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02. Audit Fiscal Years Ended 6/30/87 and 6/30/88CITY OF .�AL,ISPE�L K�,ISPELL. MO 'A CITY OF KALI; EfLL TABLE OF CONTENTS Paae Organization 1 Fiscal Year Ended June 30, 1987 Independent Auditor's Report 2-4 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 Changes in Financial Position - All 13 Proprietary Fund Types Dotes to Financial Statements 14-43 Independent Auditor's Report on Supplemental Information Schedule 44 and Supplemental Schedule Independent Auditor's Report on Supplemental Information Schedule 45 Supplemental Schedule 46 Schedule of Federal Financial Assistance 47-48 Fiscal Year Ended June 30, 19888 Independent Auditor's Report 49-50 Financial Statements 51 Combined Balance Sheet - All Fund Types and Account Groups 52-53 Combined Statement of Revenues, Expenditures, and Changes in Fund 54-55 Balances - All Governmental Fund Types Combined Statement of Revenues, Expenditures, and Changes in Fund 56-57 Balances - Budget and Actual - General, Special Revenue, Debt Service, and Capital Projects Fund Types i CITY OF KPLISPELL KALISPELL, MONTI'ANA [OEM Fiscal Year Ended June 30. 1988 - cont Financial Statements - cont. Combined Statement of Revenues, Expenses, and Changes in Retained 58-59 Earnings - All Proprietary Fund Types Combined Statement of Changes in Financial Position - All 60-61 Proprietary Fund Types Notes to Financial Statements 62-90 Independent Auditor's Report on Supplemental Information Schedule 91 and Supplemental Schedule Independent Auditor's Report on Supplemental Information Schedule 92 Supplemental Schedule 93 Schedule of Federal Financial Assistance 94-95 Independent Auditor's Report on Compliance Based on an Audit of 96-99 General Purpose Financial Statements Independent Auditor's Report on Compliance with Laws and Regulations 100-101 Related to Major and Nornajor Federal Financial Assistance Programs Independent Auditor's Report on Internal Accounting Control 102-104 Independent Auditor's Report on Internal Accounting Control (Accounting 105-107 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 Independent Auditor's Report on Other Financial and Internal 108-111 Accounting Control Matters Independent Auditor's Report on Prior Audit Report Recommendations 112-118 ii CITY OF KALI,1;PE-U KALISPELL, MQ�TTAIIA ORGAN ZATIO Fiscal Year Fiscal Year Ended June 30, 1987 Ended June 3-0.,...198-8 Mr. John "Ed" Kennedy Mayor Mr. John "Ed" Kennedy CITY COUNCIL Mr. Hward G. Grainger Mr. Jin C. Atkinson Mrs. Clare Fafferman Mrs. Clare Hafferman Mr. Charles J. Fanning Mir. Noel D. Furlong Mr. Gary 6,1. NYstul Mr. Gary W. N� 7stul Mrs. Marla Robinson Mr. John F. Gunnerson Mr. Louis B. Ruiz, Jr. Mr. Roger Hopkins Mr. Wayne P. Saverud Mr. Wayne P. Saverud Mr. Sandy Schindler Mr. Sandy Schindler CITY OFFICI Mr. Glenn Neier Attorney Mr. Glenn Neier Mr. Addison Clark Chief of Police Mr. Addison Clark Mr. Don Halver Clerk/Treasurer Mr. Don Halver Mr. Francis Willis City Judge Mr. Francis Willis Mr. Kenneth Farrrr�-er Water/Sewer/Garbage Mr. Kenneth Harmer Collector CITY OF KALISPELL KALISPELL, MONTAM INDEPENDENT AILD.ITOP'S REPORT Fiscal Year Ended June 30, 1987 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 AUDITORS RE= To the Honorable Mayor and City Council City of Kalispell Kalispell, MT 59901 We have audited the general purpose financial statements of the City of Kalispell, Montana, as of and for the year ended June 30, 1987, as listed in the table of contents. These general purpose financial statements are the responsibility of the City of Kalispell's management. Cur 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 $6,025,673 and the fixed assets balances and the related depreciation expense of the Enterprise Funds amounting to $11,773,32.7 and $430,596, respectively. In our opinion, except for the effects of such adjustments, if any, as might have been necessary had we been able to examine the fixed assets described in paragraph three, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Kalispell, Montana, at June 30, 1987, and the results of its operations and the changes in financial position of its proprietary fund types for the year then ended, in conformity with generally accepted accounting principles. -3- AN EQUAL OPPOPTUN%TY EMPLOYER P`'�Yq'�61.0 INDEPENDENFT At3DITOR IS REPORT - cont. As discussed in Dotes l.o. and 15 to the financial statements, the City changed its method of accounting for special assessment financial activities effective July 1, 1986. April 18, 1989 Mc DONALD L. DOOLEY� Bureau Chief CITY OF KUJ-SI�ELL KALISPELL, MOfflANA FINANCIAL STATEMENTS i am CITY OF KALISPELL KALI SPELL , MONTANA C0141BINED BALANCE SHEET - ALL FUND TYPES MD ACCOUNT GRQ-QPS June 30, 1987 GWEEMENTAL FUND TYPE$. Special Debt Capital General Revenue __Saj3Lj_c_e_ Projects Cash/Investments $ 116,045 $ 2,139,691 $ 39,282 $ 52,328 Taxes/Assessments Receivable 930,846 524,035 647,827 34,297 Other Receivables 3,395,574 Due from Other Funds/Governments - - 56,515 1,505 102,083 Inventories - - Amount Available in Debt Service Funds - - Amount to be Provided for Retirement of General Long -Term Debt - - Fixed Assets (Net of Accumulated Depreciation) - TOTAL ASSETS $ 2,045,M $ 6,115,815 $ _,614 5R8 $ 1708 LIABILITIES AM FUID EOUITY Liabilities: Short -Term Payables IS 41,538 $ 421,380 $ 23,370 $ 26,499 Due to Other Funds/Governments 20,775 27,361 87,341 Other Short -Term Liabilities Deferred Revenue 930,846 3,893,400 647,827 34,297 Long -Term Liabilities Total Liabilities $ 972,384 $ 4,335,555 $ 698,55 $ 148,137 Fund Equity: Contributed Capital $ $ $ - - $ 11,192 Investment in General Fixed Assets Retained Earnings Reserved Unreserved Fund Balance Reserved 159,800 Unreserved 74,507 1,620,.460 (9,944) 29,379 Total Fund Equity $ 74,507 $ 1,780,26 $ (9,944) $ ALLM TOTAL LIABILITIES AND FUND EQUITY $ j_LDAfj_M $ 5, 15.815 $ 688r614 $ 188?708 See accompanying Notes to Financial Statements. I M. PROPRIETARY FIDUCIARY $ 6,025.673 $ -0- $ 19,111.583 FUND TYPES FUND TYPES ACCOUNT GROUPS $ X594 . $ 31.855.779 General TOTALS Trust General Long -Term (MEMORANDUM Enterprise and A nc, Fixed Assets Debi_ — ONLY) _ $ 1,520,576 $ 23,094 $ - - $ - - $ 3,891,216 39,331 - - - - - - 2,176,336 503,811 - - - - - - 3,899,385 233,229 - - - - - - 393,332 101,811 - - - - - - 101,811 - - - - - - (9,944) (9,944) - - - - - - 3,604,643 3,604,643 11.773 ,327 - - 6,025, 73 - - — ,799,004 $ 15272-085 $ 2-3094 $ 6.025513 $ 3 _� $ 35$7 $ 101,919 $ - - $ - - $ - - $ 614,706 139,426 11,734 - - - - 286,637 - - 11,560 - - - - 11,560 - - - - - - - - 5,506,370 270,224 - - - - 3,594,699 6,324,923 $ X971,569 $ 23,2.9 $ -0- $ 3,594.699 $ 12,744,196 $ 5,847,477 $ - - $ - - $ - - $ 5,858,669 - - - - 6,025,673 - - 6,025,673 1,120,315 - - - - - - 1,120,315 4,232,724 - - - - - - 4,232,724 159,800 1,714,402 $ 21,2,00.516 $ -0- $ 6,025.673 $ -0- $ 19,111.583 $ 14,172,08 $ 23-,-294 $ LN5,3 $ X594 . $ 31.855.779 . a • COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES ALL GOVERNMENTAL FUND TYPES Fiscal Year Ended June 30, 1987 Other Financing Sources (Uses): Proceeds of General Long -Term Debt $ GOVERNMENTAL - - FUND TYPES _ 60,000 - - - - Special Debt (60,000) General Revenge— Service Revenues: $ -0- Excess (Deficiency) of Revenues and Other Sources Taxes/Special Assessments $ 1,131,669 $ 962,099 $ 167,022 Licenses and Permits 1,023,363 283,564 Restatements 24,845 1.306 3,935 Intergovernmental Revenue Fund Balances - July 1, 1986 - As Restated 240,658 216.972 $ 509,587 $ (28.145) 5,392 Charges for Services 12.952 $ 222,101 $ 8.310 61,195 - - Fines and Forfeitures 130,964 40,020 - - Miscellaneous Revenues 58,43 212.727 1.103 Total Revenues $ 2.067.386 $ 1.810.473 $ 177,45 Expenditures: Current: General Government $ 423,716 $ 286,773 $ - - Public Safety 1,348,316 119,842 - - Public Works 272,042 643,957 - - Public Health 53,255 469 - - Culture and Recreation 178,773 56,436 - - Housing and Community Development - - 1,425,480 - - Miscellaneous 6,701 215,857 - - Debt Service - - 306.007 167,561 Total Expenditures $ 2.282,803 $ 3.054,821 $ 167.51 Excess (Deficiency) of Revenues Over Expenditures $ (215.417) $ (1.244.348) $ 9.891 Other Financing Sources (Uses): Proceeds of General Long -Term Debt $ - - $ - - $ - - Operating Transfers In 60,000 - - - - Operating Transfers (Out) - -, (60,000) Total Other Financing Sources (Uses) $ 60.000 $ (60.000) $ -0- Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses $ (155.417) $ (1304,348) $ _9,891 Fund Balances - July 1, 1986 - As Previously Reported $ 215,666 $ 1,023,363 $ 12,312 Restatements 1.306 2,082,433(40,457) Fund Balances - July 1, 1986 - As Restated $ 216.972 $ 3.105.796 $ (28.145) Residual Equity Transfers In (Out) $ 12.952 $ (21,188) $ 8.310 Fund Balances - June 30, 1987 See accompanying Notes to Financial Statements. --1,2B-0,260__LMA, G9VERMENTAL FUND TYPES - conte Capital Projects TOTALS (MEMORA MI M ONLY) $ 47,539 $ 2,308,329 1,961 314,305 2,470 758,107 20,000 303,296 - - 734 170,984 272.994 $ 72,744 $ 4.128.015 $ - - $ 710,489 73 1,468,2.31 53,396 969,395 - - 53,724 13,402 248,611 - - 1,425,480 - - 222,558 660 474,228 $ 67,531 $ 5.572,716 $ _5,173 $ (1.444,701) $ 20,988 $ 20,988 - - 60,000 - - (60,000) $ 26,161 $ (1,423,713) $ 13,173 $ 1,264,514 (9,881) 2,033.401 $ 3.292 $ 3,297,915 $ _ (74) $ -0- $ 29,M $ -2-,-B7-4,2Q_2 CITY OF KALILPELL COMBINED STATEMENT OF RE-UNUES, EXPENDIMRES, AND CHANCES IN FUND BALM)CES - BUDGET I!GENERAL,. DEBT SERVICE, AND CAPITAL PROJECTEFUND TYPES Fiscal Year Ended June 30, 1987 Revenues: Taxes/Special Assessments Licenses and Permits Intergovernmental Revenue Charges for Services Fines and Forfeitures Miscellaneous Revenues Total Revenues Expenditures: Current: General Government Public Safety Public Works Public Health Culture and Recreation Housing and Community Develo�ent Miscellaneous Debt Service Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Sources (Uses): Proceeds of General Long -Term Debt Operating Transfers In Operating Transfers (Out) Total Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses Fund Balances - July 1, 1986 - As Previously Reported Restatements Fund Balances - July 1, 1986 - As Restated Residual Equity Transfers In (Out) Fund Balances - June 30, 1987 See accompanying Notes to Financial Statements. -10- $ 431,721 $ 423,716 $ 8,005 1,357,470 1,348,316 9,154 288,544 272,042 16,502 55,104 53,255 1,849 182,972 178,773 4,199 11,158 6,701 4,457 $ 2,326,969 $ 2,282,803 $ 44,166 60,000 $ 60,000 60,000 $ 60,000 -0- $ 215,666 $ 215,666 $ - - -0 1,306 1,306 • � y $ 12,952 GENERAL FUND _ Variance - Favorable Budget Actual_ (Unfavorable) $ 1,350,784 $ 1,131,669 $ (219,115) 285,013 283,564 (1,449) 220,860 240,658 19,798 189,910 222,101 32,191 110,287 130,964 20,677 101,027 58,430 (42,597) 8 2,257,881 $ 2,067,386 $ (190,495) $ 431,721 $ 423,716 $ 8,005 1,357,470 1,348,316 9,154 288,544 272,042 16,502 55,104 53,255 1,849 182,972 178,773 4,199 11,158 6,701 4,457 $ 2,326,969 $ 2,282,803 $ 44,166 60,000 $ 60,000 60,000 $ 60,000 -0- $ 215,666 $ 215,666 $ - - -0 1,306 1,306 • � y $ 12,952 SPECIAL REVENUE FUNDS FUNDS $ - - Variance - Variance - 124,112 Favorable Favorable Budget Actual (Unfavorable) $ 1,000,968 $ 962,099 $ (38,869) 23,699 24,845 1,146 306,449 509,587 203,138 86,761 61,195 (25,566) 43,321 298,218 40rO20 212,727 (3,301) (85,491) $ 1,759,416 $ 1,810,473 $ 51,057 CAPITAL DEBT SERVICE FUNDS FUNDS $ - - Variance - Variance - 124,112 Favorable Budget Actual (Unfavorable) $ 58,306 $ 167,022 $ 108,716 2,184 3,935 1,751 2,266 5,392 3,126 -0- $ 62,756 _.1,10 $ 177,452 _ 1,103 $ 114,696 CAPITAL PROJECTS FUNDS $ - - $ - - Variance - 124,112 119,842 Favorable udaet Actual (Unfavmble) $ 82,038 $ 47,539 $ (34,499) -0- 1,961 1,961 -0- 2,470 2,470 -0- 20,000 20,000 $ 82,M $ 72,704 $ _(9,334) $ 379,300 $ 286,773 $ 92,527 $ - - $ - - $ - - $ - - $ - - $ - - 124,112 119,842 4,270 - - - - - - 82,038 73 81,965 1,008,491 643,957 364,534 - - - - - - -0- 53,396 (53,396) 533 469 64 -- -- -- -- -- -- 76,195 56,436 19,759 - - - - - - 26,893 13,402 13,491 2,739,323 1,425,480 1,313,843 - - - - - - - - - - - - 241,702 215,857 25,845 - - - - - - - - - - - - 472,168 306,007 166,16 68,343 167,561 (99,218) _0_ _ 660 (660) $ 5,041,824 $ 3,054,821 $ 1,987,003 $ 68,343 $ 20,252 $ (99,218) $ 108,931 $ 67,53-1 $ 41,400 (60,000) (60,000) -0- $ (60,000) $ (60,000) $ -0- $ 1,023,363 $ 1,023,363 $ - - -0- 2,082,433 2,082,433 $ 1,023,363 $ 3,105,796 $ 2,082433 $ -0- $ (21,188) $ (21,188) $ 12,aI2,A $ X780,260 $ 4,099.305 -11- $ (5,5$7) $ 9,891 $ _15,478 $ -0- $ -0- $ (5,5871 $ 9,891 $ 12,312 $ 12,312 -0- (40,457) $ 12,312 $ (28,145) $ -0- B,31 $ 6,725 $ (9,944) $ (26,893) $ 5,173 $ 22,06 $ - - $ -0- $ 20,988 $ 20,986 $ -0- $ -0-- _ $ 20,988 $ 20,988 $ 15,478 $ (26,893) $ 26,161 $ 53,054 $ - - $ 13,173 $ 13,173 $ - - (40,457) -0- D881) (9,881) $ (40,457) $ 13,173 $ 3,292 $ (91881) $ -8,_3310 $ -0- $ (74) $ (74) $ ,16,669) $ 113-720) $ 29,379 $ 43,Q9 CITY OF KAT_,ISPELL AALISPELL, MONTANA COMMINED SMTEMENT OF REVENUES, EXPENSES, CHANGES IN RETAINED EARNING ALL PROPRIETARY FUND TYPE Fiscal Year Ended June 30, 1987 PROPRIETARY FUND TYPES _ Enterprise Operating Revenues: -� Charges for Service $ 1,565,626 Special Assessments 297,553 Total Operating Revenues $ 1_,863,179 Operating Expenses: in Personal Services $ 618,341 Supplies 33,315 Purchased Services 260,362 Fixed Charges 20,420 Losses/Bad Debt Expenses 18,124 Depreciation 430,596 Materials 99,617 Inter -Departmental Charges 148,614 Total Operating Expenses . $ 1,629,389 Operating income (Loss) $-- 233,790 Non -Operating Revenues (Expenses): Purfax Settlement $ 260,574 Interest 105,772 Debt Service Interest Expense (240,769) Total Non -Operating Revenues (Expenses) $ 125,577 Net Income (Loss) $ 359,367 Add depreciation on fixed assets acquired by grants, entitlements, and shared revenues externally restricted for capital acquisitions and construction that reduced contributed capital 195,020 Increase (Decrease) in Retained Earnings $ 554,387 Retained Earnings - July 1, 1986 - As Previously Stated $ 4,759,524 Restatements 39,12 Retained Earnings - July 1, 1986 - As Restated $ 4,798,652 Retained Earnings - June 30, 1987 $ 5. 53 3,039 See accompanying Notes to Financial Statements. -12- • KALISPELL, MONPANA COhIBINED STATEMENT OF CHANGES IN FINANCIAL POSITIO ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30, 1987 Sources of Working Capital: Operations: Net Income (Loss) Add: Items Not Requiring Working Capital: Depreciation Working Capital Provided by Operations Other Sources of Working Capital: Contributions Net Decrease in Restricted Assets Restatements Affecting Working Capital Net Increase in Current Liabilities Payable Frcm Restricted Assets Total Sources of Working Capital Uses of Working Capital: Compensated Absences Fixed Asset Purchases Pond Payments Loan Payments RestatEinents Affecting Working Capital Total Uses of Working Capital Net Increase (Decrease) in Working Capital Elements of Increase (Decrease) in Working Capital: Cash/Investments Assessments Receivable Contract Receivable Accounts Receivable Interest Receivable Due From EPA Inventory Warrants Payable Accounts Payable Due To Other Funds Interest Payable Net Increase (Decrease) in Working Capital See accompanying Notes to Financial StatEments, -13- PROPRIETARY FUND TYPES Enterprise $ 359,367 430,596 $ 789,963 696,132 382,352 2,813 140,789 $ 2,012,049 $ 1,788 1,805,388 65,000 75,106 24,151 $ 1,971,433 $ 40,E $ (86,806) 2,542 10,000 (31,555) (3,751) (145,947) 16,245 124,278 148,770 513 6,327 .' 9 CITY OF KALISPEL� KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies The following is a summary of the City of Kalispell`s significant accounting policies: a. Reporting Ent ' fes? The City is governed by an elected tslayor 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. [ORMINNIMMA 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 special assessments, 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, special assessment 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. -14- CITY OF KALISPELL KALISPELL. MOANA NOTES TO FINANCIAL STATEMENTS - cont. June 30, 1987 1. Summaiy of Sianificant Accounting Policies - c 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 AIS LOIS-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 Lona -Term Debt Account Group - Used to account for all long-term debt of the City except that accounted for in the Tax Increment Fund, a Special Revenue Fund, and 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 became 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. -15- 1. CITY OF KALISPELL KALISPELL, MONTANA NOTESTQ FINANCIAL STATEMENTS - cont. Summau of Sianificant 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 refraining 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 Council on the second Monday in August, after holding public hearings as required by State statutes. The operating budgets cannot be increased except for a public emergency which could not have been reasonably foreseen at the time of adoption of the budget. Budget appropriation transfers may be made between the general classifications of salaries and wages, maintenance and operation and capital outlay. 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. Capital Outlay Expenditures Capital outlay expenditures are current expenditure categories statements. They are not reported expenditure category as required by principles. -16- included within the various reflected in the financial in a separate capital outlay generally accepted accounting CITY OF KALISPELL NOTES TO FINANCIAL STATEMENT'S - cont. 1. Summary of Significant Accounting Policies - cont g. 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 were not valued at their estimated fair market value on the date received, as required by generally accepted accounting principles. A value was not recorded for the donated fixed assets. