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Home My WebLink About2008CITY OF CHUBBUCK AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2008 AND 2007 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2008 AND 2007 TABLE OF CONTENTS Title Page Table of Contents Auditor's Reports Independent Auditor's Report Financial Statements Statements of Net Assets Statements of Activities Balance Sheets - Governmental Funds Statements of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Statements of Net Assets - Proprietary Funds Statements of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds Statements of Cash Flows - Proprietary Funds Notes to Financial Statements Required Supplementary Information Budgetary Comparison Schedule - General Fund Notes to Required Supplementary Information Other Supplementary Information Combining Balance Sheet - Nonmajor Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds Budgetary Comparison Schedule - Nonmajor Governmental Funds Compliance Section Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Schedule of Findings and Responses Page 1 2 3 4 5 6 7-8 9 10 11-12 13-25 26 27 28 29 30 31 32 33 34 35 DEATON & COMPANY, CHARTERED Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, ID 83201-5278 (208) 232-5825 Mcirber,f Id, I s.,e;m, of Certified Public Accour,cu Membca0 \, 1, 1, hx, I," of Certified Public Aecouru nu F.tis' -.k . ir. .. INDEPENDENT AUDITOR'S REPORT To the City Council City of Chubbuck We have audited the accompanying financial statements of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of City of Chubbuck as of and for the years ended September 30, 2008 and 2007, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Chubbuck's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of Chubbuck as of September 30, 2008 and 2007, and the respective changes in financial position and cash flows, where applicable, thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated September 11, 2009, on our consideration of the City of Chubbuck's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and important for assessing the results of our audit. The budgetary comparison information on pages 27 through 32, is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Chubbuck's basic financial statements. The combining and individual nonmajorfund -financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The City has not presented the required Management's discussion and analysis that accounting principles generally accepted in the United States has determined is necessary to supplement, although not required to be part of, the basic financial statements. L Pocatello September 11, 2009 CITY OF CHUBBUCK, IDAHO STATEMENTS OF NET ASSETS SEPTEMBER 30, 2008 4 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED Governmental Business -type Development Activities Activities Total Authority ASSETS Current assets Cash and cash equivalent $ 1,568,325 $ 2,408,954 $ 3,977,279 $ 1,195,337 Property taxes receivable 189,630 - 189,630 35,703 Intergovernmental receivables 216,223 - 216,223 - Internal balances (395,301) 395,301 - Other accounts receivable - 563,035 563,035 1,578,877 3,367,290 4,946,167 1,231,040 Noncurrent assets Restricted assets Employee benefit fund 80,246 - 80,246 - Bond reserves - 819,972 819,972 - Water deposits 148,005 148,005 - Advance to joint venture - 188,970 188,970 - Capital assets 8,588,991 11,134,557 19,723,548 - Accumulated depreciation (4,508,997) (4,282,735) (8,791,732) - 4,160,240 8,008,769 12,169,009 - 5,739,117 11,376,059 17,115,176 1,231,040 LIABILITIES Current liabilities Accounts payable 66,635 345,638 412,273 14,287 Accrued payroll 17,780 9,017 26,797 Accrued bond interest - 33,815 33,815 - Current portion compensated absences 30,653 11,434 42,087 - Current portion of bonds payable - 190,000 190,000 - Current portion of long-term debt - 1,162,202 1,162,202 - Current portion capital lease obligation 124,635 - 124,635 - Payable from restricted assets - Employee benefit fund 80,246 - 80,246 - Water deposits - 148,005 148,005 - 319,949 1,900,111 2,220,060 14,287 Noncurrent liabilities Bonds payable - 385,000 385,000 - Note payable - 1,484,599 1,484,599 - Accrued compensated absences 275,880 102,912 378,792 - 275,880 1,972,511 2,248,391 - 595,829 3,872,622 4,468,451 14,287 NET ASSETS Invested in capital assets, net of related debt 3,955,359 3,630,021 7,585,380 - Restricted for bond service - 819,972 819,972 - Unrestricted 1,187,929 3,053,444 4,241,373 1,216,753 $ 5,143,288 $ 7,503,437 $ 12,646,725 $ 1,216,753 4 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED Functions/Programs Primary Government: Governmental activities: General government Law enforcement Fire control Building inspection Street Parks and recreation Health and welfare Other special revenue funds Business -type activities Water Sewer Sanitation CITY OF CHUBBUCK, IDAHO STATEMENTS OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2008 Program Revenues Operating Charges for Grants and Expenses Services Contributions Total Net (Expense) Development Revenue Authority $ 288,868 $ 195,206 $ - $ (93,662) $ 2,299,792 - 72,224 (2,227,568) 1,085,222 183,189 - (902,033) 150,084 - - (150,084) - 769,091 - - (769,091) - 555,030 48,949 - (506,081) - 38,814 - - (38,814) - 134,017 - 43,200 (90,817) - 5,320,918 427,344 115,424 (4,778,150) - 1,435,959 2,105,560 - 669,601 1,537,829 2,094,123 - 556,294 1,551,827 1,130,791 - (421,036) 4,525,615 5,330,474 - 804,859 Total primary government $ 9,846,533 $ 5,757,818 $ 115,424 $ (3,973,291) $ - Component Unit: Chubbuck Development Authority $ 1,811,198$ (1,811,198) Net General revenues General property taxes and sales tax Franchise fees Intergovernmental Leases and rents Interest income Gain on sale of assets Capital contributions Other revenue Transfers in (out) NET CHANGE IN NET ASSETS BEGINNING NET ASSETS PRIOR PERIOD ADJUSTMENT ENDING NET ASSETS General Business -type Development Activities Activities Total Authority $ (4,778,150) $ 804,859 $ (3,973,291) $ (1,811,198) 3,641,216 - 3,641,216 1,588,253 208,853 - 208,853 902,580 - 902,580 27,606 - 27,606 - 55,095 78,510 133,605 35,994 12,040 - 12,040 - 1,319,561 493,445 1,813,006 - 22,752 - 22,752 31,835 (12,687) 12,687 6,177,016 584,642 6,761,658 1,656,082 1,398,866 1,389,501 2,788,367 (155,116) 3,744,422 6,272,582 10,017,004 1,371,869 - (158,646) (158,646) $ 5,143,288 $ 7,503,437 $ 12,646,725 $ 1,216,753 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUSBUCK, IDAHO BALANCE SHEETS GOVERNMENTALFUNDS SEPTEMBER 30,2008 WITH COMPARATIVE TOTALS AS OF SEPTEMBER 30, 2007 Unreserved, reported in General fund 734,822 - 734,822 618,692 Special revenue fund - 689,060 689,060 630,849 734,822 689,060 1,423,882 1,249,541 $ 1,365,364 $ 689,060 $ 1,998,043 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds, net of accumulated depreciation of $4,508,997. 