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HomeMy WebLinkAbout2010CITY OF CHUBBUCK, IDAHO AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2010 AND 2009 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2010 AND 2009 TABLE OF CONTENTS Page Title Page 1 Table of Contents 2 Auditor's Reports Independent Auditor's Report 3 Financial Statements Statements of Net Assets q Statements of Activities 5 Balance Sheets - Governmental Funds 6 Statements of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 7-8 Statements of Net Assets - Proprietary Funds 9 Statements of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds 10 Statements of Cash Flows- Proprietary Funds 11-12 Notes to Financial Statements 13-26 Required Supplementary Information 27 Budgetary Comparison Schedule - General Fund 28 Notes to Required Supplementary Information 29 Other Supplementary Information 30 Combining Balance Sheet - Nonmajor Governmental Funds 31 Statement of Revenues, Expenditures, and Changes in Fund Balances - NonmajorGovemmental Funds 32 Budgetary Comparison Schedule - Nonmajor Governmental Funds 33 Compliance and Single Audit Section 34 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 35 Independent Auditor's Report on Compliance with Requirements that Could have a Direct and Material Effect on each Major Program and on Internal control over compliance in Accordance with OMB Circular A-133 36 Schedule of Expenditures of Federal Awards 37 Schedule of Findings and Questioned Costs 38-39 Summary Schedule of Prior Audit Findings 40 DEATON & COMPANY, CHARTERED Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, ID 83201-52' - (208) 232-5825 Members of Idaho Society of Cenitietl Public Accouman¢ Members ofAmerican Insiiwie of Certifetl Public Accouman�s 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, 2010 and 2009, 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, 2010 and 2009, 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 June 22, 2011, 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 28 through 33, 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 financial statements as a whole. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A- 133, Audits of States, Local Governments, and Non -Profit Organizations, and is also not a required part of the financial statements. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements 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. !nm Pocatello, Idaho June 22, 2011 CITY OF CHUBBUCK, IDAHO STATEMENTS OF NET ASSETS SEPTEMBER 30, 2010 ASSETS Current assets Cash and cash equivalent Property taxes receivable Intergovernmental receivables Internal balances Other accounts receivable Noncurrent assets Restricted assets Bond reserves Water deposits Advance to joint venture Capital assets Accumulated depreciation LIABILITIES Current liabilities Accounts payable Accrued payroll Accrued bond interest Current portion compensated absences Current portion of bonds payable Current portion of long-term debt Current portion capital lease obligation Payable from restricted assets - Water deposits Noncurrent liabilities Bonds payable Note payable Accrued compensated absences Advance payable NET ASSETS Invested in capital assets, net of related debt Restricted for bond service Unrestricted Governmental Business -type Development CIAWWC Activities Activities Total Authority Authority $ 2,561,374 $ 3,792,655 $ 6,354,029 $ 3,039,331 $ 256,991 - 256,991 99,375 11,542,722 12,114,938 214,003 - 214,003 _ (661,776) 661,776 - - 612,747 612,747 25,000 2,370,592 5,067,178 7,437,770 3,163,706 - 132,650 132,650 - 152,109 152,109 - - 12,114,939 12,114,939 - _ 8,912,131 11,520,710 20,432,841 - 12,114,938 (3,799,051) (4,971,904) (8,770,955) - _ 5,113,080 18,948,504 24,061,584 12,114,938 7,483,672 24,015,682 31,499,354 3,163,706 12,114,938 62,586 2,053,313 2,115,899 83,905 - 149,335 65,559 214,894 - - - 63,036 63,036 - - 66,715 18,557 85,272 - _ - 60,000 60,000 - _ - 321,159 321,159 - _ 43,139 - 43,139 - _ - 152,109 152,109 321,775 2,733,733 3,055,508 83,905 65,000 65,000 - 11,136,636 11,136,636 266,864 74,222 341,086 _ - - - 12,114,938 266,864 11,275,858 11,542,722 12,114,938 588,639 14,009,591 14,598,230 83,905 12,114,938 5,069,941 3,876,095 8,946,036 - 132,650 132,650 - 1,825,092 5,997,346 7,822,438 3,079,801 $ 6,895,033 $ 10,006,091 $ 16,901,124 $ 3,079,801 $ 4 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2010 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 Total primary government Component Unit: Chubbuck Development Authority CIAWWC Authority Program Revenues Total Operating Net Charges for Grants and (Expense) Development CIAWWC Expenses Services Contributions Revenue Authority Authority $ 297,342 $ 121,602 $ - $ (175,740) $ - $ - 2,512,720 - 158,025 (2,354,695) - - 1,172,846 195,564 - (977,282) - - 159,482 - - (159,482) - - 771,777 - - (771,777) - - 625,569 59,186 - (566,383) - - 58,154 - - (58,154) - - 30,419 - 26,240 _ (4,179) - - 5,628,309 376,352 184,265 (5,067,692) - - 1,438,541 2,193,212 - 754,671 _ _ 1,821,036 2,322,331 - 501,295 _ _ 1,192,962 1,602,525 - 409,563 _ _ 4,452,539 6,118,068 - 1,665,529 - _ $10,080,848 $ 6,494,420 $ 184,265 $ (3,402,163) $ - $ - $ 215,230 4,176,298 - $ (215,230) $ - $ 215,230 Franchise fees 227,744 $ (215,230) $ 5 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED General Business -type Development CIAWWC Activities Activities Total Authority Authority Net $ (5,067,692) $ 1,665,529 $ (3,402,163) $ (215,230) $ General revenues General property taxes and sales tax 4,176,298 - 4,176,298 1,688,770 Franchise fees 227,744 - 227,744 _ _ Intergovernmental 817,906 - 817,906 Leases and rents 19,491 - 19,491 _ Interest income 19,292 22,844 42,136 13,742 - Capital contributions 11,073 - 11,073 - Other revenue 34,088 34,088 Transfers in (out) _ _ _ - - 5,305,892 22,844 5,328,736 1,702,512 - NET CHANGE IN NET ASSETS 238,200 1,688,373 1,926,573 1,487,282 - BEGINNING NET ASSETS 6,587,781 8,338,932 14,926,713 1,592,519 - PRIOR PERIOD ADJUSTMENT 69,052 (21,214) 47,838 - ENDING NET ASSETS $ 6,895,033 $10,006,091 $16,901,124 $ 3,079,801 $ 5 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO BALANCE SHEETS GOVERNMENTALFUNDS SEPTEMBER 30, 2010 WITH COMPARATIVE TOTALS AS OF SEPTEMBER 30, 2009 ASSETS Cash Property and sales taxes receivable Intergovernmental receivables LIABILITIES Accounts payable Accrued payroll Employee benefit fund Interfund payable Accrued compensated absences Deferred revenue FUND BALANCES Unreserved, reported in: General fund Special revenue fund Other General Governmental Fund Funds Total 2nna $ 1,948,342 $ 613,032 $ 2,561,374 $ 1,888,237 256,991 - 256,991 204,542 214,003 - 214,003 207,438 $ 2,419,336 $ 613,032 $ 3,032,368 $ 2,300,217 $ 62,586 $ $ 62,586 $ 57,933 149,335 149,335 33,149 - - 107,519 661,776 661,776 339,069 66,715 66,715 76,338 144,161 144,161 101,572 1,084,573 1,084,573 715,580 1,334,763 - 1,334,763 962,458 - 613,032 613,032 622,179 1,334,763 613,032 1,947,795 1,584,637 $ 2,419,336 $ 613,032 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 $3,799,051. 5,113,080 Deferred tax revenue represents amounts that were not available to fund current expenditures and therefore are not reported in the funds 144,161 Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds: Capital lease (43,139) Accrued compensated absences (266,864) Net assets of governmental funds $ 6,895,033 0 See accompanying notes to financial statements $ 2,300,217 DEATON 3 COMPANY, CHAR"rERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTALFUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2010 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2009 EXPENDITURES General government 301,208 Other 301,208 169,192 Law enforcement General Governmental 2,409,109 2,439,011 Fire control Fund Funds Total 2009 REVENUES 157,675 - 157,675 152,361 General property taxes and sales tax $ 4,133,709 $ - $ 4,133,709 $ 3,911,681 Franchise fees 227,744 - 227,744 222,369 Intergovernmental 817,906 - 817,906 815,486 Parks revenue 2,499 - 2,499 3,379 Licenses, permits and fines 121,602 - 121,602 135,984 Grants 158,025 - 158,025 87,840 Fire protection and prevention 195,564 - 195,564 164,847 Leases and rents 19,491 - 19,491 34,660 Interest income 15,193 4,099 19,292 26,714 Donations 12,390 13,850 26,240 33,713 Donation of infrastructures 11,073 - 11,073 - Charges for services 56,687 - 56,687 48,438 Other revenues 30,765 3,323 34,088 39,323 Interest expense 5,802,648 21,272 5,823,920 5,524,434 EXPENDITURES General government 301,208 - 301,208 169,192 Law enforcement 2,409,109 - 2,409,109 2,439,011 Fire control 1,024,047 - 1,024,047 971,009 Building inspection 157,675 - 157,675 152,361 Street 732,617 - 732,617 758,550 Parks and recreation 578,779 - 578,779 527,601 Health and welfare 58,154 - 58,154 30,850 Street guarantee fund - - - 3,734 Court fund - - 11,699 Parks Fund - 30,419 30,419 116,440 Capital outlays 177,694 - 177,694 131,803 5,439,283 30,419 5,469,702 5,312,250 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 363,365 (9,147) 354,218 212,184 OTHER FINANCING SOURCES Proceeds from capital lease 85,772 85,772 58,491 Principal payments on leases (72,089) (72,089) (153,670) Interest expense (4,743) (4,743) - Proceeds from sale of assets 15,750 Transfers in (out) - - 28,000 8,940 8,940 (51,429) NET CHANGE IN FUND BALANCES 372,305 (9,147) 363,158 160,755 BEGINNING FUND BALANCE 962,458 622,179 1,584,637 1,423,882 ENDING FUND BALANCE $ 1,334,763 $ 613,032 $ 1,947,795 $ 1,584,637 (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 FOR THE YEAR ENDED SEPTEMBER 30, 2010 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 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 2010 Total 363,158 11,073 166,621 (370,048) 42,589 (13,683) 38,490 $ 238,200 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, 2010 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED SEPTEMBER 30, 2009 OPERATING EXPENSES Salaries and wages Personnel benefits Repairs and maintenance Supplies and tools Garbage containers Travel, meetings, and training Fuels and lubricants Telephone and communications Utilities Treatment - Pocatello Insurance Other purchased services Professional services Facilities plan Bad debt Depreciation OPERATING INCOME NONOPERATING REVENUE (EXPENSE) Interest income Interest expense Capital contributions Loss from asset disposal Transfers in (out) NET INCOME (LOSS) BEGINNING NET ASSETS PRIOR PERIOD ADJUSTMENT ENDING NET ASSETS 570,171 364,130 220,498 1,154,799 1,259,592 Internal Internal 241,567 175,055 129,789 546,411 533,127 Service Service 177,535 Water Sewer Sanitation Total 2009 Funds 2010 Funds 2009 OPERATING REVENUES 21,058 23,161 69,955 90,139 26,665 2,133 Service revenue $2,193,212 $2,197,331 $1,540,753 $5,931,296 $5,177,691 $ 61,772 $ 65,683 Revenue used as security - 1,802 10,959 9,256 774 - for revenue bond: 5,409 50,150 71,671 47,953 5,088 21,518 Charges for services - 125,000 4,103 125,000 385,000 66 146 130,900 2,193,212 2,322,331 1,540,753 6,056,296 5,562,691 61,772 65,683 OPERATING EXPENSES Salaries and wages Personnel benefits Repairs and maintenance Supplies and tools Garbage containers Travel, meetings, and training Fuels and lubricants Telephone and communications Utilities Treatment - Pocatello Insurance Other purchased services Professional services Facilities plan Bad debt Depreciation OPERATING INCOME NONOPERATING REVENUE (EXPENSE) Interest income Interest expense Capital contributions Loss from asset disposal Transfers in (out) NET INCOME (LOSS) BEGINNING NET ASSETS PRIOR PERIOD ADJUSTMENT ENDING NET ASSETS 570,171 364,130 220,498 1,154,799 1,259,592 - - 241,567 175,055 129,789 546,411 533,127 - - 177,535 149,344 306,759 633,638 1,169,862 19,958 15,121 25,736 21,058 23,161 69,955 90,139 26,665 2,133 - - 7,314 7,314 - - - 9,157 - 1,802 10,959 9,256 774 - 16,112 5,409 50,150 71,671 47,953 5,088 21,518 4,798 4,105 4,103 13,006 8,952 66 146 130,900 5,723 3,082 139,705 130,158 12,555 18,057 - 852,719 - 852,719 804,357 - - 34,744 100,752 26,783 162,279 88,177 - - 8,219 - 5,353 13,572 48,293 - 48 53,563 10,035 - 63,598 50,706 - - 8,197 - - 8,197 14,930 - - 4,041 - 33,971 38,012 20,284 - - 130,687 121,906 175,373 427,966 413,921 11,065 11,065 1,415,427 1,810,236 988,138 4,213,801 4,689,707 76,171 68,088 777,785 512,095 552,615 1,842,495 872,984 (14,399) (2,405) 12,522 6,778 3,544 22,844 58,039 - - (19,644) (10,800) (128,653) (159,097) (181,164) - - - - - - 116,041 - - (3,470) - - (3,470) - - - - - (28,000) (10,592) (4,022) (125,109) (139,723) (35,084) 767,193 508,073 427,506 1,702,772 837,900 (14,399) (2,405) 4,317,390 3,757,891 180,920 7,418,301 82,731 85,136 (21,215) $5,084,583 $4,244,749 $ 608,426 Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds (14,399) Change in net assets of business -type activities $1,688,373 10 $8,256,201 $ 68,332 $ 82,731 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED M 00 w N G M o C N C N _ � LL G N N i i i i i i n n u c n n C ._ N r r c N 7 LL N O N i� ' a O N V M W W m M M N N O M N W 0)rn n O D V M M O O M V M W M- o N W(O NMO—N W V M M 7M 0 O MRM NNW� �w N M O O N Ol OM(O f� (0N 0 O�Ot`7 M V V N M N O W mM OM NN n nrl p O V V O N nNMact (O N_V ni0 0p ODW N N M (O is MM(ON N M 100 V NCo N NN O M N co W O O i0 i0 ONS N N NN n 00O NN N O M p m H --M sN co C COt0 .-N m " V M n Z N ) O0 n t0 M M LL F } o a d' N W C NO(O ' NI�N .� V V W O m N F N N V V N N M r Ono (MO V N O LL, W Q N V �- a) W O M (+l co Co d 0 0 2 a W❑ C LQS �Mv v N (fl m O W vs Yana U' N> n r O n tp (a Mm N OOn N ODM (a .- N N} ` N V n M m M r ' n O O N n n n N W M> W N O)ON V OO �N N 06 0 n nn N N M Q7 Q O 2 3 NONfV W M UI cO 00f� N wo V r N 7 J W F y O O n N 0 N n n N N O M M SLL O N M�Mn �NMO LL N W 0 W r n O U a N LL Y a V N N m N Q ONON ' O N N U NN c f0 V N V Vn i0L N M (O NN V M V Z F W n 10 00 v ._. m .- M M N of W 2 > N 200: v� W LL a a Fa- a N w o U > r V y N N ¢ >_ W W 2m D ¢ F n F u? 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V N fn W F C OO CN MOZf- CO V 0� " tin w O —w W O> m cv in a N m of W O o w < in E» f» —mwm �� Op Y a Q Z y W>~ m3Nwww m o o CD CO N v C11 m v co V -j w~ z a m O m N 2 LL 0 0: LL p m Ox60O} LLD W LL VJm E» F» V Q y Z }O 0 F_ LL} Q O _U O m r N N VpWOa> Z�w0Ir W C > Z d V W o uj QQN~ I FQ a N 2 O U N w W 3 > > 0� F w ¢ F oz a ~ Z U Z QQ' Z W N w e N Q p, �-O d me m 9 K W m o a O IL o 4,2 N N m W O w LLa w> > N >'aE W O z Z Oa O w IL Z J Q N U Q U U p Q Q F x F V U O c N U O w LLJ wz IL w o a z CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 1 OF 14) NOTE 1 - Summary of Significant Accountinq 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 two component unit; the Chubbuck Development Authority and the Chubbuck Impact Area Waste Water Authority. Discretely Presented Component Units Chubbuck Development Authority (CDA) One 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 83202. Chubbuck Impact Area Waste Water Collection Authority (CIAWWCA) 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 City of Chubbuck provides loans to the Authority with no interest or maturity date. Outstanding balance of loans to the authority at yearend totaled $12,114,939. 13 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 2 OF 14) NOTE 1 - Summary of Significant Accounting Policies (Continued) A. Reporting Entity (Continued) 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. Complete financial statements of the Authority can be obtained from the Treasury, City of Chubbuck, 5160 Yellowstone Ave, Chubbuck, Idaho 83202. 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. 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. 