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HomeMy Public PortalAbout2007-2008 annual final auditCITY OF MOAB, UTAH INDEPENDENT AUDITORS' REPORT BASIC FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2008 CITY OF MOAB, UTAH TABLE OF CONTENTS YEAR ENDED JUNE 30, 2008 Pages INDEPENDENT AUDITORS' REPORT 1-2 MANAGEMENT'S DISCUSSION AND ANALYIS MDA-1 thru MDA-6 BASIC FINANCIAL STATEMENTS: Government -wide Financial Statements: Statement of Net Assets 3 Statement of Activities 4 Fund Financial Statements: Balance Sheet — Governmental Funds 5 Reconciliation of Total Governmental Fund Balances to Net Assets of Governmental Activities 6 Statement of Revenues, Expenditures, and Changes in Fund Balance — Governmental Funds 7 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 8 Statement of Revenues, Expenditures, and Changes in Fund Balances — Budget and Actual — General Fund 9-10 Statement of Net Assets — Proprietary Funds 11 Statement of Revenues, Expenses, and Changes in Fund Net Assets — Proprietary Funds 12 Statement of Cash Flows — Proprietary Funds 13 Notes to the Financial Statements 14-35 SUPPLEMENTARY INFORMATION: Combining and Individual Fund Statements and Schedules: Combining Balance Sheet — Non -major Governmental Funds 36 Combining Statement of Revenues, Expenditures and Changes in Fund Balances — Non -major Governmental Funds 37 Impact Fee Schedule 38 LARSON & ROSENBERGER LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT October 8, 2008 Honorable Mayor Members of the City Council City of Moab, Utah Mayor and Council Members: 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 the City of Moab, as of and for the year ended June 30, 2008, which collectively comprise the City of Moab's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Moab'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 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, each major fund, and the aggregate remaining fund information of the City of Moab, as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable, and the budgetary comparison for the general fund thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. SALT LAKE CITY OFFICE 9065 SOUTH 1300 EAST SANDY, UTAH 24094 (801)313-1900 FAX (801) 313-1912 LOS ANGELES OFFICE 801 NORTH BRAND BLVD STE 1180 GLENDALE, CALIFORNIA 91203 (818) 334-8623 FAX (818) 241-7353 SPANISH FORK OFFICE 765 NORTH MAIN SPANISH FORK, UTAH 84660 (801) 798-3545 FAX (801) 798-3678 1 MO/LB OFFICE 115 WEST 200 SOUTH 44 MOAB. UTAH 84532 (435) 259-9100 FAX (435) 259-1100 MEMBER ❑ F THE I N T E R N A T I O N A L ACCOUNTING GROUP ( T I R O) + W W W. L A R S C O. C O M The Management's Discussion and Analysis on pages MDA-1 through MDA-6 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. Additionally, the State of Utah requires the information in the Impact Fee Schedule on page 38, but it is not a required part of the basic financial statements. 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. In accordance with Government Auditing Standards, we have also issued a report dated October 8, 2008, on our consideration of the City of Moab's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. 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 should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Moab's basic financial statements. The combining non -major fund financial statements on pages 36-37 are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining non -major 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. 04 ,kwf gL4,47,, L_(_ Larson & Rosenberger, LLP Certified Public Accountants 2 MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Moab, we offer readers of the City of Moab financial statements this narrative overview and analysis of the financial activities of the City for the fiscal year ended June 30, 2008. It is designed to provide an overview of the City's financial activity. It is also intended to assist the reader in focusing on significant financial issues including identifying changes in the City's financial position (its ability to address the next and subsequent years' challenges), identifying any material deviations from the approved budget, and identifying individual fund issues or concerns. We encourage readers to consider the information presented here in conjunction with the Transmittal Letter and the City's financial statements. FINANCIAL HIGHLIGHTS • The total net assets of City of Moab increased by $1,274,217 to $21,182,275. The governmental net assets increased by $637,613 and the business -type net assets increased by $636,604. • The total net assets of $21,182,275 are made up of $15,076,679 in capital assets net of related debt and $6,105,596 in other net assets. • The General Fund (the primary operating fund) had an increase in its fund balance of $296,322, due to an increase in revenue and significant revenue over expenditures. REPORTING THE CITY AS A WHOLE The discussion and analysis is intended to serve as an introduction to the City of Moab's basic financial statements. The City of Moab's basic financial statements comprise three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also includes other supplementary information in addition to the basic financial statements. The government -wide financial statements are designed to provide readers with a broad overview of the City of Moab's finances, in a manner similar to a private -sector business. • The statement of net assets presents information on all of the City of Moab's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the City of Moab is improving or deteriorating. However, other non -financial factors will need to be considered. • The statement of activities presents information showing how the City's net assets changed during the fiscal year reported. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, MDA-1 regardless of the timing of related cash flows. Thus, all of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. Both of the government -wide financial statements distinguish functions of the City of Moab that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business -type activities). The government -wide financial statements can be found on pages 3-4 of this report. REPORTING THE CITY'S MOST SIGNIFICANT FUNDS A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Moab also uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. • Governmental funds — These funds are used to account for the same functions reported as governmental activities in the government -wide financial statements. These fund statements focus on how money flows into and out of these funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the City's general government operations and the basic services it provides. Governmental fund information helps interested persons determine whether there are more or fewer financial resources that can be spent in the near future to finance the City's programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in a reconciliation included with the fund financial statements. The only major governmental fund (as determined by generally accepted accounting principles) is the General Fund. The balance of the governmental funds are determined to be non -major and are included in the combining statements within this report. • Proprietary funds — The only type of proprietary funds that the City of Moab maintains are the Water and Sewer Enterprise Fund, and the Storm Drain Enterprise Fund. MDA-2 As determined by generally accepted accounting principles, the Water and Sewer enterprise fund meets the criteria for major fund classification. • Fiduciary funds — These funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government -wide financial statements because the resources of those funds are not available to support the City's own programs. The accounting method used for these funds is much like that used for proprietary funds. GOVERNMENT -WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the City of Moab, assets exceed liabilities by $21,182,275. The largest portion of the City of Moab's net assets (71.18%) reflects its investment in capital assets (e.g., land, buildings, infrastructure assets, and machinery and equipment), less any related debt used to acquire those assets that is still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. A summary financial information for June 30, 2007 and 2008 follow: City of Moab Net Assets June 30, 2008 and 2007 Current and other assets Capital assets Total assets Other liabilities Long-term liabilities outstanding Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Total net assets Governmental Activities 2008 $ 4,384,774 10,113,040 14,497,814 668,562 2,092,833 2,761,395 8,248,040 228,362 3,260,017 $ 11,736,419 2007 $ 3,731,946 9,718,155 13,450,101 410,873 1,940,422 2,351,295 Business -type Activities 2008 2007 $ 2,653,116 $ 2,210,817 6,943,120 7,028,139 9,596,236 9,238,956 113,899 314,223 36,481 115,481 150,380 429,704 Total 2008 $ 7,037,890 17,056,160 24,094,050 782,461 2,129,314 2,911,775 7,790,155 6,828,639 6,625,990 15,076,679 354,806 1,532,874 1,444,628 1,761,236 2,953,845 1,084,343 738,634 4,344,360 $ 11,098,806 $ 9,445,856 $ 8,809,252 $ 21,182,275 2007 $ 5,942,763 16,746,294 22,689,057 725,096 2,055,903 2,780,999 14,416,145 1,799,434 3,692,479 $ 19,908,058 City of Moab Changes in Net Assets June 30, 2008 and 2007 Governmental Activities Business -type Activities Total 2008 2007 2008 2007 2008 2007 Revenues: Program revenues: Charges for services $ 1,340,937 $ 1,621,091 $ 1,270,875 $ 1,419,919 $ 2,611,812 $ 3,041,010 Operating grants and contribs 516,299 723,652 - - 516,299 723,652 Capital grants and contribs 460 41,650 189,243 160,441 189,703 202,091 General revenues: General sales and use tax 1,427,015 1,293,975 - - 1,427,015 1,293,975 Franchise tax 229,883 222,599 - - 229,883 222,599 Highway tax 434,970 403,153 - - 434,970 403,153 Transient room tax 463,760 272,001 - - 463,760 272,001 Resort community tax 2,314,087 2,275,687 - - 2,314,087 2,275,687 Energy tax 68,095 57,887 - - 68,095 57,887 Unrestricted investment earnings 151,072 174,560 104,268 86,906 255,340 261,466 Other 97,810 184,047 - - 97,810 184,047 Gain(loss) on sale of assets (69,696) - - - (69,696) Transfers - - - - Total revenues 6,974,692 7,270,302 1,564,386 1,667,266 8,539,078 8,937,568 Expenses: General government 1,630,300 1,670,428 - - 1,630,300 1,670,428 Public safety 1,707,655 2,030,682 - - 1,707,655 2,030,682 Highways and public works 1,286,433 1,391,382 - - 1,286,433 1,391,382 Sanitation 786,467 764,138 - - 786,467 764,138 Parks and recreation 904,724 654,680 - - 904,724 654,680 Community and economic development 21,500 26,500 - - 21,500 26,500 Water Utility - 511,532 698,444 511,532 698,444 Sewer Utility - 406,203 583,999 406,203 583,999 Storm Drain Utility - 10,047 - 10,047 Total expenses 6,337,079 6,537,810 927,782 1,282,443 