4,079,994 Deferred tax revenue represents amounts that were not available to fund current expenditures and therefore are not reported in the funds 39,927 Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds: Capital lease (124,635) Accrued compensated absences (275,880) Net assets of governmental funds $ 5,143,288 0 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED Other General Governmental Fund Funds Total 2007 ASSETS Cash $ 879,265 $ 689,060 $ 1,568,325 $ 1,462,233 Accounts receivable - - - Property and sales taxes receivable 189,630 189,630 179,159 Intergovernmental receivables 216,223 216,223 180,417 Restricted assets - cash 80,246 80,246 176,234 $ 1,365,364 $ 689,060 $ 2,054,424 $ 1,998,043 LIABILITIES Accounts payable $ 66,635 $ - $ 66,635 $ 71,333 Accrued payroll 17,780 - 17,780 - Employee benefit fund 80,246 - 80,246 176,234 Interfund payable 395,301 - 395,301 451,533 Accrued compensated absences 30,653 - 30,653 26,909 Deferred revenue 39,927 - 39,927 22,493 630,542 - 630,542 748,502 FUND BALANCES Unreserved, reported in General fund 734,822 - 734,822 618,692 Special revenue fund - 689,060 689,060 630,849 734,822 689,060 1,423,882 1,249,541 $ 1,365,364 $ 689,060 $ 1,998,043 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds, net of accumulated depreciation of $4,508,997. 4,079,994 Deferred tax revenue represents amounts that were not available to fund current expenditures and therefore are not reported in the funds 39,927 Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds: Capital lease (124,635) Accrued compensated absences (275,880) Net assets of governmental funds $ 5,143,288 0 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTALFUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2007 EXPENDITURES General government 217,346 Other 217,346 106,488 Law enforcement General Governmental 2,240,447 2,042,398 Fire control Fund Funds Total 2007 REVENUES 147,877 - 147,877 160,533 General property taxes and sales tax $ 3,620,123 $ 3,660 $ 3,623,783 $ 3,611,371 Franchise fees 208,853 - 208,853 195,214 Intergovernmental 902,580 - 902,580 658,629 Parks revenue 48,949 - 48,949 58,136 Licenses, permits and fines 195,206 - 195,206 221,481 Grants 72,224 - 72,224 58,191 Fire protection and prevention 183,189 - 183,189 293,714 Leases and rents 27,606 - 27,606 40,295 Interest income 38,856 16,239 55,095 55,177 Donations - 43,200 43,200 40,540 Other revenues 9,873 12,879 22,752 39,151 Proceeds from capital lease 5,307,459 75,978 5,383,437 5,271,899 EXPENDITURES General government 217,346 217,346 106,488 Law enforcement 2,240,447 2,240,447 2,042,398 Fire control 985,968 - 985,968 819,373 Building inspection 147,877 - 147,877 160,533 Street 727,758 - 727,758 589,043 Parks and recreation 509,437 - 509,437 541,991 Health and welfare , 38,814 - 38,814 24,505 Street guarantee fund - 12,910 12,910 30,785 Court fund 3,507 3,507 58,898 Parks Fund - 117,600 117,600 22,300 Capital outlays 207,704 - 207,704 265,414 5,075,351 134,017 5,209,368 4,661,728 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 232,108 (58,039) 174,069 610,171 OTHER FINANCING SOURCES Proceeds from capital lease 124,610 124,610 62,645 Principal payments on leases (131,565) (131,565) (105,052) Proceeds from sale of assets 19,914 - 19,914 - Transfers in (out) (128,937) 116,250 (12,687) 16,716 (115,978) 116,250 272 (25,691) NET CHANGE IN FUND BALANCES 116,130 58,211 174,341 584,480 BEGINNING FUND BALANCE 618,692 630,849 1,249,541 1,200,919 PRIOR PERIOD ADJUSTMENT - - - $ (535,858) ENDING FUND BALANCE $ 734,822 $ 689,060 $ 1,423,882 $1,249,541 (Continued) 7 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTALFUNDS YEAR ENDED SEPTEMBER 30, 2008 Reconciliation of the change in fund balances - total governmental funds to the change in net assets of governmental activities: Net change in fund balances - total governmental funds Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. Capital asset contributions from other entities are not recognized as a revenue for governmental purposes, but are required to be recognized on the Statement of Activities: Contributed capital assets Capital asset purchases capitalized Depreciation expense The net affect of sales transactions involving capital assets Deferred revenues are not recorded as current period receipts The issuance of long-term debt (e.g., bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. This amount is the net effect of these differences in the treatment of long-term debt and related items Some expenses reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental fund: Accrued compensated absences Change in net assets See accompanying notes to financial statements 2008 Total $ 174,341 1,319,561 207,704 (285,567) (7,874) 17,433 6,955 (33,687) $1,398,866 DEATON & COMPANY, CHARTERED E See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2008 WITH COMPARATIVE TOTALS AS OF SEPTEMBER 30, 2007 Internal Internal Service Service ASSETS Water Sewer Sanitation Total 2007 Funds 2008 Funds 2007 Current assets Cash and cash equivalents $1,035,653 $1,144,301 $ 229,000 $2,408,954 $1,345,255 $ - $ - Accounts receivable 260,943 169,463 132,629 563,035 712,206 - 1,296,596 1,313,764 361,629 2,971,989 2,057,461 Noncurrent assets Restricted assets Bond reserves 312,209 507,763 - 819,972 876,091 Water deposits 148,005 - - 148,005 145,055 - - Interfund receivable - 395,301 - 395,301 451,533 Advance to joint venture - 188,970 - 188,970 - - _ Capital assets 4,576,286 4,012,370 2,286,258 10,874,914 8,248,327 259,643 259,643 Accumulated depreciation _ (1,445,604) _ (2,559,393) (113,200) (4,118,197) (3,940,464) (164,538) (153,473) 3,590,896 2,545,011 2,173,058 8,308,965 5,780,542 95,105 106,170 4,887,492 3,858,775 2,534,687 11,280,954 7,838,003 95,105 106,170 LIABILITIES Current Liabilities Accounts payable 47,737 186,925 101,007 335,669 165,354 9,969 716 Payroll payable 4,512 2,790 1,715 9,017 - Accrued compensated absences 5,717 3,573 2,144 11,434 13,565 - - Current portion of bonds payable 140,000 50,000 - 190,000 180,000 - _ Accrued interest 9,280 8,550 15,985 33,815 23,466 - - Current portion of long-term debt 14,139 - 1,148,063 1,162,202 13,694 - _ Payable from restricted assets - Water deposits 148,005 148,005 145,055 369,390 251,838 1,268,914 1,890,142 541,134 9,969 716 Noncurrent Liabilities Bonds payable 150,000 235,000 - 385,000 575,000 - _ Note payable 313,123 - 1,171,476 1,484,599 327,205 - - Compensated absences 51,456 32,160 19,296 102,912 122,082 514,579 267,160 1,190,772 1,972,511 1,024,287 883,969 518,998 2,459,686 3,862,653 1,565,421 9,969 716 NET ASSETS Invested in capital assets, net of related debt 2,513,420 1,167,977 (67,088) 3,614,309 3,211,964 95,105 106,170 Restricted for bond service 312,209 507,763 - 819,972 876,091 - - Unrestricted 1,177,894 1,664,037 142,089 2,984,020 2,184,527 (9,969) (716) $4,003,523 $3,339,777 $ 75,001 7,418,301 $6,272,582 $ 85,136 $ 105,454 Adjustment to reflect the consolidation of internal service fund activities related to enterprise activities. 