14 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 3 OF 14) NOTE 1 - Summary of Significant Accounting Policies (Continued) B. Basis of Presentation (Continued) Proorietary 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. 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. 15 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 4 OF 14) NOTE 1 - Summary of Significant Accounting Policies (Continued) C. Measurement Focus and Basis of Accounting (Continued) 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. The excess expenditures were funded by donated capital outlays, 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. 16 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 5 OF 14) NOTE 1 - Summary of Significant Accounting Policies (Continued) F. Property, Plant, and Equipment (Continued) 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 Other structures Vehicles Equipment Fund Financial Statements 20-50 years 5-40 years 5-30 years 2-40 years 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 principal 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. 17 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 6 OF 14) NOTE 1 - Summary of Significant Accounting Policies (Continued) 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. 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. 18 DEATON & COMPANY, CHARTERED CITY OF CHUBSUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 7 OF 14) NOTE 2 - Legal Compliance - Budgets (Continued) 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. NOTE 3 - Restricted Assets and Payable from Restricted Assets NOTE 4 NOTE 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: Proprietary Bond reserves Water deposits Total $ 132,650 152,109 $ 284,759 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 $152,109 at yearend. 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 accrual is made to recognize property taxes receivable at year end. property taxes were expected to be collected and remitted by the County. Cash and Cash Equivalents and Investments Primary Government: Deposits at year end consist of the following: Deposits Cash in bank - carrying amount Restricted Unrestricted 19 reporting purposes. At year end, an At year end, $256,991 in outstanding $ 284,759 6,354,029 $ 6,638,788 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 8 OF 14) NOTE 5 - Cash and Cash Equivalents and Investments (Continued) 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 of the City's deposits (cash and certificates of deposit) was $6,638,788 and the bank balance was $7,545,534. The deposits were covered by colateralized accounts or federal depository insurance of $250,000 per bank. The City uses various commercial banks to limit their exposure to custodial credit risk, however, some of the City's deposits including the State of Idaho, Local Government Investment Pool (LGIP) at yearend were not insured nor colateralized in the amount of $505,471. The State Treasurer's Investment Pools (LGIP) operates in accordance with appropriate state laws and regulations. The reported value of the pools is the same as the fair value of the pool shares. Investments - The City has no investments Component Unit - Chubbuck Development Authority (CDA): Deposits at year end consist of the following: Deposits Cash in bank - carrying amount Unrestricted $ 3,039,331 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 $3,039,331. At year-end, all the Authority's deposits were held in the LGIP. Deposits in the LGIP are not insured or guaranteed by the Federal Deposit Insurance Corporation, the State of Idaho or any other government agency. CDA's deposits in the bank at yearend were subject to custodial credit risk. The State Treasurer's Investment Pools (LGIP) operates in accordance with appropriate state laws and regulations. The reported value of the pools is the same as the fair value of the pool shares. Investments - The CDA has no investments Component Unit - Chubbuck Impact Area Waste Water Collection Authority (CIAWWCA): Deposits and Investments - The CIAW WCA has no deposits or investments. NOTE 6 - Receivables All trade receivables are shown net of allowance for doubtful accounts. Doubtful accounts are based on an aging delinquent balance report. Historically 100% of property taxes have been collected, therefore, there is no allowance for uncollectible property tax receivables. Receivables as of year-end for the City's business -type funds are as follows: Water Sewer Sanitation Total Accounts Receivables -F-3-89,-98-6 267,29479,89 837,17 Allowance for Doubtful Accounts (118,578) (64,375) (41,474) (224,427) $ 271,408 $ 202,919 $ 138,420 $ 612,747 20 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 9 OF 14) NOTE 7 - 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 8 - Changes in Fixed Assets A summary of general fixed assets at year end is as follows: 21 DEATON & COMPANY, CHARTERED Beginning Ending Balance Additions Deletions Balance Work in process $ 2,116,290 $ - $ $ 2,116,290 Infrastructures 355,025 11,073 366,098 Nondepreciable assets - Land 90,866 - 90,866 Office Equipment 232,894 - 6,845 226,049 Buildings and Improvements 