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Home My WebLink About2005CITY OF CHUBBUCK AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2005 AND 2004 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO ANNUAL FINANCIAL REPORT SEPTEMBER 30, 2005 AND 2004 TABLE OF CONTENTS Page Title Page 1 Table of Contents 2 Auditor's Reports Independent Auditor's Report 3 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 4 Financial Statements Statements of Net Assets 5 Statements of Activities 6 Balance Sheets - Governmental Funds 7 Statements of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 8 - 9 Statements of Net Assets - Proprietary Funds 10 Statements of Revenues, Expenses, and Changes in Net Assets - Proprietary Funds 11 Statements of Cash Flows - Proprietary Funds 12 Notes to Financial Statements 13-22 Required Supplementary Information 23 Budgetary Comparison Schedule - General Fund 24 Budgetary Comparison Schedule - Development Fund 25 Other Supplementary Information 26 Combining Balance Sheet - Nonmajor Governmental Funds 27 Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 28 Budgetary Comparison Schedule - Nonmajor Governmental Funds 29 DLATON & COMPANY, CHARTERED Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, ID 83201-5278 (208) 232-5825 Mr -b a of Idaho Society of Cer ificd Public Accountants wlaothers of American Institute r,f CCFIiIied Public ACCOLIIII ant3 INDEPENDENT AUDITOR'S REPORT To the City Council City of Chubbuck, Idaho We have audited the accompanying financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Chubbuck as of and for the years ended September 30, 2005 and 2004, which collectively comprise the City's basic financial statements as listed in the table of contents. These financial statements are the responsibility of 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. 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Chubbuck as of September 30, 2005 and 2004, 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 12, 2006, on our consideration of the City's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The required supplementary information 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 nonmajor fund 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. I- (.z, &--,e —a - Pocatello, Idaho June 12, 2006 Deaton & Company, Chartered Certified Public Accountants 215 North 9th, Suite A Pocatello, ID 83201-5278 (208) 232-5825 Member., of Idaho Society of certified Public Accountants Member., of American Institme of Certified Public Accountums REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS To the City Council City of Chubbuck, Idaho We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Chubbuck as of and for the years ended September 30, 2005 and 2004, which collectively comprise the City of Chubbuck's basic financial statements and have issued our report thereon dated June 12, 2006. 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 City of Chubbuck's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. 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 .lune 12, 2006 ASSETS Current assets Cash Investments Property taxes receivable Intergovernmental receivables Other accounts receivable Noncurrent assets Restricted assets - cash Employee benefit fund Bond reserves Water deposits Note receivable - General fund Capital assets Accumulated depreciation LIABILITIES Current liabilities Accounts payable Accrued compensated absences Current portion of bonds payable Accrued bond interest Current portion of long-term debt Capital lease obligation Payable from restricted assets - Employee benefit fund Water deposits Noncurrent liabilities Bonds payable Note payable - Proprietary fund Construction line of credit Capital lease obligation Accrued compensated absences NET ASSETS Invested in capital assets, net of related debt Restricted for bond service Unrestricted CITY OF CHUBBUCK, IDAHO STATEMENTS OF NET ASSETS SEPTEMBER 30, 2005 AND 2004 