FUND TYPES - cont. $ (10,358) Capital TOTALS Projects (MEMORANDUM ONLY) $ - - $ 2,931 ,557 - - 161,900 13,670 545,945 23,788 378,281 - - 2242,088 - - 247,989 3,718 1824,198 $ 41,176 $ 24 ,691 ,958 $ - - $ 518,530 1 ,6224,372 _ - 966,502 - - 524,3624 216,2451 331 , 807 - - 1248,821 2431 ,896 1 ,060,153 - - 5248,695 $ 431,896 $ 5 ,2469 ,695 $ (390,720) $ (777,737) $ 324,759 $ 3�4,759 358,136 2423,838 - - (2423,838) $ 392,895 $ 34,759 $ 2,175 $ (7242,978) $ (10,358) $ 1,483,589 - - (3,895) $ (10,358) $ 1,479,694 (19,222) (29,580) $ _(27-:405) $ 707,136 CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL, SPECIAL REVENUE, DEBT SERVICE, AND CAPITAL PROJECTS FUND TYPES Fiscal Year Ended June 309 1989 See accompanying Notes to Financial Statements. -10- GENERAL FUND Variance - Favorable Budget Actual (Unfavorable Revenues: Taxes/Special Assessments $ 1,262,173 $ 1,219,569 $ (42,604) Licenses and Permits 201,200 159,153 (42,047) Intergovernmental Revenue 333,110 329,837 (3,273) Charges for Services 275,535 292,684 17,149 Fines and Forfeitures 1824,600 213,976 29,376 Miscellaneous Revenues 1,395 1,253 (142) Investment and Royalty Earnings 30,000 65,893 35,893 Total Revenues $ 2 ,288 ,013 $ 2 ,282 ,365 $ (5,648) Expenditures: Current: General Government $ 424,718 $ 423,000 $ 1,718 Public Safety 1,370,347 1,368,8773 1,474 Public Works 233,264 232,121 1,143 Public Health 53,157 52,887 270 Culture and Recreation 183,862 181,267 2,595 Housing and Community Development - - - - - - Miscellaneous 3,846 3,464 382 Capital Outlay 81,422 471 80,951 Debt Service 3,753 1,163 2,590 Total Expenditures $ 2 ,354 ,369 $ 2 ,263 ,246 $ 91,123 Excess (Deficiency) of Revenues Over Expenditures $ 66,356 $ 19,119 $ 85,475 Other Financing Sources (Uses): Proceeds of General Long -Term Debt $ - - $ - - $ - - Operating Transfers In - - - - - - Operating Transfers (Out) - - - - - - Total Other Financing Sources (Uses) $ -0- $ -0- $ -0- Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ 66,356 $ 19,119 $ 85,475 Fund Balances - July 1, 1988 - As Previously Stated (8,230) Restatements - - Fund Balances - July 1, 1988 - As Restated $ (8,230) Residual Equity Transfers In (Out) (10,358) Fund Balances - June 30, 1989 $ 531 See accompanying Notes to Financial Statements. -10- SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS Variance - Variance - Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ 1,820,637 $ 1,535,605 $ (285,032) $ 193,756 $ 176,383 $ (17,373) 5,690 2,436 (3,254) -0- 311 311 210,171 201,034 (9,137) -0- 1,4o4 1,404 53,353 61,809 8,456 - - - - - - 37,200 28,112 (9,088) - - - - - - 441,491 246,736 (194,755) - - - - - - 42,500 101,812 59,312 2,500 12,775 10,275 $ 2,611 ,042 $ 2,177,544 $ (433,498) $ 196,256 $ 190,873 $ (5,383) CAPITAL PROJECTS FUNDS Variance - Favorable Budget Actual (Unfavorable) 787,900 13,670 (774,230) 6,000 23,788 17,788 -0- 3,718 3,718 $ 793,900 $ 41,176 $ (752,724) 95,531 $ 95,530 $ 1 $ - -- 259,766 255,499 4,267 - - - - - - - - - - - 935,555 734,381 201,174 - - - - - - - - - - - 1,477 1,477 -0- - - - - - - - - - - - - 35,184 35,184 -0- - - - - - - - - - - - - 678,017 331,807 346,210 - - 190,660 145,357 45,303 - - 972,544 627,786 344,758 - - - - - - 1 ,867,291 431 ,896 1,388,543 511,699 345,970 165,729 191,370 201,562 (10,192) $ 3,680,433 $ 2,572,991 $ 1 ,107,442 $ 191 ,370 $ 201 ,562 $ (10,192) $ 1 ,867,291 $ 431 ,896 $ 1,388,543 $ (1,069,391) $ (395,447) $ 673,944 $ (4,886) $ (10,689) $ (15,575) $ (1,073,391) $ (390,720) $ 682,671 $ - - $ - - $ - - $ - - $ - - $ - - $ - - $ 34,759 $ 34,759 75,933 65,702 (10,231) - - - - - - 1,072,641 358,136 (714,505) (531076) (423,838) 107,338 ` $ (455,243) $ (358,136) $ 97,107 $ -0- $ -0- $ -0- $ 1,072,641 $ 392,895 $ (679,746) $ 1,524,634 $ (753,583) $ 771,051 $ (4,886) $ (10,689) $ (15,575) $ 750 $ 2,175 $ 2,925 $ 1,522,977 $ (20,800) $ (10,358) (3,895) - - - - $ 1,519,082 $ (20,800) $ (10,358) (19,222) $ 765,499 $ (31,489) $ (27,405) -11- CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES Fiscal Year Ended June �O. 198 PROPRIETARY VTTWTT) rVVDL"4Z Enterprise Operating Revenues: Charges for Service $ 1,727,559 Miscellaneous Revenues 29,817 Special Assessments 442,074 Total Operating Revenues $ 2,199,450 Operating Expenses: Personal Services $ 656,597 Supplies 41,546 Purchased Services 364,008 Fixed Charges 161,148 Losses/Bad Debt Expenses 14,862 Depreciation 503,193 Total Operating Expenses $ 1,741,354 Operating Income (Loss) $ 458,096 Non -Operating Revenues (Expenses): Loss On Fixed Asset Disposition $ (3,718) Intergovernmental Revenue 10,515 Interest 147,303 Debt Service Interest Expense (198,167) Total Non -Operating Revenues (Expenses) $ 44,067 Net Income (Loss) $ 414,029 Add depreciation on fixed assets acquired by grants, entitlements, and shared revenues externally restricted for capital acquisitions and construction that reduced contributed capital 223,623 Increase (Decrease) in Retained Earnings $ 637,652 Retained Earnings - July 1, 1988 - As Previously Reported $ 5,764,398 Restatements (3,822) Retained Earnings - July 1, 1988 - As Restated $ 5,760,576 Residual Equity Transfers In (Out) 29,580 Retained Earnings - June 30, 1989 $ 6,427,808 See accompanying Notes to Financial Statements. -12- CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES Fiscal Year Ended June �0. 198 PROPRIETARY FUND TYPES Enterprise Cash Flows From Operating Activities: Cash Received From Customers $ 1,655,800 Cash Received From Assessments 435,213 Cash Received From Hookups 33,213 Cash Payments to Suppliers for Goods and Services (605,033) Cash Payments to Employees for Services (654,078) Cash From Other Operating Revenues 24,611 Net Cash Provided by Operating Activities $ 889,726 Cash Flows From Noncapital Financing Activities: Operating Grants Received $ 11,130 Cash Payments for Grants (2,460) Loans to Other Funds (137,855) Net Cash Provided by Noncapital Financing Activities $ (129,185) Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets $ (705,451) Principal Paid on Revenue Bonds and Contracts (162,246) Interest Paid on Revenue Bonds and Contracts (197,560) Proceeds From Settlement 90,000 Proceeds From Inception of Lease Contract 24,000 Decrease in Due From Other Governments 16 Decrease in Due to Other Funds (Lease Related) (15,150) Proceeds From Sale of Capital Equipment 500 Capital Contributed by Tax Increment 29,580 Capital Contributed by Government 196,920 Net Cash Used for Capital and Related Financing Activities $ (739,391) Cash Flows From Investing Activities: Interest on Investments $ 143,627 Purchase of Sidewalk and Curb Warrants (34,758) Redemption of Sidewalk and Curb Warrants 5,000 Net Cash Used in Investing Activities $ 113,869 Net Increase in Cash and Cash Equivalents $ 135,019 Cash and Cash Equivalents at July 1, 1988 1,768,987 Cash and Cash Equivalents at June 30, 1989 $ 1,904,006 See accompanying Notes to Financial Statements -13- CITY OF KALISPELL KALISPELL. MONTANA COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES - cont. Fiscal Year Ended June 30, 1989 PROPRIETARY FUND TYPES Disclosure of Accounting Policy: For purposes of the statement of cash flows, the Enterprise Funds consider all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. See accompanying Notes to Financial Statements. -14- Enterprise Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 458,096 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 503,191 Provision for Uncollectable Accounts (6,189) Change in Assets and Liabilities: Decrease (Increase) in Accounts Receivable (38,302) Decrease (Increase) in Assessments Receivable (6,861) Decrease (Increase) in Inventory (7,515) Increase (Decrease) in Accounts Payable (15,957) Increase (Decrease) in Compensated Absences 3,263 Net Cash Provided by Operating Activities $ 889,726 Disclosure of Accounting Policy: For purposes of the statement of cash flows, the Enterprise Funds consider all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. See accompanying Notes to Financial Statements. -14- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS June 30, 1989 1. Summary of Significant Accounting Policies The following is a summary of the City of K_alispell's significant accounting policies: a. Reporting Entity The City is governed by an elected Mayor and City Council. The general purpose financial statements include all funds, account groups, boards, commissions, and authorities which meet the criteria embodied in GASB Cod. Sec. 2100, "Def ining the Reporting Entity." Such criteria are manifestation of oversight responsibility (financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters), scope of public service (benefit to the City and/or its residents, conducted within the geographic boundaries of the City, and generally available to its citizens), and special financing relationships. b. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for within a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. The following types of funds and account groups are maintained by the City. GOVERNMENTAL FUNDS General Fund - Used to account for all financial resources except those required to be accounted for in other funds. Special Revenue Funds - Used to account for the proceeds of special revenue sources (other than expendable trusts or for major capital projects) that are legally restricted to expenditures for specific purposes. Capital Projects Funds - Used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). Debt Service Funds - Used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. di CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 1. Summary of Significant Accounting Policies - cont. b. Fund Accounting - cont. PROPRIETARY FUNDS Enterprise Funds - Used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. FIDUCIARY FUNDS Trust and Agency Funds - Used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These may include (a) expendable trust funds, (b) nonexpendable trust funds, (c) pension trust funds and (d) agency funds. FIXED ASSETS AND LONG-TERM LIABILITIES General Fixed Assets Account Group - Used to account for the fixed assets of the City which are not accounted for in proprietary funds. General Long -Term Debt Account Group - Used to account for all long-term debt of the City except that accounted for in the proprietary funds. C. Basis of Accounting The modified accrual basis of accounting is followed by all funds except the proprietary funds. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, that is, when they become both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The accrual basis of accounting is utilized by the proprietary funds for recording revenue. WE M CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 Summary of Significant Accounting Policies - cont. c. Basis of Accounting - cont. The City records real and personal property taxes and assessments levied for the current year as revenue. Taxes and assessments receivable remaining unpaid at year end and not expected to be collected soon enough thereafter to be available to pay obligations of the current year were recorded as deferred revenue, with a corresponding reduction in revenues, as required by generally accepted accounting principles. In addition, prior period delinquent taxes and assessments collected in the current period were recorded as revenue in the current period as required by generally accepted accounting principles. Expenditures other than interest on long-term debt are recorded when the liability is incurred. d. Budgets and Budgetary Accounting An operating budget is adopted each fiscal year for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds, on the modified accrual basis. A non-binding management budget is adopted for the Enterprise Funds. The final budget is legally enacted by the City on the second Monday in August, after holding public hearings as required by State statutes. The operating budgets cannot be increased except for a public emergency which could not have been reasonably foreseen at the time of adoption of the budget. Budget appropriation transfers may be made between the general classifications of salaries and wages, maintenance and operation and capital outlay. e. Encumbrances All appropriations, except for construction in progress, lapse at the end of the fiscal year. The City does not utilize a formal encumbrance accounting system. f. Fixed Assets All purchased fixed assets are valued at cost where historical records are available and at estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Improvements are capitalized and, in proprietary funds, depreciated over the remaining useful lives of the related fixed assets. -17- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 Summary of Significant Accounting Policies - cont. f. Fixed Assets - cont. General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in governmental funds, and the related assets are reported in the general fixed assets account group. Assets in the general fixed assets account group are not depreciated. Public domain ("infrastructure") general fixed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized, as these assets are immovable and of value only to the government. Fixed assets purchased or acquired by proprietary fund types are recorded in the individual fund making the purchase. Any fixed assets donated specifically for an enterprise fund are also recorded in that individual fund. Depreciation on proprietary fund fixed assets is provided over their estimated useful lives on the straight-line method.. The useful lives of these assets have been estimated as follows: Buildings 20-50 years Improvements other than buildings 10-50 years Machinery and equipment 5-20 years Vehicles and heavy equipment 5-20 years Sewer lines and pump stations 10-50 years g. Taxes and Assessments An allowance for uncollectible accounts was not maintained for real and personal property taxes and special assessments receivable. The direct write-off method is used for these accounts. h. Enterprise Accounts Receivable Reserves for estimated uncollectable accounts receivable are maintained for the Water, Sewer and Ambulance Enterprise Funds. Accounts receivable are reported as a net of uncollectable accounts. The reserves for uncollectables on June 30, 1989, were as follows: Water $ 3,888 Sewer 4,524 Ambulance 8,342 Total $ 16,754 -18- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 1. Summary of Significant Accounting Policies - cont. i. Inventories Inventories of materials and supplies are expensed at the time of purchase. Inventories of materials and supplies on hand are not maintained. Inventories were not, however, considered material. The Enterprise Fund inventory of materials and supplies was valued at a combination of cost and replacement cost. Inventories are offset by a reserve of equity. j. Vacation and Sick Leave Liabilities incurred because of unused vacation and sick leave accumulated by employees which is payable upon termination are included in the financial statements. The liability for unused vacation and sick leave for governmental fund employees is recorded in the general long-term debt account group. Expenditures for these liabilities are recognized when paid. The liability for unused vacation and sick leave for proprietary fund employees is recorded as a long-term liability in the proprietary funds. The expenses were recorded when the liability was incurred as required by generally accepted accounting principles. k. Long -Term Debt Unmatured general long-term debt of the City, including special assessment debt for which the government is obligated in some manner, is recorded in a separate, self -balancing set of accounts, the General Long -Term Debt Account Group. Long-term debt of the proprietary funds is reported as a liability in the specific fund making the debt service payments. For more information on the long-term debt of the City, see Note 7. 1. Contributed Capital Enterprise Fund contributions from grants, customers, special improvement districts and other outside sources restricted for capital acquisition or construction are reported as contributed capital. Depreciation on assets acquired from contributions is reflected in the statement of revenue, expenses, and changes in retained earnings. The amount of depreciation applicable to assets acquired through contribution from grants, entitlements, and shared revenues is transferred to the related contribution account instead of retained earnings. Enterprise Fund resources received from grants, entitlements, or shared revenues which may be utilized for operations or for either operations or capital acquisition or construction are reported as "non-operating" revenues. CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 1. Summary of Significant Accounting Policies - cont. M. Interfund Transactions Interfund transactions consisting of identified services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as revenue in the fund performing the services. Transactions which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of the expenditures in the fund that is reimbursed. Advances between funds are accounted for in the appropriate Interfund receivable and payable accounts. n. Comparative Data Comparative total data for the prior year have not been presented in the accompanying financial statements. The information has been excluded because the City began presenting a statement of cash flows for its enterprise funds rather than a statement of changes in financial position in accordance with Governmental Accounting Standards Board Statement Number 9. o. 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 cash flows of its proprietary fund types in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 2. Property Taxes Property tax levies are set in August, in connection with the budget process, and are based on taxable values listed as of January 1 for all property located in the City. Taxable values are established by the State Department of Revenue based on market values. A. revaluation of all property is required to be completed on a periodic basis. Taxable value is defined by State statute as a fixed percentage of market value. I! CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 2. Property Taxes - cont. Real property taxes and special assessments are generally billed in October and are payable 50% by November 30 and 50% by May 31. After these dates, taxes and assessments become delinquent and become a lien on the property. Personal property is assessed and personal property taxes are billed throughout the year, with a significant portion generally billed in May, June and July. Personal property taxes are based on levies set during the prior August. These taxes become delinquent 30 days after billing. Taxes and assessments that become delinquent are charged interest at the rate of 5/6 of 1% per month plus a penalty of 2%. Real property on which taxes and assessments remain delinquent and unpaid may be sold at tax sales. In the case of personal property, the property is to be seized and sold after the taxes become delinquent. The City is permitted by State statutes to levy taxes up to certain fixed limits for various purposes. The taxes levied by the City for the year ended June 30, 1989, were within the legal limits. The taxable value upon which the tax levies for the fiscal year ended June 30, 1989, were based was $15,504,295. Current tax collections for the year ended June 30, 1989, were approximately 64/09' of the amount levied. 3. Deficit Fund Balances The following Special Revenue Funds had deficit fund balances at June 30, 1989: a. Airport Fund - $(202,1431) - Most of the deficit, $(154,266), arose in the fiscal year ended June 30, 1985, when certain capital improvements at the airport were made. Proceeds from the sale of land were intended to fund the improvements, however, the City has not been able to sell the land, resulting in the deficit fund balance. The deficit has increased each fiscal year because interest costs on registered warrants ($9,357 this fiscal year) and operating costs have exceeded the Airport Fund revenue. The deficit was reduced to ($2,905) in the subsequent fiscal year. b. Parking Fund - $0,067) - The deficit arose because of a $7,912 short -fall in anticipated revenue and will be eliminated with revenues collected in future fiscal years. -21- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 3. Deficit Fund Balances - cont. c. Retirement Fund - $(34,555) - The deficit resulted because of a short -fall in anticipated revenue. Most of the short -fall was in tax revenues. The deficit was eliminated during the subsequent fiscal year. d. Health Fund - $(40,191) - The deficit is the result of a short -fall in anticipated revenue, mostly in the tax revenue source. The deficit was reduced to $(2,146) in the subsequent fiscal year. The following Debt Service Funds had deficit fund balances at June 30, 1989: General Obligation $ (16,996) 1981 Sidewalk and Curb $ (4,985) 1983 Sidewalk and Curb $ ( 96 ) 1984 Sidewalk and Curb $ (2,503) 1985 Sidewalk and Curb $ (9,093) 1986 Sidewalk and Curb $ (3,121) 1987 Sidewalk and Curb $ (3,628) S.I.D. Number 313 $ (2,274) S.I.D. Number 326 $ (3,068) S.I.D. Number 328 $ (31,861) S.I.D. Number 333 $ (83,256) S.I.D. Number 334 $ (7,2224) S.I.D. Number 337 $ (5,283) Lighting District Number 1 $ (7,156) These deficits were caused by a short -fall in anticipated revenue and will be eliminated as delinquent assessments are collected. The following Capital Projects Funds had deficit fund balances at June 30, 1989: Southwest Kalispell Sewer/Water Project $ (29,478) 1989 Sidewalk and Curb Construction $ (2,527) These deficits resulted when the City did not receive grant reimbursements from the Environmental Protection Agency for project expenditures already made. They will be eliminated with the receipt of the reimbursements. -22- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 4. Budget Overdrafts/Variances Significant favorable budget to actual variances existed in the housing and community development and capital outlay expenditure categories in the amounts of $346,210 and $344,758, respectively, in the Special Revenue Funds. These variances relate primarily to the Tax Increment Fund. The City did not purchase as much land or complete certain street projects as was anticipated in the budget. The significant unfavorable budget to actual revenue variance and favorable budget to actual expenditure variance reported in the Capital Projects Funds resulted when the Southwest Kalispell Water/Sewer Project was budgeted for in the Capital Projects Fund but a major portion of the financial activity related to the construction project was accounted for and reported in the dater and Sewer Enterprise Funds and the costs of the project were recorded as contributed capital and fixed assets. A total budget overdraft is reported in the Debt Service Funds in the amount of $(10,192). This overdraft is the aggregate total of all Debt Service fund budgets and is comprised primarily of a total budget overdraft in the 1987 Sidewalk and Curb Fund of $(8,835). Total budget overdrafts also occurred in a number of other Debt Service Funds as follows: 1980 Sidewalk and Curb $ (34) 1983 Sidewalk and Curb $ ( 41) 1985 Sidewalk and Curb $ (620) S.I.D. Number 328 $ (2,656) S.I.D. Number 333 $ (1,171) S.I.D. Number 335 $ (127) S.I.D. Number 336 $ (125) S.I.D. Number 337 $ (999) 5. Cash and Investments The City maintains a cash and investment pool for all funds under the control of the City Treasurer. In addition, investments are separately held for several of the funds. Cash and investments may include cash and cash items; demand, time, savings and fiscal agent deposits; investments in the State Short -Term Investment Pool (S.T.I.P.); direct obligations of the United States Government and securities issued by agencies of the United States; repurchase agreements; and registered warrants. -23- CITY OF KALISPELL ALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 5. Cash and Investments - cont. The composition of cash and investments on June 30, 1989, was as follows: Cash on nand $ 250 Petty Cash 500 Cash in Banks: Demand Deposits 673,171 Savings Deposits 44,672 Time Deposits 84,231 Repurchase Agreements 2,244,000 Sidewalk and Curb - Bonds/Warrants 64,033 Performance Bond 500 Variable Annuity Life Insurance Company (VALIC) Deferred Compensation Plan 48,619 Total per Balance Sheet $ 3,159,976 Deposits - At year-end, the carrying amount of the City's deposits was $802,074 and the bank balance was $886,835. These deposits include demand, time, and savings deposits. Of .the bank balance, $298,276 was covered by Federal depository insurance and $588,559 was uninsured and uncollateral ized. This uninsured and uncollateralized portion includes $431,108 which was covered by collateral held by the financial institutions or by their trust departments or agents, but not in the City's name. Montana statutes require that the City obtain securities for the uninsured portion of the deposits as follows: 1. securities equal to 505? of such deposits if the institution in which the deposits are made has a net worth to total assets ratio of 6% or more, or 2. securities equal to 100% of the uninsured deposits if the institution in which the deposits are made has a net worth to total assets ratio of less than 6%. The State statutes do not specify in whose custody or name the collateral is to be held. The amount of collateral held for City deposits at June 30, 1989, exceeded the amount required by State statutes. Investments - As noted above, statutes authorize the City to invest in direct obligations of the United States Government and securities issued by agencies of the United States, repurchase agreements, and the State Short -Term Investment Pool (S.T.I.P.). These investments are in addition to time and savings deposits, which are included in deposits above. The City's investments are categorized below to give an indication of the level of risk assumed by the City at June 30, 1989. -24- CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 5. Cash and Investments - cont. Category 1 - Includes investments that are insured, registered, or for which the securities are held by the City or its agent in the City's name. Category 2 - Includes uninsured and unregistered investments for which the securities are held by the financial institution's, broker's or dealer's trust department or agent in the City's name. Category 3 - Includes uninsured and unregistered investments for which the securities are held by the financial institution, broker or dealer, or by its trust department or agent but not in the City's name. Category Carrying Market 1 2 3 Value Value Repurchase Agreements $ -0- $ -0- $ 2 ,244 ,000 $ 2 ,244 ,000 $ 2 ,244 .000 In addition, funds placed in a deferred compensation plan by City employees were held and invested by the Variable Annuity Life Insurance Company (VALIC). Funds in the plan at June 30, 1989, amounted to $48,619. 