2,837,922 30,811 - 2,868,733 Vehicles and Equipment 3,289,836 207,344 253,085 3,244,095 8,922,833 249,228 259,930 8,912,131 Accumulated Depreciation 3,686,441 370,048 257,438 3,799,051 $ 5,236,392 $(120,820) $ 2.492 $ 5,113.080 A summary of proprietary type fixed assets at year end is as follows: 21 DEATON & COMPANY, CHARTERED Beginning Ending Balance Additions Deletions Balance Nondepreciable assets - Land $ 709,854 $ - $ $ 709,854 Office Equipment 162,405 34,500 196,905 Buildings and Improvements 7,813,773 135,982 7,949,755 Vehicles and Equipment 2,649,233 68,082 53,119 2,664,196 11,335,265 238,564 53,119 11,520,710 Accumulated Depreciation 4,561,307 439,031 28,434 4,971,904 $ 6,773,958 $ (200,467) $ 24,685 $ 6,548,806 21 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 10 OF 14) NOTE 9 - Interfund Receivables Payables and Transfers Interfund balances at yearend consisted of the following amounts: Due to Water Fund Sewer Fund Due from General Fund $ 154,011 507,765 $ 661,776 The balance of $507,765 due to the sewer fund from the general fund resulted from three 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. Outstanding balance at year end was $237,021. 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. No payments have been made as of September 30, 2010. The third loan, in the amount of $168,696, was to assist in the payment of the employee benefit expenditures. This loan has a zero percent interest rate and will be paid back as funds become available. The balance of $154,011 due to the water fund from the general fund was to assist in the payment of the employee benefit expenditures. This loan has a zero percent interest rate and will be paid back as funds become available. NOTE 10 - Long-term Debt and Accrued Compensation Accrued Compensated Absences: Current portion Noncurrent portion Long-term Debt: Governmental Business -type $ 66,715 $ 18,557 266,864 74,222 $ 333.579 _$ 92.779 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 $85,772; dated March 2, 2010; interest rate of 4.25% with final maturity dated February 1, 2011. Less current portion Noncurrent portion 22 43,139 43,139 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 11 OF 14) NOTE 10 - Long-term Debt and Accrued Compensation (Continued) Business -type activities: In 2006, the City refinanced a construction line of credit for a note payable with the Department of Environmental Quality (DEQ) with an interest rate of 3.25% and semi-annual payments for 20 years. Current portion Noncurrent portion $ 15,085 283,369 $ 298,454 At yearend the City was authorized, on a line -of -credit, to borrowed $19,841,414 from the Department of Environmental Quality (DEQ) under five (5) separate loans. One loan of $1,400,000 requires the principal and 3% interest to be paid in biannual installments over 20 years. The other four (4) loans have zero percent interest rate and are required to be paid in biannual installments over 20 years at the close of the loan. At yearend two of the five loans were closed. The notes are 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 $10,931,330. DEQ line of credit at 3%, with biannual payment of $47,504 for 20 years, and a maturity date of June 20, 2028. Loan closed April 29, 2010. DEQ line of credit at zero percent interest, with biannual payment of $5,499 for 20 years, and a maturity date of November 1, 2030. Loan closed April 22, 2010. DEQ line of credit at zero percent interest, with biannual payment of $86,273 for 20 years, and a maturity date of February 16, 2030. DEQ line of credit at zero percent interest, with biannual payment of $93,698 for 20 years, and a maturity date of February 16, 2030. Total Award Available Outstanding $ 1,400,000 $ $ 1,400,000 219,976 219,976 8,701,260 5,250,340 3,450,920 9,389,548 5,641,610 3,747,938 DEQ line of credit at zero percent interest, with biannual payment of $2,281 for 20 years, and a maturity date of February 16, 2030. 130,630 39,380 91,250 $ 19,841,414 $ 10,931,330 $ 8,910,084 Less current portion 8,931 Noncurrent portion $ 8,901,153 23 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 12 OF 14) NOTE 10 - Lona -term Debt and Accrued Compensation (Continued) Business -type activities (continued): 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 $ 125,000 Water Fund Certificates - Note 2 125,000 Less current portion 60.000 Noncurrent portion $ 65.000 On June 4, 2008, the City issued three notes to purchase assets needed in order to collect sanitation for the City. Notes one and two were issued at 5.50% and the third note at 5.25%. The third note was refinanced in 2009. The notes were issued for $936,576, $541,537 and $1,375,000 with monthly payments of $17,890, $6,985, and $9,321, respectively until the maturity date of May 5, 2013, 2016 and 2029, respectively. Notes Payable: Balance Note 1 $ 528,095 Note 2 405,520 Note 3 1.315.642 Principal Interest 2,249,257 Less current portion 297.143 Noncurrent portion $ 1,952,114 Annual Debt Service Requirements for leases, bonds and notes payable Year Ending Governmental Activities Business -type Activities September 30 Principal Interest Principal Interest 2011 $ 43,139 $ 779 $ 381,158 $ 210,767 2012 - - 824,305 150,130 2013 - - 701,118 128,737 2014 - - 573,649 117,209 2015 - - 582,852 108,006 2016-2020 - - 2,656,433 431,820 2021-2025 - - 2,767,204 267,959 2026-2030 - - 2,679,270 78,956 2031 - 416,806 702 $ 43,139 $ 779 $ 11,582,795 $ 1,494,286 24 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 13 OF 14) NOTE 10 - Long-term Debt and Accrued Compensation (Continued) Changes in long-term liabilities Long-term liability activity for the year was as follows 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 PERSI. 