Governmental Business -type Activities Activities $ 451,205 $ 281,446 761,877 475,231 199,994 - 176,160 - - 495,239 1,589,236 1,251,916 165,382 - - 874,365 - 130,973 - 461,949 6,692,095 7,777,572 (3,867,821) (3,518,935) 2,989,656 5,725,924 4,578,892 6,977,840 2005 $ 732,651 1,237,108 199,994 176,160 495,239 2,841,152 2004 $ 859,144 1,450,707 187,332 171,396 494,567 3,163,146 165,382 181,022 874,365 872,128 130,973 119,065 461,949 461,949 14,469,667 13,868,496 (7,386,756) (6,950,576) 8,715,580 8,552,084 11,556,732 11,715,230 62,581 104,262 166,843 124,747 19,250 10,144 29,394 28,335 - 160,000 160,000 150,000 - 33,674 33,674 38,174 46,195 49,589 95,784 - 84,948 - 84,948 71,122 165,382 - 165,382 181,022 - 130,971 130,971 119,065 378,356 488,640 866,996 712,465 - 925,000 925,000 1,085,000 415,754 - 415,754 461,949 - 354,159 354,159 - 113,147 - 113,147 187,971 196,300 91,291 287,591 255,016 725,201 1,370,450 2,095,651 1,989,936 1,103,557 1,859,090 2,962,647 2,702,401 2,210,425 3,124,048 5,334,473 5,423,827 - 874,365 874,365 872,128 1,264,910 1,120,337 2,385,247 2,716,874 $ 3,475,335 $ 5,118,750 $ 8,594,085 $ 9,012,829 5 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED EXPENDITURES General government Law enforcement Fire control Building inspection Street Parks and recreation Health and welfare Development fund Other special revenue funds Business -type activities Utilities CHANGES IN NET ASSETS CITY OF CHUBBUCK, IDAHO STATEMENTS OF ACTIVITIES YEARS ENDED SEPTEMBER 30, 2005 AND 2004 Program Revenues 2005 Capital Net Charges for Grants and (Expense) Expenses Services Contributions Revenue 2004 Net (Expense) Revenue $ 187,437 $ 59,397 - 154,208 $ (128,040) $ (40,512) 1,937,611 - - 9,318 (1,928,293) (1,882,924) 840,960 269,946 5,375 (565,639) (548,388) 149,327 327,658 178,331 127,124 704,148 (704,148) (571,318) 521,138 46,163 9,980 (464,995) (342,696) 23,098 (23,098) (17,616) 1,539,655 99,336 (1,440,319) (1,140,802) 120,916 120,850 (66) 38,165 6,024,290 703,164 244,859 (5,076,267) (4,378,967) 3,661,364 3,337,244 - (324,120) 116,831 $ 9,685,654 $ 4,040,408 $ 244,859 $ (5,400,387) $ (4,262,136) Net (expense)/revenue General revenues General property taxes and sales tax Franchise fees Intergovernmental Operating grants Leases and rents Interest income Other revenue NET CHANGE IN NET ASSETS BEGINNING NET ASSETS PRIOR PERIOD ADJUSTMENT ENDING NET ASSETS General Business -type Activities Activities 2005 2004 $ (5,076,267) $ (324,120) $ (5,400,387) $ (4,262,136) 4,016,357 154,208 595,217 22,828 40,592 109,288 4,938,490 (137,777) 3,613,112 - 4,016,357 3,840,304 - 154,208 138,537 - 595,217 525,148 - - 57,988 - 22,828 22,733 43,153 83,745 49,268 - 109,288 23,489 43,153 4,981,643 4,657,467 (280,967) 5,399,717 (418,744) 9,012,829 395,331 8,807,905 (190,407) $ 3,475,335 $ 5,118,750 8,594,085 $ 9,012,829 0 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO BALANCE SHEETS GOVERNMENTAL FUNDS SEPTEMBER 30, 2005 AND 2004 Other General Development Governmental Fund Fund Funds 2005 2004 ASSETS Cash $ 101,786 $ 145,998 $ 203,421 $ 451,205 $ 495,830 Investments 171,868 246,523 $ 343,486 761,877 837,233 Propertytaxes receivable 163,384 36,610 - 199,994 187,332 Intergovernmental receivables 176,160 - - 176,160 171,396 Other receivables - - - - 21,044 Restricted assets - cash 165,382 - - 165,382 181,022 $ 778,580 $ 429,131 $ 546,907 $ 1,754,618 1,893,857 LIABILITIES Accounts payable 62,581 - - 62,581 61,098 Employee benefit fund 165,382 - - 165,382 181,022 Accrued compensated absences 19,250 - - 19,250 19,250 Deferred revenue 54,398 28,318 - 82,716 86,227 301,611 28,318 - 329,929 347,597 FUND BALANCES Unreserved, reported in: General fund 476,969 - - 476,969 347,855 Special revenue fund - 400,813 546,907 947,720 1,198,405 476,969 400,813 546,907 1,424,689 1,546,260 $ 778,580 $ 429,131 $ 546,907 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 $3,867,821 2,824,274 2,874,918 Deferred tax revenue represents amounts that were not available to fund