85,136 $ 7,503,437 E See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2007 NONOPERATING REVENUE (EXPENSE) Interest income 34,873 43,637 - 78,510 97,452 - Internal Internal (18,629) (93,734) (140,406) (55,207) - - Capital contributions 493,445 Service Service 493,445 Water Sewer Sanitation Total 2007 Funds 2008 Funds 2007 OPERATING REVENUES 496,430 (447,725) 395,531 444,236 29,559 NET INCOME (LOSS) 1,200,847 Service revenue $1,815,560 $1,809,123 $1,130,791 $4,755,474 $4,332,044 $ 57,203 $ 53,209 Revenue used as security 5,180,962 105,454 116,289 PRIOR PERIOD ADJUSTMENT (246,654) for revenue bond: $4,003,523 $3,339,777 $ 75,001 $6,008,482 $ 85,136 $ 105,455 Charges for services 290,000 285,000 575,000 755,000 2,105,560 2,094,123 1,130,791 5,330,474 5,087,044 57,203 53,209 OPERATING EXPENSES Salaries and wages 536,323 302,742 200,606 1,039,671 967,188 - - Personnel benefits 106,460 58,071 33,945 198,476 423,837 - - Repairs and maintenance 236,695 108,515 32,298 377,508 533,117 23,352 18,506 Supplies and tools 70,033 39,363 38,306 147,702 106,958 1,236 7,220 Garbage containers - - 554,813 554,813 - - - Travel, meetings, and training 13,733 7,775 5,607 27,115 16,698 - - Fuels and lubricants 22,509 4,740 74,020 101,269 40,607 31,790 19,691 Telephone and communications 3,021 2,597 2,596 8,214 16,785 59 45 Utilities 83,385 5,140 1,798 90,323 113,123 10,019 7,516 Treatment -Pocatello - 692,468 - 692,468 808,979 - - Sanitation -disposal - - 344,808 344,808 604,649 - - Insurance 176,788 122,704 45,675 345,167 65,095 - - Other purchased services - - - - 38,834 - - Professional services 27,551 10,252 - 37,803 64,930 - - Facilities plan 22,357 26,788 - 49,145 6,677 - - Bad debt 9,409 6,145 3,649 19,203 17,446 - - Depreciation 92,879 125,127 113,200 331,206 217,506 11,065 11,065 1,401,143 1,512,427 1,451,321 4,364,891 4,042,429 77,521 64,043 OPERATING INCOME 704,417 581,696 (320,530) 965,583 1,044,615 (20,318) (10,834) NONOPERATING REVENUE (EXPENSE) Interest income 34,873 43,637 - 78,510 97,452 - Interest expense (28,043) (18,629) (93,734) (140,406) (55,207) - - Capital contributions 493,445 - - 493,445 - - Transfers in (out) (3,845) (472,733) 489,265 12,687 (12,686) 496,430 (447,725) 395,531 444,236 29,559 NET INCOME (LOSS) 1,200,847 133,971 75,001 1,409,819 1,074,174 (20,318) (10,834) BEGINNING NET ASSETS 2,802,676 3,205,806 - 5,180,962 105,454 116,289 PRIOR PERIOD ADJUSTMENT (246,654) ENDING NET ASSETS $4,003,523 $3,339,777 $ 75,001 $6,008,482 $ 85,136 $ 105,455 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds (20,318) Change in net assets of business -type activities $1,389,501 10 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED 00 rrr , rrr rr � d p N N C CI N MM C N 3 LL pp 0 M M N N r r r r r R N L V N n r C N C H O LL O) <O OJ M M N 'O 10 N N (O R (O m M of 10 10 O N O � O m N N f0 00 tp O O) N W V tN0 N M o � � 0 N M 0p O I� OMM a N O O m n n N MMNM V O O O) W 10 10 V 10 M '-MO a0 0 40� t0 N O1 MIS 0OOn W m ' N N 01 GW i s O N l N O N M � f p W N f� O W .- m M O N 0 — W M 0) O) N r W M n N 0 to F N( NMV M MM O O V M 0 "ItZ t0 N N .� N V3 O � Q' N W M t0 O? th r N N M n N V O O W Lu d— K Sa r RN�10 O W O) O a0 a0 m rO V 1� W V W N 0> N W Z N N Q p 2 W H N N it Hi 1 a F 4 U a W m Vl W} wo t W MNOna f0 y W y M M tOM M (O N V M M cy V OI;t fl N O O Of t0 f0 O Ci (O M M (O W M O W O M moa 2 .?, NN a� N(0 m0� �mOiv m M to w v 'O w 'R 7 OM V =LLLL, h 001 v vNONp .a_..iMO M U t z O N r W yi oaxy p Q J W O th M } F N 100 M 1- V O10 OD m MNaO t0 M OJ DJ h W 1� N O 0 W p r mmv lot s aD W NCO 1� v v M 0 M 10 tpVy N zFWn wM> �sV ev 0 f U > m m F U H F cE Q z 3 @ U N U N W J LU ? w W w q F F = N > Z .0. ~ O NUJ a z g H >y W¢ Z a 0 LL x x> T o G c V > Q C N Q d Q m a C7 C) W O Qa`i a9m 'o J a0 g za a.) G s d �> Lu NN da E a,� td ` a �_ a � coL, � 0 z Q N W d i.'o z � �' m � 'a ° y W � � cQi s Oaa—Oa2 O.c"��o Q� ,M, >'y aci oo N a Q D Q O O 'N 0 p U> d` �0 0z.octiF2 0QEmOa0 pd� r '0 ya h M U 3xd_ ULL z O a () xv¢2Lw � tU'O tUoN rUa amO w w 0 p`5 Z c �Z Z 4' Z ULLNZLLN Sy3p M0 Lod> Za -,ma ="=Q z z z ¢ ars¢ x (0LLw w uj U U V U Z m z W 0 Ci /k\ � \k) LL § 0_ §;§2 k}�b� - Lq - - - o w0 - , �IL 02§�� I-!SS 'no ` ca \ ^ - - LL 0 U. , 32220>0 o0Ke§Ono (O>«_§ . 0 Lu0 - ` - - �ALU § e§§ § «Ir IL ( ; � S e§ A . §) § K 2§ _ E §[ {LU .),) §§ ■ b> \{E § § !E ;_ { E $ 2; Z50 0 -F, ! & - ;! § ]) - § ::_ § b x CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 1 OF 13) NOTE 1 - Summary of Significant Accounting Policies The City's financial statements comply with generally accepted accounting principles (GAAP). GAAP includes all relevant Governmental Accounting Standards Board (GASB) pronouncements. In the government -wide financial statements and the fund financial statements for the proprietary funds, Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions issued on or before November 30, 1989, have been applied unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. For enterprise funds, GASB Statement Nos. 20 and 34 provide the City the option of electing to apply FASB pronouncements issued after November 30, 1989. The City has elected not to apply those pronouncements. The accounting and reporting framework and the more significant accounting policies are discussed in subsequent subsections of this Note. A. Reporting Entity The City's financial reporting entity comprises the following: Primary Government In determining the financial reporting entity, the City complies with the provisions of GASB Statement No. 14, "The Financial Reporting Entity". Currently, the City reports one component unit; the Chubbuck Development Authority. Discretely Presented Component Units The component unit reported in the combined financial statements represents the financial balances and transactions of the Chubbuck Development Authority (CDA). CDA is a legally separate entity incorporated under the State of Idaho's urban renewal laws. CDA works with the City to develop blighted areas within the City using tax increment financing to fund projects. These projects could include providing infrastructures, purchasing land and demolishing blighted structures or rehabilitating structures to provide for low income housing, among others. The Board of Commissioners of the Authority consists of 7-9 members, which are appointed by the Mayor. Complete financial statements of the Authority can be obtained from the Treasury, City of Chubbuck, 5160 Yellowstone Ave, Chubbuck, Idaho. B. Basis of Presentation Government -wide Statements The Statement of Net Assets and Statement of Activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business -type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non-exchange revenues. Business -type activities are financed in whole or in part by fees charged to external parties for goods or services. 