6. Fixed Assets A summary of changes in general fixed assets follows: Balance Balance July 1, 1988 Additions Deletions June 309 1989 Land $ 917,389 $ 610,003 $ - - $ 1,527,392 Buildings 3,215,814 - - - - 3,215,814 Improvements Other Than Buildings 996,379 4,244 - - 1,000,623 Machinery & Equipment 1,740,313 24,389 3,163 1 ,761 ,539 Construction Work In Progress -0- 2,844 - - 2,844 Total $ 6,869_,895 $ 641_2480 $ 3L163 $ 7_1508.212 -25- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 6. Fixed Assets - cont. A summary of proprietary fund type property, plant, and equipment at June 30, 1989 follows: 7. Long -Term Debt a. The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1989: General Obligation Bonds (1) Revenue Bonds (2) Special Assessment Bonds (1) Urban Renewal Bonds (1) Contracted Debt (1)(2) Compensated Absences Payable (1)(2) Total Balance Balance July 1, 1988 Additions Reductions June 30, 1989 $ 495,000 $ $ (25,000) $ 470,000 2,440,000 ( 85,000) 2,355,000 482,312 3+,758 (64,449) 1452,621 1,975,000 (75,000) 1,900,000 1455,936 (162,295) 293,641 2412,520 33,360 445,880 $ 6,260,768 $ 68,118 $ (411 ,74z4) $ 5,917,1 42 (1) Reported in general long-term debt account group. (2) Reported in Enterprise Fund. -26- Enterprise Land $ 245,369 Storm Sewer System 2,862,053 Machinery & Equipment 712,702 Construction Work in Progress 381,488 Source of Supply 347,709 Pumping Plant 1496,726 Treatment Plant 3,836,440 Transmission and Distribution 7,582,581 General Plant 475,218 Total $ 16,940,286 Less Accumulated Depreciation (5,098,771) Net $ 11 ,841 ,515 7. Long -Term Debt a. The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1989: General Obligation Bonds (1) Revenue Bonds (2) Special Assessment Bonds (1) Urban Renewal Bonds (1) Contracted Debt (1)(2) Compensated Absences Payable (1)(2) Total Balance Balance July 1, 1988 Additions Reductions June 30, 1989 $ 495,000 $ $ (25,000) $ 470,000 2,440,000 ( 85,000) 2,355,000 482,312 3+,758 (64,449) 1452,621 1,975,000 (75,000) 1,900,000 1455,936 (162,295) 293,641 2412,520 33,360 445,880 $ 6,260,768 $ 68,118 $ (411 ,74z4) $ 5,917,1 42 (1) Reported in general long-term debt account group. (2) Reported in Enterprise Fund. -26- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 7. Long -Term Debt - cont. b. Bonded Debt Bonds payable at June 30, 1989 are comprised of the following individual issues: 1. General Obligation Bonds Final Outstanding Issue Interest Term of Maturity Bonds June 30, Annual Purpose Date Rate Bond Date Issued 1989 Payment Bruckhau ser Pool 4/1/85 8.3-9.25% 15 yrs. 2000 $ 550,000 $ 470,000 Varies General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. The Debt Service Funds used to service the general obligation bonds had a deficit fund balance of $16,996 at June 30, 1989. 2. Revenue Bonds Total Revenue Bonds Final Outstanding Interest Term of Maturity Bonds June 30, Annual Rate Bond Date Issued 1989 moment 5.5% 20 yrs. 1992 $ 200,000 $ 30,000 $ 10,000 6.75% 20 yrs. 1996 445,000 305,000 Varies 10.08% 20 yrs. 20024 875,000 790,000 15,000 7.0% 20 yrs. 2006 11300,000 1,230,000 Varies $ 2,820 ,000 $ 2,355 ,000 Revenue Bonds are directly related to and expected to be paid from specific proprietary funds. Revenue Bond Disclosure The revenue bond ordinances require certain disclosures regarding the Sewer Fund in each year's audited fiancial statements. For the fiscal year ended June 30, 1989, the following are the required disclosures which are not contained elsewhere in the audited financial statements. a. Number of premises connected to the system at the end of the fiscal year: 4,362 -27- Issue Purpose Date 1972 Sewer Plant 1/1/72 1976 Storm Sewer 7/1/76 10.83 Sewer Plant 9/1/83 1986 Sewer Lines 6/1/86 Total Revenue Bonds Final Outstanding Interest Term of Maturity Bonds June 30, Annual Rate Bond Date Issued 1989 moment 5.5% 20 yrs. 1992 $ 200,000 $ 30,000 $ 10,000 6.75% 20 yrs. 1996 445,000 305,000 Varies 10.08% 20 yrs. 20024 875,000 790,000 15,000 7.0% 20 yrs. 2006 11300,000 1,230,000 Varies $ 2,820 ,000 $ 2,355 ,000 Revenue Bonds are directly related to and expected to be paid from specific proprietary funds. Revenue Bond Disclosure The revenue bond ordinances require certain disclosures regarding the Sewer Fund in each year's audited fiancial statements. For the fiscal year ended June 30, 1989, the following are the required disclosures which are not contained elsewhere in the audited financial statements. a. Number of premises connected to the system at the end of the fiscal year: 4,362 -27- 7. CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 Long -Term Debt - cont. b. Bonded Debt - cont. 2. Revenue Bond Disclosure - cont. b. Amount of cash on hand in each account of the Sewer System at the end of the fiscal year. Sewer Operating $ 3248,617 Sewer Capital Improvement 101,171 Sewer Revenue Reserve 285,797 Construction Fund 158,672 Replacement and Depreciation 326,398 Sewer Revenue Bond Account 113,453 Sewer Operating Reserve 47,000 c. Operating reserve to be accumulated and maintained in an amount equal to the average one month operating expense. Operating expenses for fiscal year ended June 30, 1989, of $502,957 divided by 12 = $41 ,913. d. The City shall maintain rates and charges sufficient to produce annual net revenues equal to at least 125; of the maximum amount of principal and interest to become due for all existing issues. Cash Flow Coverage Sewer Service Charges Storm Sewer Assessments Total Operating Revenue Less: Operating Expense (Before Depreciation) Available for Debt Service Maximum Debt Service Coverage -28- Fiscal Year Ended June 30, 1989 $ 812,1483 197,805 $ 1 ,010,288 502,957 $ 507,331 $ 284,725 178% CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 7. Long -Term Debt -.cont. b. Bonded Debt - cont. 2. Revenue Bond Disclosures - cont. e. Revenue bond reserve to be accumulated and maintained in an amount equal to the maximum amount of principal and interest to become due in any future fiscal year. Fiscal Year Ended Debt Service Coverage June 30, 1989 Revenue Bond Reserve Account Balance $ 285,797 Maximum Principal and Interest Due in Future Fiscal Year 284,725 Excess Coverage $ 1,072 f. Noncompliance by the City with the provisions of the Revenue Bond Ordinance. (1) Sewerage department boobs were not audited annually within 120 days after the close of each fiscal year by an independent public accountant or by the Department of Commerce as prescribed by the 1983 and 1986 Revenue Bond Ordinances. 3. Tax Increment Urban Renewal Bonds In December, 1985, the City issued $2,100,000 in Tax Increment Urban Renewal bonds pursuant to Title 7, Chapter 15, Parts 42 and 43, MCA, and pursuant to the Bond Resolution adopted by the Kalispell City Council. These Series 1985 Bonds are considered to be special obligations of the City payable solely from tax increment generated by the area. The City has irrevocably pledged and appropriated the tax increment to the payment of the Series 1985 Bonds which have a first lien on all tax increment revenue generated by the area. The Series 1985 Bonds do not constitute a general obligation of the City or pledge the ad valorem taxing power of the City. Although the long-term liability created by the issuance of the bonds is considered a fund -specific liability, it is reported as a liability in the general long-term debt account group as required by generally accepted accounting principles. At June 30, 1989, there was $123,045 available in the Tax Increment Fund, a Special Revenue Fund, to service these bonds. Issue 'urpose Date :n Renewal Bonds Increment 12/85 Interest Term of Rate Bond 6.25-9.5% 16 yrs. Final Outstanding Maturity Bonds June 30, Date Issued 1989 7/1/2002 $ 2,100,000 $ 1,900,000 -29- Annual Payment Varies CITY OF KALISPELL KALISPELL, MONTANA ES TO FINANCIAL STATEMENTS - cont. June 30, 1989 7. 'Long -Term Debt - cont. b. Bonded Debt - cont. 4. Special Assessment Bonds (S.I.D. Total Special Assessment Bonds Reported in General Long -Term Debt Account Group (S.I.D.) $ 914,120 $ 452,621 -30- Final Outstanding Issue Interest Term of Maturity Bonds June 30, Annual Purpose Date Rate Bond Date Issued 1989 Payment Reported in General Long -Term Debt Account Group S.I.D. No. 313 10/1/71 7.0% 20 yrs. 1992 $ 100,000 $ 3,000 Varies S.I.D. No. 328 7/1/79 8.7% 20 yrs. 1999 300,000 150,000 Varies S.I.D. No. 333 7/28/82 15.0% 10.yrs. 1992 65,000 20,000 Varies S.I.D. No. 334 1/1/82 14.5% 10 yrs. 1992 14,000 4,000 Varies S.I.D. No. 335 11/1/82 12.0 10 yrs. 1992 15,000 6,000 Varies S.I.D. No. 336 12/1/86 12.0% 10 yrs. 1994 24,500 2,500 Varies S.I.D. No. 337 12/1/86 7.74% 15 yrs. 2002 110,000 100,000 Varies 1981 Sidewalk and Curb 10/1/81 9.5% 8 yrs. 1989 18,000 3,000 Varies 1982 Sidewalk and Curb 4/1/83 12.0% 8 yrs. 1990 1,000 1,000 Varies 1983 Sidewalk and Curb 2/1/84 10.0% 8 yrs. 1991 6,500 2,500 Varies 1984 Sidewalk and Curb 3/5/85 12.01% 8 yrs. 1992 45,000 20,000 Varies 1985 Sidewalk and Curb 12/3/85 10.0% 8 yrs. 1993 44,600 28,600 Varies 1986 Sidewalk and Curb 12/31/86 9.0% 8 yrs. 1994 20,987 13,488 Varies 1987 Sidewalk and Curb 12/31/87 12.0% 8 yrs. 1995 31,275 23,275 Varies 1988 Sidewalk and Curb 1/1/89 12.0% 8 yrs. 1996 314,758 34,758 Varies Special Light Construction No. 1 12/1/82 12.0% 10 yrs. 1993 75,000 28,500 Varies Special Light Construction No. 2 11/20/84 12.0% 8 yrs. 1991 28,500 12,000 Varies Total Special Assessment Bonds Reported in General Long -Term Debt Account Group (S.I.D.) $ 914,120 $ 452,621 -30- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 7. Long -Term Debt - cont. b. Bonded Debt - cont. 4. Special Assessment Bonds (S.I.D.) - cont. Special assessment bonds are secured by a lien on the assessed properties. The primary source of repayment is the assessments levied against the benefiting properties. However, the City is liable, to an extent, for repayment of these special assessment bonds. The City is authorized by State law to establish and has established a revolving .fund to ensure the payment of debt service on the bonds in the event that assessed property owners are in default. At June 30, 1989, material delinquent special assessments receivable were as follows: S.I.D. No. 328 $ 51,804 S.I.D. No. 333 54,080 Total $ 105,884 c. Contracted Debt d. Compensated Absences Payable Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund $ 59,017 General Long -Term Debt Account Group83 6,863 Total $ 445,880 -31- Origination Interest Due Principal Outstanding Purpose Date Rate Term Date Amount June 30, 1989 Phone System (1) 9/11/87 Varies 3 yrs. 8/15/90 $ 39,077 $ 25,265 Copy Machine (1) 3/15/88 8% 5 yrs. 3/15/93 7,595 5,973 Liability Insurance (1) 7/1/87 Varies N/A 7/15/05 241,773 241,773 Ambulance (2) 7/28/88 Varies 3 yrs. 8/15/91 224,360 20.630 Total $ 312,805 $ 293,641 (1) Reported in general long-term debt account group. (2) Reported in Enterprise Fund. d. Compensated Absences Payable Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund $ 59,017 General Long -Term Debt Account Group83 6,863 Total $ 445,880 -31- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 7. Long -Term Debt - cont. e. Reouirements to Amortize Debt The annual requirements to amortize all long-term debt out- standing, except compensated absences payable, as of June 30, 1989, including interest payments of $3,493,990, are as follows: Annual Requirements to Amortize Long -Term Debt June 30, 1989 The City participates in the following retirement plans: Public Employees' Retirement System (P.E.R.S.) All the City's employees that work the equivalent of 120 working days in any fiscal year or more, except police and firemen participate in the Montana Public Employees' Retirement System (P.E.R.S.), a cost sharing multiple -employer retirement system. The payroll for employees covered by P.E.R.S. for the year ended June 30, 1989, was $1,448,519, and the City's total payroll was $2,673,167 for the same year. -32- General Special Year Ending Obligation Revenue Assessment Urban June 30 Bonds Bonds Bonds Renewal 1990 $ 67,230 $ 281 ,405 $ 99,568 $ 251,095 1991 69,917 274,350 85,623 254,895 1992 67,142 282,023 84,471 252,695 1993 69,367 284,042 62,865 254,905 1994 66,463 284,725 54,980 256,085 1995 - 1999 352,912 1 ,261 ,568 225,282 1 ,291 ,695 2000 - 2004 71,013 1 185,703 7 83 ,050 2005 - 2007 321,595 Total $ 7649044 $ 4 ,175 ,411 $ 612,789 $ 3 ,344 ,420 Year Ending Contracted June 30 Debt Totals 1990 $ 32,757 $ 732,055 1991 22,424 709,209 1992 12,022 698,353 1993 1,384 672,563 1994 662,253 1995 - 1999 3,131 ,457 2000 - 2004 2,039,766 2005 - 2007 321,595 Total $ 68.587 $ 8.965,252 State -Glide Retirement Plans The City participates in the following retirement plans: Public Employees' Retirement System (P.E.R.S.) All the City's employees that work the equivalent of 120 working days in any fiscal year or more, except police and firemen participate in the Montana Public Employees' Retirement System (P.E.R.S.), a cost sharing multiple -employer retirement system. The payroll for employees covered by P.E.R.S. for the year ended June 30, 1989, was $1,448,519, and the City's total payroll was $2,673,167 for the same year. -32- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 8. State -Wide Retirement Plans - cont. Public Employees' Retirement System (P.E.R.S.) - cont. All City employees that work more than the equivalent of 120 working days per fiscal year are required by State law to participate in P.E.R.S. A few other employees may, at their option, participate as well. Employees who retire (1) at or after age 60 with five years of creditable service, (2) at or after age 65 regardless of years of service, or (3) with 30 or more years of creditable service are entitled to a retirement benefit, payable monthly for the life of the member and/or beneficiary. The benefit amount is the number of years of creditable service divided by 60, and multiplied by the final compensation. The final compensation is a member's highest average annual compensation during any three consecutive years of membership service. Benefits fully vest after five years of service. Vested employees may retire at age 50 or with 25 years of service and receive reduced benefits. P.E.R.S. also provides death and disability benefits, with amounts determined by the State of Montana. Covered employees are required by State statute to contribute 6% of their salary to the plan. The City is similarly required to contribute to the plan at a rate set by State statute, which was 6.417% of covered payroll for the year ended June 30, 1989. The City's contribution requirement for the year ended June 30, 1989, was $182,608, which consisted of $89,656 from employees and $92,952 from the City. These amounts represent 6% and 6.417% of covered payroll, respectively, after deducting additional contributions from employees of $2,751. The additional contributions represent voluntary payment of contributions on time worked at another qualifying governmental entity or agency, thereby purchasing additional creditable service. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess P.E.R.S.'s funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. P.E.R.S. does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at June 30, 1989, for P.E.R.S. as a whole, determined -33- W CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 State -Vide Retirement Plans - cont. Public Employees' Retirement System (P.E.R.S.) - cont. through an actuarial update at June 30, 1989, and an actuarial valuation at July 1, 1988, was $1,042,198,038. The net assets available for benefits on that date, valued at cost or amortized cost, were $762,152,670, leaving an unfunded pension benefit obligation of $280,045,368. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1988, actuarial valuation, the P.E.R.S. contribution rate of 12.417% will amortize unfunded past service costs over 24.96 years. The City's contribution represented less than 1% of total contributions required from all employers. Ten year historical trend information showing P.E.R.S.'s progress in accumulating sufficient assets to pay benefits when due is presented in P.E.R.S.'s June 30, 1989 annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. Municipal Police Officers' Retirement System (M.P.O.R.S.) City police officers are covered under the Municipal Police Officers' Retirement System (M.P.O.R.S.), a cost sharing multiple -employer retirement system. The payroll for employees covered by M.P.O.R.S. for the year ended June 30, 1989, was $508,338, and the City's total payroll was $2,673,167 for the same year. M.P.O.R.S. members become eligible for retirement benefits, payable monthly for the life of the member and/or beneficiary, after 20 years of service if first employed on or before July 1, 1975, and after reaching age 50 and completing 20 years or more of service if first employed after July 1, 1975. Members eligible for retirement who do not elect to serve any additional years as an active police officer shall receive a service retirement allowance equal to 50% of the final average salary. A policy officer who is eligible for service retirement after 20 years of service and who elects to serve additional years shall receive the 50% salary plus an additional 1% of such allowance per year of additional service, up to a maximum of 60% of the final average salary. The final average salary is the monthly compensation of a member, averaged over the last 36 months of his active service. M.P.O.R.S. also provides death and disability benefits, with amounts determined by the State of Montana. -34- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 8. State -aide Retirement Plans - cont. Municipal Police Officers' Retirement System (M.P.O.R.S.) - cont. Funding for the plan is provided by the City, the covered police officers, and the State of Montana. Covered police officers are required by State statute to contribute 6% of their salary to the plan if first employed prior to July 1, 1979, and 7.50% of their salary to the plan if first employed on or after July 1, 1979. The City is similarly required to contribute to the plan at a rate set by State statute, which was 13.02% of covered payroll for the year ended June 30, 1989: The State contributes to the plan, out of the premium tax on motor vehicle property and casualty insurance policies, 15.06% of the compensation paid all members during the preceding year. The City's contribution requirement for the year ended June 30, 1989, was $104,159, which consisted of $37,973 from employees and $66,186 from the City. These amounts represent 6.452% and 13.02% of covered payroll, respectively, after deducting additional contributions from employees of $5,173. The additional contributions represent voluntary payment of contributions on time .worked at another qualifying governmental entity or agency, thereby purchasing additional creditable service. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess M.P.O.R.S.'s funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. M.P.O.R.S. does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at June 30, 1989, for M.P.O.R.S. as a whole, determined through an actuarial update at June 30, 1989, and an actuarial valuation at July 1, 1988, was $66,546,327. The net assets available for benefits on that date, valued at cost or amortized cost, were $31,723,887, leaving an unfunded pension benefit obligation of $34,822,440. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1988, actuarial valuation, the M.P.O.R.S. weighted contribution rate of 35.46% will amortize unfunded past service costs over 29.51 years. The City's contribution represented 5.1° of total contributions required from all participating employers. _35- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 8. State -Azide Retirement Plans - cont. Municipal Police Officers' Retirement System (M.P.O.R.S.) - cont. Ten year historical trend information showing M.P.O.R.S.'s progress in accumulating sufficient assets to pay benefits when due is presented in M.P.O.R.S.'s June 30, 1989, annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. Firefighters' Unified Retirement System (F.U.R.S.) City firefighters are covered under the Firefighters' Unified Retirement System (F.U.R.S.), a cost sharing multiple employer retirement system. The payroll for employees covered by F.U.R.S. for the year ended June 30, 1989, was $494,552, and the City's total payroll was $2,673,167 for the same year. F.IT.R.S. members become eligible for retirement benefits, payable monthly for the life of the member and/or beneficiary, after reaching age 50 and completing 10 years or more of service. A member hired before July 1, 1981, who is eligible for retirement and who elects to retire after completing 20 years of service and reaching age 50 as an active firefighter shall receive a service retirement allowance equal to 50% of the monthly compensation last received by the member. A member who completes more than 20 years of service shall receive an additional 1% of his final compensation for each year in excess of 20, up to a maximum of 60% of the monthly compensation last received by the member. A member hired before July 1, 1981, who is eligible for retirement and who elects to retire after completing 10 years or more of service but has not both completed 20 years of service and reached age 50 as an active firefighter shall receive a service retirement allowance equal to 2% of the monthly compensation last received by the member for each year of service up to a maximum of 60% of his final salary. A member hired on or after July 1 , 1981, who is eligible for retirement shall receive a service retirement allowance equal to 2% of his final average salary for each year of service up to a maximum of 30 years of service. The final average salary means the monthly compensation of a member hired on or after July 1 , 1981 , averaged over the last 36 months of his active service or, if he has not been a member that long, over the period of his membership. F.U.R.S. also provides death and disability benefits, with amounts determined by the State of Montana. -36- CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 8. 