current expenditures and therefore are not reported in the funds 82,716 86,227 Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds: Remodel loan to sewer fund (461,949) (461,949) Capital lease (198,095) (259,093) Accrued compensated absences (196,300) (173,251) Net assets of governmental funds $ 3,475,335 3,613,112 7 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEARS ENDED SEPTEMBER 30, 2005 AND 2004 REVENUES General property taxes and sales tax Franchise fees Intergovernmental Parks revenue Licenses, permits and fines Grants Fire protection and prevention Leases and rents Interest income Donations Other revenues EXPENDITURES General government Law enforcement Fire control Building inspection Street Parks and recreation Health and welfare Development fund Street guarantee fund General LID fund Court fund Parks Fund NET CHANGE IN FUND BALANCES BEGINNING FUND BALANCE ENDING FUND BALANCE Other General Development Governmental Fund Fund Funds 2005 2004 $ 2,900,245 $ 1,117,373 $ 2,250 $ 4,019,868 $ 3,754,077 154,208 - - 154,208 138,537 595,217 - - 595,217 575,443 46,163 - - 46,163 38,728 387,055 - - 387,055 271,026 24,673 99,336 - 124,009 80,891 269,946 - - 269,946 102,546 22,828 - - 22,828 22,733 19,306 10,905 10,381 40,592 25,776 - - 120,850 120,850 76,200 57,575 - 51,713 109,288 99,125 4,477,216 1,227,614 185,194 5,890,024 5,185,082 149,750 - - 149,750 140,843 1,944,476 - - 1,944,476 1,815,421 867,771 - - 867,771 675,666 149,327 - - 149,327 92,411 703,519 - - 703,519 582,395 513,082 - - 513,082 424,368 23,098 - - 23,098 17,616 - 1,539,655 - 1,539,655 1,216,438 - - 2,700 2,700 15,000 188 188 - - 50,768 50,768 435 - - 67,260 67,260 22,600 4,351,023 1,539,655 120,916 6,011,594 5,003,193 126,193 (312,041) 64,278 (121,570) 181,889 347,855 711,376 487,029 1,546,260 1,364,371 $ 474,048 $ 399,335 $ 551,307 $ 1,424,690 $1,546,260 (Continued) 8 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEARS ENDED SEPTEMBER 30, 2005 AND 2004 2005 2004 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 $ (121,570) $ 181,889 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 purchases capitalized 186,019 158,873 Depreciation expense (246,788) (249,247) Deferred revenues are not recorded as current period receipts (3,511) 86,227 Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets: Capital tease obligation principal payments 71,122 71,829 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 (23,049) 5,437 Change in net assets $ (137,777) $ 255,008 0 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF NET ASSETS PROPRIETARY FUNDS SEPTEMBER 30, 2005 AND 2004 10 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED 2005 2004 ASSETS Current assets Cash $ 281,446 $ 363,314 Investments 475,231 613,474 Accounts receivable 495,239 473,523 1,251,916 1,450,311 Noncurrent assets Restricted assets - cash Bond reserves 874,365 872,128 Water deposits 130,973 119,065 Note receivable - General fund 461,949 461,949 Capital assets 7,777,572 7,372,545 Accumulated depreciation (3,518,935) (3,329,543) 5,725,924 5,496,144 6,977,840 6,946,455 LIABILITIES Current Liabilities Accounts payable 104,262 63,649 Accrued compensated absences 10,144 9,085 Current portion of bonds payable 160,000 150,000 Accrued bond interest 33,674 38,174 Current portion of long-term debt 49,589 - Payable from restricted assets - Water deposits 130,971 119,065 488,640 379,973 Noncurrent Liabilities Bonds payable 925,000 1,085,000 Construction line of credit 354,159 - Compensated absences 91,291 81,765 1,370,450 1,166,765 1,859,090 1,546,738 NET ASSETS Invested in capital assets, net of related debt 3,124,048 2,808,002 Restricted for bond service 874,365 872,128 Unrestricted 1,120,337 1,719,587 $ 5,118,750 $ 5,399,717 10 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PROPRIETARY FUNDS YEARS ENDED SEPTEMBER 30, 2005 AND 2004 OPERATING REVENUES Service revenue OPERATING EXPENSES Salaries and wages Personnel benefits Repairs and maintenance Supplies Travel, meetings, and