13 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 2 OF 13) NOTE 1 - Summary of Significant Accounting Policies (Continued) B. Basis of Presentation (Continued) Fund Financial Statements Fund financial statements of the reporting entity are organized into funds, each of which is considered to be separate accounting entities. Each fund is accounted for by providing a separate set of self -balancing accounts that constitute its assets, liabilities, fund equity, revenues, and expenditure/expenses. Funds are organized into three major categories: Governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets, liabilities, revenues or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type. b. Total assets, liabilities, revenues, or expenditures/expenses of the individual governmental fund or enterprise fund are at least 5 percent of the corresponding total for all governmental and enterprise funds combined. Governmental Funds General Fund The General Fund is the general operating fund of the City and is always classified as a major fund. All financial resources, except those required to be accounted for in another fund, are accounted for in the General Fund. Special Revenue Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. Proprietary Funds Enterprise Funds Enterprise funds are used to account for business -like activities provided to the general public. These activities are financed primarily by user charges and the measurement of financial activity focuses on net income measurement similar to the private sector. The reporting entity includes the water, sewer and sanitation funds. Internal Service Funds Internal service funds account for repairs and maintenance service for vehicles and equipment provided to other departments or agencies of the City on a cost reimbursement basis. C. Measurement Focus and Basis of Accounting Measurement focus is a term used to describe "which" transactions are recorded within the various financial statements. Basis of accounting refers to "when"transactions are recorded regardless of the measurement focus applied. 14 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 3 OF 13) NOTE 1 - Summary of Siqnificant Accounting Policies (Continued) C. Measurement Focus and Basis of Accountinq (Continued) Measurement Focus On the government -wide Statement of Net Assets and the Statement of Activities, both governmental and business -like activities are presented using the economic resources measurement focus as defined in item b. below. In the fund financial statements, the 'current financial resources" measurement focus or the "economic resources" measurement focus is used as appropriate: a. All governmental funds utilize a "current financial resources" measurement focus. Only current financial assets and liabilities are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources during a given period. These funds use fund balance as their measure of available spendable financial resources at the end of the period. b. The proprietary fund utilizes an "economic resources" measurement focus. The accounting objectives of this measurement focus are the determination of operating income, changes in net assets (or cost recovery), financial position, and cash flows. All assets and liabilities (whether current or noncurrent) associated with their activities are reported. Proprietary fund equity is classified as net assets. Basis of Accounting In the government -wide Statement of Net Assets and Statement of Activities, both governmental and business- like activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting form exchange and exchange - like transactions are recognized when the exchange takes place. In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under this modified accrual basis of accounting, revenues are recognized when "measurable and available" Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or within sixty days after year end. Expenditures (including capital outlay) are recorded when the related fund liability is incurred, except for general obligation bond principal and interest which are reported when due. All proprietary funds utilize the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. The effect of interfund activity has been eliminated from the government -wide financial statements. D. Budgets and Encumbrances Budgets are adopted on a basis consistent with generally accepted accounting principles. Annual appropriated budgets are adopted for the general and special revenue funds. All annual appropriations lapse at fiscal year end. Each month the City prepares a financial report that reflects the actual and budgeted financial data. A strict purchase order system is used in controlling and maintaining expenditures within budget categories. This data is reviewed by the City Council. The City does not use the encumbrance method of accounting. 15 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 4 OF 13) NOTE 1 - Summary of Significant Accounting Policies (Continued) D. Budgets and Encumbrances (Continued) The General Fund incurred expenditures in excess of appropriations of the following amounts for the year: General government $ 55,356 Fire control 86,485 Health and welfare 5,419 Capital Outlays 46,602 Principal payments on leases 29,814 Transfer out 128,937 The excess expenditures were funded by decreased expenditures in other functional expenditures and proceeds in excess of the amount budgeted. E. Cash and Cash Equivalents For the purpose of the Statement of Net Assets, "cash and cash equivalents" includes all demand, savings accounts, certificates of deposits, and state investing pools of the City. For the purpose of the proprietary fund Statement of Cash Flows, "cash and cash equivalents" include all demand and savings accounts, and certificates of deposit or short-term investments with an original maturity of three months or less. F. Property, Plant, and Equipment The accounting treatment for property, plant and equipment depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government - wide or fund financial statements. Government -wide Statements In the government -wide financial statements, fixed assets are accounted for as capital assets. All fixed assets are valued at historical cost, or estimated historical cost if actual is unavailable, except for donated fixed assets which are recorded at their estimated fair value at the date of donation. Estimated historical cost was used to value the majority of the assets acquired prior to September 30, 2003. Governmental fund infrastructure assets were not capitalized prior to October 1, 2003. Depreciation of all exhaustible fixed assets is recorded as an allocated expense in the Statement of Activities, with accumulated depreciation reflected in the Statement of Net Assets. Depreciation is provided over the assets' estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Buildings 20-50 years Other structures 5-40 years Vehicles 5-30 years Equipment 2-40 years 16 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 5 OF 13) NOTE 1 - Summary of Significant Accounting Policies (Continued) F. Property, Plant, and Equipment (Continued) Fund Financial Statements In the fund financial statements, fixed assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Fixed assets used in proprietary fund operations are accounted for the same as in the government -wide statements. G. Restricted Assets Restricted assets include cash and investments of the general fund that are legally restricted as to their use. The primary restricted assets are related to employee benefits. Restricted assets include cash and investments of the proprietary fund that are legally restricted as to their use. The primary restricted assets are related to utility deposits and bond reserve requirements. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then unrestricted resources as they are needed. H. Long-term Debt The accounting treatment of long-term debt depends on whether the assets are used in governmental fund operations or proprietary fund operations and whether they are reported in the government -wide or fund financial statements. All long-term debt to be repaid from governmental and business -type resources are reported as liabilities in the government -wide statements. The long-term debt consists primarily of notes payable, capital leases, and accrued compensated absences. Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. Debt proceeds are reported as other financing sources. Payment of principle and interest are reported as expenditures. The accounting for proprietary funds is the same in the fund statements as it is in the government -wide statements. I. Comparative data/reclassifications Comparative total data for the prior year has been presented in the fund financial statements in order to provide an understanding of the changes in assets and operations of these funds. Also, certain amounts presented in the prior year data have been reclassified in order to be consistent with the current year's presentation. J. Compensated Absences The City's policies regarding vacation time permit employees to accumulate earned but unused vacation leave. The liability for these unpaid compensated absences is recorded as long-term debt in the government -wide statements. The current portion of this debt is estimated based on historical trends. In the fund financial statements, governmental funds report only the compensated absence liability payable from expendable available financial resources, while the proprietary funds report the liability as it is incurred. 17 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 6 OF 13) NOTE 1 - Summary of Significant Accounting Policies (Continued) K. Equity Classifications Government -wide Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages notes, or other borrowings that are attributable to the acquisition, construction, or improvement of these assets. b. Restricted net assets - Consists of net assets with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." Fund Statements Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved. Unreserved can be further split between designated and undesignated. Proprietary fund equity is classified the same as in the government -wide statements. L. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the City to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE 2 - Legal Compliance - Budgets Approximately six to seven months before the start of a new fiscal year, the City's financial officer submits to the City Council a proposed operating budget for the fiscal year commencing the following October 1. The budget is prepared by fund, function and activity, and includes information on the past year, current year estimates and requested appropriations for the next fiscal year. The City Council holds public hearings and may add to, subtract from or change appropriations, but may not change the form of the budget. Any changes in the budget must be within the revenues and reserves estimated as available to the City or the revenue estimates must be changed by an affirmative vote of a majority of the City Council. After public hearings and before the end of the fiscal year, the City Council formally adopts the budget. Expenditures may not legally exceed budgeted appropriations at the activity level. During the year, several supplementary appropriations may be necessary. in DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 7 OF 13) NOTE 3 - Restricted Assets and Payable from Restricted Assets Assets have been set aside for special items and are restricted for that purpose. Restricted resources are used only after the unrestricted resources are depleted. To date cash has been restricted for the following items: Governmental Health insurance $ 80,246 The Health Insurance Deposit account is restricted for payments of insurance premiums and claims. Proprietary Bond reserves Water deposits Total $ 819,972 148,005 $ 967,977 Bond reserves are amounts the City is legally required to reserve for the repayment of outstanding bonds. Water deposits are collected from individuals who have a history of collection problems. Money on deposit may be used to pay past due balances or is returned when the payer's payment history improves. Restricted water deposits totaled $148,005 at yearend. NOTE 4 - Property Tax Bannock County has the responsibility of assessing and collecting all property taxes. Taxes levied for the year are payable in two installments due December 20th of the current year and June 20th of the following year. The County remits property taxes collected to the City monthly. Property taxes are recognized as revenue when received for monthly reporting purposes. At year end, an accrual is made to recognize property taxes receivable at year end. At year end, $189,630 in outstanding property taxes were expected to be collected and remitted by the County. NOTE 5 - Cash and Cash Equivalents and Investments Primary Government: Deposits at year end consist of the following: Deposits Cash in bank - carrying amount Restricted Unrestricted $ 1,048,223 3,977,279 $ 5,025,502 Bank Deposits - Custodial Credit Risk for deposits is the risk that, in the event of bank failure, the government's deposits may not be returned to it. At year end the carrying amount of the City's deposits (cash and certificates of deposit) was $5,025,502 and the bank balance was $6,856,775. The deposits were covered by federal depository insurance of $250,000 per bank. The City uses various commercial banks to limit their exposure to custodial credit risk, however, the City's deposits in the bank and Local Government Investment Pool (LGIP) at yearend exceeded the federal depository insurance in the amount of $6,374,938. Investments - The City has no investments 19 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 8 OF 13) NOTE 5 - Cash and Cash Equivalents and Investments (Continued) Component Unit - Chubbuck Development Athority (CDA): Deposits at year end consist of the following: Deposits Cash in bank - carrying amount Unrestricted $ 1,195,337 Bank Deposits - Custodial Credit Risk for deposits is the risk that, in the event of bank failure, the government's deposits may not be returned to it. At yearend the carrying amount and bank balance of CDA's deposits (cash and certificates of deposit) was $1,195,337 The deposits were covered by federal depository insurance of $250,000 per bank. CDA's deposits in the bank at yearend exceeded the federal depository insurance in the amount of $945,337. Investments - The CU has no investments