'State -Wide Retirement Plans - cont. Firefighters' Unified Retirement System (F.U.R.S.) - cont. Funding for the plan is provided by the City, the covered firefighters, and the State of Montana. Covered firefighters are required by State statute to contribute 6% of their salary to the plan. The City is similarly required to contribute to the plan at a rate set by State statute, which was 13.021P of covered payroll for the year ended June 30, 1989. The State contributes to the plan, out of the premium tax on insurance policies, 22.98% of the compensation paid all members during the preceding year. The City's contribution requirement for the year ended June 30, 1989, was $0.4,0614, which consisted of $29,673 from employees and $624,391 from the City. These amounts represent 6% and 13.02% of covered payroll, respectively. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present, value of credited projected benefits, is intended to help users assess F.U.R.S.'s funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. F.U.R.S. does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at June 30, 1989, for F.U.R.S. as a whole, determined through an actuarial update performed as of June 30, 1989, and an actuarial valuation at July 1, 1988, was $89,015,297. The net assets available for benefits on that date, valued at cost or amortized cost, were $30,378,892, leaving an unfunded pension benefit obligation of $58,636,405. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1988, actuarial valuation, the F.U.R.S. contribution rate of 42% will amortize unfunded past service costs over 34.25 years. The City's contribution represented 5% of total contributions required from all participating employers. Eight year historical trend information showing F.U.R.S.'s progress in accumulating sufficient assets to pay benefits when due is presented in F.U.R.S.'s June 30, 1989, annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. -37- CITY OF KALISPELL KALISPELL. MONTANA TO FINANCIAL STATEMENTS - cont. June 30, 1989 9. Local Retirement Plans Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of benefits under the plan) , subject only to the claims of the City's general creditors. Participants' rights under the plan are equal to those of general creditor of the City in an amount equal to the fair market value of the deferred account for each participant. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prudent investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. Investments are managed by the plan's trustee with no specific restrictions on the investment options. The plan assets of $148,619 are recorded in an agency fund at June 30, 1989, as required by generally accepted accounting principles. 10. Amounts Due From Other Governments The amounts due from other governments consist of the following: Due From Other Governments: Special Revenue Fund: Drug Enforcement Fund: Due from Flathead County $ 4,315 Enterprise Fund: Sewer Fund: Due from Environmental Protection Agency $ 126,571 Due from State Department of Commerce (C.D.B.G.) 58,5140 Water Fund: Due from State Department of Commerce (C.D.B.G.) 20,585 Total Enterprise Funds $ 20696 -38- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 11. Amounts Due From and To Other Funds Due from other funds and due to other funds consist of the following: Receivable Fund Payable Fund Amount Tax Increment Fund (1) S.I.D. Number 328 (2) $ 79,595 Tax Increment Fund (1) G.O. Bond (2) $ 16,700 Water Fund (4) Parking Fund (1) $ 1,200 Dater Fund (4) Retirement Fund (1) $ 20,050 Water Fund (4) Health Fund (1) $ 25,105 Water Fund (4) Sewer Fund (4) $ 90,545 Water Fund (4) Southwest Kalispell Sewer (3) $ 956 S.I.D. Revolving Fund (2) 1989 Sidewalk and Curb Construction (3) $ 2,526 S.I.D. Revolving Fund (2) 1981 Sidewalk and Curb (2) $ 4,851 S.I.D. Revolving Fund (2) 1983 Sidewalk and Curb (2) $ 100 S.I.D. Revolving Fund (2) 1984 Sidewalk and Curb .(2) $ 2,335 S.I.D. Revolving Fund (2) 1985 Sidewalk and Curb (2) $ 7,791 S.I.D. Revolving Fund (2) 1986 Sidewalk and Curb (2) $ 2,936 S.I.D. Revolving Fund (2) 1987 Sidewalk and Curb (2) $ 3,605 S.I.D. Revolving Fund (2) S.I.D. Number 313 (2) t) 1,919 S.I.D. Revolving Fund (2) S.I.D. Number 326 (2) $ 3,205 S.I.D. Revolving Fund (2) S.I.D. Number 328 (2) $ 33,765 S.I.D. Revolving Fund (2) S.I.D. Number 333 (2) $ 41,000 S.I.D. Revolving Fund (2) S.I.D. Number 334 (2) $ 2,710 S.I.D. Revolving Fund (2) S.I.D. Number 337 (2) $ 275 Notes: (1) Special Revenue Fund Total Receivable - $ 96,295 Total Payable - $ 46,355 (2) Debt Service Fund Total Receivable - $ 107,018 Total Payable - $ 200 ,7 87 (3) Capital Projects Fund Total Payable - $ 3,482 (4) Enterprise Fund Total Receivable - $ 137,856 Total Payable $ 90,545 -301- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 12. Restricted Cash/Investments The following restricted cash/ investments were held by the City as of June 30, 1989. These amounts are reported within the cash/investment account on the Combined Balance Sheet. Description Amount Special Revenue Fund: Development - Reserved for Community Development Fund - Interest Interest Subsidy $ 87,784 Tax Increment Fund: Sinking and Interest 123,046 Interest Subsidy 73,912 Bond Proceeds 239,528 UDAG Repayment Fund: for Bond Proceeds Rehabilitation Grants 26,946 Community Development 60,838 Total Special Revenue Funds $ 612,054 Enterprise Fund: Grater - Replacement and Depreciation $ 96,684 Sewer - Replacement and Depreciation 326,398 Sewer - Construction 158,672 Sewer - Reserve for Operations 47,000 Sewer - Sinking and Interest 113,453 Sewer - Contingency 285,797 Sewer - Capital Improvements 101,171 Solid Waste - Replacement and Depreciation 74,915 Total Enterprise Funds $ 1,204,090 Trust and Agency Funds: VALIC 457 Deferred Compensation Fund $ 48,617 Performance Bond 2,980 Total Trust and Agency Funds $ 51,597 Total Restricted Cash/Investments $ 1,867,741 13. Fund Equity Reserved retained earnings/fund balances of the City at June 30, 1989 consisted of: Special Revenue Funds: Community Development - Reserved for Interest Subsidy $ 87,784 Tax Increment: Reserved for 1985 Revenue Bond 123,046 Reserved for Interest Subsidy 73,912 Reserved for Bond Proceeds 239,528 UDAG Loan Repayment: Reserved for Interest Subsidy 7,712 Reserved for Loans And Grants 23,393 Reserved for Rehabilitation Grants 408 Reserved for Community Emergency 9,608 Total Special Revenue Funds $ 565,391 -40- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FIFANCIAL STATEMENTS - cont. June 30, 1989 13• Fund Equity - cont. Enterprise Funds: Water: Reserved for Inventory $ 95,546 Reserved for Replacement and Depreciation 96,684 Sewer: Reserved for Replacement and Depreciation 326,398 Reserved for Construction 298,161 Reserved for Operations 47,000 Reserved for Capital Improvements 168,673 Reserved for Sinking and Interest 113,452 Reserved for Contingency 285,797 Garbage: Reserved for Replacement and Depreciation 74,915 Total Enterprise Funds $ 1-2506 ,626 14. Changes in Contributed Capital A schedule of changes in contributed capital is presented below: Contributed Capital - July 1, 1988 Add: Capital Grants Deduct: Depreciation on assets acquired via capital grants Other adjustments Contributed Capital - June 30, 1989 $ 576,786 $ 5,070,258 $ 5,647,044 20,586 176,334 196,920 15,605 208,018 223,623 6,2o6 6,2o6 $ 581,767 $ 5,032,368 $ 5,614,135 15. Restatements During the current fiscal year, adjustments relating to prior years' transactions were made to the fund balance and retained earnings accounts. The following is a schedule of other such adjustments: Fund Special Revenue Funds: Airport Fund Enterprise Funds: Sewer Fund Total Enterprise Funds Amount Reason for Adjustment $ (31895) Adjustment of prior year expenditures (10,028) Adjustment of prior year expense 6,206 Adjustment of contributed capital $ (3 ,822) -41- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 16. Residual Equity Transfers Residual equity transfers are made to transfer the remaining equity balance of a discontinued fund to another fund. Transfers made during the year consist of the following: Fund Receiving Transfer Fund Making Transfer Amount Fire Truck Fund (3) General Fund (1) $ 10,358 S.I.D. Revolving Fund (2) 79 Sidewalk and Curb (2) 4,500 S.I.D. Revolving Fund (2) S.I.D. Number'302 (2) 510 S.I.D. Revolving Fund (2) S.I.D. Number 306 (2) 54 S.I.D. Revolving Fund (2) S.I.D. Number 307 (2) 1,183 S.I.D. Revolving Fund (2) S.I.D. Number 308 (2) 2,243 S.I.D. Revolving Fund (2) S.I.D. Number 309 (2) 1,021 S.I.D. Revolving Fund (2) S.I.D. Number 315 (2) 3,842 S.I.D. Revolving Fund (2) S.I.D. Number 316 (2) 316 Sewer Fund (4) First Alley gest Fund (3) 29,580 $ 53,607 Notes: (1) General Fund Total Transfers Out - $ 10,358 (2) Debt Service Fund Total Transfers In - $ 13,669 Total Transfers Out - $ 13,669 (3) Capital Projects Fund Total Transfers In - $ 10,358 Total Transfers Out - $ 29,580 (4) Enterprise Fund Total Transfers In - $29,580 17. Segment Information For Enterprise Funds The City maintains four Enterprise Funds which provide water, sewer, ambulance, and solid waste services. Segment information for the year ended June 30, 1989 was as follows: Operating Revenues Depreciation, Depletion and Amortization Expense Operating Income or (Loss) Operating Grants, Entitle- ments and Shared Revenues Operating Transfers In Out Tax Revenues Net Income or Loss Current Capital: Contributions Transfers Solid Total Water Sewer Ambulance Waste Enterprise Fund Fund Fund Fund Funds $ 734,493 $ 1,040,105 $ 180,583 $ 244,269 $ 2,199,450 $ 105,328 $ 350,988 $ 11,378 $ 35,1499 $ 503,193 $ 141,729 $ 186,160 $ 27,076 $ 103,131 $ 1458,096 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 177,831 $ 102,238 $ 26,466 $ 107,494 $ 414,029 $ 20,586 $ 176,334 $ $ $ 196,920 $ $ $ $ $ -42- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 17. Segment Information For Enterprise Funds - cont. 18. County Provided Services The City of Kalispell is provided various financial services by Flathead County. The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. 19. Joint Ventures Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. Insurance Coverage Effective July 1, 1987, the City of Kalispell, Montana, joined with other Montana cities and towns to form a self-insurance pool offering workers' compensation and liability coverages. Liability limits of $750,000 per person and $1.5 million per incident were obtained through the insurance pool. In August of 1986, the pool (named the Montana Municipal Insurance Authority) issued $6.25 million in tax exempt bonds to fund the liability program's reserves. The City signed a note with the Authority for $241,773, its pro rata share of the debt, in order to help secure the bonds. Most of the debt service on the bonds is expected to be paid through interest earnings on bond proceeds and other funds of the Authority. The City has, however, elected to record this potential liability as a long-term liability in its accounting records and report it as such in its financial statements. -4,)- Solid Total Water Sewer Ambulance haste Enterprise Fund Fund Fund Fund Funds Plant, Property and Equipment: Additions $ 209,801 $ 823,594 $ * 1,489 $ $ 1,034,884 Deletions $ 18,510 $ 290,959 $ 700 $ $ 310,169 Net Working Capital $ 675,821 $ 573,744 $ 91,580 $ 89,840 $ 1,430,985 Total Assets $ 3,751,707 $ 10,492,945 $ 132,825 $ 343,575 $ 14,721,052 Bonds and Other Long -Term Liabilities: Payable from Operating Revenues $ 16,516 $ 2,386,086 $ 21,213 $ 10,832 $ 2,434,647 Payable from Other Sources $ $ $ $ $ Total Equity $ 3,718,560 $ 7,881 ,259 $ 110,517 $ 331,607 $ 12,041 ,943 18. County Provided Services The City of Kalispell is provided various financial services by Flathead County. The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. 19. Joint Ventures Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. Insurance Coverage Effective July 1, 1987, the City of Kalispell, Montana, joined with other Montana cities and towns to form a self-insurance pool offering workers' compensation and liability coverages. Liability limits of $750,000 per person and $1.5 million per incident were obtained through the insurance pool. In August of 1986, the pool (named the Montana Municipal Insurance Authority) issued $6.25 million in tax exempt bonds to fund the liability program's reserves. The City signed a note with the Authority for $241,773, its pro rata share of the debt, in order to help secure the bonds. Most of the debt service on the bonds is expected to be paid through interest earnings on bond proceeds and other funds of the Authority. The City has, however, elected to record this potential liability as a long-term liability in its accounting records and report it as such in its financial statements. -4,)- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 19• Joint Ventures - cont. Insurance Coverage - cont. Audited financial statements for the Montana Municipal Insurance Authority for the fiscal year ending June 30, 1989, disclosed the following: City -County Health Department The City -County Health Department is operated under an interlocal agreement between Flathead County and the City of Kalispell. The Department operates under the supervision and control of the City -County Health Board. The Board consists of seven members, six of whom are appointed by the Board of County Commissioners. The City of Kalispell contributed $39,6142 from their General Fund to Flathead County in support of the City -County Health Department during the fiscal year ended June 30, 1989. County -Wide Administrative Board The City of Kalispell along with Flathead County, the City of Columbia Falls, and the City of Whitefish, participate in a County -wide Administrative Board (CAB) that was established by an interlocal agreement in December, 1979• The CAB was formed for the purpose of coordinating all land use planning, subdivision reviews and approval, and zoning application and enforcement in Flathead County, as well as to assist in annexation by the cities. The Board consists of four members, the Payor of each of the three cities and the Chairman of the Flathead County Board of County Commissioners. The CAB is financed by a tax levied by each of the parties to the interlocal agreement in proportion to the expected benefits that each party shall receive during the ensuing fiscal year. -44- Liability Workers' Insurance Compensation Assets $ 10 ,106 ,886 $ _3.825.987 Current Liabilities $ 531,504 $ 86,987 Long -Term Debt 6,299,672 - Unpaid Claims Liabilities 2,690,000 3,739,000 Fund Balances 585,710 - Total Liabilities and Fund Balance $ 10,106,886 $ 3,825,987 Revenues $ 2,693,532 $ 3,697,599 Expenses 2,371,937 3,697,599 Excess Revenue (Expense) $ 321,595 $ -0- City -County Health Department The City -County Health Department is operated under an interlocal agreement between Flathead County and the City of Kalispell. The Department operates under the supervision and control of the City -County Health Board. The Board consists of seven members, six of whom are appointed by the Board of County Commissioners. The City of Kalispell contributed $39,6142 from their General Fund to Flathead County in support of the City -County Health Department during the fiscal year ended June 30, 1989. County -Wide Administrative Board The City of Kalispell along with Flathead County, the City of Columbia Falls, and the City of Whitefish, participate in a County -wide Administrative Board (CAB) that was established by an interlocal agreement in December, 1979• The CAB was formed for the purpose of coordinating all land use planning, subdivision reviews and approval, and zoning application and enforcement in Flathead County, as well as to assist in annexation by the cities. The Board consists of four members, the Payor of each of the three cities and the Chairman of the Flathead County Board of County Commissioners. The CAB is financed by a tax levied by each of the parties to the interlocal agreement in proportion to the expected benefits that each party shall receive during the ensuing fiscal year. -44- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 19. Joint Ventures - cont. County -Vide Administrative Board - cont. The financial activities of the CAB are accounted for by Flathead County within a Special Revenue Fund. The following is a summary of the CAB's total operations for the fiscal year ended June 30, 1989: Total Assets $ 55,541 Total Liabilities $ 20,871 Total Equity $ 34,670 Total Revenues $ 193,638 Total Expenditures $ 175,309 Net Increase in Fund Balance $ 18,424 The City's share of CAB's assets, liabilities, and equity was not readily available. 20. Pending Litigation The following is a list of litigation pending against the City of Kalispell and the amount of damages claimed by the Plaintiff. The City Attorney's evaluation as to the outcome of each case is also noted. The City has liability insurance which may cover all or part of the damages requested. Damages Potential Case Requested of Loss Franklin vs. City of Kalispell $ 500,000 Reasonably possible Marquart vs. City of Kalispell $ 20,000 Reasonably possible Remax Real Estate vs. City of Kalispell 60,000 Reasonably possible 21. Loans Receivable a. On June 29, 1984, the City entered into an agreement with Kalispell Center Limited Partnership (KCLP) whereby funds received by the City under an Urban Development Action Grant were loaned to KCLP to help fund the Kalispell Center Mall project. The total amount loaned to KCLP was $3,336,928. The balance of the loan receivable at June 30, 1989, was $3,195,751 and is recorded in the Urban Development Action Grant Loan Repayment Fund, a Special Revenue Fund. Loan repayments to the City began in April, 1987. The repayment schedule calls for monthly principal and interest payments of $21,096.95 on the first day of each month. The term of the loan is 25 years. Interest was deferred for the first year but will accrue at 6% per annum for years 2 through 4, than at 9% for the remaining 21 years of the loan. -45- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1989 21. Loans Receivable - cont. b. A. loan was made from the Tax Increment Fund, a Special Revenue Fund, to the 2nd Avenue gest Professional Building, a partnership, in the amount of $67,000 on December 30, 1985. The loan was made for the purpose of acquiring real property for development as a parking lot. The term of the loan is fifteen years at 5% interest for the first five years. For years 6 through 15 the interest rate will accrue at the rate paid on U.S. Treasury bills as of the 15th day of January of the year in which the payments are due. The repayment schedule calls for a monthly principal and interest payment of $530 each month for the first five years of the loan. The balance of the loan receivable at June 30, 1989 was $55,810 and is recorded in the Tax Increment Fund, a Special Revenue Fund. -46- CITY OF KALISPELL KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION ma SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1989 -47- DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - - STATE OF MONTANA (406)444-3010 INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION To the Honorable City Manager, Mayor and City Council City of Kalispell, Kalispell, MT 59901 HELENA, MONTANA 59620 We have audited the general purpose financial statements of the City of Kalispell, Montana, for the year ended June 30, 1989, and have issued our report thereon dated June 27, 1991. Those financial statements are the responsibility of the City's management. Our responsibility was to express an opinion on those financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the City of Kalispell, Montana, taken as a whole. The accompanying Schedule of Federal Financial Assistance for the year ended June 30, 1989, is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in this schedule has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. June 27, 1991 DONALD L. DOOLEY Bureau Chief By: 11r' J(l tx c cl STAN NORDWICK Audit Section Supervisor -48- AN EQUAL OPPORTUNITY EMPLOYER CITY OF KALISPELL KALISPELL, MONTANA SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1989 -49- CITY OF KALISPELL KALISPELL. MONTANA ULE OF FEDERAL FINANCIAL ASSISTANCE For the Fiscal Year Ended June 30, 1989 Federal Pass -Through Program or CFDA Grantor's Award Number Number Amount Federal Grantor/Pass-Through Grantor/Program Title U.S. Department of the Treasury Direct Programs: State and Local Government Fiscal Assistance - Revenue Sharing 21.300 U.S. Department of Transportation Passed Through State Department of Justice: State and Community Highway Safety 20.600 89-02-01-6 $ 2,385 State and Community Highway Safety 20.600 88-11-01-3 $ 11,285 Total Department of Transportation U.S. Department of Justice Passed through Flathead County: Drug Control and Systems Improvement - Formula Grants 16.579 U.S. Department of Housing and Urban Development Passed Through State Department of Commerce: Community Development Block Grant - State's Program 14.228 Community Development Block Grant - State's Program 14.228 Total U.S. Department of Housing and Urban Development U.S. Environmental Protection Agency Direct Programs: Kalispell Sewer Study Project 66.015 Construction Grants for Wastewater Treatment Works 66.418 Construction Grants for Wastewater Treatment Works 66.418 Construction Grants for Wastewater Treatment Works 66.418 Total U.S. Environmental Protection Agency Total Federal Financial Assistance MT-CDBG-C84-06 $ 500,000 STT-CDBG-87-PF-09 $ 375,000 $ 19,181 $ 164,000 $ 7,785,297 $ 393,250 Notes: (1) The beginning balance had been reduced from the ending balance in the prior report by the amount of $168,944. This amount represents the balance reported in the previous fiscal year for the Urban Development Action Grant. The grant was determined to have been completed and closed out. The balance remaining consisted of the proceeds from the repayment of loans made under the terms of the original grant and is now considered a local resource and is no longer considered to be Federal grant money. The balance is available to make additional loans consistent with the terms of the original grant. Im Beginning Cash Receipts Ending Balance Federal Matching/ Cash Balance July 1, 1988 Funds Income/Other Disbursements June 30, 1989 $ 12,084 $ - - $ - - $ 12,084- $ -0- -0- 2,385 - - 2,385 -0- -0- 11,285 - - 11,285 -0- $ -0- $ 13,670 $ -0- $ 13,670 $ -0- $ -0- $ 3,151 $ 6,735 $ 4,315 $ 5,571 $ 94,523 $ 1,499 $ 5,227 $ 13,465 $ 87,784 -0- 99,706 - - 99,706 -0- $ 94,523 $ 101,205 $ 5,227 $ 113,171 $ 87,784 $ 44,984 $ 12,975 $ - - $ 53,603 $ 4,356 -0- 49,286 - - - - 49,286 260,574 - - - - 80,804 179,770 -0- 972230 297,218 203,909 190,539 $ 305,558 $ 159,491 $ 297,21 $ 338,316 $ 423,951 $ 412,165 (1) $ 277,517 $392,180 $ 4811556 $ 517,306 CITY OF KALISPELL KALISPELL, MONTANA INDEPENDENT AUDITOR'S REPORT Fiscal Year Ended June 30, 1990 -52- DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR - STATE OF MONTANA (406) 444-3010 INDEPENDENT AUDITOR'S REPORT To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 CAPITOL STATION HELENA, MONTANA 59620 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the year ended June 30, 1990, as listed in the table of contents. These general purpose financial statements are the responsibility of the City of Kalispell's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The City of Kalispell has not maintained adequate records relating to fixed assets of the general fixed assets account group and the Enterprise Funds. Accordingly, we were unable to satisfy ourselves as to the fixed assets balances of the general fixed assets account group amounting to $7,692,686 and the fixed assets balances and the related depreciation expense of the Enterprise Funds amounting to $13,140,191 and $526,704, respectively. In our opinion, except for the effects of such adjustments, if any, as might have been necessary had we been able to examine the fixed assets described in paragraph three, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Kalispell, Montana, at June 30, 1990, and the results of its operations and cash flows of its proprietary fund types for the year then ended, in conformity with generally accepted accounting principles. June 27, 1991 DONALD L. DOOLEY Bureau Chief By:_ STAN NORDWICK Audit Section Supervisor -53- ,AN EOUAL OPPORTUNITY EMPLOYER CITY OF KALISPELL KALISPELL, MONTANA FINANCIAL STATEMENTS Fiscal Year Ended June 30, 1990 -54- CITY OF KALISPELL KALISPELL, MONTANA COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 1990 GOVERNMENTAL FUND TYPES ASSETS Cash/Investments Taxes/Assessments Receivable Other Receivables (Net of Uncollectables) Due from