training Fuels and lubricants Telephone and communications Utilities Treatment - Pocatello Sanitation contract Insurance Other purchased services Facilities plan Depreciation OPERATING INCOME NONOPERATING REVENUE (EXPENSE) Interest income Interest expense NET INCOME (LOSS) BEGINNING NET ASSETS PRIOR PERIOD ADJUSTMENT ENDING NET ASSETS 2005 $ 3,337,244 11 See accompanying notes to financial statements 843,986 408,164 410,288 286,434 11,925 45,003 11,550 102,338 569,099 562,424 58,979 84,512 6,621 189,393 3,590,716 (253,472) 43,153 (70,648) (27,495) (280,967) 5,399,717 2004 $ 3,188,256 674,556 347,657 319,158 206,006 14,844 27,767 8,977 89,737 530,710 474,453 31,713 71,480 20,755 175,475 2,993,288 194,968 23,492 (78,137) (54,645) 140,323 5,449,801 (190,407) 5,118,750 $ 5,399,717 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO STATEMENTS OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEARS ENDED SEPTEMBER 30, 2005 AND 2004 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from revenues Cash paid to suppliers and employees Change in water deposits Interest income Interest expense Net cash provided by (used in) operating activities CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital expenditures Investing in notes receivable Net cash used in capital and related financing activities CASH FLOW FROM FINANCING ACTIVITIES Cash from note Bond principal payments Net cash provided by (used in) financing activities NET DECREASE IN CASH BEGINNING CASH ENDING CASH NET INCOME 2005 2004 $ 3,315,528 $ 3,138,731 (3,350,125) (2,822,329) 11,906 17,027 43,153 23,492 (75,148) (82,434) (54,686) 274,487 (405,027) (88,156) (461,949) (405,027) (550,105) 403,748 - (150,000) (145,000) 253,748 (145,000) (205,965) (420,618) 1,967,981 2,388,599 $ 1,762,016 RECONCILIATIONS OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Depreciation (Increase) decrease in assets Accounts receivable Increase (decrease) in liabilities Accounts payable Accrued compensated absences Accrued bond interest Water deposits payable Total adjustments 2005 $ (280,967) $ 1,967,981 2004 $ 140,323 189,393 175,475 (21,716) (49,525) 40,613 (6,998) 10,585 2,482 (4,500) (4,297) 11,906 17,027 226,281 134,164 NET CASH PROVIDED BY OPERATING ACTIVITIES $ (54,686) $ 274,487 12 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 1 OF 10) 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," and includes all component units of which the City appointed a voting majority of the units' board, the City is either able to impose its will on the unit or a financial benefit or burden relationship exists. Currently, the City has no potential component units. 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 expend iturelexpenses. 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; and 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. 13 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 2 OF 10) NOTE 1 - Summary of Significant Accountinq Policies (Continued) B. Basis of Presentation (Continued) 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. 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. 14 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 3 OF 10) NOTE 1 - Summary of Significant Accounting Policies (Continued) C. Measurement Focus and Basis of Accounting (Continued) 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. 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 General Fund incurred expenditures in excess of appropriations of the following amounts for the year ended: Fire control $ 19,385 Building inspection $ 45,244 Street $ 142,246 Parks and recreation $ 14,922 Health and welfare $ 7,398 Court fund $ 2,768 The excess expenditures were provided by available fund balance in the fund. E. Cash and Investments For the purpose of the Statement of Net Assets, "cash" includes all demand, savings accounts, and certificates of deposits 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. 