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. At yearend 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 $368,275, $381,576, and $360,332, for the three years ended September 30, 2010, 2009, and 2008, respectively. NOTE 12 - 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 13 - Subsequent Events Subsequent events were evaluated up to June 22, 2011, the date the financial statements were available to be issued. 25 DEATON & COMPANY, CHARTERED Beginning Ending Due within Balance Additions Reductions Balance one year Governmental activities Capital leases $ 29,466 $ 85,772 $ 72,099 $ 43,139 $ 43,139 Compensated absences 381,692 - 48,113 333,579 66,715 Compensated absences $ 411,158 $ 85,772 $ 120,212 $ 376,718 $ 109.854 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 PERSI. 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. At yearend 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 $368,275, $381,576, and $360,332, for the three years ended September 30, 2010, 2009, and 2008, respectively. NOTE 12 - 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 13 - Subsequent Events Subsequent events were evaluated up to June 22, 2011, the date the financial statements were available to be issued. 25 DEATON & COMPANY, CHARTERED Beginning Ending Due within Balance Additions Reductions Balance one year Business -type activities Bonds payable $ 385,000 $ - $ 260,000 $ 125,000 $ 60,000 Notes payable 3,880,699 8,116,165 539,069 11,457,795 321,159 Compensated absences 142,187 - 49,408 92,779 18,557 $4,407,886 $ 8,116,165 $ 848,477 $ 11,675,574 $ 399,716 NOTE 11 -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 PERSI. 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. At yearend 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 $368,275, $381,576, and $360,332, for the three years ended September 30, 2010, 2009, and 2008, respectively. NOTE 12 - 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 13 - Subsequent Events Subsequent events were evaluated up to June 22, 2011, the date the financial statements were available to be issued. 25 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 14 OF 14) NOTE 14 - Other Postemolovment Benefits The City does not participate in other post -employment benefit (OPEB). The City complies with the Consolidated Omnibus Budget Reconciliation Act (COBRA). NOTE 15 - Correction of an Error and Prior Period Adjustments During the year, the City found vehicles and equipment, in the general and sewer fund, that had been depleted in prior years but were reported on the books at $2,482, and $21,214, respectively. The City also found vehicles and equipment, in the general fund, that had been added in prior years but were not recorded on the books with a book value of $71,534. These adjustments increased the governmental assets in the government wide statement of activities in the amount of $69,052. The decrease in business -type assets in the statement of activities and statement of net assets totaled $21,214 in the sewer fund. Due to the governmental financials reporting on the modified accrual basis, the governmental financial statements were not affected. 26 DEATON & COMPANY, CHARTERED REQUIRED SUPPLEMENTARY INFORMATION M DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO BUDGETARY COMPARISON SCHEDULE GENERALFUND YEAR ENDED SEPTEMBER 30, 2010 Charges to appropriations General government Budgeted Amounts 233,361 Variance (67,847) Law enforcement 2,458,900 Actual Positive 49,791 Original Final Amounts (Negative) Resources Building inspection 159,351 159,351 157,675 General property taxes and sales tax $ 4,134,794 $ 4,134,794 $ 4,133,709 $ (1,085) Franchise fees 207,000 207,000 227,744 20,744 Intergovernmental 772,099 772,099 817,906 45,807 Parks revenue 53,600 53,600 52,629 (971) Licenses, permits and fines 133,265 133,265 121,602 (11,663) Grants - - 107,895 107,895 Fire protection and prevention 162,740 162,740 195,564 32,824 Leases and rents - - 19,491 19,491 Interest income 19,000 19,000 15,193 (3,807) Donations - - 12,390 12,390 Donation of infrastructures - - 11,073 11,073 Charges for services 27,000 27,000 56,687 29,687 Other resources 20,200 20,200 30,765 10,565 Amounts available for appropriations 5,529,698 5,529,698 5,802,648 272,950 Charges to appropriations General government 233,361 233,361 301,208 (67,847) Law enforcement 2,458,900 2,458,900 2,409,109 49,791 Fire control 1,060,803 1,060,803 1,024,047 36,756 Building inspection 159,351 159,351 157,675 1,676 Street 851,175 851,175 732,617 118,558 Parks and recreation 654,688 654,688 578,779 75,909 Health and welfare 33,275 33,275 58,154 (24,879) Capital Outlays - - 177,694 (177,694) Total charges