Other Funds Due from Other Governments Prepaid Expenses Inventories Amount Available in Debt Service Funds Amounts Available in Special Revenue Funds Amount to be Provided for Retirement of General Long -Term Debt Amount to be Provided from Special Assessments Fixed Assets (Net of Accumulated Depreciation) TOTAL ASSETS LIABILITIES AND FUND EQUITY Liabilities: Short -Term Payables Due to Other Funds Other Short -Term Liabilities Deferred Revenue Long -Term Liabilities Total Liabilities Fund Equity: Contributed Capital Investment in General Fixed Assets Retained Earnings Reserved Unreserved Fund Balance Reserved Unreserved Total Fund Equity TOTAL LIABILITIES AND FUND EQUITY ,826 $ 5 ,903 ,007 $ 870 ,7614 $ 19 ,774 $ 38,588 $ 2143,907 $ 110,691 $ 5,200 - - 8,680 198,5314 - - 5245,616 3,769,2114 5148,2148 - - $ 584,204 $ 14 ,021 ,801 $ 857,473 $ 5,200 - - 717,169 13,291 - - 589,622 1 164,037 14,5711 $ 589,622 $ 1,881,206 $ 13,291 $ 114,5714 $ 1 ,173,826 $ 5,903,007 $ 870,761 $ 19,7714 See accompanying Notes to Financial Statements, -55- Special Debt Capital General Revenue Service Projects 616,239 $ 2,009,789 $ 83,360 $ 19,7714 5115,616 569,2614 5148,2148 - - 165 3,2114,917 120,035 - - 8,680 79,596 118,938 - - _ _ 1,493 183 - - 3,126 27,9148 ,826 $ 5 ,903 ,007 $ 870 ,7614 $ 19 ,774 $ 38,588 $ 2143,907 $ 110,691 $ 5,200 - - 8,680 198,5314 - - 5245,616 3,769,2114 5148,2148 - - $ 584,204 $ 14 ,021 ,801 $ 857,473 $ 5,200 - - 717,169 13,291 - - 589,622 1 164,037 14,5711 $ 589,622 $ 1,881,206 $ 13,291 $ 114,5714 $ 1 ,173,826 $ 5,903,007 $ 870,761 $ 19,7714 See accompanying Notes to Financial Statements, -55- PROPREITARY FIDUCIARY FUND TYPES FUND TYPES ACCOUNT GROUPS $ 3,159,976 1,718,711 2,541 ,793 General General 207,214 Trust 1,676 Fixed Long -Term Enterprise and Agency 95,5145 Assets Debt $ 1,643,821 $ 106,414 2,575,1406 2,923,823 1407,24145 55,583 -- -- -- 311,480 -- -- -- 130,995 - - - - - - -- -- -- 13,291 -- -- -- 123,046 - - - - - - 2,575,1406 407,445 13,1140,191 - - 7,692,686 - - $ 15 ,282 ,070 $ 106__L414 $ 7 ,692 ,686 $ 3 ,119 ,188 $ 60,307 $ 106,14114 $ 2,332,911 - - - - 3,119,188 $ 2 ,393 ,218 $ 106,414 $ -0- $ 3 ,119 ,188 $ 5,937,606 1,445,959 5,505,287 $ 12,888,852 $ 15,282,070 - - 7,692,686 $ -0- $ 7 692,686 $ -0- TOTALS (MEMORANDUM ONLY) June 30, 1990 June 30, 1989 19 ,3�49 ,727 $ 4,479,397 $ 3,159,976 1,718,711 2,541 ,793 3,646,597 3,746,0142 207,214 341,169 1,676 210,011 31,074 21,094 130,995 95,5145 13,291 (31 ,489) 123,046 123,045 2,575,1406 2,923,823 1407,24145 467,116 20,832,877 19 ,3�49 ,727 $ 314 ,167 ,729 $ 32 ,9�47 ,852 $ 565,107 207,2114 -0- 14,863,078 5 ,1452 ,099 $ 11 ,087 ,498 $ 5,937,606 7,692,686 1 ,445,959 5,505,287 717,169 1,781 ,524 $ 23 ,080 ,231 $ 1062414 $ 7,692,686 $ 3,119,188 $ 34,167,729 I $ 591 ,596 3141 ,169 105,966 5,7314,688 5,917,142 $ 12 ,690 ,561 $ 5,614,135 7,508,212 1 ,506,626 4,921 ,182 537,986 169,150 $ 20 ,257 ,291 $ 32,947,852 CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES Fiscal Year Ended June 30, 1990 Excess Other Uses GOVERNMENTAL FUND TYPES 589,091 $ 1 ,115 ,707 Special Debt Fund Balances - July 1, General Revenue Service Revenues: As Previously Taxes/Special Assessments $ 1,618,915 $ 2,5814,326 $ 2314,0314 Licenses and Permits $ 183,598 2,371 283 Intergovernmental Revenue 5714,1432 282,689 14,350 Charges for Services - - 301,588 65,768 - - Fines and Forfeitures 198,061 25,862 - - Miscellaneous Revenues As Restated 8,983 262,093 - - Investment and Royalty Earnings $ 57,355 914,5014 13,059 Total Revenues $ 2 ,9142 ,932 $ 3 ,317 ,613 $ 251,726 Expenditures: - Fund Balances - June 30, Current: $ 589,622 $ 1_,881,206 General Government $ 1422,1411 $ 1014,110 $ - - Public Safety 1,412,849 373 ,677 - - Public Works 213,709 767,673 - - Publie Health 13,091 1,846 - - Culture and Recreation 212,952 147,1429 - - Housing and Community Development - - 370,973 - - Miscellaneous 3,263 158,878 - - Capital Outlay 59,323 175,762 - - Debt Service 13,688 264,293 206,946 Total Expenditures $ 2 ,351 ,286 $ 2 ,2614 ,6141 $ 206,946 Excess (Deficiency) of Revenues Over Expenditures $ 591,646 $ 1,052,972 $ 1414,780 Other Financing Sources (Uses): Proceeds of General Long -Term Debt $ - - $ _ _ $ - - Proceeds of General Fixed Asset Disposition - - 210,180 - - Operating Transfers In - - 2,555 - - Operating Transfers (Out) (2,555) (150,000) Total Other Financing Sources (Uses) $ (2,555) $ 62,735 $ -0- 0- Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ 589,091 $ 1 ,115 ,707 $ 44,780 Fund Balances - July 1, 1989 - As Previously Reported $ 531 $ 765,1499 $ (31,1489) Restatements - - - - Fund Balances - July 1, 1989 - As Restated $ 531 $ 765,1499 $ (31,1489) Residual Equity Transfers In (Out) - - - Fund Balances - June 30, 1990 $ 589,622 $ 1_,881,206 $ 139291 See accompanying Notes to Financial Statements. -57- GOVERMIENTAL $ 526,521 FUND TYPES - cont. TOTALS - - Capital (MEMORANDUM ONLY) Projects June 30, 1990 June 30, 1989 $ - - $ 4,437,275 $ 2,931 ,557 - - 186,252 161,900 61,845 923,316 545,0145' - - 367,356 378,281 - - 223,923 242,088 1,104 272,180 247,989 169 165,087 184,198 $ 63 7118 $ 6 ,575 ,389 $ 4 ,691 ,958 - - $ 526,521 $ 518,530 - - 1 ,786,526 1 ,624,372 - - 981 ,382 966,502 - - 14,937 54,364 - - 260,381 216,451 - - 370,973 331,807 - - 162,141 148,821 189,610 424,695 1,060,153 - - 484,927 548,695 $ 189,610 $ 5 ,012 ,483 $ 5 ,469 ,695 $ (126,492) $ 1,562,906 $ (777,737) $ 18,471 $ 18,471 $ 34,759 - - 210,180 -0- 150,000 152,555 423,838 - - (152,555) (423,838) $ 168 ,471 $ 228,651 $ 34,759 $ 41,979 $ 1,791,557 $ (742,978) $ (27,405) $ 707,136 $ 1,483,589 - - -0- (3,895) $ (27,405) $ 707,136 $ 1,479,694 - - -0- (29,580) $ 14,574 $ 2.498_L693 $ 707,136 No CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL, SPECIAL REVENUE, DEBT SERVICE, AND CAPITAL PROJECTS FUND TYPES Fiscal Year Ended June 30, 1990 Revenues: Taxes/Special Assessments Licenses and Permits Intergovernmental Revenue Charges for Services Fines and Forfeitures Miscellaneous Revenues Investment and Royalty Earnings Total Revenues Expenditures: Current: General Government Public Safety Public Works Public Health Culture and Recreation Housing and Community Development Miscellaneous Capital Outlay Debt Service Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Sources (Uses): Proceeds of General Long -Term Debt Proceeds of General Fixed Asset Disposition Operating Transfers In Operating Transfers (Out) Total Other Financing Sources (Uses) GENERAL FUND Variance -� Favorable Budget Actual (Unfavorable) 1 ,248,046 134,700 377,750 285,260 215,200 4,975 139,595 $ 2 ,405 ,526 $ 42 8, 846 1,412,857 217,452 13,091 212,952 3,269 59,323 15,433 $ 2 ,363 ,223 $ 1,618,915 183,598 5714,432 301 ,588 198,061 89983 57,355 $ 2 ,942 ,932 $ 422,411 1,412,849 213,709 13,091 212,952 3,263 59,323 13,688 $ 2,351 ,286 $ 42,303 $ 591,646 (2,555) (2,555) (2.555) $ (2,555) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ 39,748 $ 589,091 Fund Balances - July 1, 1989 - As Previously Stated $ 531 Restatements - Fund Balances - July 1, 1989 - As Restated $ 531 Residual Equity Transfers In (Out) - Fund Balances - June 30, 1990 $ 589,622 See accompanying Notes to Financial Statements. -59- $ 370,869 48,898 196,682 16,328 (17,139) 4,008 (82,240) $ 537,406 $ 6,435 8 3,743 -0- -0- 6 -0- 1,745 $ 11 ,937 $ 549,343 $ _ _ -0- $ -0- $ 549,343 SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS CAPITAL PROJECTS FUNDS Variance - Variance - Variance - Favorable Favorable Favorable Budget Actual (Unfavorable) Budget Actual (Unfavorable) Budget Actual (Unfavorable) $ 2,176,864 $ 2,584,326 $ 1107,462 $ 476,649 $ 234,034 $ (242,615) $ - - $ - - $ - - 2,435 2,371 (64) -0- 283 283 256,732 282,689 25,957 -0- 4,350 4,350 104,035 61,845 (42,190) 60,400 65,768 5,368 28,000 25,862 (2,138) 259,523 262,093 2,570 _ _ _ _ _ _ -0- 1,104 1,104 33,200 94,504 61,304 600 13,059 12,459 -0- 169 169 $ 2,817,154 $ 3,317,613 $ 500,459 $ 477,249 $ 251,726 $ (225,523) $ 104,035 $ 63,118 $ (40,917) $ 104,145 $ 104,110 $ 35 $ - - 375,972 373,677 2,295 - - 804,277 767,673 36,604 - - - - - - - - - - - - 1,846 1,846 -0- - - - - - - - - - - - - 47,429 47,429 -0- - - - - - - - - - - - - 992,656 370,973 621,683 - - - - - - - - - - - - 165,229 158,878 6,351 - - 677,564 175,762 501,802 - - - - - - 398,327 189,610 208,717 268,755 264,293 4,46253 8,418 206,946 151,472 $ 3 ,437 ,873 $ 2 ,264 ,641 $ 1 ,173 ,232 $358,418 $ 206,946 $ 151,472 $ 398,327 $ 189,610 $ 208,717 (620,719) $ 1,052,972 $ 1,673,691 $ 118,831 $ 44,780 $ (74,051) 200,971 210,180 9,209 - - - - - - 2,555 2,555 -0- (372,150) (150,000) 222,150 (12,528) -0- (12,528) $ (168,624) $ 62,735 $ 231,359 $ (12,528) $ -0- $ (12,528) $ 789,343 $ 1,115,707 $ 1,905,050 $ 765,499 $ 765,499 $ 1,881 ,206 $ 106,303 $ 44,780 $ (31,489) $ (31,489) $ 13,291_ -60- $ (294,292) $ (126,492) $ 167,800 $ 63,436 $ 18,471 215,356 150,000 $ 278,792 $ 168,471 $ 61,523 $ (15,500) $ 41,979 $ (27,405) $ (27,405) $ __14,574 $ (44,965) (65,356) $ (110,321) $ 57,479 CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS ALL PROPRIETARY FUND TYPES Operating Expenses: Personal Services Fiscal Year Ended June 30, 1990 724,751 $ 656,597 Supplies PROPRIETARY 68,670 68,670 41,546 FUND TYPES TOTALS (MEMORANDUM ONLY) 348,580 Year Ended 155,149 Enterprise June 30, 1990 June 30, 1989 Operating Revenues: 11,100 14,862 Charges for Service $ 1,735,619 $ 1,735,619 $ 1,727,559 Miscellaneous Revenues 73,450 73,450 $ 29,817 Special Assessments 447,145 447,145 Operating Income (Loss) 442,074 Total Operating Revenues $ 2 ,256 ,214 $ 2 ,256 ,214 $ 2 ,199 9450 Operating Expenses: Personal Services $ 724;751 $ 724,751 $ 656,597 Supplies 68,670 68,670 41,546 Purchased Services 348,580 348,580 364,008 Fixed Charges 155,149 155,149 161,148 Losses/Bad Debt Expenses 11,100 11,100 14,862 Depreciation 526,704 526,704 503,193 Total Operating Expenses $ 1,834,954 $ 1,8349954 $ 1,741,354 Operating Income (Loss) $ 421,260 $ 421,260 $ 458,096 Non -Operating Revenues (Expenses): Curbs and Gutter Repairs $ (89,945) $ (89,945) $ -0- Loss on Disposal of Fixed Assets (5,267) (5,267) (3,718) Intergovernmental Revenue 15,945 15,945 10,515 Interest 130,030 130,030 147,303 Debt Service Interest Expense (189,469) (189,469) (198,167) Total Non -Operating Revenues (Expenses) $ (138,706) $ (138,706) $ 44,067 Net Income (Loss) $ 282,554 $ 282,554 $ 414,029 Add depreciation on fixed assets acquired by grants, entitlements, and shared revenues externally restricted for capital acquisitions and construction that reduced contributed capital 228,805 228,805 223,623 Increase (Decrease) in Retained Earnings $ 511,359 $ 511,359 $ 637,652 Retained Earnings - July 1, 1989 - As Previously Reported $ 6,427,808 $ 6,427,808 $ 5,764,398 Restatements 12,079 12,079 (3,822) Retained Earnings - July 1, 1989 - _ As Restated $ 6,439,887 $ 6,439,887 $ 5,760,576 Residual Equity Transfers in (Out) - - -0- 29,580 Retained Earnings - June 30, 1990 $ 6,951,246 $ 6,951,246 $ 6,427,808 See accompanying Notes to Financial Statements. CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF CASH FLOUTS - ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30, 1990 PROPRIETARY" FUND TYPES Cash Flows From Noneapital Financing Activities: Operating Grants Received $ 15,9145 Cash Payments for Grants (89,9145) Loans to Other Funds 137,855 Contract Paid by Developer 6,1485 Net Cash Provided by Noncapital Financing Activities $ 70,3140 Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets $ (1,8145,865) Principal Paid on Revenue Bonds and Contracts (112,8149) Interest Paid on Revenue Bonds and Contracts (189,722) Proceeds From Settlement 95,000 Proceeds From Inception of Lease Contract - Decrease in Due From Other Governments 51,131 Decrease in Due to Other Funds (Lease Related) - - Proceeds From Sale of Capital Equipment - - Capital Contributed by Tax Increment - - Capital Contributed by Government 552,277 Net Cash Used for Capital and Related Financing Activities $ (1 ,1450 ,028) Cash Flows From Investing Activities: Interest on Investments It 132,1459 Decrease in interest receivable 11995 Purchase of Sidewalk and Curb Warrants (18,1471) Redemption of Sidewalk and Curb Warrants 9,500 Net Cash Used in Investing Activities $ 125,1483 Net Increase in Cash and Cash Equivalents $ (333,190) Cash and Cash Equivalents at beginning of year 1,9014,006 Cash and Cash Equivalents at end of year $ 1,5701816 See accompanying Notes to Financial Statements Enterprise Cash Flows From Operating Activities: Cash Received From Customers $ 1,665,2314 Cash Received From Assessments 1450,228 Cash Received From Hookups 80,375 Cash Payments to Suppliers for Goods and Services (577,191) Cash Payments to Employees for Services (723,638) Cash From Other Operating Revenues 26,007 Net Cash Provided by Operating Activities $ 921,015 Cash Flows From Noneapital Financing Activities: Operating Grants Received $ 15,9145 Cash Payments for Grants (89,9145) Loans to Other Funds 137,855 Contract Paid by Developer 6,1485 Net Cash Provided by Noncapital Financing Activities $ 70,3140 Cash Flows From Capital and Related Financing Activities: Acquisition and Construction of Capital Assets $ (1,8145,865) Principal Paid on Revenue Bonds and Contracts (112,8149) Interest Paid on Revenue Bonds and Contracts (189,722) Proceeds From Settlement 95,000 Proceeds From Inception of Lease Contract - Decrease in Due From Other Governments 51,131 Decrease in Due to Other Funds (Lease Related) - - Proceeds From Sale of Capital Equipment - - Capital Contributed by Tax Increment - - Capital Contributed by Government 552,277 Net Cash Used for Capital and Related Financing Activities $ (1 ,1450 ,028) Cash Flows From Investing Activities: Interest on Investments It 132,1459 Decrease in interest receivable 11995 Purchase of Sidewalk and Curb Warrants (18,1471) Redemption of Sidewalk and Curb Warrants 9,500 Net Cash Used in Investing Activities $ 125,1483 Net Increase in Cash and Cash Equivalents $ (333,190) Cash and Cash Equivalents at beginning of year 1,9014,006 Cash and Cash Equivalents at end of year $ 1,5701816 See accompanying Notes to Financial Statements TOTALS ( MEMORANDUM ONLY) Year Ended June 30, 1990 $ 1,665,234 450,228 80,375 (577,191) (723,638) 26,007 $ 921 ,015 $ 15,945 (89,945) 137,855 6 ,4 85 $ 70,340 $ (1,845,865) (112,849) (189,722) 95,000 -0- 51 ,131 -0- -0- -0- 552,277 $ (1 ,450 ,028) $ 132,459 1 ,995 (18,471) 9,500 $ 125 ,483 $ (333,190) 1,904,006 $ _ 1 ,570,816 June 30, 1989 $ 1,655,800 435,213 33,213 (605,033) (654,078) 24,611 $ 889,726 $ 11,130 (2,460) (137,855) -0- $ (129,185) $ (705,451) (162,246) (197,560) 90,000 24,000 16 (15,150) 500 29,580 196,920 $ (739 ,391) $ 143,627 -0- (34,758) 5,000 $ 113,869 $ 135,019 1,768,987 $ 1,904 ,006 -63- CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES - cont. Fiscal Year Ended June 30, 1990 PROPRIETARY FUND TYPES Disclosure of Accounting Policy: For purposes of the statement of cash flows, the Enterprise Funds consider all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. See accompanying Notes to Financial Statements. -64- Enterprise Reconciliation of Operating Income to Net Cash Provided by Operating Activities: Operating Income $ 421,26o Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Depreciation 526,704 Provision for Uncollectable Accounts 10,923 Change in Assets and Liabilities: Decrease (Increase) in Accounts Receivable (37,276) Decrease (Increase) in Assessments Receivable 3,083 Decrease (Increase) in Inventory (23,370) Increase (Decrease) in Accounts Payable 18,579 Increase (Decrease) in Compensated Absences 1,112 Net Cash Provided by Operating Activities $ 921,015 Disclosure of Accounting Policy: For purposes of the statement of cash flows, the Enterprise Funds consider all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. See accompanying Notes to Financial Statements. -64- TOTALS (MEMORANDUM ONLY) Year Ended June 30, 1990 $ 421 ,260 526,70+ 10,923 (37,276) 3,083 (23,370) 18,579 1,112 $ 921 ,015 June 30, 1989 $ 458,096 503,191 (6,189) (38,302) (6,861) (7,515) (15,957) 3,263 889,726 CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS June 30, 1990 1. Summary of Significant Accounting Policies The following is a summary of the City of Kalispell's significant accounting policies: a. Reporting Entity The City is governed by an elected Mayor and City Council. The general purpose financial statements include all funds, account groups, boards, commissions, and authorities which meet the criteria embodied in GASB Cod. Sec. 2100, "Defining the Reporting Entity." Such criteria are manifestation of oversight responsibility (financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters), scope of public service (benefit to the City and/or its residents, conducted within the geographic boundaries of the City, and generally available to its citizens), and special financing relationships. b. Fund Accounting The accounts of the City are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for within a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. The following types of funds and account groups are maintained by the City. GOVERNMENTAL FUNDS General Fund - Used to account for all financial resources except those required to be accounted for in other funds. Special Revenue Funds - Used to account for the proceeds of special revenue sources (other than expendable trusts or for major capital projects) that are legally restricted to expenditures for specific purposes. Capital Projects Funds - Used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). Debt Service Funds - Used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. TY OF KALISPELL ALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 1. Summary of Significant Accounting Policies - cont. b. Fund Accounting - cont. PROPRIETARY FUNDS Enterprise Funds - Used to account for operations (a) that are financed and operated in a manner similar to private business enterprises - where the intent of the governing body is that costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. FIDUCIARY FUNDS Trust and Agency Funds - Used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. These may include (a) expendable trust funds, (b) nonexpendable trust funds, (c) pension trust funds and (d) agency funds. FIXED ASSETS AND LONG-TERM LIABILITIES General Fixed Assets Account Group - Used to account for the fixed assets of the City which are not accounted for in proprietary funds. General Long -Term Debt Account Group - Used to account for all long-term debt of the City except that accounted for in the proprietary funds. C. Basis of Accounting The modified accrual basis of accounting is followed by all funds except the proprietary funds. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, that is, when they become both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The accrual basis of accounting is utilized by the proprietary funds for recording revenue. -67- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 1. Summary of Significant Accounting Policies - cont. C. Basis of Accounting - cont. The City records real and personal property taxes and assessments levied for the current year as revenue. Taxes and assessments receivable remaining unpaid at year end and not expected to be collected soon enough thereafter to be available to pay obligations of the current year were recorded as deferred revenue, with a corresponding reduction in revenues, as required by generally accepted accounting principles. In addition, prior period delinquent taxes and assessments collected in the current period were recorded as revenue in the current period as required by generally accepted accounting principles. Expenditures other than interest on long-term debt are recorded when the liability is incurred. d. Budgets and Budgetary Accounting An operating budget is adopted each fiscal year for the General Fund, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds, on the modified accrual basis. A non-binding management budget is adopted for the Enterprise Funds. The final budget is legally enacted by the City on the second Monday in August, after holding public hearings as required by State statutes. The operating budgets cannot be increased except for a public emergency which could not have been reasonably foreseen at the time of adoption of the budget. Budget appropriation transfers may be made between the general classifications of salaries and wages, maintenance and operation and capital outlay. e. Encumbrances All appropriations, except for construction in progress, lapse at the end of the fiscal year. The City does not utilize a formal encumbrance accounting system. f. Fixed Assets All purchased fixed assets are valued at cost where historical records are available and at estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Improvements are capitalized and, in proprietary funds, depreciated over the remaining useful lives of the related fixed assets. w CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 Summary of Significant Accounting Policies - cont. f. Fixed Assets - cont. General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in governmental funds, and the related assets are reported in "the general fixed assets account group. Assets in the general fixed assets account group are not depreciated. Public domain ("infrastructure") general fixed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized, as these assets are immovable and of value only to the government. Fixed assets purchased or acquired by proprietary fund types are recorded in the individual fund making the purchase. Any fixed assets donated specifically for an enterprise fund are also recorded in that individual fund. Depreciation on proprietary fund fixed assets is provided over their estimated useful lives on the straight-line method. The useful lives of these assets have been estimated as follows: Buildings 20-50 years Improvements other than buildings 10-50 years Machinery and equipment 5-20 years Vehicles and heavy equipment 5-20 years Sewer lines and pump stations 10-50 years g. Taxes and Assessments An allowance for uncollectible accounts was not maintained for real and personal property taxes and special assessments receivable. The direct write-off method is used for these accounts. h. Enterprise Accounts Receivable Reserves for estimated uncollectable accounts receivable are maintained for the Water, Sewer and Ambulance Enterprise Funds. Accounts receivable are reported as a net of uncollectable accounts. The reserves for uncollectables on June 30, 1990 were as follows: Water $ 3,711 Sewer 4,524 Ambulance 5,287 Total $ 13,522 -69- CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 1. Summary of Significant Accounting Policies - cont. i. Inventories Inventories of materials and supplies are expensed at the time of purchase. Inventories of materials and supplies on hand are not maintained. Inventories were not, however, considered material. The Enterprise Fund inventory of materials and supplies was valued at a combination of cost and replacement cost. Inventories are offset by a reserve of equity. j. Vacation and Sick Leave Liabilities incurred because of unused vacation and sick leave accumulated by employees which is payable upon termination are included in the financial statements. The liability for unused vacation and sick leave for governmental fund employees is recorded in the general long-term debt account group. Expenditures for these liabilities are recognized when paid. The liability for unused vacation and sick leave for proprietary fund employees is recorded as a long-term liability in the proprietary funds. The expenses were recorded when the liability was incurred as required by generally accepted accounting principles. k. Long -Term Debt Unmatured general long-term debt of the City, including special assessment debt for which the government is obligated in some manner, is recorded in a separate, self -balancing set of accounts, the General Long -Term Debt Account Group. Long-term debt of the proprietary funds is reported as a liability in the specific fund making the debt service payments. For more information on the long-term debt of the City, see Note 7. 