15 DEA'1'ON X COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 4 OF 10) NOTE I - Summary of Significant Accounting Policies (Continued) E. Cash and Investments (Continued) Investments are carried at fair value except for short-term U.S. Treasury obligations with a remaining maturity at the time of purchase of one year or less. Those investments are reported at amortized cost. Fair value is based on quoted market price. 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 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. 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. G. 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. 16 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 5 OF 10) NOTE 1 - Summary of Significant Accounting Policies (Continued) G. Long-term Debt (Continued) 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. H. 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. 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. 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. 17 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 6 OF 10) 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. NOTE 3 - Cash and Cash Equivalents and Cash Flow Activities For purposes of the statement of cash flows, the proprietary fund types considers all highly liquid investments with a maturity of three months or less when purchased or time certificates of deposit redeemable on demand with no penalty to be cash equivalents. NOTE 4 - Restricted Assets and Payable from Restricted Assets Assets have been set aside for special items and are restricted for that purpose. To date cash has been restricted for the following items: Governmental Employee benefit fund Proprietary Bond reserves Water deposits Total $ 165,382 $ 874,365 134,973 $ 1,005,338 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. NOTE 5 - 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, $199,994 in outstanding property taxes were expected to be collected and remitted by the County. 18 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 7 OF 10) NOTE 6 - Concentration of Credit Risk The City is subject to credit risk on deposits with 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 - Cash and Cash Deposits At year end the carrying amount of the City's deposits (cash and certificates of deposit) was $903,717 and the bank balance was $1,146,618. The deposits were covered by federal depository insurance of $100,000 per bank. The City was uninsured for $946,618 in its bank accounts. Investments The City's investments are categorized below to give an indication of the level of risk assumed by the City at year-end. Category 1 includes investments that are insured or registered, or for which the securities are held by the City or its agent in the City's name. Category 2 includes uninsured or unregistered investments for which the securities are held by the counterparty's trust department or agent in the City's name. Category 3 includes uninsured and unregistered investments for which the securities are held by the counterparty or by its trust department or agent but not in the City's name. At year end, the City did not have any investments in Category 1, Category 2 or Category 3. Investments in external investment pools are not required to be categorized. At year end, investments consisted of the following: Not Required to Be Categorized State of Idaho Local Government Investment Pool 084.35 NOTE 8 - Changes in Fixed Assets A summary of general fixed assets at year end is as follows: 19 Carrying/ Fair Value 2.084.355 Ending Balance $ 62,404 215,212 2,595,165 3,819,314 L-6-692.095 DEATON & COMPANY, CHARTERED Beginning Balance Additions Deletions Land $ 62,404 $ - $ - Office Equipment 203,147 12,065 - Buildings and Improvements 2,595,165 - - Vehicles and Equipment 3,635,236 184,078 - 6.495,952 $_196.1 43 S_ 19 Carrying/ Fair Value 2.084.355 Ending Balance $ 62,404 215,212 2,595,165 3,819,314 L-6-692.095 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 8 OF 