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Improvements are capitalized and, in proprietary funds, depreciated over the remaining useful lives of the related fixed assets. General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital aca uisition 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 innovable and of value only to the goverment. 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 - 20 years Machinery and equipment 5 - 20 years Vehicles and heavy equipment 5 - 20 years Sewer lines and pump stations 10 - 50 years h. 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. -17- 1. CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS - con.,. Summate of Significant Accounting Policies - cont. i. Enterprise Accounts Receivable No reserve for estimated uncollected accounts receivable is maintained. Accounts receivable are reported as net of revenues collected in advance. j. Inventories Inventories of materials and supplies for governmental funds are expensed at the time of purchase. Inventories of materials and supplies on hand are not maintained. The Enterprise Fund inventory of materials and supplies was valued at a combination of cost and replacement costs. k. Vacation and Sick Leake 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. 1. 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. M. 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. CITY OF KALISPELL K.AL I SPELL , MONTANA NOTES TO FINANCIAL STATEMENTS - cont. Edi • 1.Summary of Significant Accounting Policies - cont M. Contributed Capital - cont Enterprise Fund resources received from grants, entitlements, or shared revenues which may be utilized for operations or for either operations or capital acquisition or construction are reported as "non-operating" revenues. n. 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. o. Peclassification of Special Assessment Funds During the fiscal year ended June 30, 1987, the Governmental Accounting Standards Board issued its Statement Number 6, Accounting and Peportina for Special Assessments , effective for fiscal years beginning after June 15, 1987. The City has applied the provisions of this statement in the accompanying financial statements for the fiscal year ended June 30, 1987. Statement Number 6 provides that activities financed by special assessments be classified and reported in other fund types or account groups based on the nature of the activities. Fund balances previously reported under the Special Assessment Fund type have been reclassified into the other fund types and account groups. (See Note 15.) p. Total Columns on Combined Statements Total columns on the Combined Statements are captioned Memorandum Only to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations, or changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. CITY OF KAT ISPE L W, NOTES TO FINANCIAL STATEMENTS - Cont 2. Proarty 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. Real property taxes and special assessments are generally billed in October and are payable 50o by NovEnber 30 and 50o 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 20. 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, 1987 were within the legal limits. The taxable value upon which the tax levies for the fiscal year ended June 30, 11.187 was based was $16,405,664. Current tax collections for the year ended June 30, 1987 were approximately 730 of the amount levied. 3. Deficit Fund Balances The following Special Revenue Funds had deficit fund balances at June 30, 1987: 1. Airport Fund - $(182,915) - Most of this deficit, $(154,266), arose in the fiscal year ended June 30, 1985, when certain capital improvements at the airport were made. Proceeds frau the sale of land were to fund the improvements, hcwever, 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 ($9,462 this fiscal year) and insurance and administrative expenses have exceeded available Airport Fund revenue. The deficit is expected to be corrected, at least partially, if and when the land is sold. -20- CITY OF KAIISPELL ITIMMKOMOMMISM ht�:�cZiVIAN 3. Deficit Fund Balances - cont. 2. Comprehensive Insurance Fund - $(98,090) - A deficit fund balance of $(11,548) occurred in the fiscal year ended June 30, 1985, increased to $(22,292) at June 30, 1986, and to $(98,080) at June 30, 1987. The deficits were caused because liability insurance premiums were significantly higher each fiscal year than anticipated, resulting in a short -fall in revenue to cover the expenditures. The deficit was decreased by $61,000 in the fiscal year ended June 30, 1988. 3. Parking Commission Fund - $(4,048) - This deficit arose because of a decrease in parking lot revenue, partially attributed to the new shopping mall in downtown Kalispell. The deficit was considered in preparing the budget for the fiscal year ended June 30, 1988. 4. Decorative Light Maintenance Fund - $(1,477) - This fund was established during the fiscal year ended June 30, 1987, and the fund received no revenues but did incur expenditures. The fund will receive assessment revenue, which will first appear on the November, 1987 tax statements. This should eliminate the fund deficit. The following Debt Service Funds had deficit fund balances at June 30, 1987: 1985 Sidewalk and Curb - $(1,763); 1986 Sidewalk and Curb - $(1,334); S.I.D. Number 316 - $(1,794); S.I.D. Number 321 - $(2,526); and S.I.D. Number 333 - $(32,684). The deficits were caused by a short -fall in revenue and will be eliminated as delinquent assessments are collected. 4. Budget Variances In the Comprehensive Insurance Fund, a Special Revenue Fund, the budget was overexpended by $76,235. An emergency budget was adopted for the fund, but it was not adopted until September 8, 1987, after the close of the fiscal year ended June 30, 1987. 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; and repurchase agreements. -21- 5. CITY OF KAT ISPEL , KALISPELL, MOT7TANA NOTES TO FINAMCIAL STATEMEr7TS - cont. Cash and Investments - cont. The composition of cash and investments on June 30, 1987, was as follows: Cash on Hand $ 230 Petty Cash 500 Cash in Banks: Demand Deposits 211,915 Time Deposits 155,511 Repurchase Agreements 3,500,000 Special Improvement District Bonds 12,000 Variable Annuity Life Insurance Company (VALIC) - Deferred Compensation Plan 11,060 Total per Balance Sheet $ 3 891,E Deposits - At year-end, the carrying amount of the City's deposits was $367,426, and the bank balance was $366,798. These deposits include demand and time deposits. Of the bank balance, $200,500 was covered by Federal depository insurance and $166,298 was uninsured and uncollateralized. This uninsured and uncollateralized 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 500 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 1000 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 amount of collateral held for City deposits at June 30, 1987, exceeded the amount required by State statutes. The State statutes do not specify in whose custody or name the collateral is to be held. 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 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, 1987. Category 1 - Includes investments that are insured, registered, or for which the securities are held by the City Tarn 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. -22- CITY OF KALISPELL KALISPELL, MONTANA COTES TO FIND CIAL STATEMENTS - cont. June 30, 1987 5. Cash and Investments - cont Investments - cont. 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. Categoly Carrying Market 1 2 3 Value Value Repurchase Agreements $ -0- $ -0- $ 3_-,500.DQ0 $ 3,500,000 $ 3,500,000 Special Improvement District Bones21 .000 12,000 Total Investments $ 3,512,00 $ 3.512.000 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, 1987, amounted to $11,060. 6. Fixed Assets Enterprise Land $ 245,369 A summary of charges in general fixed assets follows: Improvements Other Than Buildings 443,443 Balance 960,477 Balance 342,375 July 1, 1986 Additions Deletions June 30, 1987 Land $ 694,114 $ 223,275 $ $ 917,389 Buildings 1,909,542 1,022,942 2,932,484 Improvements Other Than Buildings 676,019 129,783 805,802 Machinery & Equipment 1,932,732 142,308 718,563 1,356,477 Construction Work In Progress 13.521 13.521 Total $ 5212,4-U $ 2,52$Z9 $ 21B,-50 $ 6.025.673 The additions to Buildings and Improvements Other Than Buildings included adjustments of $603,310 and $90,673, respectively. The adjustments were made on the basis of a physical inventory and research of costs. The deletions to Machinery and Equipment and additions to Buildings included a reclassification of assets amounting to $362,251. A summary of proprietary fund type property, plant, and equipment at June 30, 1987 follows: -23- Enterprise Land $ 245,369 Buildings 395,209 Improvements Other Than Buildings 443,443 Machinery & Equipment 960,477 Construction Work in Progress 342,375 Source of Supply 298,809 Pumping Plant 556,079 Treatment Plant 2,556,736 Transmission and Distribution 6,521,279 General Plant 620,518 Storm Sewer System 2.822.499 Total $ 15,762,793 Less Accumulated Depreciation (3.989.466) Net $ 11,773,327 -23- CITY OF KAL SI PELL KALI:SPELL, MOI�'TANA NOTES TO FINMCIAL STATEMENTS - cont a. The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1987: Balance Balance July 1, 1986 Additions Reductions June 30, 1987 General Obligation Bonds(1) $ 535,000 $ $ (20,000) $ 515,000 Revenue Bonds(2) 2,580,000 (65,000) 2,515,000 Urban Renewal Bonds (1) 2,100,000 (60,000) 2,040,000 Special Assessment Bonds (1) 503,850 130,987 (41,250) 593,587 Contracted Debt(1)(2) 377,184 (91,282) 285,902 Compensated Absences Payable(1)(2) 334,833 45,020 (4,489) 375,434 Total $ 6.430.867 $ 12(5,077 $ (282,021) $ 6.324.923 (1) Reported in general long-term debt account group. 5.5% 20 yrs. (2) Reported in Enterprise Fund. $ 200,000 $ 50,000 $ 10,000 b. Bonded Debt Storm Sewer 7/1/76 Bonds payable at June 30, 1987 are comprised of the following individual issues: 355,000 Varies 1983 1. General Obligation Bon n Final Issue Interest Term of Maturity PurpQse Date Rate Bond Date Bruckhauser Pool 4/1/85 8.3-9.29. 15 yrs. 2000 Total General Obligation Bonds Outstanding Bonds June 30, Annual Issued 1987 Payimn $ 550.000 $ 515,000 Varies General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. The Debt Service Fund had a deficit fund balance of $9,944 at June 30, 1987. 2. Revenue Bonds Final Outstanding Issue Interest Term of Maturity Bonds June 30, Annual PuMgse ^ Date Rate - Bond Date Issued 1987 Pyment 1972 Seger Plant 1/1/72 5.5% 20 yrs. 1992 $ 200,000 $ 50,000 $ 10,000 1976 Storm Sewer 7/1/76 6.750 20 yrs. 1996 445,000 355,000 Varies 1983 Sewage Plant 9/1/83 10.08% 20 yrs. 2004 875,000 830,000 $ 15,000 1986 Sewer Lines 6/1/86 7.0% 20 yrs. 2006 1.300,000 1,280,000 Varies Total Revenue Bonds $ 2_32D,000 $ Z451a,000 Revenue Bonds are directly related to and expected to be paid fram specific proprietary funds. 7. CITY OF KALISPELL KALISPELL. MO�rtIANA E*, )-1 •� 2. Revenue Bonds - cont® Revenue Bond Disclosure The revenue bond ordinances require certain disclosures regarding the Sewer Fund in each year's audited financial statements. For the fiscal year ended June 30, 1987, 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 - 5,000. (b) Amount of cash on hand in each account of the Sager System at the end of the fiscal year. Sewer Operating $ 226,690 Sewer Capital Improvement 81,835 Sewer Revenue Reserve 211,198 Operating Reserve 35,000 Construction Fund 221,474 Replacement and Depreciation 173,009 Sewer Revenue Bond Account 150.521 Total $ 2,DO,727 (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, 1987 of $481,017 divided by 12 = $40,085. (d) The City shall maintain rates and charges sufficient to produce annual net revenues equal to at least 1250 of the maximum mount of principal and interest to become due for all existing issues. Fiscal Year Ended Cash Flow Coverage June 30. 1987 Sewer Service Charges $ 698,886 Storm Sewer Assessments 73,901 Hookup Charges 255 5 Total Operating Revenue $ 798,412 Less: Operating Expenses (Before Depreciation) 481.017 Available for Debt Service $ 317,395 Maximum Debt Service $ 291,741 Coverage 1090 -25- CITY OF KALISPELL MOTES TO FINANCIAL STATEMENTS= cont. 7. • - m D-• • Bonded Debt cont, 2. Revenue Bonds - cont. Revenue Bond Disclosure - cont (e) Noncampliance 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 Ca-inerce as prescribed by the 1983 and 1986 Revenue Bond Ordinances. (2) An operating reserve was not accumulated and maintained in an amount equal to one month's average operating expense. The required reserve was $40,085 and the actual reserve accumulated and maintained by the City was $35,000. (3) The City did not 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. The City's coverage was only 109%. 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. Final Outstanding Issue Interest Term of Flaturity Bonds June 30,J Annual Purpose Date Rate Bond Date Issued 1987 PAvment Urban Renewal Bonds Tax Increment 12/85 6.25-9.5% 16 yrs. 7/l/2002 $ 2,100.000 $ 2,040,000 Varies Total Urban Renewal Bonds $ 2-,100,00 $ 2_,0 M_Q -26- _ CITY OF KALISPELL KALISPELL, MO A1�A NOTES TO FINANCIAL STATEMENTS - cont INSFUM-111MME Purse Reported in General Issue Date Lona -Term Interest Term of Rate Bond Debt Account Croup S.I.D. No. 302 Na turity 12/1/67 6.70 20 yrs. S.I.D. No. 306 Issued 4/1/68 5/7% 20 yrs. S.I.D. No. 307 4/1/68 5.250 20 yrs. S.I.D. No. 313 1987 10/1/71 7% 20 yrs. S.I.D. No. 326 54,000 Il/l/78 7.750 10 yrs. S.I.D. No. 328 7,000 7/1/79 8.70 20 yrs. S.I.D. No. 333 Varies 7/28/82 150 10 yrs. S.I.D. No. 334 1992 1/1/82 14.5% 10 yrs. S.I.D. No. 335 14,000 11/1/82 12% 10 yrs. S.I.D. No. 336 9,000 12/1/86 120 10 yrs. S.I.D. No. 337 Varies 12/1/86 7.74% 15 yrs. Special Light 1992 75,000 54,000 Varies Construction No. 1 12/1/82 12% 10 yrs. Special Light 22,000 2,000 Varies 1988 Construction No. 2 11/26/84 12% 8 yrs. 1979 Sidewalk & Curb 11/1/79 70 8 yrs. 1980 Sidewalk & Curb 7/11/80 7% 8 yrs. 1981 Sidewalk & Curb 10/1/81 9.5% 8 yrs. 1982 Sidewalk & Curb 4/1/83 129. 8 yrs. 1983 Sidewalk & Curb 2/1/84 10% 8 yrs. 1984 Sidewalk & Curb 3/5/85 12% 8 yrs. 1985 Sidewalk & Curb 12/31/85 10% 8 yrs. 1986 Sidewalk & Curb 12/31/86 9% 8 yrs. Total Special Assessment Bonds Reported in General Long -Term Debt Account Group (S.I.D.) Final Outstanding Na turity Bonds June 30, Annual _ Date Issued 1987 Payment 1988 $ 50,000 $ 2,500 Varies 1987 13,500 1,000 Varies 1987 54,000 2,000 Varies 1992 100,000 7,000 Varies 1988 75,000 4,000 Varies 1999 300,000 203,000 Varies 1992 65,000 50,000 Varies 1992 14,000 11,000 Varies 1992 15,000 9,000 Varies 1994 4,500 4,500 Varies 2001 110,000 110,000 Varies 1992 75,000 54,000 Varies 1992 28,500 18,000 Varies 1987 22,000 2,000 Varies 1988 4,500 2,500 Varies 1989 18,000 12,000 Varies 1991 11000 1,000 Varies 1992 6,500 6,500 Varies 1993 45,000 28,000 Varies 1993 44,600 44,600 Varies 1994 20.987 20,987 Varies 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 lava 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. -27- 7. CITY OF FEAT I SPELL NOTES TO FINANCIAL STATEMENTS - cont 4. Speeial Assessment Bonds _(S I D ) - cont At June 30, 1987 material delinquent special assessment receivable were as follows: S.I.D. No. 328 $ 49,150 S.I.D. No. 333 34,068 S.I.D. No. 324 6,769 Total $ 89,987 Prior to the fiscal year ended June 30, 1987, the City accounted for and reported bond issues financed by special assessments within a separate Special Assessment fund type in the general purpose financial statements. However, the Governmental Accounting Standards Board, in Statement No. 6, required the elimination of this fund type and the reclassification of special assessment activities into other fund types and account groups. (See Note l.o.) As such, at June 30, 1987, unmatured special assessment bonds payable for which the City is obligated in scree manner are reported in the general long-term debt account group. In prior fiscal years these bonds payable were reported within the Special Assessment Fund type. c. Contracted Debt Origination Interest Due Principal Outstanding PPP pose Date Rate Term. Date Amount June 30, 1987 Storm Sewers (1) 8/31/82 0% 8 yrs. 8/31/89 $ 80,000 $ 30,000 Garbage Truck and Cans (1) 4/18/86 8.250 3 yrs. 4/15/89 209,651 134,205 Land Purchase (2) 4/24/80 7% 10 yrs. 7/1/90 85,724 64,324 Land Purchase (2) 5/1/80 70 10 yrs. 7/1/90 76.862 �5 ,373 Total $ 452= $ 285,902 (1) Peported in Enterprise Fund. (2) P.eported in general long-term debt account group. d. Compensated Absences Pay -able Compensated absences payable, which represent vacation and sick leave earned by emplcyees which is payable upon termination, were as follows: Enterprise Fund $ 51,019 General Long -Term Debt Account Group $ 324,415 7. 0 NWAILSJMEZA • e. Requirements to Amortize Debt The annual requirements to amortize all long-term debt out- standing, except compensated absences payable, as of June 30, 1987, including interest payments of $4,699,493, are as follows: Annual Requirements to Amortize Fong -Term Debt June 30, General 1987 Special Year Ending Obligation Revenue Assessment Contracted June 30 Bonds Bonds Bonds Debt 1988 $ 66,393 $ 281,365 $ 196,670 $ 127,172 1989 69,543 277,863 102,916 115,404 1990 67,230 2.81,405 99,568 48,698 1991 69,917 274,350 85,623 1992 67,142 282,023 84,471 1993 - 1997 345,558 1,358,920 209,888 1998 - 2002 214,198 1,195,765 102,090 �►I1Iilc�►�d�7 KO Year Ending 1988 1989 1990 1991 1992 1993 - 1997 1998 - 2002 2003 - 2006 Total Urban Renewal $ 245,920 251,532 251,095 254,895 252,695 1,284,975 1,300,760 } . i NP $ 917,520 817,258 747,996 684,785 686,331 3,199,341 2,812,813 782,938 State -Wide Retirement Plans The City participates in the following retirement plans: Public Epees' 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 pol ice and f iremrien, 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, 1987 was $1,379,574, and the City's total payroll was $2,662,754 for the same year. Ems CITY OF KALISPELL NOTES TO FIMNCIAL STATE IEN S - cont. 8. State -Gide Retirement Plans - cont Public EmQ.lQyees' Retirement stem (PERS) - 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 60 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 6.4170 of covered payroll for the year ended June 30, 1987. The City's contribution requirement for the year ended June 30, 1987 was $174,306, which consisted of $85,799 from employees and $88,527 from the City. These amounts represent 6% and 6.4170 of covered payroll, respectively, after deducting additional contributions from employees of $3,004. 