1. Contributed Capital Enterprise Fund contributions from grants, customers, special improvement districts and other outside sources restricted for capital acquisition or construction are reported as contributed capital. Depreciation on assets acquired from contributions is reflected in the statement of revenue, expenses, and changes in retained earnings. The amount of depreciation applicable to assets acquired through contribution from grants, entitlements, and shared revenues is transferred to the related contribution account instead of retained earnings. Enterprise Fund resources received from grants, entitlements, or shared revenues which may be utilized for operations or for either operations or capital acquisition or construction are reported as "non-operating4° revenues. -70- im CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 Summary of Significant Accounting Policies - cont. M. Interfund Transactions Interfund transactions consisting of identified services performed for other funds or costs billed to other funds are treated as expenditures in the fund receiving the services and as revenue in the fund performing the services. Transactions which constitute reimbursements of a fund for expenditures or expenses initially made from it which are properly applicable to another fund are recorded as expenditures in the reimbursing fund and as reductions of the expenditures in the fund that is reimbursed. Advances between funds are accounted for in the appropriate Interfund receivable and payable accounts. n. Comparative Data Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the City's financial position and operations. However, compartive (i.e., presentation of prior year totals by fund type) data have not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. o. 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 cash flows of its proprietary fund types in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 2. Property Taxes Property tax levies are set in August, in connection with the budget process, and are based on taxable values listed as of January 1 for all property located in the City. Taxable values are established by the State Department of Revenue based on market values. A revaluation of all property is required to be completed on a periodic basis. Taxable value is defined by State statute as a fixed percentage of market value. -71- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 2. Property Taxes - cont. Real property taxes and special assessments are generally billed in October and are payable 50% by November 30 and 50% by May 31. After these dates, taxes and assessments become delinquent and become a lien on the property. Personal property is assessed and personal property taxes are billed throughout the year, with a significant portion generally billed in May, June and July. Personal property taxes are based on levies set during the prior August. These taxes become delinquent 30 days after billing. Taxes and assessments that become delinquent are charged interest at the rate of 5/6 of 1% per month plus a penalty of 2%. Real property on which taxes and assessments remain delinquent and unpaid may be sold at tax sales. In the case of personal property, the property is to be seized and sold after the taxes become delinquent. The City is permitted by State statutes to levy taxes up to certain fixed limits for various purposes. The taxes levied by the City for the year ended June 30, 1990, were within the legal limits. The taxable value upon which the tax levies for the fiscal year ended June 30, 1990, were based was $15,655,701. Current tax collections for the year ended June 30, 1990, were approximately 83% of the amount levied. 3. Deficit Fund Balances The following Special Revenue Funds had deficit fund balances at June 30, 1990: a. Airport Fund - $(2,905) - The deficit arose in the fiscal year ended June 30, 1985, when certain capital improvements at the airport were made. Proceeds from the sale of land were intended to fund the improvements, however, the City has not been able to sell the land, resulting in the deficit fund balance. The deficit was reduced from $202,1431 at June 30, 1989 to its current amount. The deficit is expected to be eliminated during the fiscal year ended June 30, 1991. b. Parking Fund - $(5,121) - The deficit arose because of a $7,912 short -fall in anticipated revenue from overtime parking fines and will be eliminated with revenues collected in future fiscal years. c. Health Fund - $(2,1146) - The deficit is the result of a rate increase for premiums for the City Health Care Plan. The increase was taken into consideration when formulating the budget for the subsequent fiscal year and it is anticipated that the deficit will be eliminated in the fiscal year ended June 30, 1991. -72- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 3. Deficit Fund Balances - cont. d. Drug Enforcement Grant Fund - $(248) - The deficit was a result of a budget overdraft in the Fund. Expenditures were made in excess of the cash available. The deficit will be eliminated in the fiscal year ended June 30, 1991. The following Debt Service Funds had deficit fund balances at June 30, 1990: 1981 Sidewalk and Curb $ (5,249) 1983 Sidewalk and Curb $ (162) 1984 Sidewalk and Curb $ (2,784) 1985 Sidewalk and Curb $ (9,075) 1986 Sidewalk and Curb $ (1,599) 1987 Sidewalk and Curb $ (2,865) 1988 Sidewalk and Curb $ (957) S.I.D. Number 313 $ (3,615) S.I.D. Number 326 $ (2,591) S.I.D. Number 328 $.(62,593) S.I.D. Number 333 $ (70,350) S.I.D. Number 334 $ (4,815) S.I.D. Number 335 $ (53) S.I.D. Number 336 $ (455) Lighting District Number 1 $ (7,134) Lighting District Number 2 $ (1,856) These deficits were caused by a short -fall in anticipated revenue and will be eliminated as delinquent assessments are collected or as loans are made from the Revolving Fund. 4. Budget Overdrafts/Variances Significant favorable budget to actual variances existed in the General and Special Revenue Funds in the tax revenue source in the amounts of $370,869 and $407,462, respectively. These variances resulted from the distribution of protested taxes by the County, collection of delinquent taxes, and an increase in the percentage of tax collections over that of the previous fiscal year. A significant favorable budget to actual variance existed in the General Fund intergovernmental revenue source in the amount of $196,682. This variance resulted primarily from the City receiving more video poker apportionment and corporation license taxes than anticipated in the budget. -73- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 4. Budget Overdrafts/Variances - cont. An unfavorable budget to actual variance existed in the tax/assessment revenue source in the Debt Service Funds in the amount of $242,615. This variance relates primarily to S.I.D. Number 328. Assessments were levied in the amount of $201,867, however, only $561 was collected. S.I.D. Number 333 also had an unfavorable budget to actual variance in the same revenue source in the amount of $31,843. Significant favorable budget to actual variances existed in the housing and community development and capital outlay expenditure categories in the amounts of $621,683 and $501,802, respectively, in the Special Revenue Funds. These variances relate primarily to the Tax Increment Fund. The City did not begin or complete as many street projects as was anticipated in the budget. Significant favorable budget to actual expenditure variances were reported in the Debt Service Funds and the Capital Projects Funds of $151,472 and $208,717, respectively. The Debt Service Fund variance resulted when $150,000 was budgeted for principal and $18,000 for interest in S.I.D. Number 328 and only $15,000 and $13,050, respectively, was expended. Most of the variance in the Capital Projects Funds resulted when the Southwest Kalispell dater/Sewer Project recorded expenditures of only $17,376 against a budget of $168,797. 5. Cash and Investments The City maintains a cash and investment pool for all funds under the control of the City Treasurer. In addition, investments are separately held for several of the funds. Cash and investments may include cash and cash items; demand, time, savings and fiscal agent deposits; investments in the State Short -Term Investment Pool (S.T.I.P.); direct obligations of the United States Government and securities issued by agencies of the United States; repurchase agreements; and registered warrants. -74- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 5. Cash and Investments - cont. The composition of cash and investments on June 30, 1990, was as follows: Cash on Hand $ 250 Petty Cash 500 Cash in Banks: Demand Deposits 154,191 Savings Deposits 146,386 Time Deposits 121,055 Repurchase Agreements 3,910,000 Performance Bond 5,000 Sidewalk and Curbs - Bonds/Warrants 73,004 Variable Annuity Life Insurance Company (VALIC) Deferred Compensation Plan 69,011 Total per Balance Sheet $ X4,479,397 Deposits - At year-end, the carrying amount of the City's deposits was $421,632 and the bank balance was $513,395. These deposits include demand, time, and savings deposits. Of the bank balance, $222,688 was covered by Federal depository insurance and $290,707 was uninsured and uncollateral ized. This uninsured and un collateralized was fully covered by collateral held by the financial institutions or by their trust departments or agents, but not in the City's name. Montana statutes require that the City obtain securities for the uninsured portion of the deposits as follows: 1. securities equal to 50% of such deposits if the institution in which the deposits are made has a net worth to total assets ratio of 6% or more, or 2. securities equal to 100% of the uninsured deposits if the institution in which the deposits are made has a net worth to total assets ratio of less than 6%. The State statutes do not specify in whose custody or name the collateral is to be held. The amount of collateral held for City deposits at June 30, 1990, exceeded the amount required by State statutes. Investments - As noted above, statutes authorize the City to invest in direct obligations of the United States Government and securities issued by agencies of the United States, repurchase agreements, and the State Short -Term Investment Pool (S.T.I.P.). These investments are in addition to time and savings deposits, which are included in deposits above. The City's investments are categorized below to give an indication of the level of risk assumed by the City at June 30, 1990. CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 5. Cash and Investments - cont. Category 1 - Includes investments that are insured, registered, or for which the securities are held by the City or its agent in the City's name. Category 2 - Includes uninsured and unregistered investments for which the securities are held by the financial institution's, broker's or dealer's trust department or agent in the City's name. Category 3 - Includes uninsured and unregistered investments for which the securities are held by the financial institution, broker or dealer, or by its trust department or agent but not in the City's name. Category Carrying Market 1 2 3 Value Value Repurchase Agreements $ -0- $ -0- $ 3-2910 2000 $ x,910 ,000$ 3 ,910 ,000 In addition, funds placed in a deferred compensation plan by City employees were held and invested by the Variable Annuity Life Insurance Company (VALIC). Funds in the plan at June 30, 1990, amounted to $69,011. 6. Fixed Assets A summary of changes in general fixed assets follows: Land Buildings Improvements Other Than Buildings Machinery & Equipment Construction Mork In Progress Total Balance July 1, 1989 Additions $ 1,527,392 $ 3,215,814 68,431 1,000,623 32,843 1 ,761 ,539 87,127 2,844 17,503 $ 7,508,212 $ 205,904 Balance Deletions June 30, 1990 $ 1,527,392 3,28+,245 1,033,x+66 $ 21,430 1,827,236 20,347 $ 21,430 $ 7,692,686 CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 6. Fixed Assets - cont. A summary of proprietary fund type property, plant, and equipment at June 30, 1990 follows: 7. Long -Term Debt a. The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1990: Enterprise Land $ 245,369 Storm Sewer System 2,862,053 Machinery & Equipment 798,734 Construction Work in Progress 880,723 Source of Supply 3147,709 Pumping Plant 533,856 Treatment Plant 3,8140,226 Transmission and Distribution 8,7146,913 General Plant 497,786 Total $ 18,753 ,369 Less Accumulated Depreciation (5,613,178) Net $ 13,1140,191 7. Long -Term Debt a. The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1990: (1) Reported in general long-term debt account group. (2) Reported in Enterprise Fund. (3) Reductions include the removal of a note payable with Montana Municipal Insurance Authority for insurance coverage by the City. The City does not consider the note to be a liability as the debt service is expected to be paid through interest earnings on bond proceeds and other earnings of the Authority. -77- Balance Balance July 1, 1989 Additions Reductions June 30, 1990 General Obligation Bonds (1 ) $ 1470,000 $ $ (25,000) $ 14145,000 Revenue Bonds (2) 2,355,000 (95,000) 2,260,000 Special Assessment Bonds (1) 1452,621 18,1471 (75,000) 396,092 Urban Renewal Bonds (1) 1,900,000 (80,000) 1,820,000 Contracted Debt (1)(2) 293,6141 (260,803) (3) 32,838 Compensated Absences Payable (1) (2) 14145,880 52,289 1498,169 Total $ 5 ,917 ,1142 $ 70,76o $ (535,803) $ 5 ,1452 ,099 (1) Reported in general long-term debt account group. (2) Reported in Enterprise Fund. (3) Reductions include the removal of a note payable with Montana Municipal Insurance Authority for insurance coverage by the City. The City does not consider the note to be a liability as the debt service is expected to be paid through interest earnings on bond proceeds and other earnings of the Authority. -77- CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 7. Long -Term Debt - cont. b. Bonded Debt Bonds payable at June 30, 1990 are comprised of the following individual issues: 1. General Obligation Bonds 1986 Sewer Lines 6/1/86 7.0% 20 yrs. 2006 1,300,000 1,200,000 Varies Total Revenue Bonds $ 2_1820 ,000 $ 2 ,260 ,000 Revenue Bonds are directly related to and expected to be paid from specific proprietary funds. Revenue Bond Disclosure The revenue bond ordinances require certain disclosures regarding the Sewer Fund in each year's audited fiancial statements. For the fiscal year ended June 30, 1990, the following are the required disclosures which are not contained elsewhere in the audited financial statements. a. Number of premises connected to the system at the end of the fiscal year: 24,393 Final Outstanding Issue Interest Term of Maturity Bonds June 30, Annual Purpose Date Rate Bond Date Issued 1990 Payment Bruckhauser Pool 4/1/85 8.3-9.25% 15 yrs. 2000 $ 550,000 $ 445,000 Varies General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. $24,644 is available in the Debt Service Funds to service the general obligation bonds. 2. Revenue Bonds Final Outstanding Issue Interest Term of Maturity Bonds June 30, Annual Purpose Date Rate Bond Date Issued 1990 Payment 1972 Sewer Plant 1/1/72 5.5% 20 yrs. 1992 $ 200,000 $ 20,000 $ 10,000 1976 Storm Sewer 7/1/76 6.75% 20 yrs. 1996 445,000 275,000 Varies 1983 Sewer Plant 9/1/83 10.08% 20 yrs. 2004 875,000 765,000 15,000 1986 Sewer Lines 6/1/86 7.0% 20 yrs. 2006 1,300,000 1,200,000 Varies Total Revenue Bonds $ 2_1820 ,000 $ 2 ,260 ,000 Revenue Bonds are directly related to and expected to be paid from specific proprietary funds. Revenue Bond Disclosure The revenue bond ordinances require certain disclosures regarding the Sewer Fund in each year's audited fiancial statements. For the fiscal year ended June 30, 1990, the following are the required disclosures which are not contained elsewhere in the audited financial statements. a. Number of premises connected to the system at the end of the fiscal year: 24,393 7. ITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 Long -Term Debt - cont. b. Bonded Debt - cont. 2. Revenue Bonds - cont. b. Amount of cash on hand in each account of the Sewer System at the end of the fiscal year. Sewer Operating $ 387,794 Sewer Capital Improvement 30,272 Sewer Revenue Reserve 285,798 Construction Fund 117,026 Replacement and Depreciation 205,132 Sewer Revenue Bond Account 81,227 Sewer Operating Reserve 47,000 $ 1 154,24 c. Operating reserve to be accumulated and maintained in an amount equal to the average one month operating expense. Operating expenses for fiscal year ended June 30, 1990, of $550,026 divided by 12 = $45,836. d. The City shall maintain rates and charges sufficient to produce annual net revenues equal to at least 125%V of the maximum amount of principal and interest to become due for all existing issues. Cash Flow Coverage Sewer Service Charges Storm Sewer Assessments Total Operating Revenue Less: Operating Expense (Before Depreciation) Available for Debt Service Maximum Debt Service Coverage -79- Fiscal Year Ended June 30, 990 t 830,454 200,129 $ 1,030,583 550,026 $ 480,557 $ 284,725 169% CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL. STATEMENTS - cont. June 30, 1990 7. Long -Term Debt - cont. b. Bonded Debt - cont. 2. Revenue Bond Disclosure - cont. e. Revenue bond reserve to be accumulated and maintained in an amount equal to the maximum amount of principal and interest to become due in any future fiscal year. Fiscal Year Ended Debt Service Coverage June 30, 1990 Revenue Bond Reserve Account Balance $ 285,798 Maximum Principal and Interest Due in Future Fiscal Year 284,725 Excess Coverage $ 1,073 f. Noncompliance by the City with the provisions of the Revenue Bond Ordinance. (1) Sewerage department books were not audited annually within 120 days after the close of each fiscal year by an independent public accountant or by the Department of Commerce as prescribed by the 1983 and 1986 Revenue Bond Ordinances. 3. Tax Increment Urban Renewal Bonds In December, 1985, the City issued $2,100,000 in Tax Increment Urban Renewal bonds pursuant to Title 7, Chapter 15, Parts 42 and 43, MCA, and pursuant to the Bond Resolution adopted by the Kalispell City Council. These Series 1985 Bonds are considered to be special obligations of the City payable solely from tax increment generated by the area. The City has irrevocably pledged and appropriated the tax increment to the payment of the Series 1985 Bonds which have a first lien on all tax increment revenue generated by the area. The Series 1985 Bonds to not constitute a general obligation of the City or pledge the ad valorem taxing power of the City. Although the long-term liability created by the issuance of the bonds is considered a fund -specific liability, it is reported as a liability in the general long-term debt account group as required by generally accepted accounting principles. At June 30, 1990, there was $123,046 available in the Tax Increment Fund, a Special Revenue Fund, to service these bonds. Issue Purpose Date Urban Renewal Bonds Tax Increment 12/85 Interest Term of Rate Bond 6.25-9.5% 16 yrs. Final Outstanding Maturity Bonds June 30, Date Issued 1990 7/1/2002 $ 2,100,000 $ 1,820,000 M Annual Payment Varies CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 7. Long -Term Debt - cont. b. Bonded Debt - cont. 4. Special Assessment Bonds (S.I.D.) Final Issue Interest Term of Maturity Purpose Date Rate Bond Date Reported in General Long -Term Debt Account Group S.I.D. No. 313 10/1/71 7.0% 20 yrs. 1992 S.I.D. No. 328 7/1/79 8.7% 20 yrs. 1999 S.I.D. No. 333 7/28/82 15.0% 10 yrs. 1992 S.I.D. No. 334 1/1/82 14.5% 10 yrs. 1992 S.I.D. No. 335 11/1/82 12.0% 10 yrs. 1992 S.I.D. No. 336 12/1/86 12..0% 10 yrs. 1994 S.I.D. No. 337 12/1/86 7.74% 15 yrs. 2002 Light Construc- Varies 44,600 20,600 Varies 20,987 tion No. 1 12/1/82 12.0% 10 yrs. 1992 Light Construc- Varies 15,818 15,818 Varies tion No. 2 11/26/84 12.0% 8 yrs. 1992 1982 Sidewalk and Curb 4/1/83 12.0% 8 yrs. 1990 1983 Sidewalk and Curb 2/1/84 10.0% 8 yrs. 1991 1984 Sidewalk and Curb 3/5/85 12.0% 8 yrs. 1992 1985 Sidewalk and Curb 12/3/85 10.0% 8 yrs. 1993 1986 Sidewalk and Curb 12/31/86 9.0% 8 yrs. 1994 1987 Sidewalk and Curb 12/31/87 12.0% 8 yrs. 1995 1988 Sidewalk and Curb 1/1/89 12.0% 8 yrs. 1996 1989 Sidewalk and Curb 1/3/90 10.5% 8 yrs. 1998 Total Special Assessment Bonds Reported in General Long -Term Debt Account Group (S.I.D.) -81- $ 914,591 $ 396,092 Outstanding Bonds June 30, Annual Issued 1990 Payment $ 100,000 $ 1,000 Varies 300,000 135,000 Varies 65,000 14,000 Varies 14,000 2,000 Varies 15,000 4,500 Varies 4,500 1,500 Varies 110,000 95,000 Varies 75,000 18,000 Varies 28,500 6,000 Varies 1,000 1,000 Varies 6,500 2,000 Varies 45,000 16,000 Varies 44,600 20,600 Varies 20,987 10,988 Varies 31,275 19,275 Varies 37,411 33,411 Varies 15,818 15,818 Varies $ 914,591 $ 396,092 CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 7. Long -Term Debt - cont. b. Bonded Debt - cont. 4. Special Assessment Bonds (S.I.D.) - cont. Special assessment bonds are secured by a lien on the assessed properties. The primary source of repayment is the assessments levied against the benefiting properties. However, the City is liable, to an extent, for repayment of these special assessment bonds. The City is authorized by State law to establish and has established a revolving fund to ensure the payment of debt service on the bonds in the event that assessed property owners are in default. At June 30, 1990 material delinquent special assessments receivable were as follows: S.I.D. No. 328 $ 75,179 S.I.D. No. 333 38,462 Total $ 113,6141 c. Contracted Debt d. Compensated Absences Payable Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund $ 60,130 General Long -Term Debt Account Group 2438,039 Total $ 498,169 SM Origination Interest Due Principal Outstanding Purpose Date Rate Term Date Amount June 30, 1990 Phone System (1) 9/11/87 Varies 3 yrs. 8/15/90 $ 39,077 $ 15,504 Copy machine (1) 3/15/88 8� 5 yrs. 3/15/93 7,595 4,553 Ambulance (2) 7/28/88 Varies 3 yrs. 8/15/91 24,360 12,781 Total $ 71_2032 $ 32,838 (1) Reported in general long-term debt account group. (2) Reported. in Enterprise Fund. d. Compensated Absences Payable Compensated absences payable, which represent vacation and sick leave earned by employees which is payable upon termination, were as follows: Enterprise Fund $ 60,130 General Long -Term Debt Account Group 2438,039 Total $ 498,169 SM CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 7. Long -Term Debt - cont. e. Requirements to Amortize Debt The annual requirements to amortize all long-term debt out- standing, except compensated absences payable, as of June 30, 1990, including interest payments of $3,288,621, are as follows: Annual Requirements to Amortize Long -Term Debt June 30, 1990 8. State -Wide Retirement Plans The City participates in the following retirement plans: Public Employees' Retirement System (P.E.R.S.) All the City's employees that work the equivalent of 120 working days in any fiscal year or more, except police and firemen participate in the Montana Public Employees' Retirement System (P.E.R.S.), a cost sharing multiple -employer retirement system. The payroll for employees covered by P.E.R.S. for the year ended June 30, 1990, was $1,14214,6814, and the City's total payroll was $2,8114,362 for the same year. -83- General Special Urban Year Ending Obligation Revenue Assessment Renewal June 30 Bonds Bonds Bonds Bonds 1991 $ 69,917 $ 2714,350 $ 85,623 $ 2514,895 1992 67,1142 282,023 814,1471 252,695 1993 69,367 2814,0142 62,865 2514,905 19914 66,1463 2814,725 514,980 256,085 1995 68,523 2814,563 145,131 256,195 1996 - 2000 355,402 1,218,485 168,001 1,297,525 2001 - 2005 1,099,804 22,250 521,025 2006 - 2010 166,005 Total $ 696,814 $ 3 9893'997 $ 523 ,321 $ 3,093 4325 Year Ending Contracted June 30 Debt Totals 1991 $ 25,145 $ 709,930 1992 9,949 696,280 1993 671,179 1994 662,253 1995 654,412 1996 - 2000 3,039,413 2001 - 2005 1,643,079 2006 - 2020 166,005 Total $ 35,094 $ 8 ,2142 ,551 8. State -Wide Retirement Plans The City participates in the following retirement plans: Public Employees' Retirement System (P.E.R.S.) All the City's employees that work the equivalent of 120 working days in any fiscal year or more, except police and firemen participate in the Montana Public Employees' Retirement System (P.E.R.S.), a cost sharing multiple -employer retirement system. The payroll for employees covered by P.E.R.S. for the year ended June 30, 1990, was $1,14214,6814, and the City's total payroll was $2,8114,362 for the same year. -83- CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 8. State-wide Retirement Plans - cont. Public Employees' Retirement System (P.E.R.S.) - cont. All City employees that work more than the equivalent of 120 working days per fiscal year are required by State law to participate in P.E.R.S. A few other employees may, at their option, participate as well. Employees who retire (1) at or after age 60 with five years of creditable service, (2) at or after age 65 regardless of years of service, or (3) with 30 or more years of creditable service are entitled to a retirement benefit, payable monthly for the life of the member and/or beneficiary. The benefit amount is the number of years of creditable service divided by 56, and multiplied by the final compensation. The final compensation is a member's highest average annual compensation during any three consecutive years of membership service. Benefits fully vest after five years of service. Vested employees may retire at age 50 or with 25 years of service and receive reduced benefits. P.E.R.S. also provides death and disability benefits, with amounts determined by the State of Montana. Covered employees are required by State statute to contribute 6.15% of their salary to the plan. The City is similarly required to contribute to the plan at a rate set by State statute, which was 6.417% of covered payroll for the year ended June 30, 1990. The City's contribution requirement for the year ended June 30, 1990, was $191,772, which consisted of $100,350 from employees and $91,422 from the City. These amounts represent 6.15% and 6.417 of covered payroll, respectively, after deducting additional contributions from employees of $12,731. The additional contributions represent voluntary payment of contributions on time worked at another qualifying governmental entity or agency, thereby purchasing additional creditable service. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess P.E.R.S.'s funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. P.E.R.S. does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit Im CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 8. 'State -Wide Retirement Plans - cont. Public Employees' Retirement System (P.E.R.S.) - cont. obligation at June 30, 1990, for P.E.R.S. as a whole, determined through an actuarial valuation at July 1, 1990, was $1,093,828,244. The net assets available for benefits on that date, valued at cost or amortized cost, were $8140,999,902, leaving an unfunded pension benefit obligation of $252,828;,3142. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1990, actuarial valuation, the P.E.R.S. contribution rate of 12.567% will amortize unfunded past service costs over 21.76 years. The City's contribution represented less than 1% of total contributions required from all employers. Ten year historical trend information showing P.E.R.S.'s progress in accumulating sufficient assets to pay benefits when due is presented in P.E.R.S.'s June 30, 1990, annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. Municipal Police Officers' Retirement System (M.P.O.R.S.) City police officers are covered under the Municipal Police Officers' Retirement System (M.P.O.R.S.), a cost sharing multiple -employer retirement system. The payroll for employees covered by M.P.O.R.S. for the year ended June 30, 1990, was $595,226, and the City's total payroll was $2,8114,362 for the same year. M.P.O.R.S. members become eligible for retirement benefits, payable monthly for the life of the member and/or beneficiary, after 20 years of service if first employed on or before July 1 , 1975, and after reaching age 50 and completing 20 years or more of service if first employed after July 1, 1975. Members eligible for retirement who do not elect to serve any additional years as an active police officer shall receive a service retirement allowance equal to 50% of the final average salary. A policy officer who is eligible for service retirement after 20 years of service and who elects to serve additional years shall receive the 50, salary plus an additional 1% of such allowance per year of additional service, up to a maximum of 60% of the final average salary. The final average salary is the monthly compensation of a member, averaged over the last 36 months of his active service. M.P.O.R.S. also provides death and disability benefits, with amounts determined by the State of Montana. -85- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 8. State -Wide Retirement Plans - cont. Municipal Police Officers' Retirement System (M.P.O.R.S.) - cont. Funding for the plan is provided by the City, the covered police officers, and the State of Montana. Covered police officers are required by State statute to contribute 60 of their salary to the plan if first employed prior to July 1, 1979, and 7.50' of their salary to the plan if first employed on or after July 1, 1979. The City is similarly required to contribute to the plan at a rate set by State statute, which was 13.02% of covered payroll for the year ended June 30, 1990. The State contributes to the plan, out of the premium tax on motor vehicle property and casualty insurance policies, 15.060P of the compensation paid all members during the preceding year. The City's contribution requirement for the year ended June 30, 1990, was $116,682, which consisted of $39,184 from employees and $77,498 from the City. These amounts represent 6.55% and 13.02% of covered payroll, respectively, after deducting additional contributions from employees of $162. The additional contributions represent voluntary payment of contributions on time .worked at another qualifying governmental entity or agency, thereby purchasing additional creditable service. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess M.P.O.R.S.'s funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. M.P.O.R.S. does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at June 30, 1990, for M.P.O.R.S. as a whole, determined through an actuarial valuation at July 1, 1990, was $70,288,532. The net assets available for benefits on that date, valued at cost or amortized cost, were $34,723,078, leaving an unfunded pension benefit obligation of $35,565,454. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1990, actuarial valuation, the M.P.O.R.S. weighted contribution rate of 35.46% will amortize unfunded past service costs over 26.19 years. The City's contribution represented 5.8% of total contributions required from all participating employers. CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 8. State -Gide Retirement Plans - cont. Municipal Police Officers' Retirement System (M.P.O.R.S.) - cont. Ten year historical trend information showing M.P.O.R.S.'s progress in accumulating sufficient assets to pay benefits when due is presented in. M.P.O.R.S.'s June 30, 1990, annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. Firefighters' Unified Retirement System (F.U.R.S.) City firefighters are covered under the Firefighters' Unified Retirement System (F.U.R.S.), a cost sharing multiple employer retirement system. The payroll for employees covered by F.U.R.S. for the year ended June 30, 1990, was $501,424, and the City's total payroll was $2,81+,362 for the same year. F.U.R.S. members become eligible for retirement benefits, payable monthly for the life of the member and/or beneficiary, after reaching age 50 and completing 10 years or more of service. A. member hired before July 1, 1981, who is eligible for retirement and who elects to retire after completing 20 years of service and reaching age 50 as an active firefighter shall receive a service retirement allowance equal to 50% of the monthly compensation last received by the member. A member who completes more than 20 years of service shall receive an additional 1% of his final compensation for each year in excess of 20, up to a maximum of 60% of the monthly compensation last received by the member. A member hired before July 1, 1981, who is eligible for retirement and who elects to retire after completing 10 years or more of service but has not both completed 20 years of service and reached age 50 as an active firefighter shall receive a service retirement allowance equal to 2n of the monthly compensation last received by the member for each year of service up to a maximum of 60% of his final salary. A member hired on or after July 1 , 1981, who is eligible for retirement shall receive a service retirement allowance equal to 2% of his final average salary for each year of service up to a maximum of 30 years of service. The final average salary means the monthly compensation of a member hired on or after July 1, 1981, averaged over the last 36 months of his active service or, if he has not been a member that long, over the period of his membership. F.U.R.S. also provides death and disability benefits, with amounts determined by the State of Montana. ME CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 8. 'State -Aide Retirement Plans - cont. Firefighters' Unified Retirement System (F.U.R.S.) - cont. Funding for the plan is provided by the City, the covered firefighters, and the State of Montana. Covered firefighters are required by State statute to contribute 6/ of their salary to the plan. The City is similarly required to contribute to the plan at a rate set by State statute, which was 13.02/ of covered payroll for the year ended June 30, 1990. The State contributes to the plan, out of the premium tax on insurance policies, 22.98% of the compensation paid all members during the preceding year. The City's contribution requirement for the year ended June 30, 1990, was $95,371, which consisted of $30,086 from employees and $65,285 from the City. These amounts represent 6% and 13.02% of covered payroll, respectively. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be payable in the future as a result of employee service to date. The measure, which is the actuarial present value of credited projected benefits, is intended to help users assess F.U.R.S.'s funding status on a going -concern basis, assess progress made in accumulating sufficient assets to pay benefits when due, and make comparisons among various pension plans and employers. F.U.R.S. does not make separate measurements of assets and pension benefit obligation for individual employers. The pension benefit obligation at June 30, 1990, for F.U.R.S. as a whole, determined through an actuarial valuation at July 1, 1990, was $91,553,110. The net assets available for benefits on that date, valued at cost or amortized cost, were $34,203,195, leaving an unfunded pension benefit obligation of $57,349,915. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1990, actuarial valuation, the F.U.R.S. contribution rate of 42% will amortize unfunded past service costs over 33.514 years. The City's contribution represented 5% of total contributions required from all participating employers. Nine year historical trend information showing F.U.R.S.'s progress in accumulating sufficient assets to pay benefits when due is presented in F.U.R.S.'s June 30, 1990, annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 9. Local Retirement Plans Deferred Compensation Plan The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. Participation in the plan is optional. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights of the City (without being restricted to the provisions of benefits under the plan), subject only to the claims of the City's general creditors. Participants' rights under the plan are equal to those of general creditor of the City in an amount equal to the fair market value of the deferred account for each participant. It is the opinion of the City's legal counsel that the City has no liability for losses under the plan but does have the duty of due care that would be required of an ordinary prudent investor. The City believes that it is unlikely that it will use the assets to satisfy the claims of general creditors in the future. Investments are managed by the plan's trustee with no specific restrictions on the investment options. The plan assets of $69,012 are recorded in an agency fund at June 30, 1990, as required by generally accepted accounting principles. 10. Amounts Due From Other Governments The amounts due from other governments consist of the following: Due From Other Governments: Special Revenue Fund: D.A..R.E. Fund - Due from State 1,93 Debt Service Fund: Special Light No. 2 Fund - Due from Norwest Bank $ 183 -89- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 11. Amounts Due From and To Other Funds Due from other funds and due to other funds consist of the following: Receivable Fund General Fund (1) General Fund (1) General Fund (1) Tax Increment Fund (2) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.P. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) S.I.D. Revolving Fund (3) Payable Fund Parking Fund (2) Health Insurance Fund (2) D.A.R.E. Fund (2) S.I.D. Number 328 (3) 1981 Sidewalk and Curb (3) 1983 Sidewalk and Curb (3) 1984 Sidewalk and Curb (3) 1985 Sidewalk and Curb (3) 1986 Sidewalk and Curb .(3) 1987 Sidewalk and Curb (3) 1988 Sidewalk and Curb (3) S.I.D. Number 313 (3) S.I.D. Number 326 (3) S.I.D. Number 328 (3) S.I.D. Number 333 (3) S.I.D. Number 334 (3) S.T.D. Number 336 (3) Notes: (1) General Fund Total Receivable - $ 8,680 (2) Special Revenue Fund Total Receivable - $ 79,596 Total Payable - $ 8,680 (3) Debt Service Fund Total Receivable - $ 118,938 Total Payable - $ 198,5314 -90- Amount $ 3,994 $ 3,686 $ 1,000 $ 79,596 $ 5,249 $ 152 $ 2,336 $ 7,791 $ 2,936 $ 3,605 $ 957 $ 1,919 $ 2,591 $ 47,238 $ 41 ,000 $ 2,709 $ 455 $ 207,214 CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 12. Restricted Cash/Investments The following restricted cash/ investments were held by the City as of June 30, 1990. These amounts are reported within the cash/investment account on the Combined Balance Sheet. Description Amount Special Revenue Fund: Community Development Fund - Interest Subsidy $ 87,571 Tax Increment Fund: Sinking and Interest 123,046 Interest Subsidy - Commercial Loans 98,680 Bond Proceeds 228,000 Community Development Loan and Grant 28,127 Interest Subsidy - Residential Program 75,000 UDAG Repayment Fund: Rehabilitation Grants 39,945 Community Development Loan and Grant 26,786 Community Emergency 10,014 Total Special Revenue Funds $ 717,169 Enterprise Fund: Sewer - Replacement and Depreciation 205,132 Sewer - Reserve for Operations 47,000 Sewer - Construction 117,026 Sewer - Sinking and Interest 81,227 Sewer - Contingency 285,798 Sewer - Capital Improvements 30,272 Solid Waste - Replacement and Depreciation 101,955 Total Enterprise Funds $ 868,410 Trust and Agency Funds: VALIC 457 Deferred Compensation Fund $ 69,012 Performance Bond 5,000 Total Trust and Agency Funds $ 74,012 Total Restricted Cash/Investments $ 116592591 13. Fund Equity Reserved retained earnings/fund balances of the City at June 30, 1990 consisted of: Special Revenue Funds: Community Development - Reserved for Interest Subsidy $ 87,571 -91- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 13. Fund Equity - cont. Special Revenue Funds - cont. Tax Increment: Reserved for 1985 Revenue Bond 123,046 Reserved for Interest Subsidy 98,680 Reserved for Bond Proceeds 228,000 Reserved for Loans and Grants 103,127 UDAG Loan Repayment: Reserved for Reserved for Loans and Grants 26,786 Reserved for Rehabilitation Grants- 39,945 Reserved for Community Emergency 10,014 Total Special Revenue Funds $ 717,169 Enterprise Funds: Water: Reserved for Inventory $ 130,995 Sewer: Reserved for Replacement and Depreciation 205,132 Reserved for Construction 548,424 Reserved for Operations 47,000 Reserved for Capital Improvements 45,428 Reserved for Sinking and Interest 81,227 Reserved for Contingency 285,798 Solid Waste: Reserved for Replacement and Depreciation 101,955 Total Enterprise Funds $ 1,445,959 14. Changes in Contributed Capital 1 schedule of changes in contributed capital is presented below: Contributed Capital - July 1, 1989 Add: Capital Grants Deduct: Depreciation on assets acquired via capital grants Contributed Capital - June 30, 1990 Water Sewer Total $ 581 767 $ 5,032,368 $ 5,614,135 56,772 495,504 552,276 (16,380) (212,425) (228,805) $ 622,159 $ 5j3151447606 $ IM CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - conte June 30, 1990 15. Restatements During the current fiscal year, adjustments relating to prior years' transactions were made to the retained earnings accounts. The following is a schedule of such adjustments: Fund Amount Reason for Adjustment Water Fund $ 12,079 Adjust inventory 16. Segment Information For Enterprise Funds The City maintains four Enterprise Funds which provide water, sewer, ambulance, and solid waste services. Segment information for the year ended June 30, 1990 was as follows: Solid Total Water Sewer Ambulance Waste Enterprise Fund Fund Fund Fund Funds Operating Revenues $ 709,550 $ 1,104,013 $ 195,635 $ 247,016 $ 2,256,214 Depreciation, Depletion and Amortization Expense $ 112,714 $ 365,605 $ 11,159 $ 37,226 $ 526,704 Operating Income or (Loss) $ 103,504 $ 188,382 $ 34,121 $ 95,253 $ 421,260 Operating Grants, Entitle- ments and Shared Revenues $ $ $ $ $ Operating Transfers In $ $ $ $ $ Out $ $ $ $ $ Tax Revenues $ $ $ $ $ Net Income or Loss $ 119,299 $ 20,034 $ 33,929 $ 109,292 $ 282,554 Current Capital: Contributions t 56,772 $ 495,504 $ $ $ 552,276 Transfers $ $ $ $ $ Plant, Property and Equipment: Additions $ 995,085 $ 1,853,914 $ 1,131 $ 35,248 $ 2,885,378 Deletions $ 327,826 $ 744,470 $ $ $ 1,072,296 Net Working Capital $ 393,381 $ 517,797 $ 127,884 $ 174,100 $ 1,213,162 Total Assets $ 3,967,401 $ 10,703,272 $ 159,438 $ 451,959 $ 15,282,070 Bonds and Other Long -Term Liabilities: Payable from Operating Revenues $ 16,086 $ 2,292,403 $ 13,560 $ 10,862 $ 2,332,911 Payable from Other Sources $ $ $ $ $ Total Equity $ 3,906,708 $ 8,396,799 $ 144,446 $ 440,899 $ 12,888,852 -93- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 17. County Provided Services The City of Kalispell is provided various financial services by Flathead County. The County also serves as cashier and treasurer for the City for tax and assessment collections and other revenues received by the County which are subject to distribution to the various taxing jurisdictions located in the County. The collections made by the County on behalf of the City are accounted for in an agency fund in the City's name and are periodically remitted to the City by the County Treasurer. No service charges have been recorded by the City or the County. 18. Joint Ventures Joint ventures are independently constituted entities generally created by two or more governments for a specific purpose. Insurance Coverage Effective July 1, 1987, the City of Kalispell, Montana, joined with other Montana cities and towns to form a self-insurance pool (named the Montana Municipal Insurance Authority) offering workers' compensation and liability coverages. Initial liability limits of $1,500,000 per participant, and Workers' Compensation coverage of $5,000,000 in excess of $500,000 for each accident and aggregate coverage of $5,000,000 in excess of $3,033,532 were obtained through the insurance pool. The Authority is governed by a Board of Directors consisting of thirteen officials from participating cities and towns. At June 30, 1990, the Authority had one hundred and three members in its liability program and eighty-one members in its Workers' Compensation program. In August of 1986, the pool issued $6.25 million in tax exempt bonds to fund the liability program's reserves. The City signed a note with the Authority for $241,773, its pro rata share of the debt, in order to help secure the bonds. Most of the debt service on the bonds is expected to be paid through interest earnings on bond proceeds and other funds of the Authority. The City has, therefore, elected not to record this potential liability as a long-term liability in its accounting records and report it as such in its financial statements. Audited financial statements for the Montana Municipal Insurance Authority for the fiscal year ending June 30, 1990, disclosed the following: -94- TY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 18. Joint Ventures - cont. Insurance Coverage - cont. City-County Health Department The City -County Health Department is operated under an interlocal agreement between Flathead County and the City of Kalispell. The Department operates under the supervision and control of the City -County Health Board. The Board consists of seven members, six of whom are appointed by the Board of County Commissioners. The City of Kalispell levied 3.75 mills in support of the City -County Health Department for the fiscal year ended June 30, 1990. County -Wide Administrative Board The City of Kalispell along with Flathead County, the City of Columbia Falls, and the City of Whitefish, participate in a County -wide Administrative Board (CAB) that was established by an interlocal agreement in December, 1979• The CAB was formed for the purpose of coordinating all land use planning, subdivision reviews and approval, and zoning application and enforcement in Flathead County, as well as to assist in annexation by the cities. The Board consists of four members, the Mayor of each of the three cities and the Chairman of the Flathead County Board of County Commissioners. The CAB is financed by a tax levied by each of the parties to the interlocal agreement in proportion to the expected benefits that each party shall receive during the ensuing fiscal year. -95- Liability Workers' Insurance Compensation Assets $ 11 ,299 ,610 $ 51140.171 Current Liabilities $ 6245,5249 $ 155,536 Long -Term Debt 6,390,2924 - Unpaid Claims Liabilities 2,630,000 4,984,635 Fund Balances 1 ,633 ,767 Total Liabilities and Fund Balance $ 11,299,610 $ 5,140,171 ,Revenues $ 2,905,670 $ 3,�440,909 Expenses 1,837,509 3,440,909 Excess Revenue (Expense) $ 1.068,161 $ -0- City-County Health Department The City -County Health Department is operated under an interlocal agreement between Flathead County and the City of Kalispell. The Department operates under the supervision and control of the City -County Health Board. The Board consists of seven members, six of whom are appointed by the Board of County Commissioners. The City of Kalispell levied 3.75 mills in support of the City -County Health Department for the fiscal year ended June 30, 1990. County -Wide Administrative Board The City of Kalispell along with Flathead County, the City of Columbia Falls, and the City of Whitefish, participate in a County -wide Administrative Board (CAB) that was established by an interlocal agreement in December, 1979• The CAB was formed for the purpose of coordinating all land use planning, subdivision reviews and approval, and zoning application and enforcement in Flathead County, as well as to assist in annexation by the cities. The Board consists of four members, the Mayor of each of the three cities and the Chairman of the Flathead County Board of County Commissioners. The CAB is financed by a tax levied by each of the parties to the interlocal agreement in proportion to the expected benefits that each party shall receive during the ensuing fiscal year. -95- CITY OF KALISPELL KALISPELL. MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 18. 'Joint Ventures - cont. County -Aide Administrative Board - cont. The financial activities of the CAB are accounted for by Flathead County within a Special Revenue Fund. The following is a summary of the CAB's total operations for the fiscal year ended June 30, 1990: Total Assets $ 38,3148 Total Liabilities $ 12,605 Total Equity $ 25,743 Total Revenues $ 172,888 Total Expenditures $ 181,814 Net Decrease in Fund Balance $ (8,926) The City's share of CAB's assets, liabilities, and equity was not readily available. 