to appropriations 5,451,553 5,451,553 5,439,283 12,270 EXCESS OF REVENUES OVER (UNDER) EXPENDITURES 78,145 78,145 363,365 285,220 Other Financing Sources Proceeds from capital leases - - 85,772 85,772 Principal payments on leases (80,000) (80,000) (72,089) 7,911 Interest expense (8,145) (8,145) (4,743) 3,402 (88,145) (88,145) 8,940 97,085 NET CHANGE IN FUND BALANCE (10,000) (10,000) 372,305 382,305 BEGINNING FUND BALANCE 10,000 10,000 962,458 952,458 ENDING FUND BALANCE $ - $ - $ 1,334,763 $ 1,334,763 28 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO REQUIRED SUPPLEMENTARY INFORMATION SEPTEMBER 30, 2010 NOTE 1 - EXPENDITURES IN EXCESS OF BUDGET GENERALFUND General government The City had expenditures in excess of budget of $67,847 due to an increase of self insured employee benefit expenditures. These expenditures were paid by borrowing additional monies from the proprietary funds. 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 $24,879. 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 $177,694. These expenditures were paid using capital leases provided by a commercial bank, donations of infrastructures, and under bugeted expendutes within the department. 29 DEATON & COMPANY, CHARTERED OTHER SUPPLEMENTARY INFORMATION 30 DEATON & COMPANY, CHARTERED § 9§2 J�/2 SLI} /jzco 3//LU U. K IL 2co �S§� z )\} \ \ z co co LO Lq ƒ{z a e \ \ a7 3zrs LL 4) » » _ LO » § LL. cu LL. ~ Jto _ rn w U Z J Q m z z LL LL Z O W (R N Z ZeO� ZS LL J W QU (p O in ¢ m Y Q WC6 2 a m w w U50z LL W (D W oW'a> U W Z Z ~ Wix > O W LL w LL O F - z W 2 W F- F - y Y r L C CL LL W O co N O) u N1 O of M N cy M Col— 1 N � o r- rn In v I� co ' (D M V Co W 0 N N C O L LL a 0 C O 7 U LL m C c m c 7 0 LL 7 C J L LL d C 9 C 7 LL O (D COO M ' O co N N 6q 0' co N N fA h O I) M N N .N- N N 0 O aS U C C N N W y p N z m W p L LU Q O w IBM "m lli M - tem U) W U Z J a m Z z 7 LL Z W 0 Z Q S U W Z m N M O N M � O va O M M (0 N N (P m oc N O In N M 1— In N v� C M M 0 0 n (n co � N V O Ce) rn w Lo (O � (A O fA W U Z W U a z m J z Q 7 m LL z Z LL Z LL 2 Z W z m W N M T C CITY OF CHUBBUCK, IDAHO BUDGETARY COMPARISON SCHEDULE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED SEPTEMBER 30, 2010 Budgeted Amounts Variance Actual Positive Original Final Amounts (Negative) Resources General property taxes and sales tax $ 15,000 $ 15,000 $ - $ (15,000) Interest income 11,400 11,400 4,099 (7,301) Donations 80,000 80,000 13,850 (66,150) Other resources 40,500 40,500 3,323 (37,177) Amounts available for appropriations 146,900 146,900 21,272 (125,628) Charges to appropriations Street guarantee fund 15,500 15,500 - 15,500 General LID fund 3,600 3,600 - 3,600 Juvenile referral fund 500 500 - 500 Court fund 42,100 42,100 - 42,100 Road projects fund 1,200 1,200 - 1,200 Parks fund 84,000 84,000 30,419 53,581 Total charges to appropriations 146,900 146,900 30,419 116,481 NET CHANGE IN FUND BALANCE - - (9,147) (9,147) BEGINNING FUND BALANCE 622,179 622,179 ENDING FUND BALANCE $ $ $ 613,032 $ 613,032 33 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED COMPLIANCE AND SINGLE AUDIT SECTION 34 DEATON & COMPANY, CHARTERED Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, ID 83201-5278 (208) 232-5825 Members of Idaho Sociny of Certified Public Acconnlams Members of An,encan Institute of Certified Public Accoumama is rr n; M � . •� .ate �.. 0 fl \ I ■� �f ■ If dl a , M \L I IL 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, 2010 and 2009, which collectively comprise the City of Chubbuck's basic financial statements and have issued our report thereon dated June 22, 2011. 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'g internal control over financial reporting. A deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies (2010-1 and 2010-2) in internal control over financial reporting, described in the accompanying schedule of findings and questioned costs that we consider to be significant deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 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. We noted certain matters that we reported to management of City of Chubbuck, in a separate letter dated June 22, 2011. 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. L Pocatello, Idaho June 22, 2011 Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, ID 83201-5278 (208)232-5825 Members of Idaho Saciety of Cenified Public Aceoumnnis Members of American Innimhe of C,nified Public Accountants ■ 1 I16L� I r ■ Ik ME a Elf MLI ■ 1! YI e • 1 1I &_ M1 MM a IG a A J�MIL INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 To the City Council City of Chubbuck Compliance We have audited City of Chubbuck's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of City of Chubbuck's major federal programs for the years ended September 30, 2010 and 2009. City of Chubbuck's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of City of Chubbuck's management. Our responsibility is to express an opinion on City of Chubbuck's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United Slates of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about City of Chubbuck's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of City of Chubbuck's compliance with those