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 enplc yr ee 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, 1986 for P. E. R. S. as a whole, determined through an actuarial valuation performed as of that date, was $792,170,389. The net assets available for benefits on that -30- CITY OF YALISPELL a,3441-VOIN NOTES TO FINANCIAL STATEMENT - cont 8. State-wide Retirement Plans - cont Public Emloyees' Retirement System (P.E.R.S.) - cont. date, valued at cost or amortized cost, were $558,989,899, leaving an unfunded pension benefit obligation of $233,180,490. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1986 actuarial valuation, the P. E. R.S. contribution rate of 12.417% will amortize unfunded past service costs over 28.24 years. The City's contribution represented less than 1% of total contributions required from all participating employers. Nine 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, 1987 annual report, which can be obtained frau the Montana Department of Administration, Public Emplcyees' Retirement Division. Munici 1 Police Officers' Retirement system (M P 0 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. 0. R. S. for the year ended June 30, 1987 was $500,583, and the City's total payroll was $2,662,754 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. 0. R. S. also provides death and disability benefits, with amounts determined by the State of Montana.. 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. -31- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINAXIAL STATEMENTS - conte 8.tS ate -Wide Retirement Plans - cont. M nic p2l Police 0 ficers' Retirement stem (M P 0 R S) - cont 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, 1987. 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, 1987 was $97,014, which consisted of $31,838 from employees and $65,176 from the City. These amounts represent 6.36% 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 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. 0. R. S. does not make separate measurements of assets and pension benefit obligation for individual enpioyers. The pension benefit obligation at June 30, 1986 for M. P. 0. R.S. as a whole, determined through an actuarial valuation performed as of that date, was $54,205,103. The net assets available for benefits on that date, valued at cost or amortized cost, were $22,354,564, leaving an unfunded pension benefit obligation of $31,850,539. The actuarial present value of vested and nonvested accrued benefits was not avail -able. Based on the July 1, 1986 actuarial valuation, the M.P.O.R.S. weighted contribution rate of 35.27% will amortize unfunded past service costs over 33.6 years. The City's contribution represented 5.71% of total contributions required from all participating employers. Nine 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, 1987 annual report, which can be obtained from the Miontana Department of Administration, Public Employees' Retirement Division. -32- CITY OF KA.LISPELL NOTES TO FINANCIAL STATEMEI\TTS - cont. 8. State -Wide Retirement Plans - cont Firefighters' Unified Retirement (F U R S ) City firefighters are covered under the Firefighters' Unified Retirement System (F. U. R.S.) , a cost sharing multipleemployer retirement system. The payroll for employees covered by F.U.R.S. for the year ended June 30, 1987 was $446,166, and the City's total payroll was $2,662,754 for the same year. F. U. R. S. members became 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 usual 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. Funding for the plan is provided by the City, the covered firefighters, and the State of Fontana. 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, 1987. 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, 1987 was $84,861, which consisted of $26,770 from employees and $58,091 frau the City. These amounts represent 6% and 13.02% of covered payroll, respectively. -33- CITY OF KALISPELL KALISPELL, MOhrIANA 8. State -Wide Retirement Plans - cont. Firefighters' Unified Retirement t System (F.U.R.S.) - cont. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be 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 camparisons 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, 1986 for F. U. R. S. as a whole, determined through an actuarial valuation performed as of that date, was $62,548,560. The net assets available for benefits on that date, valued at cost or amortized cost, were $20,555,380, leaving an unfunded pension benefit obligation of $41,993,180. The actuarial present value of vested and nonvested accrued benefits was not available. Based on the July 1, 1986 actuarial valuation, the F.U. R. S. contribution rate of 421. will amortize unfunded past service costs over 40.23 years. The City's contribution represented 4.810 of total contributions required frau all participating employers. Six 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, 1967 annual report, which can be obtained from the Montana Department of Administration, Public Emplcyees' Retirement Division. 9. Local Retirement Plans Deferred Compensation PI an 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. -34- NOR -. "4y, NOTES TO FINANCIAL STATEMENT - co 9. Local Retirement Plans - cont. Deferred Compensation Plan - cont 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 $11,060 are recorded in an agency fund at June 30, 1987, as required by generally accepted accounting principles. 10. Amounts Due From and Due To Other Governments The amounts due frau and due to other govert ments consist of the following: Due Frcm Other Governments: Special Revenue Funds: The Comprehensive Insurance Fund is due $9,825 frau the Montana Municipal Insurance Authority. Capital Projects Fund: S.I.D. Number 337 is due $82,083 from the Environmental Protection Agency. S.I.D. Number 338 is due $20,000 frau the Postal Service. Enterprise Funds: The E.P.A. Construction Grant Fund is due $145,947 frau the Environmental Protection Agency. -35- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENT'S - cont �! • i -0 a i •a flogrA • - it • i- • - �, i • Due To Other Governments: Trust and Agency Funds: Payroll Fund - $11,734 is due to various agencies for payroll contributions and withholdings. Enterprise Fund: Phosohorus Study E.P.A. Fund - $139,426 is due to the Environmental Protection Agency. 11. Amounts Due From and To Other Funds Due from other funds and due to other funds consist of the following: Receivable Fund Viable Fund 0ount Tax Increment Fund (1) Parking Fund (1) $ 1,342 Tax Increment Fund (1) Comprehensive Insurance (1) 17,928 S. I. D. Revolving (1) S.I.D. Number 316 (2.) 1,678 S.I.D. Revolving (1) S.I.D. Number 324 (2) 3,252 S. I. D. Revolving (1) S.I.D. Number 333 (2) 19,462 S.I.D. Revolving (1) 1985 Sidewalk and Curb (2) 2,348 S.I.D. Revolving (1) 1986 Sidewalk and Curb (2) 621 S.I.D. Revolving (1) 1987 Sidewalk and Curb (3) 59 Special Light Decorative (2) Decorative Light Maintenance (1) 1,505 Sewer Capital Improvement (4) S.I.D. Number 337 Construction (3) 67,470 Sewer Capital Improvement (4) S.I.D. Number 338 (3) _.190.812 $ 135,E Notes: (1) Special Revenue Fund Total Receivable - $ 46,690 Total Payable - $ 20,775 (2) Debt Service Fund Total Receivable - $ 1,505 Total Payable - $ 27,361 (3) Capital Projects Fund Total Payable - $ 87,341 (4) Enterprise Fund Total Receivable - $ 87,282 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS - cont 12. Restricted Cas Investments The following restricted cash/investments were held by the City as of June 30, 1987. These amounts are reported within the cash/investment account on the Combined Balance Sheet. Description Amount Enterprise Fund: Water Replacement and Depreciation $ 105,810 Sewer Replacement and Depreciation 173,009 Sewer Construction 221,474 Sewer - Reserve for Operations 35,000 Sewer - Capital Improvements 81,835 Sewer - Sinking and interest 150,521 Sewer - Contingency 211,198 Garbage - Replacement and Depreciation 27.040 Total Enterprise $ 1e0z$O7 Special Revenue Funds: Tax Increment - Sinking and Interest $ 123,046 Community Development- Rehabilitation 36.754 Total Special Revenue Funds $ 159.800 Trust and Agency Funds: Valic 457 Deferred Compensation Fund $ 11;060 Performance Bond - Bond Held 500 Total Trust and Agency Funds $ 11,560 Total $ 1,177,247 13. Fund Ecru i ty Reserved retained earnings/fund balances of the City at June 30, 1987 consisted of: Special Revenue Funds: Tax Increment - Reserved for Sinking and Interest $ 123,046 Community Development - Reserved for Interest Subsidy 36,754 Total Special Revenue Funds $ 159.800 Enterprise Fund: Water - Reserved for Replacement and Depreciation $ 105,810 Sewer - Reserved for Replacement and Depreciation 173,009 Sewer - Reserved for Construction 167,377 Sewer - Reserved for Operations 35,000 Sewer - Reserved for Capital Improvements 250,360 Sewer - Reserved for Revenue Bonds Debt Service 150,521 Sewer - Reserved for Contingency 211,198 Garbage - Reserved for Replacement and Depreciation 27,040 Total Enterprise $ 1.0.315 -37- KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont 14. Ganges in Contributed Capital_ A schedule of changes in contributed capital is presented below: Water Sewer Total Contributed Capital - July 1, 1986 $ 449,690 $ 4,970,110 $ 5,419,800 Add: Capital Grants 13,710 142,833 156,543 Special Improvement Districts 98,808 98,808 Tax IncrEment District 108,514 275,921 384,435 Developer 28,446 27,900 56,346 Deduct: Depreciation on assets acquired via capital grants (10,930) (184,090) (195,020) Other Adjustments (73,435) (73,435) Contributed Capital - June 30, 1987 $ 589,E $ 5.258.047 $847. 15. Restatements (Prior Period Adjustments) During the current fiscal year, adjustments relating to prior years' transactions were made to the fund balance and retained earnings accounts. .; Restatements of beginning fund balances have resulted from the reallocation of Special Assessment Fund activities to other fund types and account groups, in accordance with GASB Statement Number 6 (see Note 1) . The $ (561,408) fund balance reported at June 30, 1987 for the Special Assessment Funds has been reclassified as follows: Special Assessment Fund bonds payable reclassified to the general long-term debt account group $ (503,850) Net assets of Special Assessment Fund debt service activities reclassified to Debt Service Funds (34,520) Net assets of Special Assessment Fund construction activities reclassified to Capital Projects Funds (31,508) Net assets of Special Assessment maintenance activities reclassified to Special Revenue Funds 8.470 Total -38- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont �I�T�ci�l��'I3►] 15. Restatements (Prior Period Adjustments) - cont. The following is a schedule of other such adjustments: Fund Amount Reason for Adjustment General Fund $ (47) Cancelled warrants 4,515 To correct accounts receivable beginning balance (3,162) To correct prior year's revenue Total General Fund $ 11306 Special Revenue Fund: Airport Fund $ 152 Correct prior year's interest accrual (138) Adjust contract payable for interest expense Tax Increment Fund (65,735) To record deferred revenue for loan receivable 2,100,000 To transfer liability for Tax Increment Urban Renewal Bonds to the general long-term debt account group S.I.D. Revolving Fund 2,027 To record accrual interest receivable from prior year Parking Fund 902 To correct accounts payable beginning balance Corimur_ity Developnent Fund 36�55 To record interest subsidy that was previously expensed Total Special Revenue Fund $ 2.073.963 Debt Service Fund: S.I.D. Number 336 $ (4,088) To adjust prior year's expenditures (2,028) To record accrued interest payable from prior year S.I.D. Number 335 179 To correct accounts payable beginning balance Total Debt Service Fund $ (5.937) Capital Projects Funds: S.I.D. Nk nber 337 Construction Fund $ 21,627 To correct recording fixed assets Enterprise Fund: Water $ 20 To correct accounts payable beginning balance 1,071 To correct accounts receivable beginning balance 20,490 To correct recording of fixed assets (6,700) To write-off abandoned assets Sewer 883 To correct accounts receivable beginning balance 839 To correct accounts payable beginning balance 16,550 To correct recording of fixed assets (17,097) To write-off abandoned assets (415) To record expenditures from prior years 47,638 To adjust for error in previous year Ambulance (24.151) To write-off accounts receivable Total Enterprise Fund $ .128 1= CITY OF KALISPEL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. 16. Residual Equity Transfer Residual equity transfers to close certain funds and transfer the remaining balances to other funds consist of the following: General Fund Transfers In Frcm Special Revenue Funds: Local Government Study Commission Fund $ 12,704 Bureau of Outdoor Recreation Fund 174 $ 12,878 Frcm, Capital Projects Funds: Pool Construction Fund 38 Depot Park Capital Improvement Fund 36 74 Total General Fund 12 -u Special Revenue Funds S.I.D. Revolving Fund Transfers In From Debt Service Funds: 1978 SicWalk and Curb Fund $ 2,642 Transfers Out To Debt Service Funds: S.I.D. Number 321 Fund $ (Ir965) 1976 Sidewalk and Curb Fund (1,442) 1977 Sidewalk and Curb Fund (7,545) (10,952) A - MIIA I -- •- R 195r*NMVV I Transfers Out To General Fund (12,704) Transfers Out To General Fund (174) Total Special Revenue Funds $ 122-1.1B31 EM CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont 16. Residual Eguity Transfers - cont Debt Service Funds S.I.D.Number 321 Fund Transfers In Fran Special Revenue Funds: S.I.D. Revolving 1976 Sidewalk and Curb Fund Transfers In Fran Special Revenue Funds: S.I.D. Revolving Fund 1977 Sidewalk and Curb Fund Transfers In Fran Special Revenue Fundss: S. I. D. Revolving Fund 1978 -Sidewalk and Curb Fund Transfers Out To Special Revenue Funds: S. I. D. Revolving Fund Total Debt Service Funds Capital Projects Funds Pool Construction Fund Transfers Out To General Fund Transfers Out To General Fund $ 1,965 7,545 $ (38) Total Capital Projects Funds $ X74) 17. Segment Information For Enterprise Funds The City maintains four Enterprise Funds which provide water, sewer, garbage, and ambulance services. Segment information for the year ended June 30, 1987 was as follows: EM NOTES TO FINANCIAL STATENE!\JII'S - cont. 17. Segipent Information For Enterprise Funds - cont. Total (eater Sewer Garbage Ambulance Enterprise Fund Fund Fund Fund Funds Operating Revenues $ 696,740 $ 802,230 $ 226,811 $ 137,398 $ 1,863,179 Depreciation, Depletion and Amortization Expense $ 92,681 $ 296,783 $ 32,047 $ 9,085 $ 430,596 Operating Incase or (Loss) $ 137,431 $ 24,430 $ 60,562 $ 11,387 $ 233,810 Operating Grants, Entitle- ments and Shared Revenues $ $ $ $ $ Operating Transfers In $ $ $ $ $ Out $ $ $ $ $ Tax Revenues $ $ $ $ $ Net Incase or Loss $ 161,581 $ 137,412 $ 48,583 $ 11,791 $ 359,367 Current Capital: Contributions $ 150,670 $ 545,462 $ $ $ 696,132 Transfers $ $ $ $ $ Plant, Property and Equipment Additions $ 440,090 $ 1,350,128 $ 9,654 $ 5,516 $ 1,805,388 Deletions $ 9,229 $ 70,604 $ 40,122 $ $ 119,955 Net Working Capital $ 413,635 $ 267,465 $ 35,291 $ 67,695 $ 784,086 Total Assets $ 3,402,251 $10,375,803 $ 305,797 $ 88,234 $ 14,172,085 Bonds and Other Long -Term Liabilities: Payable from Operating Revenues $ 14,391 $ 2,572,903 $ 142,401 $ 529 $ 2,730,224 Payable from Other Sources $ $ $ $ $ Total Equity $ 3,344,232 $ 7,613,668 $ 156,221 $ 86,395 $ 11,200,516 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 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 which are appointed by the Board of County Commissioners. The City of Kalispell contributed $37,000 from their General Fund to Flathead County in support of the City -County Health Department during the fiscal year ended June 30, 1987. -42- CITY OF KALISPELL NOTES TO FINANCIAL S'TATEMENT'S - cont. June 30, 1987 20. Pending Litigation There was no material pending or threatened litigation or unasserted claims or assessments against the City at June 30, 1987. 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 Fall project. The total amount loaned to KCLP was $3,336,928. The balance of the loan receivable of $3,311,313 was recorded in the Unban Development Action Grant Loan Repayment Fund, a Special Revenue Fund, on June 30, 1987. 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. b. A loan was made from the Tax Increment Fund, a Special Revenue Fund, to the 2nd Avenue Guest 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 f if teen 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, 1987 was $62,591 and is recorded in the Tax Increment Fund, a Special Revenue Fund. 22. Purfax Settlement Receivable The City accepted a $400,000 settlement on December 22, 1986, from various third party defendants, concerning faulty construction of the wastewater treatment plant in 1975. Terms of the settlement called for $125,000 to paid to the City at closing in December, 1986, $90,000 to be paid in December, 1987 and 1988, and $95,000 in December, 1989. The balance of the settlement receivable of $275,000 at June 30, 1987 was recorded in the Sewer Enterprise Fund. -43- out CITY OF KALISPELL m MD SUPPLEMENTAL SCHEDULE Fiscal Year Ended June 30, 1987 sm DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION STATE OF MONTANA (406)444-3010 To the Honorable 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, 1987, and have issued our report thereon dated April 18, 1989. 