19. Pending Litigation The following is a list of litigation pending against the City of Kalispell and the amount of damages claimed by the Plaintiff. The City Attorney's evaluation as to the outcome of each case is also noted. The City has liability insurance which may cover all or part of the damages requested. Damages Potential Case Requested of Loss Franklin vs. City of Kalispell $ 500,000 Reasonably possible Marquart vs. City of Kalispell $ 20,000 Reasonably possible Rema-- Real Estate vs. City of Kalispell 60,000 Reasonably possible 20. Loans Receivable a. On June 29, 1984, the City entered into an agreement with Kalispell Center Limited Partnership (KCLP) whereby funds received by the City under an Urban Development Action Grant were loaned to KCLP to help fund the Kalispell Center Mall project. The total amount loaned to KCLP was $3,336,928. The balance of the loan receivable at June 30, 1990, was $3,135,005 and is recorded in the Urban Development Action Grant Loan Repayment Fund, a Special Revenue Fund. Loan repayments to the City began in April, 1987. The repayment schedule calls for monthly principal and interest payments of $21,096.95 on the first day of each month. The term of the loan is 25 years. Interest was deferred for the first year but will accrue at 6% per annum for years 2 through 4, than at 9% for the remaining 21 years of the loan. _., CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1990 20. Loans Receivable - cont. b. A loan was made from the Tax Increment Fund, a Special Revenue Fund, to the 2nd Avenue West Professional Building, a partnership, in the amount of $67,000 on December 30, 1985. The loan was made for the purpose of acquiring real property for development as a parking lot. The term of the loan is fifteen years at 50% interest for the first five years. For years 6 through 15 the interest rate will accrue at the rate paid on U.S. Treasury bills as of the 15th day of January of the year in which the payments are due. The repayment schedule calls for a monthly principal and interest payment of $530 each month for the first five years of the loan. The balance of the loan receivable at June 30, 1990 was $52,158 and is recorded in the Tax Increment Fund, a Special Revenue Fund. 21. Land Sale The City sold a piece of land known as the Griffin Field, to Tidyman's Grocery store chain during the fiscal year ended June 30, 1990. The revenue was recognized in the Airport Fund, a Special Revenue Fund, on approval of the City Council. No reduction in the land account was reported in the General Fixed Asset Account Group. The land had been donated years ago and had never been valued and included in the General Fixed Assets Account Group. Therefore, no reduction was necessary in the land account. -97- CITY OF KALISPELL KALISPELL. MONTANA INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION AND SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1990 .•_ DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406)444-3010 INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 HELENA, MONTANA 59620 We have audited the general purpose financial statements of the City of Kalispell, Montana, for the year ended June 30, 1990, and have issued our report thereon dated June 27, 1991. Those financial statements are the responsibility of the City's management. Our responsibility was to express an opinion on those financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the City of Kalispell, Montana, taken as a whole. The accompanying Schedule of Federal Financial Assistance for the year ended June 30, 1990, is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. The information in this schedule has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. June 27, 1991 DONALD L. DOOLEY Bureau Chief By: 11X�: STAN NORD14ICK Audit Section Supervisor -99- AN EQUAL OPPORTUNITY EMPLOYEE CITY OF KALISPELL KALISPELL, MONTANA SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1990 M CITY OF KALISPELL KALISPELL, MONTANA SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE For the Fiscal Year Ended June 30, 1990 Federal Pass -Through Program or CFDA Grantor's Award Number Number Amount Federal Grantor/Pass-Through Grantor/Program Title U.S. Department of the Agriculture Passed Through the State Department of Lands: Cooperative Forestry Assistance - Urban Community Forestry Program 10.664 $ 3,000 U.S. Department of Transportation Passed Through State Department of Justice: State and Community Highway Safety 20.600 89-02-04-1 $ 30,000 U.S. Department of Justice Passed Through Flathead County: Drug Control and Systems Improvement - Formula Grants 16.579 Passed Through the Montana Board of Crime Control: Drug -Free Schools and Communities - State Grants - Project D.A.R.E. 84.186 8915858 $ 36,420 Total Department of Justice U.S. Department of Housing and Urban Development Passed Through State Department of Commerce: Community Development Block Grant - State's Program 14.228 MT-CDBG-C84-06 $ 500,000 Community Development Block Grant - State's Program 14.228 MT-CDBG-87-PF-09 $ 375,000 Total U.S. Department of Housing and Urban Development U.S. Environmental Protection Agency Direct Programs: Kalispell Sewer Study Project 66.015 $ 19,181 Kalispell Sewer Study Project 66.015 $ 76,140 Construction Grants for Wastewater Treatment Works 66.418 $ 164,000 Construction Grants for Wastewater Treatment Works 66.418 $ 7,785,297 Construction Grants for Wastewater Treatment Works 66.418 $ 393,250 Total U.S. Environmental Protection Agency Total Federal Financial Assistance -101- Beginning Cash Receipts Ending Balance Federal Matching/ Cash Balance July 1, 1989 Funds Income/Other Disbursements June 30, 1990 $ -0- $ 3,000 $ 3,000 $ 6,000 $ -0- $ 28,595 $ - - $ 28,595 $ 5,571 $ 24,310 $ 2,555 $ 32,684 $ (248) -0- 36,420 2,569 37,797 1 ,192 $ 5,571 $ 6o,730 $ 5,124 $ 70,481 $ 944 $ 87,784 $ - - $ - - $ 87,784 (1) $ -0- -0- 275,294 74,000 349,294 -0- $ 87,784 $ 275,294 $ 74 ,000 $ 437,078 $ -0- $ 4,356 $ - - $ 18,264 $ 22,620 $ -0- -0- 12,492 - - 12,492 -0- 49,286 - - - - 49,286 -0- 179,770 127,935 200,000 480,493 27,212 190,539 198,2143 .129,929 566,269 (47,558) $ 423,951 $ 338,670 $348,193 $ 1 ,131 ,160 $ (20,346) $ 517,306 $ 706,289 $ 430,317 $ 1,673,314 $ (19,402) -102- CITY OF KALISPELL KALISPELL, MONTANA SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE For the Fiscal Year Ended June 30, 1990 Notes: (1) Cash disbursements consist of the amount which is necessary to effectively close out the grant, even though the funds are available to make additional loans. The funds, however, are considered local resources and are no longer considered Federal grant funds. The funds held represent interest subsidies and money available to make additional loans. The grant was formally closed out in November, 1989, and the closure was acknowledged by the pass-through grantor agency. MUME DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406)444-3010 HELENA, MONTANA 59620 INDEPENDENT AUDITOR'S COMPLIANCE REPORT BASED ON AN AUDIT OF GENERAL PURPOSE FINANCIAL STATEMENTS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the years ended June 30, 1989 and 1990, and have issued our reports thereon dated June 27, 1991. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards , issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to the City of Kalispell, Montana, is the responsibility of the City's management. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. The results of our tests indicate that, with respect to the items tested, the City of Kalispell, Montana, complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City had not complied, in all material respects, with those provisions. We noted certain immaterial instances of noncompliance that we have reported to the management of the City of Kalispell, Montana, in our Independent Auditor's Report on Other Compliance, Financial, and Internal Control Matters on pages 120-123 of this audit report. This report is intended for the information of the City of Kalispell's management and granting agencies. This restriction is not intended to limit the distribution of this report, which is a matter of public record. June 27, 1991 DONALD L. DOOLEY Bureau Chief By d StAN NORDWICK Audit Section Supervisor -104- AN EOUAL OPPOPTUNITY EMPLOYER DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406) 444-3010 HELENA, MONTANA 59620 REPORT ON THE INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the years ended June 30, 1989 and 1990, and have issued our reports thereon dated June 27, 1991. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and performing our audit of the general purpose financial statements of the City of Kalispell, Montana, for the years ended June 30, 1989 and 1990, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. The management of the City of Kalispell, Montana, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. -105- AN EOUAL OPPORTUNITY EMPLOYER- REPORT ON THE INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS - cont. For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: Budgets Cash Receipts Billing/Accounts Receivable/ Other Receivables Tax /Assessment Revenue and Related Receivables Other Revenues and Receivables Purchasing/Receiving/Expenditures/ Accounts Payable Payroll Material/Supply Inventories Other Short -Term Liabilities Fixed Assets/Depreciation Cash and Investments Long -Term Debt For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the general purpose financial statements. City Court - Internal Control The City Court utilized two separate receipting systems. A. peg board system was used to receipt for all fines and forfeitures collected. These moneys were deposited directly with the City Treasurer. Another series of receipts was used to receipt for bonds posted and restitution payments received. Moneys from these sources were deposited to the City Court Trust Account. Restitution moneys were then paid by check from the trust account to the individual entitled to receive the restitution only after the restitution was paid in full. Bonds posted were returned to the individual who posted the bond by check or cash, if the bond had not been deposited to the Trust Account, if the defendant was found not guilty or if charges were dropped. If a bond was forfeited, a check was issued to the City from the Trust Account and the forfeiture was receipted for on the peg board receipt system and deposited with the City Treasurer. The following is a list of internal control weaknesses: 1. There was no segregation of duties between collecting/receipting, depositing and recording. 2. Only one signature was required to issue checks from the Trust Account. 3. All voided receipts on the peg board cash receipts system, which was used to receipt for fines and forfeitures, were not retained. 4. Restitutions paid on time payment schedules were held in the City Court until the contract was paid in full, rather than being deposited to the Trust Account when received. Sam REPORT ON THE INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS - cont. City Court - Internal Control - cont. 5. Deposits of bond and restitution payments to the City Court Trust Account were not made timely or intact. 6. For each case in which the sentence included fines which were allowed to be paid on time payment agreement, a separate agreement was not signed. 7. The bond book did not include a separate page for each individual who posted bond. In addition, all pertinent information was not recorded, such as date received, receipt number, amount, docket number, citation number, date disbursed, check number, payee, and amount. S. No reconciliation was made between the City Court Trust Account book balance and a listing of bonds and restitution payments in the account. Also, no reconciliation was made between the receipts issued for fines and forfeitures and the deposits of fines and forfeitures made to the City Treasurer. 9• The fines and restitution payments being paid on time payments were not recorded as accounts receivable and no procedures have been established to review delinquent receivables on a periodic basis. Recommendation We recommend that the City of Kalispell implement the following policies and procedures to improve internal accounting controls in the City Court office: 1. The duties of collecting/receipting, depositing, recording, reconciling, and preparing and signing checks should be segregated to the extent possible. We recommend the following segregation: Collecting/receipting - Treasurer's office clerks Depositing - Assistant Finance Director Recording - City Court Clerk for subsidiary records and the Assistant Finance Director for City Revenue Reconciling - Finance Director Preparing checks - City Judge Signing checks - City Judge and Court Clerk 2. All checks issued from the City Court Trust Account should require two signatures. 3. All voided receipts should be retained. 4. Restitutions paid on contract should be deposited daily to the Trust Account and immediately remitted to the recipient by check. 5. Deposits of bonds posted or restitution payments received should be made daily and intact to the Trust Account. Intact depositing means that the deposit should reconcile to the receipts issued for that day. -107- REPORT ON THE INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS - cont. City Court - Internal Control - cont. Recommendation - cont. 6. For each case in which the sentence included fines which are being allowed to be paid on time payments, a separate agreement should be signed by the payer. 7. The bond book should be kept alphabetically and include a separate page for each person posting a bond or making restitution. All pertinent information should be included in the bond book, such as date received, receipt number, amount of receipt, docket number, citation number, date disbursed, check number, payee, and amount of check. 8. Each month there should be a reconciliation between the City Court Trust Account book balance and a listing of bonds and restitution payments held in the account. Also, a reconciliation should be made each month between the peg board system receipts issued for fines and forfeitures and the deposits of fines and forfeitures to the City Treasurer. The amount receipted for should also be reconciled to the amount recorded as revenue for the month in the fines and forfeitures revenue account. 9. The fines and restitution payments being paid on time payments should be recorded as accounts receivable at least in a subsidiary record. Procedures should be established to monitor delinquent receivables. Parks and Recreation - Internal Control The following internal accounting control weaknesses were noted in the parks and recreation receipting process: 1. Prenumbered receipts were not issued for all collections at the Parks and Recreation Office. 2. Checks received as collections were not immediately stamped "For Deposit Only." 3. No receipt register was maintained. 4. Daily deposits were not made with the City Treasurer. 5. No reconciliation was prepared reconciling the registrations for the park programs to the money received. Recommendation We recommend that the Parks and Recreation Department implement the following internal control procedures: 1. Prenumbered receipts should be issued for all collections at the Parks and Recreation Office. 2. Checks received as collections should be immediately stamped "For Deposit Only." Me REPORT ON THE INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS - cont. Parks and Recreation - Internal Control - cont. Recommendation - cont. 3. A receipt register should be maintained which includes the date issued, payer, receipt number, amount received, and purpose or source of receipt. 4. Daily collections should be reconciled to receipts issued and deposited with the City Treasurer. 5. A monthly reconciliation should be made between the receipts issued, the receipt register, and the deposits with the City Treasurer. Parking Meter Collections Although the City has changed the procedures for accounting for parking meter collections by segregating the duties of collecting, depositing, recording, and reconciling to the extent possible, the same individual still collects and deposits the money. Recommendation We recommend that the City periodically perform some analytical procedures such as comparing collections from month to month by parking lot to determine if unreasonable variances are occurring in the parking lot collecting. The City should investigate any significant variances. Fixed Assets The following weaknesses were noted in the fixed asset internal accounting control procedures: 1. Documentation was not available or readily available to support all the costs of the fixed assets recorded in the fixed asset inventory records. 2. All donated fixed assets were not valued at fair market value at the time of the receipt. 3. A physical inventory has not been completed since June 30, 1987. 4. All equipment items were not tagged and tag numbers were not referenced in the fixed asset records. 5. The City had not established a formal policy regarding the inclusion or exclusion of infrastructure type fixed assets. 6. The City has not established a formal policy regarding the requirements of the "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments" (Common Rule). 7. Periodic reports are not submitted showing obsolete equipment, equipment needing repair, or equipment no longer useful. IffMe REPORT ON THE INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS - cont. Fixed Assets - cont. Recommendation We recommend that the City continue to upgrade its fixed asset records. To improve internal accounting controls, we recommend the following: 1. Documentation should be obtained to support the recorded costs of all fixed assets. Where historical cost is not available, the City should determine an estimated cost at the date of acquisition. 2. All donated assets should be valued at the fair market value at the time of the donation. 3. A physical inventory should be taken, at least every two years, and the results compared to the recorded fixed assets. 4. All equipment items should be tagged and the tag number referenced in the fixed asset records. 5. The City should establish a formal policy regarding the inclusion or exclusion of infrastructure type fixed assets. 6. The City should establish a formal policy regarding the requirements of the "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments" (Common Rule), pertaining to those fixed assets purchased with federal financial assistance. 7. Periodic reports showing obsolete equipment, equipment needing repair, and equipment no longer useful should be submitted to the Finance Director from the various departments in custody of the fixed assets. A material weakness is a reportable condition in which the design or operation of the specific internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited 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 structure would not necessarily disclose all matters in the internal controls structure that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, of the reportable conditions described above, we believe the following to be a material weakness: Fixed Assets. We also noted other matters involving the internal control structure and its operation that we have reported to the management of the City of Kalispell, Montana, in our Independent Auditor's Report on Other Compliance, Financial, and Internal Control Matters on pages 120 through 123 of this audit report. -110- REPORT ON THE INTERNAL CONTROL STRUCTURE IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS - cont. This report is intended for the information of the the City of Kalispell's management and granting agencies. This restriction is not intended to limit the distribution of this report, which is a matter of public record. June 27, 1991 DONALD L. DOOLEY Bureau Chief By: STAN NORDWICK Audit Section Supervisor DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406) 444-3010 HELENA, MONTANA 59620 SINGLE AUDIT OPINION ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the City of Kalispell, Montana's, compliance with the requirements governing types of services allowed or unallowed; matching, level of effort, or earmarking; reporting; special tests and provisions; claims for reimbursements; and amounts claimed or used for matching that are applicable to each of its major federal financial assistance programs, which are identified in the accompanying schedule of federal financial assistance, for the year ended June 30, 1990. The management of the City of Kalispell, Montana, is responsible for the City's compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and Office of Management and Budget Circular A-128, "Audits of State and Local Governments." Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the City of Kalispell, Montana, complied, in all material respects, with the requirements governing types of service allowed or unallowed; matching, level of effort, or earmarking; reporting; special tests and provisions; claims for reimbursements; and amounts claimed or used for matching that are applicable to each of its major federal financial assistance programs for the year ended June 30, 1990. June 27, 1991 DONALD L. DOOLEY Bureau Chief B3' p t, STAN NORD14ICK Audit Section Supervisor -112- IAN EOUAL OPPORTUNITY EMPLOYER DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406) 444-3010 HELENA, MONTANA 59620 SINGLE AUDIT REPORT ON COMPLIANCE WITH THE GENERAL REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAMS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have applied procedures to test the City of Kalispell, Montana's compliance with the following requirements applicable to each of its major federal financial assistance programs, which are identified in the schedules of federal financial assistance, for the year ended June 30, 1990: political activity, Davis -Bacon Act, civil rights, cash management, federal financial reports, Drug Free Workplace Act, allowable costs, and administrative requirements. Our procedures were limited to the applicable procedures described in the Office of Management and Budget's Compliance Supplement for Single Audits of State and Local Governments. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City of Kalispell, Montana's compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the first paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Kalispell, Montana, had not complied, in all material respects, with those requirements. This report is intended for the information of the City of Kalispell's management and granting agencies. This restriction is not intended to limit the distribution of this report, which is a matter of public record. June 27, 1991 DONALD L. DOOLEY Bureau Chief By: A"4_ &"- STAN NORDWICK Audit Section Supervisor -113- AN EOUAL OPPORTUNITY EMPLOYER" DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406) 444-3010 HELENA, MONTANA 59620 SINGLE AUDIT REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO NONMAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 In connection with our audit of the general purpose financial statements of the City of Kalispell, Montana, for the years ended June 30, 1989 and 1990, and with our study and evaluation of the City's internal control systems used to administer federal financial assistance programs, as required by Office of Management and Budget Circular A-128, "Audits of State and Local Governments," we selected certain transactions applicable to certain nonmajor federal financial assistance programs for the years ended June 30, 1989 and 1990. As required by OMB Circular A-128, we have performed auditing procedures to test compliance with the requirements governing types of services allowed or unallowed that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the City's compliance with these requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the City of Kalispell, Montana, had not complied, in all material respects, with those requirements. This report is intended for the information of the City of Kalispell's management and granting agencies. This restriction is not intended to limit the distribution of this report, which is a matter of public record. June 27, 1991 DONALD L. DOOLEY Bureau Chief 1 By: k"." )%&,1. /---- STAN NORDWICK Audit Section Supervisor -114- EQUAL OPPORTUNITY EMPLOYER DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR - STATE OF MONTANA (406) 444-3010 CAPITOL STATION HELENA, MONTANA 59620 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS (ACCOUNTING AND ADMINISTRATIVE) - BASED ON A STUDY AND EVALUATION MADE AS A PART OF AN AUDIT OF THE GENERAL PURPOSE FINANCIAL STATEMENTS AND THE ADDITIONAL TESTS REQUIRED BY THE SINGLE AUDIT ACT To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, for the years ended June 30, 1989 and 1990, and have issued our reports thereon dated June 21, 1991. As part of our audit, we made a study and evaluation of internal control systems, including applicable internal administrative controls, used in administering federal financial assistance programs to the extent we considered necessary to evaluate the systems as required by generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, the Single Audit Act of 1984, and the provisions of OMB Circular A-128, Audits of State and Local Governments. For the purpose of this report, we have classified the significant internal accounting and administrative controls used in administering federal financial assistance programs in the following categories: Accounting Controls: Cash Receipts Payroll Other Revenues and Receivables Fixed Assets/Depreciation Purchasing/Receiving/Expenditures/ Cash and Investments Accounts Payable Administrative Controls: General Requirements: Political Activity Davis -Bacon Act Civil Rights Cash Management Federal Financial Reports Allowable Costs/Cost Principles Drug -Free Workplace Act Administrative Requirements Specific Requirements Types of Services Allowed or Unallowed Eligibility Matching, Level of Effort, or Earmarking Requirements Special Reporting Requirements Special Tests and Provisions _115 - AN EOUAL OPPORTUNITY EMPLOYER INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS (ACCOUNTING AND ADMINISTRATIVE) - cont. The management of the City of Kalispell, Montana., is responsible for establishing and maintaining internal control systems used in administering federal financial assistance programs. in fulfilling that responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control systems used in administering federal financial assistance programs are to provide management with reasonable, but not absolute, assurance that, with respect to federal financial assistance programs, resource use is consistent with laws, regulations, and policies; resources are safeguarded against waste, loss, and misuse; and reliable data are obtained, maintained, and fairly disclosed in reports. Because of inherent limitations in any system of internal accounting and administrative controls used in administering federal financial assistance programs, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the systems to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. Our study included all of the applicable control categories listed above. During the year ended June 30, 1989, the City of Kalispell, Montana, had no major federal financial assistance programs and expended 59% of its total federal financial assistance under the following non -major federal financial assistance program: U.S. Environmental Protection Agency - Construction Grants for Wastewater Treatment Works. During the year ended June 30, 1990, the City of Kalispell, Montana, expended 91% of its total federal financial assistance under the following major federal financial assistance programs: U.S. Department of Housing and Urban Development - Community Development Block Grant and U.S. Environmental Protection Agency - Construction Grants for Wastewater Treatment Works. With respect to internal control systems used in administering these major and nonmajor federal financial assistance programs, our study and evaluation included considering the types of errors and irregularities that could occur, determining the internal control procedures that should, prevent or detect such errors and irregularities, determining whether the necessary procedures are prescribed and are being followed satisfactorily, and evaluating any weaknesses. With respect to the internal control systems used solely in administering the other nonmajor federal financial assistance programs of the City of Kalispell, Montana, our study and evaluation was limited to a preliminary review of the systems to obtain an understanding of the control environment and the flow of transactions through the accounting system. Our study and evaluation of the internal control systems used solely in administering these nonmajor federal financial assistance programs of the City of Kalispell, Montana, did not extend beyond this preliminary review phase. INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS (ACCOUNTING AND ADMINISTRATIVE) - cont. Our study and evaluation was more limited than would be necessary to express an opinion on the internal control systems used in administering the federal financial assistance programs of the City of Kalispell, Montana. Accordingly, we do not express an opinion on the internal control systems used in administering the federal financial assistance programs of the City of Kalispell, Montana. Further, we do not express an opinion on the internal control systems used in administering the major federal financial assistance programs of the City of Kalispell, Montana. Also, our audit, made in accordance with the standards mentioned above, would not necessarily disclose material weaknesses in the internal control systems used solely in administering nonmajor federal financial assistance programs. However, our study and evaluation and our audit disclosed the following conditions that we believe result in more than a relatively low risk that errors or irregularities in amounts that would be material to a federal financial assistance program may occur and not be detected within a timely period. Federal Fixed Assets The City of Kalispell property records did not include the percentage of Federal participation in the cost of the property, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. In addition, a physical inventory was not taken since June 30, 1987. Also, adequate maintenance procedures have not been developed to keep the property in good condition. These record requirements are outlined in the "Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments1P (Common Rule). Recommendation We recommend that the City expand the fixed asset inventory records to include the percentage of Federal participation, the location of the property, the use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. In addition, a physical inventory should be taken at least every two years, and reconciled to the general ledger. The City should establish procedures to ensure that the property is adequately maintained in good condition. Drug Free Workplace Policy The City of Kalispell had established a policy of rules for employees of the City. Included in the policy was a rule which stated that if an employee brought or used unauthorized alcohol or illegal drugs on City property or workplace during working hours, the employee would be dismissed. This policy does not, however, contain all the necessary requirements of the Drug -Free Workplace Act. The Drug -Free Workplace Act states the grantee certifies that it will provide a drug-free workplace by: -117- INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS (ACCOUNTING AND ADMINISTRATIVE) - cont. Drug Free Workplace Policy - cont. (a) Publishing a policy statement notifying employees that the unlawful manufacture, distribution, dispensing, possession, or use of a controlled substance is prohibited in the grantee's workplace, and specifying the actions that will be taken against employees for violation of such prohibition; (b) Establishing an ongoing drug-free awareness program to inform employees about: - The dangers of drug abuse in the workplace; - The grantee's policy of maintaining a drug-free workplace; - Any available drug counseling, rehabilitation, and employee assistance programs; and - The penalties that may be imposed upon employees for drug abuse violations occurring in the workplace. (c) Making it a requirement that each employee to be engaged in the performance of the grant be given a copy of the statement required by paragraph (a); (d) Notify the employee in the statement required by paragraph (a) that, as a condition of employment under the grant, the employee will: - Abide by the terms of the statement; and - Notify the employer in writing of any criminal drug statute conviction for a violation occurring in the workplace no later than five calendar days after such conviction; (e) Notifying the agency in writing within ten calendar days after receiving notice under subparagraph (d)(2) from an employee or otherwise receiving actual notice of such conviction; (f) Taking one of the following actions, within 30 calendar days of receiving notice under subparagraph (d)(2) with respect to any employee who is so convicted: - Taking appropriate personnel action against such an employee, up to and including termination; or - Requiring such employee to participate satisfactorily in a drug abuse assistance or rehabilitation program approved for such purposes by Federal, State, or local health, law enforcement, or other appropriate agency. Recommendation We recommend that the City of Kalispell establish a drug-free workplace policy as required by the Drug -Free Workplace Act and distribute the policy to all employees. INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS (ACCOUNTING AND ADMINISTRATIVE) - cont. These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in (1) our audit of the general purpose financial statements for the fiscal years ended June 30, 1959 and 1990 and (2) our audit and review of the City's compliance with laws and regulations noncompliance with which we believe could have a material effect on the allowability of program expenditures for each major federal financial assistance program and nonmajor federal financial assistance programs. This report does not affect our reports on the general purpose financial statements and on the City's compliance with laws and regulations dated June 27, 1991. This report is intended solely for the information of the City of Kalispell's management and granting agencies. This restriction is not intended to limit the distribution of this report, which is a matter of public record. Jure 27, 1991 IUM DONALD L. DOOLEY Bureau Chief J9 By: STAN NORDWICK Audit Section Supervisor DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR - STATE OF MONTANA (406) 444-3010 INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 CAPITOL STATION HELENA, MONTANA 59620 Immaterial instances of noncompliance along with findings relating to financial or accounting matters, as well as our recommendations, are presented below. Also, other matters involving the internal control structure and its operation that are not considered to be reportable conditions under standards established by the American Institute of Certified Public Accountants are disclosed below for your information, along with our recommendations for improvement where applicable. Secondary Loan Agreement The City entered into an agreement with Kalispell Center Limited Partnership on June 30, 1984, to loan the proceeds of an Urban Development Action Grant (UDAG) to the Partnership. The loan proceeds were used to assist the Partnership in funding the construction of a shopping mall, hotel and restaurant, known as the Kalispell Center ?Fall. Paragraph eight of the loan agreement, as modified on February 28, 1985, contained the following provisions: 118. The City shall receive 15 percent (15) of the cumulative annual net cash flow of the Project until this loan is paid in full. As defined herein for the purpose of this Agreement, "Cumulative Annual Net Cash Flow" shall mean the Project operating income in each Partnership fiscal year, less debt service on first mortgage and this loan, a preferred return of fifteen percent (150/10) on documented cash equity contributed to the project by Partnership prior to 90 days after substantial completion of the project, real estate taxes, reasonable expenses allowable for Federal Income tax purposes (exclusive of capital improvement reserves, depreciation and other non-cash items) and a management fee which shall not exceed four percent (4%) of project operating income. The Partnership shall deliver a Review Statement to the City from an independent Certified Public Accountant within 90 days of the close of each Partnership fiscal year during the term of the loan attesting to: (a) Gross income; (b) Operating expenses: (c) Net Annual Cash Flow: (d) Partnership Cash Equity (through 90 days after substantial completion of construction); (e) Net Proceeds, if applicable; and (f) the amount of participation in Net Annual Cash Flow and Net Proceeds, if applicable, due to the City." -120- ,AN EQUAL OPPOPTUNfTY EMPLOYEP - INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS - cont. Secondary Loan Agreement - cont. The annual report received by the City from an independent certified public accounting firm does not provide sufficient information for the City to determine if the provisions of paragraph 8, as cited above, are being complied with. In addition, the annual report does not constitute a Review Statement as prescribed in the Codification of Statements on Auditing Standards nor was the term "attesting to" as called for in paragraph B, used in the various annual reports. The Partnership has interpreted "a preferred return of fifteen percent (15%) on documented cash equity..." to mean a cumulative return of 15 percent each year. That is, the Partnership has increased the return on equity by 15% or $266,408.00 each year. In the fifth year of operation, the Partnership computed their return on equity for the fiscal year ended October 31, 1990, in the amount of $1 ,332,000.00. As a result of the Partnership increasing the return on equity by 15% or $266,408.00 each and every year, there is little possibility, if any, that the City of Kalispell will ever receive any proceeds from the cumulative net cash flow of the Project as itemized in the first sentence of paragraph 8. Recommendation The City should continue to pursue all possible options to obtain appropriate and sufficient information so that the City can determine if the terms of the secondary loan agreement (more specifically paragraph 8) are being met. Salaried Employee Pay Period The pay period for hourly City employees was from the 21st day of one month to the 20th day of the following month. Salaried employees have a calendar month pay period from the first day to the last day of the month. However, all payroll check/warrants for both hourly and salaried employees are dated the 20th of the month and are distributed on or about the 25th of the month. The majority of the payroll checks are cashed prior to the end of the month. As a result of this procedure, salaried employees are paid and have cashed their payroll checks before they have performed all of the personal services for which they have been paid. Recommendation We recommend that the City utilize a pay period which is common to both salaried and hourly employees. This would simplify the payroll processing and eliminate the problem of having to pay employees before they have worked the entire pay period. Emergency Budgets The City improperly adopted emergency budgets for various funds after the fiscal years had already ended. On September 18, 1989, the City adopted an emergency budget for the General Obligation Bond Debt Service Fund, and the Health Insurance and Retirement Special Revenue Funds for the fiscal year ended June 30, 1989, and on September 17, 1990, the City adopted an emergency budget for the Health Insurance Fund, a Special Revenue Fund, for the fiscal year ended June 30, 1990. The budgets of these funds had been overexpended during the fiscal years and the emergency budgets were intended to eliminate the overdrafts, but they were not adopted until after the City had overexpended the budgets and appropriations had lapsed. The manner in which the City overexpended the budgets and adopted emergency budget resolutions was contrary to several statutes as follows: -121- INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS - cont. Emergency Budgets - cont. Section 7-6-1235, MCA, states: 11(1) The estimates of expenditures, itemized and classified as required in 7-6-42211 and 7-6-4225 and as finally fixed and adopted and as may be amended as provided in 7-6-11231 by said council, shall constitute the appropriations for the municipality for the fiscal year intended to be covered thereby. (2) Except as provided in 7-6-1236, the council and every other municipal official shall be limited in the malting of expenditures or incurring liabilities to the amount of such detailed appropriations and classifications, respectively." Section 7-6-4234(2)(a), MCA, states in part: "The council shall not approve any claim and the clerk shall not issue any warrant for any expenditure in excess of said detailed budget appropriations, as finally adopted or as revised under the provisions of this part, except upon an order of a court of competent jurisdiction or for an emergency as hereinafter provided." Section 7-6-4252(4)(b), MCA, concerning emergency budgets states: "No expenditure may be made or liability incurred pursuant to the order until 5 days, exclusive of the day of entry of the order, elapse." Section 7-6-12160(1), MCA, states in part: "...all appropriations, other than the appropriations for uncompleted improvements in progress of construction, shall lapse at the end of the fiscal year." Recommendation The City should limit the making of expenditures and the incurring of liabilities to the final budget appropriations as approved and adopted or as revised by transfer as required by Sections 7-6-16234 and 7-6-4235, MCA. When an emergency budget is necessary and justified, the provisions of Section 7-6-4252, MCA, should be followed and no emergency budget expenditures should be made until after the emergency budget has been adopted. No emergency budget should be adopted after the fiscal year appropriations have lasped. Assessment Receivable As of June 30, 1990, certain debt service funds had insufficient resources (deferred assessments receivable, assessments receivable, and cash) to pay all short-term payables and bonds payable of the funds. Unless resolved, such deficiencies could result in the reed to fund the payments on the debt from the S.I.D. Revolving Fund in the form of loans with no visable means of repayment. This would result in the City paying off the debts of the special improvement districts with the general taxing powers of the City. The funds with resource deficiencies are as follows: -122- INDEPENDENT AUDITOR'S REPORT ON OTHER COMPLIANCE, FINANCIAL, AND INTERNAL ACCOUNTING CONTROL MATTERS - cont. Assessment Receivable - cont. Fund (Fund Number) Sidewalk and Curb 1981 Sidewalk and Curb 1983 Sidewalk and Curb 19814 Sidewalk and Curb 1985 Sidewalk_ and Curb 1987 S.I.D. 326 (3626) S.I.D. 335 (3635) S.I.D. 337 (3637) S.I.D. 336 (3636) S.I.D. 313 (3613) S.I.D. 333 (3633) S.I.D. 334 (36314) Special Light Number 2 Sidewalk and Curb 1982 Recommendation We recommend that the city review the Sidewalk and Curb Funds and the S.I.D. Funds to determine the cause of the deficits. The City should then take appropriate action to eliminate the deficits. June 27, 1991 -123- DONALD L. DOOLEY Bureau Chief By • STAN NORDWICK Audit Section Supervisor Resource Deficiency (3581) $ (5,269.00) ( 3583 ) $ (1,250-00) (3584) $ (6,565.00) (3585) $ (4,042.00) (3587) $ (2,410.00) $ (2,591.00) $ ( 936.00) $ (12,001.00) $ ( 820.00) $ (1 ,280 .00) $ (26,388.00) $ (3,245.00) (3202) $ (1,510.00) (3582) $ (17.00) Recommendation We recommend that the city review the Sidewalk and Curb Funds and the S.I.D. Funds to determine the cause of the deficits. The City should then take appropriate action to eliminate the deficits. June 27, 1991 -123- DONALD L. DOOLEY Bureau Chief By • STAN NORDWICK Audit Section Supervisor DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION -STATE OF MONTANA (406) 444-3010 HELENA, MONTANA 59620 INDEPENDENT AUDITOR'S REPORT ON PRIOR AUDIT REPORT RECOMMENDATIONS To the Honorable City Manager, Mayor and City Council City of Kalispell Kalispell, MT 59901 The following is a summary of the recommendations contained in the prior audit report of the City of Kalispell, Montana, and the actions taken on them by the City. Recommendations Actions Taken Emergency Budgets The City should limit the making of expenditures and the Not Implemented incurring of liabilities to the final budget appropriations as approved and adopted or as revised by transfer as required by Sections 7-6-4234 and 7-6-4235, MCA. When an emergency budget is necessary and justified, the provisions of Section 7-6-4252, MCA, should be followed and no emergency budget expenditures should be made until after the emergency budget has been adopted. No emergency budget should be adopted after the fiscal year appropriations have lapsed. Emergenev Budget - Financin In the future, whenever a fund has a deficit cash Implemented balance or registered emergency warrants at year end, the City should provide for sufficient resources in the ensuing fiscal year's budget to eliminate the deficit or pay the registered warrants with interest as required by law. Debt Service Funds - Budget Overdrafts The budgets in the Special Improvement District Debt Implemented Service Funds should be amended and spending authority provided when prepayments of special assessments are received and used to pay outstanding special improvement district bonds. -124- AN EOUAL OPPORTUNITY EMPLOYER-- INDEPENDENT AUDITOR'S REPORT ON PRIOR AUDIT REPORT RECOMMENDATIONS - cont. Recommendations Actions Taken Fixed Assets The City should continue to update its fixed assets Not Implemented accounting system. Documentation should be obtained, if possible, to support the recorded costs of general and Enterprise Fund fixed assets. Estimated historical costs should be determined for assets for which the actual cost is not available. The City should obtain and record approximate fair market values for donated assets as of the time they were received. An annual physical inventory should be taken of all City -owned fixed assets and the results should be reconciled to the detailed inventory records and the general ledger fixed assets accounts. Also, all assets of the City should be tagged or marked with an identifying number. Airport Fund Deficit The City Council should consider every possible solution to eliminate the deficit fund balance of the Airport Fund. We recommend that the City consider options, other than the sale of the airport land, and decide on a course of action which will eliminate the growing deficit in the fund. Parking Meter/Parking Lot Collections To improve internal accounting controls over the parking meter and parking lot collections, we recommend that the City assign another individual the responsibility of verifying the collections and depositing the cash collections. Further, the City could periodically rotate the collection process with another individual. The City Treasurer should also be provided a copy of the collection report along with the duplicate deposit slip. Swimming Pool Collections To improve internal accounting controls over swimming pool collections, any differences between the cash register tape totals and the actual daily cash collections should be immediately resolved. Daily collection reports should be prepared to provide a detailed summary of the pool activity and to substantiate the amounts deposited. If possible, deposits should be made by someone other than those individuals involved in the collection and receipting process. Prenumbered receipts issued for swimming lessons and season ticket sales should be controlled and accounted for through the use of a stationery control record. -125- Implemented Partially Implemented Partially Implemented INDEPENDENT AUDITOR'S REPORT ON PRIOR AUDIT REPORT RECOMMENDATIONS - cont. Recommendations Actions Taken Salaried Employee Pay Period We recommend that the City change the pay day so that it Not Implemented is after the end of each pay period worked. This may require that the salaried and hourly employee pay periods be revised. Employees should have worked the entire pay period before they are issued payroll checks for the pay period. Enterprise Fund - Materials and Supplies Inventory The physical inventory of Enterprise Fund materials and Partially Implemented supplies should be taken by someone other than sewer and water department personnel responsible for the materials and supplies. In addition, materials and supplies inventories should be valued at cost. Prior Period Adlustments Accounts receivable written -off should be recorded as a Implemented charge to income (bad debt expense) rather than as prior period adjustment. We recommend that an allowance for uncollectible accounts receivable be established based on past experience. When accounts receivable are written -off, the City should credit accounts receivable and debit the allowance for uncollectible accounts receivable account. If fixed assets which have not yet been fully depreciated are disposed of or sold or traded -in for less than their recorded cost less accumulated depreciation, the difference should be recorded as a loss on disposal of fixed assets, not as a prior period adjustment to retained earnings. Reported Budget in Annual Financial Report Budget amounts reported in the budget to actual Implemented financial statements in the annual financial report should reflect the budgeted revenues and expenditures from the City's budget document or, if applicable, the amounts as revised by legal budget transfers or amendments properly approved by the City Council. June 27, 1991 -126- DONALD L. DOOLEY Bureau Chief %^ f By: STAN NORDWICK Audit Section Supervisor