10) NOTE 8 - Changes in Fixed Assets (Continued) A summary of proprietary type fixed assets at year end is as follows: Beginning Ending Balance Additions Deletions Balance Land $ 263,112 $ - $ - $ 263,112 Office Equipment 162,405 - - 162,405 Buildings and Improvements 6,564,120 - - 6,564,120 Vehicles and Equipment 382,908 405,028 - 787,936 $ 7,372,545 $ 405,028 $ - $ 7,777,573 NOTE 9 - Long-term Debt and Accrued Compensation Accrued Compensated Absences: Governmental Business -type Current portion $ 19,250 $ 10,144 Noncurrent portion 196,300 91,291 $ 215,550 $ 101,435 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: Caterpillar capital lease; issue amount $233,437; dated June 26, 2001; interest rate of 5.25% with final maturity dated June 26, 2006. $ 22,981 Fire Engine capital lease; issue amount $194,190; dated March 7, 2001; interest rate of 5.75% with final maturity dated March 8, 2007. 72,195 Telephone System capital lease; issue amount $30,986; dated May 30, 2003; interest rate of 4.25% with final maturity dated September 30, 2007. 18,838 Back Hoe capital lease; issue amount of $97,740; dated November 12, 2003; interest rate of 3.6% with final maturity dated November 12, 2008. 73,957 Police vehicles capital lease; issued amount of $10,124 dated February 2, 2005; interest rate of 3.75% with final maturity dated February 2, 2006. 10,124 198,095 Less current portion 84,948 Noncurrent portion $ 1.1.3,147 20 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 9 OF 10) NOTE 9 - Long-term Debt and Accrued Compensation (Continued) Note Payable The General fund entered into a note payable with the utility fund dated July 15, 2005 with 0% interest and $46,195 paid annually, over a 10 -year period. Current portion Noncurrent portion Business -type activities: $ 46,195 415,754 $ 461,949 At year end, the City reported a construction line of credit for $403,748. Subsequent to year end, the loan was refinanced with an interest rate of 3.25% and semi-annual payments for 20 years. Current portion Noncurrent portion $ 49,589 354,159 $ 403,748 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 Water Fund Certificates Less current portion Noncurrent portion Annual Debt Service Requirements Year Ending September 3.0 2006 2007 2008 2009 2010 2011-2015 2016-2020 2021-2025 2026 Governmental Activities Principal Interest $ 131,143 $ 8,980 100,725 4,984 64,272 2,153 86,735 1,459 46,195 - 230,974 - 660.044 $ 17.576 21 $ 415,000 670,000 1,085,000 160,000 925,000 Business -type Activities Principal Interest $ 209,589 $ 72,008 183,260 67,561 193,694 56,552 204,143 44,680 219,607 27,307 260,533 59,584 94,619 28,698 111,169 12,148 12,134 197 $ 1.488.748 1327,691 DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO NOTES TO FINANCIAL STATEMENTS (PAGE 10 OF 10) 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 pian 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 PERS] 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, 2005 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 $484,641, $215,956, and $338,710, for the three years ended September 30, 2005, 2004, and 2003 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. 22 DEATON & COMPANY, CHARTERED REQUIRED SUPPLEMENTARY INFORMATION DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO BUDGETARY COMPARISON SCHEDULE GENERALFUND YEAR ENDED SEPTEMBER 30, 2005 Beginning budgetaryfund balance Resources General property taxes and sales tax Franchise fees Intergovernmental Parks revenue Licenses, permits and fines Grants Fire protection and prevention Leases and rents Interest income Other resources Amounts available for appropriations Charges to appropriations General government Law enforcement Fire control Building inspection Street Parks and recreation Health and welfare Total charges to appropriations Ending budgetary fund balance Budgeted Amounts Original Final $ 36,800 $ 36,800 2,876,341 156,200 571,777 44,100 213,000 15,000 146,846 22,500 5,000 12,950 4,063,714 78,411 