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 the standards for financial and compliance audits contained in the �t�n��_f4_Auci� t_Q_�Qr��t��_QrQnz�t�Qr-s�PQQ1�I[1�c Activities, and Functions, issued by the U.S, general Accounting Office. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying Schedule of Federal Financial Assistance for the year ended June 30, 1987, 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. April 18, 1989 D 1'131 S1L. DOOLEY I Bureau Chief -45- AN EOUAL OPPOPTUNr7Y EMPLOYER ph6- &9,oph CITY OF KALISPEL MOITTANA mmovagiblylu CITY OF KALISPEL MWAOI - ., I Federal CFDA �bnber Federal Grantor/Pass-Through Grantor/Program Title U. S.-DepArtment of the Treasury Direct Program: State and Local Government Fiscal Assistance - Revenue Sharing 21.300 Pass -Through Grantor's Umber .S.. Department of Housing and Urban DevelQLmn Direct Program: Urban DeveloFment Action Grant 14.221 Passed Throuah State Department of Coerce: Community Develop-nent Block Grant - State's Program 14.228 MT-CDBG-C83-017 Total U. S. Department of Housing and Urban Development U. S. Environmental Protection -Agency Direct Programs: Construction Grant for Wastewater Treatment Works Construction Grant for Wastewater Treatment Works Evergreen Sewer Study Project Kalispell Sewer Study Project Total U. S. Environmental Protection Agency Total Federal Financial Assistance I= Program or Beginning Revenues Ending Award Balance Federal Matching/ Balance Amount July 1, 1986 Funds Income/Other Expenditures June 30, 1987 $ 90,435 $ 131.7447 $ 94,42 $ _7,599 $ 158,217 $ _75,551 $ 3,175,000 $ -0- $ 485,000 $ 63,510 $ 498,920 $ 49,590 $ 1,500,000 306,467 186,346 47,695 370.442 170.066 $ 306,467 $ 471,346 $ 111,205 $ 869,362 $ 219,656 $ 1,640,611 $ (78,219) $ - - $ - - $ 19,250 $ (97,469) $ 164,600 -0- 60,750 160,000 291,641 (70,891) $ 67,140 415 - - - - 415 -0- $ 10,200 4,948 - - 4100,000 139.426 265,522 $ (721856) $ 60.754 $ 560,00 $ 450,732 $ 97,162 $ 365,35$ $26 5.11 $ 52 BI HA $ 1,428,3U $ 392.369 i CITY OF KALISPEL ma I a U- OR M mmPlablimul uIll"Mus MMIV Fiscal Year Ended June 30, 1988 Mom DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR - STATE OF MONTANA (406) 444-3010 To the Honorable Mayor City of Kalispell Kalispell, MT 59901 and City Council 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, 1988, 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. Fxcept 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 $6,869,895 and the fixed assets balances and the related depreciation expense of the Enterprise Funds amounting to $11,605,000 and $493,891, 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, 1988, and the results of its operations and the changes in financial position of its proprietary fund types for the year then ended, An conformity with generally accepted accounting principles. April 18, 1989 DONALD L. DOOLEY I Bureau Chief -50- AN EQUAL OPPORTUIVITr Efv]PLOYER 6W.P,s CITY OF KALISPELL KALISPELL, NONTANA FINANCIAL STATEMENTS Fiscal Year Ended June 30, 1988 -51- CITY OF KALISPELL KALISPELL, MONTANA COMBINED BALANCE SHEET - ALL FUM TYPES AND ACCOUNT GROUPS June 30, 1988 ASS Cash/Investments Taxes/Assessments Receivable Other Receivables Due from Other Funds/Governments Prepaid Expenses Inventories Amount Available in Debt Service Funds Amount to be Provided for Retirement of General Long -Term Debt Fixed Assets (Net of Accumulated Depreciation) LIABILITIES AND FUND EQUI Liabilities: Short -Term Payables Due to Other Funds/Governments Other Short -Term Liabilities Deferred Revenue Long -Term Liabilities Total Liabilities Fund Equity: $ $_5Q $ 8� $ %$ $ 31,483 $ 61,021 $ 327,657 $ 89,122 $ 429 5,390 74,722 10,054 836,459 3,884,135 622,789 31,358 Contributed Capital - Investment in General Fixed Assets - - - - Retained Earnings Reserved Unreserved - - - - Fund Balance Reserved - - 282,036 Unreserved (8,230) 1,240,941 Total GOVERMENTAL FUND TYPES $ 1,522,977 TOTAL LIABILITIES MU) FUND EQUITY $ 889,250 $ 5,24D,159 Special Debt Capital General Revenue Service Projects $ 47,449 $ 1,783,012 $ 60,310 $ 125 836,459 574,457 622,789 31,358 4,929 3,331,205 10,957 - - 413 33,539 71,777 - - -- 17,946 -- -- $ $_5Q $ 8� $ %$ $ 31,483 $ 61,021 $ 327,657 $ 89,122 $ 429 5,390 74,722 10,054 836,459 3,884,135 622,789 31,358 Contributed Capital - Investment in General Fixed Assets - - - - Retained Earnings Reserved Unreserved - - - - Fund Balance Reserved - - 282,036 Unreserved (8,230) 1,240,941 Total Fund Equity $ (8,230) $ 1,522,977 TOTAL LIABILITIES MU) FUND EQUITY $ 889,250 $ 5,24D,159 See accompanying Notes to Financial Statements. I (20,800) (10 MU $ (20,800) $ (10,358) $ 765,833 $ _..1,483 PROPRIETARY FIDUCIARY FUND TYPES FUND TYPES ACCOUNT GROUPS 'TOTALS (MEMORANDUM ONLY) General Trust General Long -Term Enterorise and Aaencv Fixed Asset Debt June 30, 1988 June 30, 1987 $ 1,803,261 $ 50,494 $ - - $ - - $ 3,744,651 $ 3,891,216 51,805 - - - - - - 2,116,868 2,176,336 432,867 - - - - - - 3,779,958 3,899,385 73,302 - - - - - - 179,031 -0- - - - - - - - - 17,946 393,332 88,031 - - - - - - 88,031 101,811 - - - - - - (20,800) (20,800) (9,944) - - - - - - 3,677,938 3,677,938 3,604,643 11,605,000 - - 6,869, 95 - - 18,474,895 1.7,799,000 $ 1 Q54 , 26L $ 50,494 $ 5_.,aEg$25 $ 3 65=U $ 32,058,58 $ 31, 855 ,779 $ 24,044 $ - - $ - - $ - - $ 502,273 $ 614,706 15,150 21,675 - - - - 126,991 286,637 - - 28,819 - - - - 28,819 11,560 - - 2,603,630 - - - - - - - - - - 3,657,138 5,374,741 6,260,768 5,506,370 6,324,923 $ 2,642,824 $ 50 $ -0 — $ 3,657.13$ $ 12,293,592 $ 1.2,744,196 $ 5,647,044 $ - - $ - - $ - - $ 5,647,044 $ 5,858,669 - - - - 6,869,895 - - 6,869,895 6,025,673 1,519,379 - - - - - - 1,519,379 1,120,315 4,245,019 - - - - - - 4,245,019 4,232,724 - - - - - - - - - - - - - - - - 282,036 1,201,553 159,800 1,714,402 $ 11,411,442 $ -0- $ 6,869,895 $ -0- $ 19,764, 926 $ 19,111,583 $ 14,02 $ 50,494 $ -E$9,U-5 $tZ�l$ $9_51_8 $ X1.855,779 -53- CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES. AND CHANGES IN FUND BALANCES= (50,553) ALL GOVERNMENTAL FUND TYPES $ (9,944) statements Fiscal Year Ended June 30, 1988 41.208 id Balances - July 1, 1987 - As Restated $ 74,507 $ 1,677,552 $ GOVERWIEhML FUND TYPES ;idual Equity Transfers In (Out) $ - - $ - - Special (1.511) Debt General Revenue S Service - venues: Taxes/Special Assessments $ 1,350,299 $ 1,386,383 $ 156,438 Licenses and Permits 207,244 5,702 839 Intergoverrnnental Revenue 282,404 242,460 3,474 Charges for Services 253,933 55,265 - - Fines and Forfeitures 184,663 37,204 - - Miscellaneous Revenues 657 298,717 - - Investment and Realty Earnings 39,171 87,287 _10,726 Total Revenues $ 2,318,371 $ 2,113,018 $ 171.477 Denditures: �urrent: General Goverrment $ 415,985 $ 69,448 $ - - Public Safety 1,376,408 214,951 - - Public Norks 219,628 807,516 - - Public Health 55,814 2,073 - - Culture and Recreation 185,569 35,127 - - Housing and Cmnunity Development - - 281,443 - - Miscellaneous 5,214 108,627 - - :'aapital Outlay 140,739 435,596 - - )ebt Service 1,751 312.812 222.030 Total Expenditures $ 2-,401,10$ $ 2,267,593 $ 222,030 Excess (Deficiency) of Revenues Over Expenditures $ (82,737) $ (1541575) $ (50,553) ler Financing Sources (Uses): ?roceeds of General Long -Term Debt Inception of Lease Purchase )perating Transfers In )perating Transfers (Out) Total Other Financing Sources (Uses) ,ess (Deficiency) of Revenues and Other Sources 47,844 - - - - (47.844) - - $ -0- $ -0- $ -0- Iver Expenditures and Other Uses $ (82,737) $ (154,575) $ (50,553) id Balances - July 1, 1987 - As Previously Reported $ 74,507 $ 1,780,260 $ (9,944) statements - - (102,708) 41.208 id Balances - July 1, 1987 - As Restated $ 74,507 $ 1,677,552 $ 31.264 ;idual Equity Transfers In (Out) $ - - $ - - $ (1.511) id Balances - June 30, 1988 :�I accompanying Notes to Financial Statements® am GOVERNMENTAL FUND TYPES - cont, Capital Projects $ 79,430 1,182 3,711 7,755 889 $ 92,967 210,645 1,517 $ 212,162 $ (119,195) $ 31,275 46,672 $ 77,947 $ (41,248) $ 29,379 M -- TOTALS (MEMORANDUM ONLY) Year Ended ,lune 30, 1988 June 30, 1987 $ 2,972,550 $ 2,308,329 214,967 314,305 532,049 758,107 316,953 303,296 221,867 170,984 299,374 272,994 $ 485,433 1,591,359 1,027,144 57,887 220,696 281,443 113,841 786,980 $ 31,275 46,672 47,844 (47,844) $ 77,947 $ (329,113) $ 1,874,202 (61,500) $ 1,812,702 $ -0- . .. $ 710,489 1,468,231 969,395 53,724 248,611 1,425,480 222,558 -0- $ (1,4 3,713) $ 1,264,514 2,033,401 $ 3,297,915 $ -0- -55- CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES= BUDGET AND ACTUAL - GENERAL, SPECIAL REVENUE, DEBT SERVICE, A-70 CAPITAL PROJECTS FUND TYPES Fiscal Year Ended June 30, 1988 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 Cm nunity Development Miscellaneous Capital Outlay Debt Service Total Expenditures Excess (Deficiency) of Revenues Over Expenditures Other Financing Sources (Uses): Proceeds of General Long -Term Debt Inception of Lease Purchase Operating Transfers In Operating Transfers (Out) Total Other Financing Sources (Uses) Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Uses Fund Balances - July 1, 1987 - As Previously Reported Restatements Fund Balances - July 1, 1987 - As Restated Residual Equity Transfers In (Out) Fund Balances - June 30, 1988 See accompanying Notes to Financial Statements. -56- GENERAL FUND Variance - Favorable Budget Actual (Unfavorable) $ 1,401,624 $ 1,350,299 $ (51,325) 193,166 207,244 14,078 246,489 282,404 35,915 261,737 253,933 (7,804) 148,964 184,663 35,699 3,200 657 (2,543) (10,829) 50,000 $ 2,305,180 39,171 $ 2,318,371 $ 13,191 $ 436,349 $ 415,985 $ 20,364 1,386,777 1,376,408 10,369 231,288 219,628 11,660 61,058 55,814 5,244 188,439 185,569 2,870 8,999 5,214 3,785 145,175 140,739 1,751 4,436 0- 1,751 $ 2,459,836 $ 2,401,108 $ 58,728 $ -0- $ -0- $ -0- $ 74,507 $ 74,507 $ 74,507 $ 74,507 SPECIAL REVENUE FUNDS $ 87- Variance - Favorable Budget Actual (Unfavorable) $ 1,480,747 $ 1,386,383 $ (94,364) 3,025 5,702 2,677 213,460 242,460 29,000 59,090 55,265 (3,825) 40,020 37,204 (2,816) 434,524 80,099 298,717 87,287 (135,807) 7,188 $ 2,310,965 $ 2,113,018 $ (197,947) DEBT SERVICE FLMS $ 87- Variance - Favorable Budoet Actual. (Unfavorable) $ 49,434 $ 156,438 $ 107,004 250 839 589 4,492 3,474 (11018) $ 55,176 $ 1,477 $ 11-_6,301 CAPITAL PRQ7ECTS FUNS $ 87- Variance - Favorable Budget Actual (Unfavorable) $ 81,414 $ 79,430 $ (1,984) 480 1,182 702 1,206 3,711 2,505 -0- 7,755 7,755 700 $ 83,800 889 $ 92,967 189 $ 9,167 $ 69,535 $ 69,448 $ 87- 215r159 214,951 208 - - - - - - - - - - - - 907r667 807,516 100,151 - - - - - - - - - - - - 2r110 2,073 37 - - - - - - - - - - - 35,618 35,127 491 - - - - - - - - - - - - 629,380 281,443 347,937 - - - - - - - - - - - - 141,450 108,627 32,823 - - - - - - - - - - - - 1,326r110 435,596 890,514 - - - - - - 243,242 210,645 32,597 482,943 312,812 170,131 215,016 222,030 (7,014) 1,829 1,517 -__ 12 $ 3,809,972 $ 2,267,593 $ 1,542,379 $ 215,016 $ 222,030 $ _(7,014) $ 245,071 $ 212,162 $ 32,909 $ (1,499,007) $ (154,575) $ 1,344,432 $ (159,840) $ (,50,553) $ 109,287 $ (161,271) $ (11.9,195) $ 42,076 $ - - $ - - $ - - $ - - $ - - $ - - $ 50,000 $ 31,275 $ (18,725) - - - - - - - - - - - - 46,672 46,672 -0- -0- 47,577 47,577 - - - - - - - - - - - - -0- (47,577) (47,577) - - - - - - - - - - - - $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ 96.672 $ 77,947 $ (18,725) $ (1,499,007) $ (154,575) $ 1,344,432 $ (159,8401 $ (50,5553) $ 109,287 $ (64,599) $_(41,248) $ 23,351 $ 1r780,260 -0- $ 1,780,260 (102,708) $ - - (102,708) $ (9,944) -0- $ (9,944) 41,208 $ - - 41,208 $ 29,379 - - $ 29,379 - - $ - - - - $ 1,780,260 $ 1,677,552 $ (102,708) $ (2,944) $ 31,264 $ _91,20 $ 29,379 $ 29,379 $ - - $ - - $ - - $ - - $ -0- $ (1,511) $ (1,511) $ -0- $ 1.511 $ 1,511 $ 281,253 $ 1,522.977 $ 1,241,]24 $ (169,784) $ (20,800) $ 14.$.,9$ $ (35,220) $ (10.3581 $ _24LB 2 -57- CITY OF KALISPELL KALISPELL, MONTANA COMBINED STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN RETAINED EARNINGS - ALL PROPRIETARY FUND TYPES Fiscal Year Ended June 30, 1988 PROPRIETARY FUND TYPES Enterprise @ Operating Revenues: Charges for Service $ 1,696,026 Miscellaneous Revenues 326 Special Assessments 402,413 Total Operating Revenues $ 2,098,765 Operating Expenses: Personal Services $ 619,386 Supplies 43,988 Purchased Services 398,808 Fixed Charges 183,865 Losses/Bad Debt Expenses 23,102 Depreciation 493,891 Materials - - Inter -Departmental Charges - - Total Operating Expenses $ 1,763,04 Operating Income (Loss) $ 335,725 Non -Operating Revenues (Expenses): Purfax Settlement $ - - Interest 98,661 Debt Service Interest Expense (215,977) Total Non -Operating Revenues (Expenses) $ (117,316) Net Income (Loss) $ 218,409 Add depreciation on fixed assets acquired by grants, entitlements, and shared revenues externally restricted for capital acquisitions and construction that reduced contributed capital 217,583 Increase (Decrease) in Retained Earnings $ 435,992 Retained Earnings - July 1, 1987 - As Previously Stated $ 5,353,039 Restatements (24,633) Retained Earnings - July 1, 1987 - As Restated $ 5,328,406 Retained Earnings - June 30, 1988 $ 5,j4. 98 See accompanying Notes to Financial Statements, -58- $ 2-t763,040 $ $ 335,725 $ $ -0- $ 260,574 98,661 105,772 (215.977) (240.769) $ (117,316) $ 125.577 $ 218,409 $ 359,367 $ 435.992 $ 554.387 $ 5,353,039 $ 4,759,524 (24.633) 39.128 $ 5.328,406 $ 4.798,652 $ 5.764.9$ $ 51353.039 -59- TOTALS (MEMORANDUM OM Y) Year Ended ,lune 30. 1988 ,lune 30, 1987 $ 1,696,026 $ 1,565,626 326 402,413 -0- 297.553 $ 21098,765 $ 1.863.179 $ 619,386 $ 618,341 43,988 33,315 398,808 260,362 183,865 20,420 23,102 18,124 493,891 430,596 -0- 99,617 -0- 148.614 $ 2-t763,040 $ $ 335,725 $ $ -0- $ 260,574 98,661 105,772 (215.977) (240.769) $ (117,316) $ 125.577 $ 218,409 $ 359,367 $ 435.992 $ 554.387 $ 5,353,039 $ 4,759,524 (24.633) 39.128 $ 5.328,406 $ 4.798,652 $ 5.764.9$ $ 51353.039 -59- rd 1 •M 144-11 • COMBINED STATEMENT OF CHAMES IN FINAWIAL POSITION ALL PROPRIETARY ••••♦• " • Fiscal Year Ended June 30, 1988 Ente mr ise Sources of Working Capital: Operations: Net Income (Loss) $ 218,409 Add: Items Not Requiring Working Capital: Depreciation 493,891 Compensated Absences Payable 4.735 Working Capital Provided by Operations $ 717,035 Other Sources of Working Capital Contributions 52,339 Net Decrease in Restricted Assets 74,195 Restatements Affecting Working Capital - Net Increase in Current Liabilities Payable From Restricted Assets _- - Total Sources of Working Capital $ 843.569 Uses of Working Capital: Compensated Absences $ - - Fixed Asset Purchases 345,127 Fond Payments 75,000 Contract Payments 80,689 Restatements Affecting Working Capital 15,899 Net Decrease in Current Liabilities Payable Fran Restricted Assets 140,789 Total Uses of Working Capital $ 657.504 Net Increase (Decrease) in Working Capital $ 186.065 Elements of Increase (Decrease) in Working Capital: Cash/Investments $ 82,953 Assessments Receivable 12,474 Contract Receivable - - Accounts Receivable 19,056 Interest Receivable - - Due From Other Funds 24,000 Inventory (13,780) Warrants Payable - - Accounts Payable 76,512. Due To Other Funds (15,150) Interest Payable - - Net Increase (Decrease) in Working Capital $ 186.065 See accompanying Notes to Financial Statements. t AlMealalam' 11101 •�1 $ 218,409 $ 359,367 493,891 -0- 4,735 430.596 $ 717,035 $ 789,963 52,339 696,132 74,195 382,352 -0- 2,813 -0- 140.789 $ 843,569 $ 2,012.049 $ -0- $ 1,788 345,127 1,805,388 75,000 65,000 80,689 75,106 15,899 24,151 $ 657.504 $ 1,971,433 $ 186.065 $ 40-615 $ 82,953 $ (86,806) 12,474 2,542 -0- 10,000 19,056 (31,555) -0- (3,751) 24,000 (145,947) (13,780) 16,245 -0- 124,278 76,512 148,770 (15,150) 513 -61- 1. Summary of Significant Accounting Policies The following is a summary of the City of Kalispell`s significant accounting policies: a. Reporting_Enti t7y 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. E#i c� . � a 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 special assessments, 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, special assessment 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. -62- CITY OF KALISPEL KALI SPEL, MONTANA IMES TO FINANCIAL STATEMENTS - cont June 30, 1988 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 FUM 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 AM LOW, -TERM LIABILITIE General Fixed Assets Account Groin - Used to account for the fixed assets of the City which are not accounted for in proprietary funds. General Long -Term Debt Account Groin - Used to account for all long-term debt of the City except that accounted for in the Tax Increment Fund, a Special Revenue Fund, and 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 becane 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. -63- CITY OF KALISPELL ETES TO FINANCIAL STATEMENTS -cont$ 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 delimuent 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 Council on the second Monday in August, after holding public hearings as required by State statutes. The operating budgets cannot be increased except for a public emergency which could not have been reasonably foreseen at the time of adoption of the budget. Budget appropriation transfers may be made between the general classifications of salaries and wages, maintenance and operation and capital outlay. 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. ME CITY OF KALISPELL WA • NOTES TO FINANCIAL STATEMENTS - cont 01RONW1110... 1. Summary of Significant Accounting Policies - cont. f. Fixed Assets All purchased f ixed assets are valued at cost where historical records are available and at estimated historical cost where no historical records exist. Donated fixed assets were not valued at their estimated fair market value on the date received, as required by generally accepted accounting principles. A value was not recorded for the donated fixed assets. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives are not capitalized. Improvements are capitalized and, in proprietary funds, depreciated over the remaining useful lives of the related fixed assets. General fixed assets are not capitalized in the funds used to acquire or construct them. Instead, capital acquisition and construction are reflected as expenditures in governmental funds, and the related assets are reported in the general fixed assets account group. Assets in the general fixed assets account group are not depreciated. Public domain ("infrastructure") general fixed assets consisting of roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are not capitalized, as these assets are :L-nmovable and of value only to the goverrm,ent. 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 - 20 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 No reserve for estimated uncollected accounts receivable is maintained. Accounts receivable are reported as net of revenues collected in advance. -65- CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. I. Summary of Significant Accounting Policies - cont i. Inventories Inventories of materials and supplies for governmental funds are expensed at the time of purchase. Inventories of materials and supplies on hand are not maintained. The Enterprise Fund inventory of materials and supplies was valued at a combination of cost and replacement costs. Inventories are offset by a reserve of equity. j. Vacation and Sick Lease Liabilities incurred because of unused vacation and sick leave accumulated by emplcsyees 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 sane 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 6. 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 frau contributions is reflected in the statement of revenue, expenses, and changes in retained earnings. The amount of depreciation applicable to assets aoquired through contribution frau grants, entitlements, and shared revenues is transferred to the related contribution account instead of retained earnings. Enterprise Fund resources received fr an 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 D'I'ES TO FINANCIAL STATEMENTS - cont. pig M-1110 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 ir_terfund receivable and payable accounts. n. Cgm;grative Bata Comparative total data for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the City's financial position and operations. However, comparative (i.e., presentation of prior year totals by fund type) data have not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. 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 changes in financial position in conformity with generally accepted accounting principles. Neither is such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. 2. Prmerty 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. -67- CITY OF RALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. 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 to per month plus a penalty of 29c. 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, 1988 were within the legal limits. The taxable value upon which the tax levies for the fiscal year ended June 30, 1988 was based was $15,555,491. Current tax collections for the year ended June 30, 1988 were approximately 750 of the amount levied. 3. Deficit Fund Balances The General Fund had a deficit fund balance of $8,230 for the fiscal year ended June 30, 1988. The deficit resulted from tax collections being less than anticipated. In addition, an operating transfer in anticipated in the original budget was not made. Taxes receivable amounted to $836,459 on June 30, 1988. The deficit should be eliminated during the fiscal year ended June 30, 1989 if tax collec- tions improve. The following Special Revenue Funds had deficit fund balances at June 30, 1988: 1. Airport Fund - $(193,548) - Most of this deficit, $(154,266), arose in the fiscal year ended June 30, 1985, when certain capital improvements at the airport were made. Proceeds frcan the sale of land were intended to fund the improvements, however, the City was not been able to sell the lard, resulting in the deficit fund balance. The deficit has increased each fiscal year because interest costs on registered warrants ($9,427 this fiscal year) and operating costs have exceeded the Airport Fund revenue. The deficit is expected to be corrected, at least partially, if and when the land is sold. -1 CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS - cont 3. Deficit Fund Balances - cont 2. Comprehensive Insurance Fund - $(37,948) - A deficit fund balance of $ (11,548) occurred in the fiscal year ended June 30, 1985, increased to $(22,292) at June 30, 1986, and to $(98,080) at June 30, 1987. The deficits were caused because liability insurance premiums were significantly higher each fiscal year than anticipated, resulting in a short -fall in revenue to cover the expenditures. The deficit was decreased by $61,000 in the fiscal year ended June 30, 1988, and is expected to be further reduced in the fiscal year ended June 30, 1989. 3. Retirement Fund - $(17,425) - The deficit arose because of a $18,556 short -fall in anticipated revenue. Most of the short -fall was in tax revenue. The collection of $77,674 of delinquent taxes in the ensuing fiscal years should eliminate the deficit. 4. Light Maintenance Fund - $(2,216) - An emergency budget was adopted in the fund. As a result, expenditures exceeded revenue and caused the fund deficit. The emergency budget was taken into consideration in setting the assessment charges for the fiscal year ended June 30, 1989. The following Debt Service Funds had deficit fund balances at June 30, 1988: General Obligation $ (2,945) 1980 Sidewalk and Curb $ (591) 1981 Sidewalk and Curb $ (2,228) 1985 Sidewalk and Curb $ (8,478) 1986 Sidewalk and Curb $ (4,429) S.I.D. Number 313 $ (1,984) S.I.D. Number 326 $ (1,503) S.I.D. Number 328 $ (54,985) S.I.D. Number 333 $ (65,856) S.I.D. Number 334 $ (5,439) S.I.D. Number 337 $ (1,104) Lighting District Number 1 $ (5,536) The deficits were caused by a short -fall in revenue and will be eliminated as delinquent assessments are collected. WO CITY OF KALISPELL IMANIMMUM01,41 RTES TO FINANCIAL STATEMENTS - cont 4. 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; and repurchase agreements. The composition of cash and investments on June 30, 1988, was as follows: Cash on Hand $ 200 Petty Cash 500 Cash in Banks: Demand Deposits 349,824 Time Deposits 87,532 Repurchase Agreements 3,244,000 Special Improvement District Bonds 34,275 Variable Annuity Life Insurance Company (VALIC) - Deferred Compensation Plan 28,320 Total per Balance Sheet $ 3,744.651 Deposits - At year-end, the carrying amount of the City's deposits was $437,356, and the bank balance was $447,621. These deposits include demand and time deposits. Of the bank balance, $209,587 was covered by Federal depository insurance and $238,034 was uninsured and uncollateralized. This uninsured and uncollateralized 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 50% of such deposits if the institution in which the deposits are Trade 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 amount of collateral held for City deposits at June 30, 1988, exceeded the amount required by State statutes. The State statutes do not specify in whose custody or name the collateral is to be held. 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 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, 1988. -70- CITY OF KALISPELL M AM RANAs� 4. Cash and Investments - cont. Investments - cont. Category 1 - Includes investments that are insured, registered, or for which the securities are held by the City Tuan 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. Cate Carrying Market 1 2 3 Value Value Repurchase Agreements $ -0- $ -0- $ 3,2 ,4 000 $ 3,244,000 $ 3,244,000 Special Improvement District Bonos J _4.275 34.275 a Total Investments $ 3,278,275 $ 3--,ZU,23_5 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, 1988, amounted to $28,320. Fixed Assets A summary of changes in general fixed assets follows: -71- Additions Deletions 283,330 190,577 392,353 8,517 -,.521 $ 866.260 $ 22.0M Balance June 30. 1988 $ 917,389 3,215,814 996,379 1,740,313 Bal ance Land July 1. 1987 $ 917,389 Buildings 2,932,484 Improvements Other Than Buildings 805,802 Machinery & Ebuipment 1,356,477 Construction Work In Progress 13.521 Total $ 51025,673 -71- Additions Deletions 283,330 190,577 392,353 8,517 -,.521 $ 866.260 $ 22.0M Balance June 30. 1988 $ 917,389 3,215,814 996,379 1,740,313 KALISPELL, MONTANA IMMMANOXIMM-111 5. Fixed Assets - cont. A summary of proprietary fund type property, plant, and eauignent at June 30, 1988 follows: Net $ 11.605.000 . - . a. The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1988: General Obligation Bonds (1) Revenue Bonds (2) Urban Renewal Bonds (1) Special Assessment Bonds (1) Contracted Debt (1) (2) Compensated Absences Payable (1) (2) Total Balance Enterprise Land $ 245,369 Machinery & Equipment 711,913 Construction Work in Progress 72,547 Source of Supply 347,709 Pumping Plant 496,726 Treatment Plant 3,834,666 Transmission and Distribution 7,200,824 General Plant 473,343 Storm Sewer System 2.83243 Total $ 16,215,570 Less Accumulated Depreciation (4,610.570) Net $ 11.605.000 . - . a. The following is a summary of long-term debt transactions of the City for the fiscal year ended June 30, 1988: General Obligation Bonds (1) Revenue Bonds (2) Urban Renewal Bonds (1) Special Assessment Bonds (1) Contracted Debt (1) (2) Compensated Absences Payable (1) (2) Total Balance Balance July 1. 1987 Additions Reductions June 30. 1988 $ 515,000 $ $ (20,000) $ 495,000 2,515,000 (75,000) 2,440,000 2,040,000 (65,000) 1,975,000 593,587 31,725 (143,000) 482,312 285,902 312,806 (142,772) 455,936 375.434 37.086 -0- 412.520 (1) Reported in general long-term debt account group. (2) Reported in Enterprise Fund. b. Bonded Debt Bonds payable at June 30, 1988 are comprised of the following individual issues: 1. General Obligation Bonds Issue Interest Term of Purpose Date Rate - and Bruckhauser Pool 4/1/85 8.3-9.2% 15 yrs. Total General Obligation Bonds -72- Final Outstanding Maturity Bonds June 30, Annual Date Issued 1988 Payment 2000 $ 550.000 $ 495.000 Varies 1 It/ 10 itt CITY OF KALISPELL •MMM,2021 6. Long -Term Debt - cont. b. Bonded Debt - cont. 1. General Obligation Bonds - cont General obligation bonds of the City are secured by the general credit and revenue -raising powers of the City. The Debt Service Fund had a deficit fund balance of $20,800 at June 30, 1988. Total Revenue Bonds 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 financial statements. For the fiscal year ended June 30, 1988, 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 - 5,000. (b) Amount of cash on hand in each account of the Sewer System at the end of the fiscal year. Sewer Operating $ 207,010 Sewer Capital Improvement 236,293 Sewer Revenue Reserve 249,201 Operating Reserve 35,000 Construction Fund 135,530 Replacement and Depreciation 247,664 Sewer Revenue Bond Account 148.246 Total $ 1.258.944 -73- Annual Payment $ 10,000 Varies Varies Varies 2. Revenue Bonds Final Outstanding Issue Interest Term of Maturity Bonds June 30, Purpose Date Rate and Date Issued 1988 1972 Sewer Plant 1/l/72 5.50 20 yrs. 1992 $ 200,000 — $ 40,000 1976 Storm Sewer 7/1/76 6.750 20 yrs. 1996 445,000 330,000 1983 Swage Plant 9/1/83 10.080 20 yrs. 2004 875,000 810,000 1986 Sewer Lines 6/1/86 7.0o 20 yrs. 2006 1.300.000 1.260.000 Total Revenue Bonds 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 financial statements. For the fiscal year ended June 30, 1988, 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 - 5,000. (b) Amount of cash on hand in each account of the Sewer System at the end of the fiscal year. Sewer Operating $ 207,010 Sewer Capital Improvement 236,293 Sewer Revenue Reserve 249,201 Operating Reserve 35,000 Construction Fund 135,530 Replacement and Depreciation 247,664 Sewer Revenue Bond Account 148.246 Total $ 1.258.944 -73- Annual Payment $ 10,000 Varies Varies Varies 6. CI'T'Y OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont. •I. t- VIII i.- . •. b. Bonded Debt - cont. 2. Revenue Bonds - cont. Revenue Bond Disclosure - cont. (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, 1988 of $563,361 divided by 12 = $46,947. (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. Fiscal Year Ended Cash Floe Coverage June 30, 1988 Sewer Service Charges $ 825,259 Storm Sewer Assessments 174,365 Total Operating Revenue $ 999,624 Less: Operating Expense (Before Depreciation) 563,361 Available for Debt Service $ 436,263 Maximum Debt Service $ 282,533 Coverage 154% (e) 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. (2) An operating reserve was not accumulated and maintained in an amount equal to one month's average operating expense. The required reserve was $46,947 and the actual reserve accumulated and maintained by the City was $35,000. -74- I INWOF KALISPE • NOTES • • June i •:: 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, Farts 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. Final Outstanding Issue Interest Term of Maturity Bonds June 30, ase Date Rate and Date Issued 1988 Q ban Renewal Bonds Tax Increment 12/85 6.25-9.5% 16 yrs. 7/l/2002 Total Urban Renewal Bonds 2,100,00 $ 1,975,000 Varies 11 111 111 4. Spacial Assessment Bonds (S.I.D.) Final Outstanding Issue Interest Term of Maturity Bonds June 30, Purpose Date _ Rate Bond Date Issued 1988 Reported in General on -Term Debt Account Group S.I.D. No. 313 75,000 10/1/71 7% 20 yrs. S.I.D. No. 326 165,000 11/1,/78 7.75% 10 yrs. S.I.D. No. 328 Varies 7/1/79 8.70 20 yrs. S.I.D. No. 333 1992 7/28/82 150 10 yrs. S.I.D. No. 334 4,500 1/1/82 14.5% 10 yrs. S.I.D. No. 335 105,000 11/1/82 12% 10 yrs. S. I. D. No. 336 Varies 12/1/86 129. 10 yrs. S.I.D. No. 337 1989 12/1/86 7.740 15 yrs. Special Light 11000 1,000 Varies 1992 Construction No. 1 12/1/82 12% 10 yrs. Special Light 24,000 Varies 1993 44,600 Construction No. 2 11/26/84 12% 8 yrs. 1981 Sidewalk & Curb 1.0/1/81 9.5% 8 yrs. 1982 Sidewalk & Curb 4/1/83 12% 8 yrs. 1983 Sidewalk & Curb 2/1/84 100 8 yrs. 1984 Sidewalk & Curb 3/5/85 12% 8 yrs. 1985 Sidewalk & Curb 12/31/85 100 8 yrs. 1986 Sidewalk & Curb 12/31/86 9% 8 yrs. 1987 Sidewalk & Curb 12/31/87 12% 8 yrs. Total Special Assessment Bonds Reported in General Long -Term Debt Account Group (S.I.D.) -75- 1992 $ 100,000 $ 5,000 Varies 1988 75,000 2,000 Varies 1999 300,000 165,000 Varies 1992 65,000 26,000 Varies 1992 14,000 5,000 Varies 1992 15,000 7,500 Varies 1994 4,500 2,500 Varies 2001. 110,000 105,000 Varies 1992 75,000 37,500 Varies 1992 28,500 15,000 Varies 1989 18,000 7,000 Varies 1991 11000 1,000 Varies 1992 6,500 3,500 Varies 1993 45,000 24,000 Varies 1993 44,600 30,100 Varies 1994 20,987 18,487 Varies 1995 31.275 27.725 Varies $ �a52 $ 482.312 NOTES TO FINANCIAL STATEMENTS= cont.. 6. Lorig-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, 1988 material delinquent special assessment receivable were as follows: S.I.D. No. 328 $ 74,677 S.I.D. No. 333 43.876 Total $ 218,553 c. Contracted Debt (1) Reported in Enterprise Fund. (2) Reported in general long-term debt account group. 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 $ 55,754 General Long -Term Debt Account Group $ 356,766 -76- Origination Interest Due Principal Outstanding Purpose Date Rate Term Date Amount June 30, 1988 Storm Sewers (1) 8/31/82 00-.8 yrs. 8/31/89 $ 80,000 $ 20,000 Garbage Truck and Cans (1) 4/18/86 8.250 3 yrs. 4/15/89 209,651 63,516 Land Purchase (2) 4/24/80 7% 10 yrs. 7/1/90 85,724 29,331 Land Purchase (2) 5/1/80 7% 10 yrs. 7/1/90 76,862 35,173 Phone System (2) 9/11/87 Varies 3 yrs. 8/15/90 39,077 34,500 Copy Machine (2) 3/15/88 80 5 yrs. 3/15/93 7,595 7,283 Liability Insurance (2) 7/1/87 Varies 7/15/05 241,773 241,773 Ambulance (1) 7/29/88 Varies 3 yrs. 8/15/91 24,360 24,360 Total $ 765.042 $ 455,936 (1) Reported in Enterprise Fund. (2) Reported in general long-term debt account group. 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 $ 55,754 General Long -Term Debt Account Group $ 356,766 -76- 6. 7. CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS - cont, Long -Term Debt - cont. e. Rau irements to Amortize Debt The annual requirements to amortize all long-term debt out- standing, except compensated absences payable, as of June 30, 1988, including interest payments of $3,999,625, are as follows: Annual Requirements to Amortize Long Debt --Term ,lune 30. General 1988 Special Year Ending Obligation Revenue Assessment June 30 Bonds Bonds Bonds 1989 $ 69,543 $ 277,863 $ 102,916 1990 67,230 2.81,405 99,568 1991 69,917 274,350 85,623 1992 67,142 282,023 84,471 1993 69,367 284,042 62,865 1994 - 1998 347,812 1,308,218 198,360 1999 - 2003 142,575 1,196,210 102,090 s Year Ending 1989 1990 1991 1992 1993 1994 - 1998 1999 - 2003 2004 - 2007 Total Urban Renewal _ Bonds $ 251,533 251,095 254,895 254,695 254,905 1,289,015 1,041,815 Totals $ 861,574 731,509 706,895 700,083 672,563 3,143,405 2,482,690 549.14 State -Wide Retirement Plans The City participates in the following retirement plans: Contracted $ 159,719 32,211 22,110 11,752 1,384 $ 227,U6 Public loyees' Retirement stem (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, 1988 was $1,431,175, and the City's total payroll was $2,634,528 for the same year. -77- CITY OF KALISPELL D'I'ES TO FINANCIAL STATEMENTS - cont. 7. tate-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 tc participate in P. E.R.S. A few other employees may, at their option, participate as well. Emplcyrees 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 prcwides death and disability benefits, with amounts determined by the State of Montana.. Covered employees are required by State statute to contribute 60 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 6.4170 of covered payroll for the year ended June 30, 1988. The City's contribution requirement for the year ended June 30, 1988 was $181,145, which consisted of $89,306 from employees and $91,839 from the City. These amounts represent 6% and 6.417% of covered payroll, respectively, after deducting additional contributions from employees of $3,346. 