NOTE 6 - Concentration of Credit Risk Interest Rate Risk is the risk that changes in interest rates will adversely affect the value of a deposit. The City manages its exposure to declines in fair value by limiting the average maturity of its deposits to one year or less, or redeemable on demand with no penalty. Credit Risk is the risk that an issuer or a counterparty to a deposit will not fulfill its obligations. The City seeks to minimize credit risk through diversification of deposits within the choices allowed under state statutes. Concentration of Credit Risk is the risk of loss attributed to the magnitude of an investment in a single issuer. Exclusive of the State of Idaho LGIP, the City's deposits in any one issuer does not represent a concentration of total credit risk. The funds in the State of Idaho LGIP are in a variety of investments which are required to have an A quality credit rating or better. The City is subject to credit risk on deposits in banks that exceed the FDIC maximum insured balance amount. Additionally, the City grants credit to customers in the City for utility service. This extension of credit potentially subjects the City to credit risk. NOTE 7 - Changes in Fixed Assets A summary of general fixed assets at year end is as follows: DEATON & COMPANY, CHARTERED Beginning Ending Balance Additions Deletions Balance Work in process $ $ 1,251,228 $ - $ 1,251,228 Infrastructures 19,658 - 19,658 Nondepreciable assets - Land 90,866 - - 90,866 Office Equipment 232,894 - - 232,894 Buildings and Improvements 2,642,285 72,788 - 2,715,073 Vehicles and Equipment 4,194,501 183,591 98,820 4,279,272 7,160,546 1,527,265 98,820 8,588,991 Accumulated Depreciation 4,314,375 285,567 90,945 4,508,997 $ 2,846,171 $ 1,241,698 $ 7,875 $ 4,079,994 20 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 9 OF 13) NOTE 7 - Changes in Fixed Assets (Continued) NOTE 8 NOTE 9 A summary of proprietary type fixed assets at year end is as follows: Nondepreciable assets - Land Office Equipment Buildings and Improvements Vehicles and Equipment Accumulated Depreciation Beginning Ending Balance Additions Deletions Balance $ 495,573 $ $ $ 495,573 162,405 162,405 6,569,692 1,244,081 7,813,773 1,020,657 1,642,149 2,662,806 8,248,327 2,886,230 11,134,557 3,940,464 342,271 4,282,735 $ 4,307,863 $ 2,543,959 $ $ 6,851,822 Interfund Receivables. Pavables and Transfers Interfund balances at yearend consisted of the following amounts: Due to Utility Fund Due from General Fund $ 395,301 The balance of $395,301 due to the utility fund from the general fund resulted from two loans. The first loan originated in July 2005, in the amount of $461,949, with annual payments of $56,232, to assist the general fund in a legal payment. The second loan originated in February 2007, in the amount of $102,048, with annual payments of $32,000, was to assist in purchasing fixed assets. Interfund transfers: Transfer out: Water Fund Sewer Fund General Fund Transfer in Sanitation Fund Other funds 3,845 472,733 - 12,687 116,250 $ 489.265 $ 116.250 The balance of $489,265 transfered to the sanitation fund was for the assistance in purchasing capital assets. The balance of $116,250 transfered into other funds was for the assistance in other purchased goods and services. Long-term Debt and Accrued Compensation Accrued Compensated Absences: Governmental Business -type Current portion $ 30,653 $ 11,434 Noncurrent portion 275,880 102,912 $ 306.533 $ 114.346 21 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 10 OF 13) NOTE 9 - Long-term Debt and Accrued Compensation (Continued) Long-term Debt: The City's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business -type activities. Governmental Activities: As of year end, the governmental long-term debt of the City consisted of the following: Capital Lease Obligation: Vehicles capital lease; issue amount $128,808; dated February 20, 2008; interest rate of 4.75% with final maturity dated February 15, 2009. $ 63,376 Backhoe capital lease; issue amount of $97,740; dated November 12, 2003; interest rate of 3.6% with final maturity dated November 12, 2008. 40,540 Police Video System capital lease; issue amount of $60,851; dated September 25, 2006; interest rate of 5.7% with final maturity dated February 15, 2009. 20,719 124,635 Less current portion 124,635 Noncurrent portion $ - Business -type activities: In 2006, the City refinanced a construction line of credit for a note payable with the Department of Environmental Quality with an interest rate of 3.25% and semi-annual payments for 20 years. Current portion Noncurrent portion $ 14,139 313,123 $ 327,262 The City issued two utility bonds. On October 1, 1972, the City issued its Sewer Revenue Bonds, at 5.425% and mature on October 1, 2013. The Water Fund Certificate was issued in May of 1995, with interest rates up to 7.25% and a maturity date of April 1, 2010. Bonds Payable Sewer Revenue Bond $ 285,000 Water Fund Certificates 290,000 575,000 Less current portion 190,000 Noncurrent portion $ 385,000 WA DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 11 OF 13) NOTE 9 - Long-term Debt and Accrued Compensation (Continued) On June 4, 2008, the City issued three notes to purchase assets needed in order to collect sanitation for the City. Two notes were issued at 5.50%. The notes were issued for $936,576 and $541,537 with monthly payments of $17,890 and $6,985 until the maturity date of May 5, 2013 and 2016. The third note had a balance of $920,819 at yearend, However, the note was set up as a line of credit up to $1,375,000. The City had a balance of $454,181 available at yearend. The remaining balance was used in the subsequent year and a fixed 20 year note, at a rate of 5.5%, was issued. Due to the refinancing of the third note and the additions in the subsequent year, the balance of $920,819 at yearend was considered short term. Notes Payable: Balance Note 1 $ 877,721 Note 2 520,998 Note 3 920,819 2009 2,319,538 Less current portion 1,148,063 Noncurrent portion $ 1,171,475 Annual Debt Service Requirements Year Ending Governmental Activities Business -type Activities September 30 Principal Interest Principal Interest 2009 $ 124,635 $ 4,458 $ 1,352,202 $ 125,515 2010 - - 459,666 90,549 2011 - - 323,685 63,630 2012 - - 343,461 45,405 2013 - - 286,671 26,600 2014-2018 - - 292,977 50,215 2019-2023 - - 104,179 19,137 2024-2026 - - 58,960 2,925 $ 124,635 $ 4,458 $ 3,221,801 $ 423,976 Changes in long-term liabilities Long-term liability activity for the year ended, was as follows: Beginning Beginning Ending Due within Balance Additions Reductions Balance one year Governmental activities Capital leases $ 131,590 $ 124,610 $ 131,565 $ 124,635 $ 124,635 Compensated absences 269,102 64,340 26,909 306,533 30,653 $ 400,692 $ 188,950 $ 158,474 $ 431,168 $ 155,288 23 DEATON & COMPANY, CHARTERED Beginning Ending Due within Balance Additions Reductions Balance one year Business -type activities Bonds payable $ 755,000 $ - $ 180,000 $ 575,000 $ 190,000 Notes payable 354,159 2,398,932 106,290 2,646,801 1,162,202 