2,049,610 740,766 104,083 561,273 498,160 15,700 4,048,003 $ 52,511 24 3,562,608 156,200 617,777 44,100 324,000 15,000 254,466 22,500 5,000 12,950 5,014,601 235,411 2,049,610 848,386 104,083 561,273 498,160 15,700 4,312,623 $ 738,778 Actual Amni tntc J41,dbb 2,900,245 154,208 595,217 46,163 387,055 24,673 269,946 22,828 19,306 57.575 �IWAFAV IWE See accompanying notes to financial statements 149,750 1,944,476 867,771 149,327 703,519 513,082 23,098 4,351,023 $ 474,048 Variance Positive (Negative) $ 311,055 (662,363) (1,992) (22,560) 2,063 63,055 9,673 15,480 328 14,306 44,625 (537,385) 85,661 105,134 (19,385) (45,244) (142,246) (14,922) (7,398) (38,400) $ (264,730) DEATON & COMPANY, CHARTERED CITY OF CHUBBUCK, IDAHO BUDGETARY COMPARISON SCHEDULE DEVELOPMENT FUND YEAR ENDED SEPTEMBER 30, 2005 Beginning budgetary fund balance Resources General property taxes and sales tax Interest income Grants Amounts available for appropriations Charges to appropriations Development fund Ending budgetary fund balance Budgeted Amounts Original Final 885,000 885,000 860,000 $ 25,000 25 Variance Actual Positive Amounts (Negative) $ 702,043 $ 702,043 885,000 1,117,373 232,373 - 10,905 10,905 - 99,336 99,336 885,000 1,227,614 342,614 860,000 1,216,438 (356,438) $ 25,000 $ 713,219 $ 688,219 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED OTHER SUPPLEMENTARY INFORMATION DEATON & COMPANY, CHARTERED � f E 2 2 / 0 k / ? \ M S U) $ L. e w w cn 2 � E W 7 7 2kj �' mn G o \ �§ƒ \/ / / \CD /® > O£ 2 z m m \/ CA M� 7 AC c C Cq 0 C 2 a. LL & & a a m U)\ Iq \ / \ / � co \ o tea. to + U')- �k k k �t m § \ $ fl - \ v 0 2a) r QLL a ea m 2w� to CD 0LU �2w // / \ Q�CD CL g 2 2 M m■ § - C + >�LL m�J� m�m K m m > 32Rw U- w0. o00LU wa 77 o & 0 = r-: 0/ Rƒ G/ $ 7 5 [ Q q ss _ m 2 \\ \ k a2= . . �q /ƒ G G o a U3, � f E 2 2 / 0 k / ? \ M S U) $ w U cn 2 «__ LUc D 2kj m \ L \ >/ E o 2 \CD /® > O£ 2 � f E 2 2 / 0 k / ? \ M S U) 00 N c CD E ro •U 0 N a) 0 c rn c .T cu 0- E U U m a) w O G LQ 00 L M t-- — ti N d N M 00 r• T m 0) N O c+] -100 O E G N O C7 C' N N CN U' C(D 0~0 LO C F, I 0 LL S^ r T r V+ LO Z ca co Oco ' ' 00 00 m ti N 0) M -� ' O 0000 m N co to Je C C- O cl t` ti [p r- et C%4eN- CD CD Ln r aw N GO. VD- U) r, ti r- m to Z N co ' CO c0 co 00 L .Q1 O N = C� co m �atL ❑ cfr � z ZN ' r CO ' ' 00 c0 m N r• D N 3 r MI,- O O uz LC] N V O r~ E~ C7 o U L+ o N d 69 EA QU Jco Ya ~m 4) Cl z co UA _ V z > mw a a) w :3wLU H3 64 ~ _ O y U z0 a Ox O Z L 'C ' C0 Y G r ti O] ti r-waW c� "' r=a 0 co o CN N co LL �} ZZr w w 01 O rD ' O CD ' ' 07 O CD Y I,- CD r LO O N I- O 0) 7 6- C �° co (OD LL N N N N o m N c7 N LO N �LL z c� m w F N a w H U U Z w U Q Z w X `�° � a 7 ❑ J Q Z m z LL ❑ Q E _ � N v c ro s w w {I} C N j ❑ O t (U LU .. o as cn .m sn a Q Z Z w ❑LN• r L j3 to p iB CL r z Z CD Z LLI O N W (=j wa`So0 Xn`i�0 W w z m .w z m w 00 N c CD E ro •U 0 N a) 0 c rn c .T cu 0- E U U m a) w CITY OF CHUBBUCK, IDAHO BUDGETARY COMPARISON SCHEDULE NONMAJOR GOVERNMENTAL FUNDS YEAR ENDED SEPTEMBER 30, 2005 Charges to appropriations Street guarantee fund Budgeted Amounts 5,500 Variance 2,800 General LID fund 3,000 Actual Positive 2,812 Original Final Amounts (Negative) Beginning budgetary fund balance $ - $ - $ 487,029 $ 487,029 Resources Road projects fund 1,200 1,200 - General property taxes and sales tax 5,000 5,000 2,250 (2,750) Interest income 9,900 9,900 10,381 481 Donations 105,000 105,000 120,850 15,850 Other resources 46,000 46,000 51,713 5,713 Amounts available for appropriations 165,900 165,900 185,194 19,294 Charges to appropriations Street guarantee fund 5,500 5,500 2,700 2,800 General LID fund 3,000 3,000 188 2,812 Juvenile referral fund 200 200 - 200 Court fund 48,000 48,000 50,768 (2,768) Road projects fund 1,200 1,200 - 1,200 Parks fund 108,000 108,000 67,260 40,740 Total charges to appropriations 165,900 165,900 120,916 44,984 Ending budgetary fund balance $ - $ - $ 551,307 $ 551,307 29 See accompanying notes to financial statements DEATON & COMPANY, CHARTERED