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, 1988 for P. E. R.S. as a whole, determined through an actuarial valuation performed as of that date, was NO CITY OF KALISPELL 7. State-wide Retirement Plans - cont. Publiclovees' Retirement System (P.E.R.S.) - cont. $945,736,228. The net assets available for benefits on that date, valued at cost or amortized cost, were $692,744,348, leaving an unfunded pension benefit obligation of $252,991,880. 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 participating 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, 1988 annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. Municipal Police Officers' Retirement stem (M.P.O.R.S.Z City police officers are covered under the Municipal Police Officers' Retirement System (M. P. 0. 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, 1988 was $513,526, and the City's total payroll was $2,634,528 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 500 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 to of such all%µance per year of additional service, up to a maximum of 600 of the final average salary. The final average salary is the monthly canpensation of a member, averaged over the last 36 months of his active service. M. P. 0. R. S. also provides death and disability benefits, with amounts determined by the State of Montana. 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. -79- CITY OF KALISPELL NOTES TO FINANCIAL STATEMENTS - cont i • " 7. State -Wide Retirement Plans - cont Municinal Police Officers' Retirement- System (M P 0 R S) - cont. 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, 1988. The State contributes to the plan, out of the premium tax on motor vehicle property and casualty insurance policies, 15.060 of the compensation paid all members during the preceding year. The City's contribution requirement for the year ended June 30, 1988 was $99,700, which consisted of $32,839 from employees and $66,861 from the City. These amounts represent 6.39% 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 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, 1988 for M. P. 0. R.S. as a whole, determined through an actuarial valuation performed as of that date, was $63,243,858. The net assets available for benefits on that date, valued at cost or amortized cost, were $28,423,763, leaving an unfunded pension benefit obligation of $34,820,095. 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 35.27% will amortize unfunded past service costs over 29.51 years. The City's contribution represented 5.33% of total contributions required from all participating employers. Ten year historical trend information showing M. P. 0. R. S.'s progress in accumulating sufficient assets to pay benefits when due is presented in M. P. 0. R. S. 's June 30, 1988 annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. :I CITY OF KALISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATENEN,9 - Cont. 7. State -Wide Retirement Plans - cont Firefighters' Unified Retirement System (F UR S 1 City firefighters are covered under the Firefighters' Unified Retirement System (F. U. R.S.) , a cost sharing multiple-emplcyer retirement system. The payroll for employees covered by F.U.R. S. for the year ended June 30, 1988 was $457,961, and the City's total payroll was $2,634,528 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 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. 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, 1988. 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, 1988 was $87,105, which consisted of $27,478 from employees and $59,627 from the City. These amounts represent 6% and 13.02% of covered payroll, respectively. CITY OF KALISPELL ♦ . 1 NOTES TO FINANCIAL STATEMENT'S - cont 7. State -Wide Retirement Plans - cont Firefighters' Unified Retirement System (FURS) - cont. The "pension benefit obligation" is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases, estimated to be 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 ccmparisons 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, 1988 for F.U.R.S. as a whole, determined through an actuarial valuation performed as of that date, was $82,099,843. The net assets available for benefits on that date, valued at cost or amortized cost, were $26,628,768, leaving an unfunded pension benefit obligation of $55,471,075. 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 4.85% of total contributions required from all participating employers. Seven 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, 1988 annual report, which can be obtained from the Montana Department of Administration, Public Employees' Retirement Division. 8. 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. WO CITY OF KALISPELL • •� 8. Local Retirement Plans - cont. Deferred Compensation Plan - cont. All mounts 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 $28,320 are recorded in an agency fund at June 30, 1988, as required by generally accepted accounting principles. 9. Amounts Due From and Due To Other Governments The amounts due from and due to other governments consist of the follaaing: Due Fran Other Governments: General Fund: $413 is due frau the State Department of Highways Enterprise Funds: The Sewer Enterprise Funds is due $49,302 from the Environmental Protection Agency. The Ambulance Enterprise Fund is due $24,000 frau the State Board of Investments (Intercap) Due To Other Governments: Trust and Agency Fund: Due to State of Montana $ 22,575 CITY OF KALISPE AM, 0001021 NOTES TO FINAWIAL STATEMENTS - cont, 10. Amounts Due From and To Qther Funds Due from other funds and due to other funds consist of the following: Receivable Fun Payable Fund -Amount� Tax Increment Fund (l) Airport (I) $ I81 Tax Increment Fund (I) Retirement (l) 5,209 Tax Increment Fund (I) Capital Projects Fire Truck (3) 10,054 Tax ZoorBneDt Fund (l) Ambulance (4) I5,150 Tax Increment Fund (l) General Obligation (2) 2,945 G.Z.D. Bep/DIviog (2) S.I.D. Number 313 (2) 11919 S.I.D. Revolving (2) S.I.D. Number 326 (2) 1,300 G.I.D. Revolving (2) S.I.D. Number 328 (2) 17,748 S.I.D. Revolving (2) S.I.D. Number 333 (3) 32,870 3.I.D. Revolving (2) 8.I.D. Number 334 (2) 2/285 8.I.D. Revolving (2) 8.Z,D. y�umdzec 336 (2) l G.Z.D. BevoIviDq (2) S.I.D. Number 337 (2) 844 S.I.D. Revolving (2) 1980 Sidewalk and Curb (2) 605 S.I.D. RevOIv (2) 198I Sidewalk and Curb (2) 2,128 S.I.D. Revolving (2) I985 Sidewalk and Curb (2) 7,791 S.I.D. Revolving (2) 1986 Sidewalk and Curb (2) 4^28� � Notes: (I) Special Revenue Fund Total Receivable - $ 33,539 Total Payable - $ 5,390 (2) Debt Service fund Total Receivable - $ 71,777 Total Payable - $ 74,722 (3) Capital Projects Fund Total Payable - $ I0/054 /4\ Enterprise Food Total Payable - $ 15,150 lI. Restricted CasbZInvestTrent The following restricted oas`/iovestmeotovYere held by the City as of June 30, I988. These amounts are reported within the cash/investment account on the Combined Balance Sheet. Description Amount Enterprise Fund: Water Replacement and Depreciation $ I05,8I0 Sewer Replacement and Depreciation 250,248 Sewer Construction 309,880 Sewer - Reserve for Operations 35,000 Sewer - Capital ImprovBneDts 285,088 Sewer - Giokloq and Interest 148,246 Sewer - Contingency 249,201 Solid Rasteg - Replacem�ot and Depreciation 4/,875 Thtsl Enterprise $ 2,-431^,348 CITY OF KALISPELL KALISPELL, MONTANA D'I'ES TO FINANCIAL STATEMENT'S - cont 11. Restricted CasbZInvestments - cont. WA Description Special Revenue Funds: Tax Increment - Sinking and Interest Community Development Fund - Interest Subsidy Interest Subsidy Total Special Revenue Funds Trust and Agency Funds: amu+ $ 123,046 87,033 71.957 $ 282,036 Valic 457 Deferred Compensation Fund $ 28,320 Performance Bond 500 Total Trust and Agency Funds $ 28.820 Total $ IZA2,22 Fund Ecu itv Reserved retained earnings/fund balances of the City at June 30, 1988 consisted of: Special Revenue Funds: Cm nunity Develogment - Reserved for Interest Subsidy Tax Increment - Reserved for Reserved for Total Special Revenue Funds $ 87,033 1985 Revenue Bond 123,046 Interest Subsidy 71.957 $ 282.036 Enterprise Fund: Water - Reserved for Inventory Water - Reserved for Replacement and Depreciation Sewer - Reserved for Replacement and Depreciation Sewer - Reserved for Operations Sewer - Reserved for Construction Suer - Reserved for Sinking and Interest Sewer - Reserved for Contingency Sewer - Reserved for Capital Improvements Garbage - Reserved for Replacement and Depreciation Total Enterprise $ 88,031 105,810 250,248 35,000 309,880 148,246 249,201 285,088 CITY OF KALIISPELL KALISPELL, MONTANA NOTES TO FINANCIAL STATEMENTS - cont 13. Changes in Contributed Capital A schedule of changes in contributed capital is presented below: Contributed Capital - July 1, 1987 Add: Capital Grants Special Improvement Districts Tax Increment District Developer Deduct: Depreciation on assets acquired via capital grants Other Adjustments Contributed Capital - June 30, 1988 14. Restatements During the current fiscal year, transactions were made to the accounts. Water Sewer Total $ 589,430 $ 5,258,047 $ 5,847,477 1,258 1,258 11,192 11,192 2,960 2,960 48,121 48,121 (15,605) (201,978) (217,583) (46.381) (46,381) $ 576.785 $ 5 070,E $ 5,647,044 adjustments relating to prior years' fund balance and retained earnings The following is a schedule of other such adjustments: Fund Amount Reason for Adjustment Special Revenue Fund $ (1_02.708) To reclassify S.I.D. Revolving Fund from Special Revenue fund type to Debt Service f and type Debt Service Fund $ (61,500) To adjustment prior year's expenditures for matured bonds payable 102.708 To reclassify S.I.D. Revolving Fund from Special Revenue fund type to Debt Service fund type Total Debt Service Fund $ 41.208 Enterprise Fund: Water $ (11,706) Adjustment to fixed assets Sewer 110 Adjustment to fixed assets (5,884) To adjust for error in recording prior year's revenue 772 To reduce amount due to E.P.A. 12,725 To adjust for error in recording prior year's revenue (3,168) To adjust for error in recording prior year's expenses Ambulance (1,583) Adjustment to fixed assets (15.899) To write-off accounts receivable Total Enterprise Fund $ X4.633) CITY OF KALISPELL M, M-05-MMUMMOOMMAR, NOTES TO FINANCIAL STATa!1ENTS - cont 15. Residual Equity Transfers Residual equity transfers consist of the following: A transfer of $1,511 was made from the S.I.D. Revolving Fund, a Debt Service Fund, to the 1987 Sidwalk and Curb Construction Fund, a Capital Projects Fund, to eliminate a deficit fund balance. 16. int Information For Enterprise Funds The City maintains four Enterprise Funds which provide water, sewer, garbage, and ambulance services. Segment information for the year ended June 30, 1988 was as follows: Total Water Sewer Garbage Ambulance Enterprise Fund Fund Fund Fund Funds Operating Revenues $ 723,348 $ 999,824 $ 228,048 $ 147,545 $ 2,098,765 Depreciation, Depletion and Amortization Expense $ 104,845 $ 349,085 $ 34,908 $ 5,053 $ 493,891 Operating Income or (Loss) $ 160,387 $ 87,378 $ 73,735 $ 14,225 $ 335,725 Operating Grants, Entitle- ments and Shared Revenues $ $ $ $ $ Operating Transfers In $ $ $ $ $ Out $ $ $ $ $ Tax Revenues $ $ $ $ $ Net Income or Loss $ 184,656 $ (49,277) $ 67,892 $ 15,138 $ 218,409 Current Capital: Contributions $ 2,960 $ 49,379 $ $ $ 52,339 Transfers $ $ $ $ $ Plant, Property and Equipment: Additions $ 139,690 $ 151,473 $ 11,800 $ 42,164 $ 345,127 Deletions $ 11,706 $ 9,579 $ $ $ 21,285 Net Working Capital $ 567,580 $ 307,780 $ 35,726 $ 59,065 $ 970,151 Total Assets $ 3,543,847 $10,088,949 $ 297,070 $ 124,400 $ 14,054,266 Bonds and Other Long -Term Liabilities: Payable from, Operating Revenues $ 15,564 $ 2,490,342 $ 72,671 $ 25,053 $ 2,603,630 Payable from Other Sources $ $ $ $ $ Total Equity $ 3,520,142 $ 7,583,136 $ 224,113 $ 84,051 $ 11,411,442 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. E • NOTES TO FINANCIAL STATEMENTS - cont June 30, 1988 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 joined with other Montana cities and towns to form a self-insurance pool offering workers' ccmpensation and liability coverages. Liability limits of $750,000 per person and $1.5 millon per incident were obtained through the insurance pool. In August of 1986, the pool (renamed the Montana Municipal Insurance Authority) had issued $6.25 million in tax exempt bonds to fund the liability program's reserves. The City, upon joining the Pool, 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. Audited financial statements for the Montana Municipal Insurance Authority for the fiscal year ending June 30, 1988, disclosed the following: Assets Liabilities Loss Reserves Fund Balance Total Liabilities, Reserves and Fund Balance Revenues Expenditures Required Initial Contribution by Members Net Increase (Decrease) in Fund Balance Liability Workers' Insurance Camensation $ 8,585.588 $ 2,289.746 $ 6,576,354 $ 169,746 1,750,000 2,120,000 259,234 -0- $ 2,664,796 $ 2,254,305 2,739,973 2,254,305 17,724 $ —153,453) $ -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 wham are appointed by the Board of County Commissioners. The City of Kalispell contributed $37,000 from their General Fund to Flathead County in support of the City -County Health Department during the fiscal year ended June 30, 1988. Em CITY OF KALISPELL lii� N ► ' ti ►i • � 19. Pending Litigation The follaaing is a list of litigation pending against the City of Kalispell and the amount of damages claimed by the Plaintiff. The City Attorney has made no evaluation as to the outcome of each case. The City has liability insurance which may cover all or part of the damages requested. Damages Case Requ,ueste Carsten Franklin vs City of Kali -spell $ 500,000 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 Develognent 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 of $3,255,305 was recorded in the Urban Development Action Grant Loan Repayment Fund, a Special Revenue Fund, on June 30, 1988. Loan repayments to the City began in April, 1987. The repayment schedule calls for monthly principal and interest payments of $21,096.95 on tt-,e 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. 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 develognent 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, 1988 was $59,285 and is recorded in the Tax Increment Fund, a Special Revenue Fund. CITY OF KALISPELL - PO 2 i W•:i 21. Purfax Settlement Receivable The City accepted a $400,000 settlement on December 22, 1986, from various third party defendants, concerning faulty construction of the wastewater treatment plant in 1975. Terms of the settlement called for $125,000 to paid to the City at closing in December, 1986, $90,000 to be paid in December, 1987 and 1988, and $95,000 in December, 1989. The balance of the settlement receivable of $185,000 at June 30, 1988 was recorded in the Sewer Enterprise Fund. Lou PIN m MID I= DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION -STATE OF MONTANA (406)444-3010 To the Honorable 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, 1988, and have issued our report thereon dated April 18, 1989. 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 the standards for financial and compliance audits contained in the Activities. and Functions, issued by the U.S. General Accounting Office. 