Compensated absences 135,647 - 21,301 114,346 11,434 $1,244,806 $ 2,398,932 $ 307,591 $ 3,336,147 $ 1,363,636 23 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 12 OF 13) NOTE 9 - Long-term Debt and Accrued Compensation (Continued) In July 2008, the City was authorized, on a line -of -credit, to borrowed $1,400,000 from the Department of Environmental Quality at 3% to be paid in biannual installments over 20 years. The note is used to finance the designing and constructing of the Chubbuck Northwest Sewer Interceptor. It may also be used to finance services to provide environmental field studies, public involvement, and agency permit applications. If funds allow, it may include the purchase of needed right-of-way for construction of the sewer system. At yearend the balance available to the City was $1,400,000. NOTE 10 - Pension Disclosures The Public Employee Retirement System of Idaho (PERSI), a cost sharing multi-employer public retirement system, was created by the Idaho State Legislature. It is a defined benefit plan requiring that both the member and the employer to contribute. The plan provides benefits based on members' years of service, age, and compensation. In addition, benefits are provided for disability, death, and survivors of eligible members or beneficiaries. The authority to establish and amend benefit provisions is established in Idaho Code. Designed as a mandatory system for eligible state and school district employees, the legislation provided for other political subdivisions to participate by contractual agreement with PERS]. Financial reports for the plan are available from PERSI upon request. After 5 years of credited service, members become fully vested in retirement benefits earned to date. Members are eligible for retirement benefits upon attainment of the ages specified for their employment classification. For each month of credited service, the annual service retirement allowance is 2.0% (2.3% police/firefighter) of the average monthly salary for the highest consecutive 42 months. The contribution requirements of the City of Chubbuck and its employees are established and may be amended by the PERSI Board of Trustees. For the year ended September 30, 2006 the required contribution rate as a percentage of covered payroll for members was 6.23% for general members and 7.65% for police/firefighters. The employer rate as a percentage of covered payroll was 10.39% for general members and 10.73% for police/firefighter members. The City of Chubbuck contributions required and paid were $360,332, $329,628, and $302,324, for the three years ended September 30, 2008, 2007, and 2006, respectively. NOTE 11 - Risk Management The City is exposed to various risks of loss. The City has obtained commercial insurance to reduce the risk of substantial losses. NOTE 12 - Subsequent Events Subsequent to yearend, the City realized that the fees for sanitation services were not sufficient for the expenditures acquired. The City increased the rates for sanitation by 5% and has announced a public hearing for September 29, 2009 to increase sanitation rates another 15%. NOTE 13 - Other Postemplovment Benefits The City does not participate in other postemployment benefits (OPEB). The City complies with the Consolidated Omnibus Budget Reconciliation Act (COBRA). Post employee benefits do not include COBRA. 24 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 13 OF 13) NOTE 14 - Correction of an Error and Prior Period Adjustments During the year the City found that in the prior year the internal revenue fund was not broken out of the enterprise funds. Due to the nature of the internal service fund the government -wide financials were not affected. However, the proprietary funds show a prior period adjustment of $105,454 for the fund balance of the internal service fund. The City also found that in the prior years it had not recognized estimates for allowance for doubtful accounts. The total unrecognized bad debts created a prior period adjustment to decrease the proprietary fund by $141,200 in the Statement of Revenue, Expenses, and Change in Net Assets - Proprietary Funds for 2007 and $158,646 in the Business -Type Activities of 2008 in the government -wide Statement of Activities. During the year the City reclassified the Chubbuck Development Authority, a component unit, from a blended component unit, which was being reported as a major fund in the general government funds, to a discretely presented component unit. The adjustment decreased the total governmental funds in 2007 in the amount of $535,858. The adjustment also decreases the governmental activities in the government -wide financial in the amount of $1,371,869. NOTE 15 - Investment in Joint Venture - Chubbuck Impact Area Wastewater Collection Authority Effective September 1, 2007, Bannock County, Idaho, City of Pocatello, Idaho and the City of Chubbuck, Idaho entered into a Joint Powers Agreement creating the Chubbuck Impact Area Wastewater Collection Authority for the purpose of financing, designing, acquiring, constructing, managing, and operating a sewage collection facility along with transmission mains and lift stations to serve those who own and operate a collection system under Idaho Law for the residence of the City of Chubbuck, Idaho. The Authority is a public entity of the State of Idaho, therefore, the Authority's income is exempt form Federal and Idaho income taxes. A six -member board governs the Chubbuck Impact Area Wastewater Collection Authority with two members representing Bannock County, two members representing the City of Pocatello and two members representing the City of Chubbuck. The Authority had no material operations during the year. Upon termination of this Agreement, title to all buildings, improvements, facilities, equipment and personal property held by the Authority shall vest in the City of Chubbuck. Audited financial statements of the Chubbuck Impact Area Wastewater Collection Authority were not required, because there were no material transactions during the 2008 fiscal year. 25 DEATON & COMPANY, CHARTERED REQUIRED SUPPLEMENTARY INFORMATION DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO BUDGETARY COMPARISON SCHEDULE GENERALFUND YEAR ENDED SEPTEMBER 30, 2008 27 DEATON & COMPANY, CHARTERED Budgeted Amounts Variance Actual Positive Original Final Amounts (Negative) Resources General property taxes and sales tax $ 3,385,058 $ 3,385,058 $ 3,620,123 $ 235,065 Franchise fees 204,000 204,000 208,853 4,853 Intergovernmental 1,025,000 1,025,000 902,580 (122,420) Parks revenue 49,450 49,450 48,949 (501) Licenses, permits and fines 269,500 269,500 195,206 (74,294) Grants - - 72,224 72,224 Fire protection and prevention 171,500 171,500 183,189 11,689 Leases and rents 28,200 28,200 27,606 (594) Interest income 14,800 14,800 38,856 24,056 Other resources 12,000 12,000 9,873 (2,127) Amounts available for appropriations 5,159,508 5,159,508 5,307,459 147,951 Charges to appropriations General government 161,990 161,990 217,346 (55,356) Law enforcement 