requirements. In our opinion, City of Chubbuck, complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the years ended September 30, 2010 and 2009. Internal Control over Compliance Management of City of Chubbuck, is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered City of Chubbuck's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance wHh OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City of Chubbuck's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and cored, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies (2010-1 and 2010-2) in internal control over financial reporting, described in the accompanying schedule of findings and questioned costs that we consider to be significant deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. City of Chubbuck's responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit City of Chubbuck's responses and, accordingly, we express no opinion on the responses. This report is intended solely for the information and use of management, City Council, others within the entity, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Pocatello, Idaho June 22, 2011 .S O r O N O M W m W a W (n 0 W 0 Z W Q W r W x F m O LL N of O c0 O O O (D V M N (n O (D N co 7 O D) O O O D) N a" h o c O m O O D) ry C 1- (D - O) I- M N r d d N M M Il o N _ W N OJ O W - (D O (D M N � Lr) � N r o O D) N V O' N r N w 'C r O of D) ry 'O y C' (n O r V (D - O) I- M N r d d N M M Il o N _ WU M ON O (t- V (OD 10 M LO C N mo)co Orn M(D(D (D V O W O W 0-0 N O ar M(D 7 V N N (O � £ 30 Q Q coM M I� �- (D � N Q) M Cl) O Z OO O O r C O OM M r Q Q O O O (� O>O Zs0 co U) >OO > > > L Q a L 00 OC) Q -5 LL E LOU( Innv�i(Mn( LO (0(D IT IT IT It a)) LLUZ (0(D (O0coo CD (0 a W O (D (D (O (O (O E a) LL > O m w m 0 0 Q o' 0 t7 w Q Q d J J Q U Q � x O Z p ~ H W W a) Q U- y M U 0 LL m O 0 a 0 Q (n O a Z) W 0 U- O W ZOQ ~ a) O Z W Z ? .o F Z F- co Q� K Q� O LU w J a) y W W Z W O LL 0 W w. a 3 m m w O .6 E V a1 a) -o N C O a) a) 3 N 3 m N a) t H r M c CITY OF CHUBBUCK, IDAHO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (PAGE 1 OF 2) FOR THE YEAR ENDED SEPTEMBER 30, 2010 SUMMARY OF AUDIT RESULTS 1. The auditor's report expresses an unqualified opinion on the financial statements of City of Chubbuck. 2. No reportable conditions disclosed during the audit of the financial statements are reported in the Independent Auditor's Report. 3. No instances of noncompliance material to the financial statements of City of Chubbuck were disclosed during the audit. 4. Reportable conditions relating to the audit of major federal award programs included significant deficiencies due to a lack of controls over asset additions and deletions reporting and the lack of controls over notes and lease liability reporting. These significant deficiencies are reported in the Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in accordance with OMB Circular A-133. 5. The Auditor's report on compliance for the major federal award programs for City of Chubbuck expresses an unqualified opinion on all major federal programs. 6. Audit findings relative to major federal programs for City of Chubbuck are reported in this Schedule. 7. The programs tested as major programs included Department of Environmental Quality, CFDA #66- 458 8. The threshold for distinguishing Types A and B programs was $300,000. 9. City of Chubbuck was considered a high-risk auditee. FINDINGS — FINANCIAL STATEMENT AUDIT 2010-1 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 $11,000 or greater to be capitalized. 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. 2010-2 The City's controls over recording and reporting all liabilities did not provide a proper classification 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 or netted with expenses. 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. 38 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (PAGE 2 OF 2) FOR THE YEAR ENDED SEPTEMBER 30, 2010 FINDINGS — FINANCIAL STATEMENT AUDIT (CONTINUED) FINDINGS AND QUESTIONED COSTS — MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Environmental Quality 2010-1 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 $11,000 or greater to be capitalized. 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. 2010-2 The City's controls over recording and reporting all liabilities did not provide a proper classification 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 or netted with expenses. 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. 39 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO SUMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED SEPTEMBER 30, 2010 FINDINGS — FINANCIAL STATEMENT AUDIT 2009-1 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 $11,000 or greater to be capitalized. 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. 2009-2 The City's controls over recording and reporting all liabilities did not provide a proper classification 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 or netted with expenses. 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. FINDINGS AND QUESTIONED COSTS — MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Environmental Quality None 40 DEATON & COMPANY, CHARTERED