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. Vie believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying Schedule of Federal Financial Assistance for the year ended June 30, 1988, 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. April 18, 1989 DONALD L. DOOLEY Bureau Chief l -92- av EOU4I OPPORTWwTY ENPLOYER 9-.0 -93- CITY OF KALISPEL FXN �",Ja •. W"MMISM Federal Pass -Through CFDA Grantor's Number Number Federal Grantor/Pass-Through Grantor/Program Title U. S. Department of the Treasury Direct Program: State and Local Government Fiscal Assistance Revenue Sharing 21.300 U. S. Department of Housing and Urban Developmn Direct Program: Urban Development Action Grant 14.221 B -84 -AB -30-0011 Passed Through State Department of Commerce: Community Development Block Grant - State's Program 14.228 MT-CDBG-C83-017 Total U. S. Department of Housing and Urban Development U. S. Environmental Protection Agency Direct Programs: Construction Grant for Wastewater Treatment Works 66.418 Construction Grant for Wastewater Treatment Works 66.418 Kalispell Sewer Study Project 66.015 Total U. S. Environmental Protection Agency Total Federal Financial Assistance 1 Program or Beginning Revenues Ending Award Balance Federal Matching/ Balance Amount July 1, 1987 Funds Income Other Emenditures June 30, 1988 $ 3,175,000 $ 49,590 $ 5,300 $ 258,855 $ 144,801 $ 1,500,000 170,06 27,828 6,486 109,857 $ 219,656 $ 33,128 $ 265,341 $ 254.658 $ 1,640,611 $ (97,469) $ 164,600 (70,891) $ 10,200 265,522 $ 97,162 $ a9 -2,M $ 125,918 $ 12,725 26,897 104,025 1,258 38,778 $ 154,073 $ 155,528 $ 1B -7,M $ 22.6 $ -95- $ 41,174 60,031 $ 101,205 $ 421,109 $ 168,944 DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA MIAMI 051 (406)444-3010 To the Honorable 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 years ended June 30, 1987 and 1988, and have issued our reports thereon dated April 18, 1989. Our audit was made in accordance with generally accepted auditing standards and the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, a12d Functions, issued by the U.S. General Accounting Office, and accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The management of the City of Kalispell, Montana, is responsible for the City's compliance with laws and regulations. In connection with our audit referred to above, we selected and tested transactions and records to determine the City's compliance with laws and regulations nonccmpliance with which could have a material effect on the general purpose financial statements of the City. The results of our tests indicate that for the transactions tested, the City of Kalispell, Montana, complied with those laws and regulations referred to above, except as described in the attached schedule. Those instances of noncompliance were considered by us in evaluating whether the general purpose financial statements are presented fairly in conformity with generally accepted accounting principles. With respect to the transactions not tested, nothing came to our attention to indicate that the City of Kalispell, Montana, had not complied with laws and regulations other than those laws and regulations for which we noted violations in our testing referred to above. In connection with our audit referred to above, we also performed tests of ccmpliance with laws and regulations nonccmpliance with which would not have a material effect on the general purpose financial statements of the City. Areas of noncompliance which would not have a material effect on the general purpose financial statements are described in the, attached schedule under a separate heading. April 18, 1989 DONALD L. DOOLEY Bureau Chief AN EOUAL OPPORTUNITY EMPLOYER pUicotas 6 goyva� CITY OF KALISPELL KALISPELL, MO�fIANA SCHEDULE OF COMPLIANCE FINDINGS NONCOMPLIANCE AREAS WHICH COULD HAVE A MATERIAL EFFECT ON THE GENERAL PURPOSE FINANCIAL STATEMENTS Emergency Budgets The City improperly adopted emergency budgets for various funds after the fiscal years had already ended. On September 8, 1987, the City adopted an emergency budget for the Comprehensive Insurance Fund, a Special Revenue Fund, for the fiscal year ended June 30, 1987, and on August 22, 1988, the City adopted an emergency budget for the Light Maintenance, Airport, and Hockaday Art Center Funds, all Special Revenue Funds, for the fiscal year ended June 30, 1988. 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 fiscal years had ended and appropriations had lapsed. The manner in which the City overexpended the budgets and adopted the emergency budget resolutions was contrary to several statutes: Section 7-6-4235, MCA, states: "(1) The estimates of expenditures, itemized and classified as required in 7-6-4224 and 7-6-225 and as finally fixed and adopted and as may be amended as provided in 7-6-4231 by said council, shall constitute the appropriations for the municipality for the fiscal year intended to be covered thereby. (2) Except as provided in 7-6-4236, the council and every other municipal officials shall be limited in the making 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 or the order, elapse." Since these emergency budgets were not properly adopted, the City actually had budget overdrafts in these funds. 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 7-6-4234 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. -97- CITY OF KAL ISPELL KALISPELL, MONTANA SCHEDULE OF COMPLIANCE FINDIWS - cont. NONCOMPLIANCE AREAS WHICH COULD HAVE A MATERIAL EFFECT ON THE GENERAL PURPOSE FINANCIAL STATEMENTS - cont. Emergency Budget - Financing On September 9, 1987, the City Council approved a resolution to declare an emergency budget for the Comprehensive Insurance Fund, a Special Revenue Fund, to cover an anticipated budget overdraft of $99,722 for the fiscal year ended June 30, 1987. In addition to the fact that the emergency budget adoption was not in compliance with State law, as previously discussed, the City also failed to make provisions to finance the emergency budget in the fiscal year ended June 30, 1988. Section 7-6-4239(2), MCA, states: "When at the end of any fiscal year any city has outstanding registered emergency warrants against any fund issued by reason of arry emergency budget or budgets and is without sufficient cash in such fund to pay the same with interest thereon, the city council must, in the annual budget for such fund for the immediately following fiscal year, make an appropriation sufficient to pay such warrants with interest thereon." In addition, Section 7-6-4255(2), MCA, states in parts "....the council shall, in their tax levies, include a levy for each fund sufficient to raise an amount equal to the total amount of such warrants, if there be any, remaining unpaid at the close of such preceding fiscal year because of insufficient money in such fund to pay the same." The tax levy requirement schedule for the fiscal year ended June 30, 1988, was prepared in error in that the cash available in the Comprehensive Insurance Fund was shown as zero. It should have been shown as approximately ($89,988), which would represent the cash balance less registered warrants payable and other short-term payables. As a result, the tax levy was set at a level which was not sufficient to fund the current year operations and eliminate the cash deficit from the previous fiscal year. The City could have levied sufficient mills to fund the deficit and still have remained within statutory mill levy limitations. Recommendation In the future, whenever a fund has a deficit cash 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. 320 CITY OF KALISPEL KALISPELL, MQNCANA SCHEDULE OF COMPLIANCE FINDINGS - cont NONCOMPLIANCE AREAS WHICH WOULD NOT HAVE A MATERIAL EFFECT ON THE GENERAL PURPOSE FINANCIAL STATEMENTS Debt Service Funds - Budget Overdraft A number of Special Improvement District Debt Service Funds had total budget overdrafts for the fiscal year ended June 30, 1988. In the aggregate, the Debt Service Funds had a total budget overdraft of $7,014. In most instances, the individual fund overdrafts occurred because the City received prepayments of special assessments and subsequently used the prepayments to call and Pay outstanding bonds without establishing the appropriate budget authority. Prepayments are not generally included in anticipated revenue in the budget since it is very difficult to estimate such prepayments. Section 7-6-4235(2), MCA, limits expenditures to the amount of the detailed appropriations as adopted. Further, Section 7-6-4234(2)(a), MCA, prohibits the approval of any claim or the issuance of any warrant for any expenditure in excess of the budget appropriations as adopted or legally revised. Recommendation The budgets in the Special Improvement District Debt 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. 1= 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 "01101219 •41• Aft-IkNJGJ.. * i►1• i- • .911 To the Honorable Mayor and City Council City of Kalispell Kalispell, MT 59901 Fe have audited the general purpose financial statements of the City of Kalispell, Montana, for the years ended June 30, 1987 and 1988, and have issued our reports thereon dated April 18, 1989. Our audit was made in accordance with generally accepted auditing standards; the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs. Activities. and Functions, issued by the U.S. General Accounting Office; the Single Audit Act of 1984; and the provisions of OMB Circular A-128, Audits of State and Local Governments; and accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The management of City of Kalispell, Montana, is responsible for the City's compliance with laws and regulations. In connection with the audit referred to above, we selected and tested transactions and records from each major federal financial assistance program and certain nonmajor federal financial assistance programs. The purpose of our testing of transactions and records frau those federal financial assistance programs was to obtain reasonable assurance that the City of Kalispell, Montana, had, in all material respects, administered major programs, and executed the tested nonmajor program transactions, in compliance with laws and regulations, including those pertaining to financial reports and claims for advances and reimbursements, noncompliance with which we believe could have a material effect on the allowability of program expenditures. Our testing of transactions and records selected from major federal financial assistance programs disclosed no instances of noncompliance with those laws and regulations. In our opinion, for the years ended June 30, 1987 and 1988, the City of Kalispell, Montana, administered each of its major federal financial assistance programs in compliance, in all material respects, with laws and regulations, including those pertaining to financial reports and claims for advances and reimbursements, noncompliance with which we believe could have a material effect on the allaaability of program expenditures. -100- AN EOUAL OPPORTUNITY EMPLOYER 6grolJ The results of our testing of transactions and records selected from nonmajor federal financial assistance programs indicate that for the transactions and records tested, the City of Kalispell, Montana, complied with the laws and regulations referred to in the second paragraph of our report. Our testing was more limited than would be necessary to express and opinion on whether the City of Kalispell, Montana, administered those programs in compliance in all material respects with those laws and regulations noncompliance with which we believe could have a material effect on the allowability of program expenditures; however, with respect to the transactions and records that were not tested by us, nothing came to our attention to indicate that the City of Kalispell, Montana, had not complied with laws and regulations. /'t April 18, 1989 -101- DONALD L. DOOLEY '. Bureau Chief DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION STATE OF MONTANA (406)444-3010 1-1,153010,I� • ' �� ►_►i : ► G G914191tiume►. __ ►i : • To the Honorable 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, Fontana, for the years ended June 30, 1987 and 1988, and have issued our reports thereon dated April 18, 1989. As part of our audit, we made a study and evaluation of the system of internal accounting control of the City of Kalispell, Montana, to the extent we considered necessary to evaluate the system as required by generally accepted auditing standards and the standards for financial and compliance audits contained in the U.S. General Accounting Officet�nQ�z�_4�_F��ci�_o_��y��D�� Organizations, Programs, Activities, and Functions. For the purpose of this report, we have classified the significant internal accounting controls in the following categories: General Cash Receipts Billing/Accounts Receivable Tax Revenue/Taxes Receivable Assessment Revenue/Assessments Receivable Purchasing Accounts Payable Expenditures Payroll Cash Disbursements Material/Supply Inventories Fixed Assets/Depreciation Cash and Investments Long -Term Debt Our study included all of the control categories listed above. The purpose of our study and evaluation was to determine the nature, timing, and extent of the auditing procedures necessary for expressing an opinion on the entity's financial statements. Our study and evaluation was more limited than would be necessary to express an opinion on the system of internal accounting control taken as a whole or on any of the categories of controls identified above. The management of the City of Kalispell, Montana is responsible for establishing and maintaining a system of internal accounting control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of a system 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 financial statements in accordance -102- IN EOUAL OPPORTUNITY EMPLOYER with generally accepted accounting principles. Because of inherent limitations in any system of internal accounting control, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the system 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 and evaluation made for the limited purpose described in the first paragraph would not necessarily disclose all material weaknesses in the system. Accordingly, we do not express an opinion on the system of internal accounting control of the City of Kalispell, Montana, taken as a whole or on any of the categories of controls identified in the first paragraph. However, our study and evaluation 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 in relation to the financial statements of the City of Kalispell, Montana, may occur and not be detected within a timely period. Fixed Assets The City of Kalispell has implemented procedures to improve its accountability over all City -owned general and Enterprise Fund fixed assets. A detailed fixed assets inventory system has been developed which contains all of the pertinent information required for proper internal accounting control over the fixed assets. However, documentation was not available or readily available to support the costs of the fixed assets recorded in the fixed assets inventory records. Also, donated assets were not valued at fair market value at the time of receipt. A value had not been assigned to them. Several of the donated assets have a substantial value and exclusion of these assets misstates the general fixed assets account group. The City did not complete a physical inventory of all City -awned fixed assets for the fiscal year ended June 30, 1988. Also, it was noted that all assets are not tagged or marked with an identifying City fixed assets number. Recommendation The City should continue to update its fixed assets 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 -awned 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. -103- NMI vivisto) 1 N?A WEMO) - -MIN SUNSIS, I These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in our audit of the financial statements for the years ended June 30, 1967 and 1988, and this report does not affect our reports on the financial statements dated April 18, 1989. This report is intended solely for the use of the City of Kalispell's Mayor and City Council and its management, and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report which, upon issuance, is a matter of public record. April 18, 1989 DONALD L. DC)CiEY. Bureau Chief -104- DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION -STATE OF MONTANA (406) 444-3010 �i� • , • !� �! +� �i iso Ni �. .A - To the Honorable 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, riontana, for the years ended June 30, 1987 and 1988, and have issued our reports thereon dated April 18, 1989. 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 reguired by generally accepted auditing standards, the standards for financial and compliance audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office, the Single Audit Act of 1984, and the provisions of OMB Circular A7-128, Audits !2 .ate 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: General Cash Receipts Purchasing Accounts Payable Administrative Contro Political Activity Davis -Bacon Act Civil Rights Cash trianaaement Financial JYznagement Systems and Federal Financial Reports Property Accounting -105- Expenditures/Cash Disbursements Payroll Fixed Assets Cash and Investments Specific Requirements: Types of Services Katching Level of Effort Reporting Special Requirements AN FOUAL OPPORTUNITY FNPLG�ER P1'_sV' T INDEPENDENT AUDITOR`S REPORT ON INTERNAL CONTROLS (ACCOUffING AMID 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, 1987, the City of Kalispell, Montana, expended 600 of its total federal financial assistance under the following major federal financial assistance programs: U.S. Department of Housing and Urban Development - Urban Development Action Grant, and U.S. Department of Housing and Urban Development - Community Development Block Grants - State's Program. During the year ended June 30, 1988, the City of Kalispell, Montana, had no major federal financial assistance programs and expended 60% of its total federal financial assistance under the following nonmajor federal financial assistance programs: U. S. Department of Housing and Urban Development - Urban Development Action Grant, and U. S. Department of Housing and Urban Development - Community Development Block Grant - State's Program. 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. -106- INDEPENDENT AUDITOR'S REPORT ON INTTERNAL CONTROLS (ACCOUNITIWS AM 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 tje 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 for which our study and evaluation was limited to a preliminary review of the systems, as discussed in the fifth pargraph of this report. Fow ever, our study and evaluation and our audit disclosed no condition that we believe to be a material weakness in relation to a federal financial assistance program of the City of Kalispell, Montana. This report is intended solely for the use of the City of Kalispell° s Mayor and City Council and its management and should not be used for arU other purpose. This restriction is not intended to limit the distribution of this report which, upon issuance, is a matter of public record. April 18, 1989 DONALD L. DOO EYv`{ Bureau Chief -107- DEPARTMENT OF COMMERCE LOCAL GOVERNMENT ASSISTANCE DIVISION LOCAL GOVERNMENT SERVICES BUREAU STAN STEPHENS, GOVERNOR CAPITOL STATION - STATE OF MONTANA (406)444-3010 9111- �111 To the Honorable Mayor and City Council City of Kalispell Kalispell, MT 59901 HELENA, MONTANA 59620 Findings relating to financial or accounting matters, along with our recommendations, are presented below. Also, other internal control weaknesses disclosed by our study and evaluation, although not considered to be material, are disclosed below for your information, along with our recommendations for improvement where applicable. Airport Fund Deficit The Airport Fund, a Special Revenue Fund, had deficit fund balances of $182,915 and $193,548, on June 30, 1987 and 1988, respectively. The deficit actually first existed at the end of the fiscal year ended June 30, 1985, in which the City made significant capital improvements. The improvements were to be financed with the proceeds from the sale of land at the airport; however, the City was unable to sell the land. Consequently, the cash resources to fund the improvements have not been provided and the City has had to register the warrants issued in payment of the improvements. As of June 30, 1988, total interest paid on the registered warrants amounted for $36,641, and the registered warrants on that date amounted to $155,971. The City incurred interest expense on registered warrants in the amount of $9,462 and $9,427 during the fiscal years ended June 30, 1987 and 1988, respectively. In addition to the interest costs, expenditures exceeded revenues by $671 in the fiscal year ended June 30, 1987 and by $1,206 in the f=iscal year ended June 30, 1988. The City does not appear to have an immediate plan to improve the financial position of the Airport Fund, other than to continue to try to sell the land. Recommendation 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. 