2,272,861 2,272,861 2,240,447 32,414 Fire control 899,483 899,483 985,968 (86,485) Building inspection 155,266 155,266 147,877 7,389 Street 741,160 741,160 727,758 13,402 Parks and recreation 657,043 657,043 509,437 147,606 Health and welfare 33,395 33,395 38,814 (5,419) Capital Outlays 161,102 161,102 207,704 (46,602) Total charges to appropriations 5,082,300 5,082,300 5,075,351 6,949 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 77,208 77,208 232,108 154,900 Other Financing Sources Proceeds from capital leases - - 124,610 124,610 Principal payments on leases (101,751) (101,751) (131,565) (29,814) Proceeds from sale of assets 19,914 19,914 Transfers in (out) (128,937) (128,937) (101,751) (101,751) (115,978) (14,227) NET CHANGE IN FUND BALANCE (24,543) (24,543) 116,130 140,673 BEGINNING FUND BALANCE 24,543 24,543 618,692 594,149 ENDING FUND BALANCE $ - $ - $ 734,822 $ 734,822 27 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2008 NOTE 1 - EXPENDITURES IN EXCESS OF BUDGET GENERALFUND General government The City had expenditures in excess of budget of $55,356 due to an increase of self insured employee benefit expenditures. These expenditures were paid using excess revenues over budget. Fire control The City had expenditures in excess of budget of $86,485 due to an increase in fire control expenditures. Increased health insurance, supplies, training and fuel expenditures were not accounted for in the budget. These expenditures were paid using grant revenues and excess revenues over budget. Health and Welfare The City did not budget a sufficient amount for the "Economic development strategy" and "Senior Citizen" program expenditures within the health and welfare expenditures. Expenditures exceeded budget by $5,419. These expenditures were paid using under budgeted expenditures in other departments. Capital Outlays The City did not budget a sufficient amount for capital outlays purchased. Capital outlays exceeded the budget by $46,602. These expenditures were paid using capital leases provided by a commercial bank. Other Financing Sources The City did not budget a sufficient amount for other financing sources. These disbursements included increased lease principal payments in the amount of $29,814 and transfers to other funds in the amount of $128,937. These disbursements were paid using under budgeted revenues. 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O W Q Z_ LL z a G N Z N y W o o w W .s.. W Z W m U Z Z wasoO n.p U? xF F ( ❑ w w O z m w M CITY OF CHUBBUCK, IDAHO BUDGETARY COMPARISON SCHEDULE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2008 Resources General property taxes and sales tax Interest income Donations Other resources Amounts available for appropriations Charges to appropriations Street guarantee fund General LID fund Juvenile referral fund Court fund Road projects fund Parks fund Total charges to appropriations EXCESS OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES Transfers in (out) NET CHANGE IN FUND BALANCE BEGINNING FUND BALANCE ENDING FUND BALANCE Budgeted Amounts Original $ 15,000 11,900 80,000 40,000 146,900 Final $ 15,000 11,900 80,000 40,000 146,900 Actual Amounts $ 3,660 16,239 43,200 12,879 75,978 Variance Positive (Negative) $ (11,340) 4,339 (36,800) (27,121) (70,922) 15,500 15,500 12,910 2,590 3,600 3,600 - 3,600 500 500 - 500 42,100 42,100 3,507 38,593 1,200 1,200 - 1,200 84,000 84,000 117,600 (33,600) 146,900 1T6-,90 0 134,017 12,883 (58,039) (58,039) 116,250 116,250 58,211 58,211 630,849 630,849 $ $ $ 689,060 $ 689,060 32 See accompanying notes to financial statements DEATON & CONIYANY, CHARTERED COMPLIANCE SECTION DEATON & COMPANY, CHARTERED Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, ID 83201-5278 (208) 232-5825 Member of Idaho S.1m, of Cenified Public Ac ulnl, Membea of American Inalimm of Cenif ied Public A¢ountant, REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the City Council City of Chubbuck We have audited the financial statements of the governmental activities, the business -type activities, the aggregate discretely presented componenet units, each major fund, and the aggregate remaining fund information of City of Chubbuck as of and for the years ended September 30, 2008 and 2007, which collectively comprise the City of Chubbuck's basic financial statements and have issued our report thereon dated September 11, 2009. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City of Chubbuck's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Chubbuck's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Chubbuck's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify ail deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City of Chubbuck's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City of Chubbuck's financial statements that Is more than inconsequential will not be prevented or detected by the City of Chubbuck's internal control. We consider the deficiencies (2008-1 and 2008-2) described in the accompanying schedule of findings and responses to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City of Chubbuck's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none of the significant deficiencies described above is a material weakness. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Chubbuck's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended for the information and use of management, City Council, and federal awarding agencies. However, this report is a matter of public record and its distribution is not limited. Pocatello, Idaho September 11, 2009 CITY OF CHUBBUCK, IDAHO SCHEDULE OF FINDINGS AND RESPONSES FOR THE YEAR ENDED SEPTEMBER 30, 2008 Findings Of Significant Deficiency And Responses 2008-1 The City's controls over recognizing asset additions and deletions did not provide all additions of assets in the governmental and proprietary funds. The City's policy requires all goods received with a useful life of more than one year and a historical cost of $5,000 or greater should be capitalized. We recommend that the City review its policy for reporting and capitalizing fixed assets. Management Response Management believes the above significant deficiency is a weakness in internal controls and has agreed to review their policy to insure the recording and reporting of all capital assets. 2008-2 The City's controls over recording and reporting all liabilities did not provide a proper classification or reporting of monies received. Monies received through note agreements or capital leases within business type entities are required to be reported on the balance sheet as notes and/or lease payables. Monies received in the proprietary funds as note payables should not be reported as revenues. We recommend that the City review its policy for reporting all notes payable, and lease payables as a liability. Management Response Management believes the above significant deficiency is a weakness in internal controls and has agreed to review their policy to insure the recording and reporting of all liabilities. 35 DEATON & COMPANY, CHARTERED