41v EOUAL OPPORTLJrViT1 EMPLOYER p-bkotms 6 9'oprna 1 Parking Meter/Parking Lot Collections The City employs one individual to gather, deposit and account for parking meter and parking lot collections. The individual gathers the collections from the meters and parking lots, counts the collections, prepares a collection report, and deposits the collections directly to a bank account in the name of the City. The individual then gives the duplicate deposit slip to the City Treasurer in return for a general receipt. Internal control is weakened because there is not an adequate segregation of duties between the functions of collecting, depositing, and accounting for such collections. Recommendation To improve internal accounting controls over the parking meter and parking lot collections, we recan-r9end 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. SwirrRning Pool Collections There were several weaknesses noted in the internal accounting controls over swimming pool collections. In daily reconciliations, differences between cash register totals and actual collections were not adequately identified and accounted for. Collection reports were not effectively utilized to account for daily pool activity and to substantiate amounts deposited to the City's accounts. Bank deposits were made by individuals who also collected money and issued receipts. It was also noted that prenumbered receipts for season tickets and swimming lessons were not adequately controlled or accounted for. Recommendation 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 swinning lessons and season ticket sales should be controlled and accounted for through the use of a stationery control record. Salaried Ehployee Pay Period The pay period for hourly City employees was from the 21st of one month to the 20th of the following month. Salaried employees have a calendar month pay period frau the first day to the last day of a month. However, all payroll 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. M CITY OF KALISPELL KALISPELL, MONI'MA !1 Ii i f • • • ' ill • Ii -• 2f• • -- • •- w wkajgm Recommendation We recommend that the City change the pay day so that it 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 Inventoy The Enterprise Fund inventory for materials and supplies was taken by sewer and water department personnel. The inventory valuation was based on catalog prices or invoices. Consequently, the potential exists to misstate inventory by reporting inventories at current cost rather than historical cost, as required by generally accepted accounting principles. Recom,endation The physical inventory of Enterprise Fund materials and 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 Adjustments During the audit period the City recorded adjustments made to write-off accounts receivable and abandoned property as prior period adjustments or restatements to retained earnings in the Enterprise Fund. Under generally accepted accounting principles, accounts receivable written -off should be recorded as a charge to income (e.g. bad debt expense). Further, fixed assets not yet fully depreciated that are written -off should have been recorded as a loss on disposal of fixed assets, an expense. These prior period adjustments did not, however, result in a material misstatement of the Enterprise Fund financial statements. Recommendation Accounts receivable written -off should be recorded as a 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 accumu- lated depreciation, the difference should be recorded as a loss on disposal of fixed assets, not as a prior period adjustment to retained earnings. -110- CITY OF KALISPELL KALISPELL, MONTANA Reported Budget in Annual Financial Report 'Dere were differences between the budget amounts as reported on the State- ment of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual in the City's annual financial report, and the budget amounts in the actual budget document. For example, the General Fund reported budgeted revenues of $2,305,180 and budgeted operating transfers in of $ -0- in the annual financial report for the fiscal year ended June 30, 1988. In the actual budget document for that same fiscal year, budgeted revenues amounted to $2,331,527 and budgeted operating transfers in amounted to $47,719. As a result, the annual financial report shows that the City planned to end the fiscal year with a deficit fund balance of $(80,149) in the General Fund, when the budget document was actually in balance. Recommendation Budget amounts reported in the budget to actual 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 try the City Council. April 18, 1989 Very -,,,truly yo rs, � s DONALD L. DOOLEY Bureau Chief I -111- • The following is a summary of the prior audit report recur nendations and the actions taken on than by the City. Recommendations Actions Taken Budget Transfers All budget revisions or transfers should be made only within or among the general class or classes of salaries and wages, maintenance and support, and capital outlay, as provided for by Section 7-6-4236, MCA. If a fund's total budget is insufficient, the emergency budget procedures in Title 7, Chapter 6, Part 42, MCA, should be followed to increase the budget. Budget Overdrafts The City's budget should include payments for interest for each bond issue or for each item affecting debt service expenditures. Furthermore, the City should make timely budget transfers as allowed by Section 7-6-4236, MCA, so as to avoid budget overdrafts in expenditure line -items. Implemented Implemented Vacation and Sick Leave Accrual Procedures should be developed with the help of the Implemented computer software vendor to ensure that vacation and sick leave is accrued at proper rates established by Sections 2-18-612 and 2-18418, MCA. Vacation Pgy L= Termination In the future, if any employee terminates for a reason which appears to reflect discredit on himself, the situation should be discussed with the City Attorney and a decision made as to whether or not the employee should be paid for unused vacation leave. Minutes of City Council Meetings The Mayor, Council, and Clerk should ensure that the minutes as approved contain the substance of all matters proposed, discussed or decided. All new pledged securities should be accepted and approved in the minutes, and all pledged securities should be reapproved on a quarterly basis. Approved budget transfers should be listed in the minutes. The presiding officer of any meeting should ensure that the meeting is closed only for those reasons allowed by statute, and the minutes should disclose the fact. -112- Not applicable during audit period Implemented Recommendations Actions Taken S,pe-c ' a Imrovement District (SID) Revolving Fund Loans - Rate of Interest Interest on loans made frcm the S.I.D. Revolving Fund Implemented should be assessed at the rate of interest borne by the bond for payment of which the loan was made. Pledged Securities The City should review the pledged securities and ensure Implemented that deposits not guaranteed or insured according to law are adequately covered in accordance with the provisions of Section 7-6-207, MCA. Fixed Assets To ensure that fixed assets are properly accounted for and safeguarded, the City should implement the following: 1. The City Council should adopt a formal Implemented capitalization policy. 2. A complete physical inventory of all City -owned Partially Implemented assets should be taken annually, and the results of the inventory should be compared with the detailed fixed assets records. 3. All assets, particularly movable items, should be Not Implemented tagged and identified as City property. 4. The inventory records should include the following Partially Implemented information for each item: description of item, date of acquisition, identification number, model/ serial number, department charged with the item, historical cost, method of acquisition (purchase, donation, etc.), physical location, and date and method of retirement. 5. The general ledger fixed assets account balances Partially Implemented should be reconciled with the detailed inventory records. Urban Development Action Grant (UDAG) Loan The UDAG loan receivable and deferred revenue should be Implemented - recorded in the Tax Increment Fund, a Special Revenue Recorded in UDAG Loan Fund. Repayment Fund, a Special Revenue Fund -113- CIj OF KALISPELL KALISPELL, MOI�TPANA INDEPENDENT AUDITOR'S REPORT ON PRIOR AUDIT REPORT RECOMENDATIONS - cont. Recommendations Actions Taken Civil Rights To insure compliance with civil rights requirements, the City should appoint an individual to oversee civil rights compliance. Political Activity The City's policies on political activity should be expanded to include the restrictions imposed by the Latch Act on employees paid with Federal financial assistance. The revised policy should be distributed to all City emplcyees. Revenue Sharing Files The City should document compliance with the Revenue Sharing public participation notice rEquirements by including a copy of each publication affidavit in the Revenue Sharing file. Also, a copy of the City's self evaluation and transition plan regarding compliance with the handicapped discrimination regulations should be placed in the Revenue Sharing file. Loan Receivable The loan made by the City with Federal grant moneys should be recorded as a loan receivable on the City's accounting records. Time Cards Each employee should properly sign their time cards each pay period, and each time card should be signed by the appropriate supervisor. Police Department Citation stationery Control All citations issued to police officers should be accounted for. Under normal conditions, all citations should be issued before a new ticket book is issued. Police Departmeant Parking Ticket Collections All remittances to the Police Department made by check should be stamped "For Deposit Only" immediately upon collection. The daily reconciliations made by the department should be sL=arized and documented on a monthly collection report which would reconcile receipts issued to collections. -114- Implemented Implemented Partially Implemented Implemented Implemented Implemented Partially Implemented CITY OF KALISPELL KALISPELL, MONTANA �s •- .�. .. - L y • Recommendations Actions Taken City Court Collections For improved control, we recommend that the checking Implemented account for collections of fines and forfeitures be closed. These collections should be deposited directly with the City Treasurer on a daily basis. There should be a division of duties relating to issuing receipts, making bank deposits and reconciling the bank account in the remaining checking account. For example, if the City Court Clerk issues the receipts and makes the bank deposits, then the City Judge or sone other individual should reconcile the bank statements. Undeposited cash should be stored in the safe within the vault instead of in a desk in the City Court offices. Swimming Pool Collections In order to improve controls over swimming pool collections, the following should be implemented: 1. All prenumbered documents should be controlled Not Implemented through the use of a stationery control register. The register should include an inventory, by number, of tickets on hand and issued. The register should be maintained by an independent party. 2. Ticket sales for swimming lessons and season tickets Not Implemented should be accounted for by ticket number. 3. Deposits should be made by sarteone other than those Not Implemented involved in the collecting and receipting processes. 4. Differences between the daily locked -in cash Not Implemented register tape and the amount of daily collections should be resolved. 5. Collection reports should be expanded to include Implemented number of swimmers holding season tickets and the number of swinurers not holding season tickets. Furthermore, the collection report should have a detailed record of ticket numbers issued for lessons and season tickets. -115- CITY OF KALISPELL KALISPELL, MONTANA ! • Il ! 9 k#j• ••• • " •• • • Recommendations Actions Taken Parking Meter and Lot Collections To improve control over parking meter and parking lot Not Implemented collections, someone should periodically accompany the collector on his rounds to provide a test sample of collections that could be expected at various times and locations and count the cash after the collector has made his rounds. In addition, we suggest that the City assign someone else the responsibility of depositing, the cash, or periodically rotate the collection assignment to another person. Furthermore, a collection report should be provided to the Treasurer in addition to the duplicate deposit slips. Reconciling City Bank Statements The Deputy Treasurer's duties should be segregated to Implemented the extent possible to provide stronger internal controls. This could be achieved by having another employee reconcile the monthly bank statements. Access to Investments and Undenosited Cash The keys to the individual safes within the vault should be strictly controlled to restrict access to undeposited cash and investment documents. One alternative would be that the safe keys could be assigned to the Clerk/ Treasurer and then the keys could be given to authorized personnel as needed. Restricted Endorsements Remittances made to the City by check or warrant should be stamped "For Deposit Only" immediately upon collection. Enterprise Fund Accounts Receivable Recordkeeping and Reports The Enterprise Fund accounts receivable records and reports should be maintained and summarized in a manner which improves accountability and provides an adequate audit trail. The general ledger accounts receivable balance should be reconciled monthly with the subsidiary records. Collection Procedures Over Sundry Accounts Receivable A formal collection policy and procedure should be established regarding the sundry accounts receivable. An aged accounts receivable listing should be prepared periodically and revievied by management. The sundry accounts receivable should be examined for uncollectible or incorrect accounts and the proper authorization should be obtained. -116- Implemented Implemented Implemented Implemented CITY OF KALISPELL KALISPELL, MOA'IA jA it it � ■ i• .i. i .. i• � Recommendations Actions Taken Budding Department Collections Collections should be stored in the safe within the Implemented vault in the City Treasurer's office. Deposits should be made weekly and reconciled to receipts issued. Collections made by check should be stamped "For Deposit Only" immediately upon collection. Furthermore, the City Clerk's office should control and provide stationery control records over all prenumbered documents. Salaried Employee Pay Period The pay day should be altered so as to coincide with or Not Implemented be after the end of each pay period worked. All of a pay period should be worked prior to issuance of payroll warrants for that period. Enterprise Fund Materials Inventory To strengthen internal controls over the sewer and water materials inventory, the inventory count should be taken by an independent party. In addition, the valuation basis should be consistent and in accordance with generally accepted accounting principles. Gasoline Purchased and Used If the City does not procure the card system for dispensing gasoline as planned by City officials, reconciliations should be made monthly between gasoline used per the gas slips and per the meter readings. Also, on a periodic basis, reconciliations should be made between gasoline purchases and gas used, taking into account gasoline in the tanks at the beginning of the period. Planning Growth of Commuter 1jystem A plan for growth of the City's computer system, including both hardware and software, over a three or five year period should be implemented. Enterprise Fund Reporting Contributions to Enterprise Funds that are externally restricted for capital acquisition or construction should be recorded and reported as contributed capital. Operating grants, entitlements or other such restricted sources of funding should be reported as non-operating revenues. Contributed capital should not be included in retained earnings account balances as reported on the Statement of Revenues, Expenses and Changes in Retained Earnings. -117- Not Implemented Implemented Partially Implemented Implemented CITY OF KALISPELL KALISPELL, MONTANA Recommendations Actions Taken Community DevelgZmnt Block Grant (CDBG) Bank Account The CDBG interest subsidy money in the outside bank Implemented account should be recorded in the City's accounting records and reported in its financial statements.