7,264,861 7,820,253 Increase in net assets 637,613 732,492 636,604 384,823 1,274,217 1,117,315 Net assets - beginning 11,098,806 10,366,314 8,809,252 8,424,429 19,908,058 18,790,743 Net assets - ending $ 11,736,419 $ 11,098,806 $ 9,445,856 $ 8,809,252 $ 21,182,275 $ 19,908,058 FINANCIAL ANALYSIS OF GOVERNMENT'S FUNDS The focus of the City's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. As of June 30, 2008, the City's governmental funds (General, Capital Projects, & Special Revenue) reported combined fund equity of $4,235,041. This represents an increase of $541,321 from last year's ending balances; this increase is due to carrying over the aquatic center project to the next fiscal year. The General Fund is the chief operating fund of the City. All activities that are not required to be accounted for in separate funds either by state or local ordinance or by a desire to maintain a matching of revenues and expenses are accounted for in this fund. Taxes continue to be the largest source of revenue in the General Fund and represent 78.55% of total general fund revenues. As stated earlier, the City maintains an enterprise fund to account for the business - type activities of the City. The fund statements included in this report provide the same information for business -type activities as is provided in the government -wide financial statements. However, the difference is that the fund statements provide much more detail. GENERAL FUND BUDGETARY HIGHLIGHTS During the fiscal year, the General Fund budget was amended from an original budget expenditure total of $6,587,345 to a final budget of $6,972,445. This increase was made because of various minor adjustments to general fund department expenditures comprised mainly of equipment purchases. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets — The City of Moab's investment in capital assets for its governmental and business -type activities as of June 30, 2008, amounts to $17,056,160 (net of accumulated depreciation). This investment in capital assets includes land, buildings and systems, improvements, infrastructure (streets, sidewalks, curb and gutter, etc.), and machinery and equipment. Major capital asset events during this fiscal year included the following: o North Area Trunk Sewer $37,892 o Municipal Building Project $71,946 o City Center/Center Street Project $397,162 o Ball Park Improvements $126,298 o Animal Shelter $551,537 Long-term debt — At June 30, 2008, the City had total bonded debt outstanding of $1,979,481. All of this debt is revenue bond debt. The City of Moab has no general obligation debt. MDA-5 ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES • The unemployment rate for Grand County was 4.7% compared with a state unemployment rate of 2.6% and a national rate of 4.6%. (Source: Utah Dept of Workforce Services). • Some capital improvements expected in the FY 2007-08 budget include: o Moab Arts and Recreation Center Roof Project o Reconstruction of 500 West o Animal Shelter Improvements REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City of Moab's finances for all those with an interest in the City's finances. Questions concerning any information provided in this report or request for additional financial information should be addressed to: City Recorder, City of Moab of Moab, 217 East Center Street, UT 84532. MDA-6 BASIC FINANCIAL STATEMENTS City of Moab Statement of Net Assets June 30, 2008 Primary Government Governmental Business -type Activities Activities Total ASSETS Cash and cash equivalents $ 2,915,639 $ 393,066 $ 3,308,705 Accounts receivable - (net of allowance) 573,444 115,725 689,169 Deposits 6,119 6,119 Note receivable 519,689 519,689 Restricted cash and cash equivalents 369,883 2,144,325 2,514,208 Capital assets (net of accumulated depreciation): Land (Not being depreciated) 371,977 244,935 616,912 Buildings 4,158,974 175,135 4,334,109 Improvements 1,458,436 6,392,506 7,850,942 Machinery and equipment 777,179 112,146 889,325 Automobiles and trucks 1,037,752 398 1,038,150 Office equipment 418,192 418,192 Water shares (Not being depreciated) - 18,000 18,000 Infrastructure 1,890,530 - 1,890,530 Total assets 14,497,814 9,596,236 24,094,050 LIABILITIES Accounts payable and accrued liabilities Customer deposits Compensated absences Noncurrent liabilities: Due within one year Due in more than one year Total liabilities 149,733 - 7,656 278,355 28,243 240,474 78,000 2,092,833 36,481 2,761,395 149,733 7,656 306,598 318,474 2,129,314 150,380 2,911,775 NET ASSETS Invested in capital assets, net of related debt 8,248,040 6,828,639 15,076,679 Restricted for: Class "C" roads 228,362 228,362 Bond requirements - 325,912 325,912 Impact fees - 1,206,962 1,206,962 Unrestricted 3,260,017 1,084,343 4,344,360 Total net assets $ 11,736,419 $ 9,445,856 $ 21,182,275 The Notes to the Financial Statements are an integral part of this statement. 3 Function/Programs Primary government: Governmental activities: General government Public safety Highways and public works Sanitation Parks, recreation and public property Community and economic development Total governmental activities Business -type activities: Water Utility Sewer Utility Storm Drain Utility (Non -major) Total business -type activities Total primary government Expenses City of Moab Statement of Activities For the Year Ended June 30, 2008 Program Revenues Charges for Services Operating Capital Grants and Grants and Contributions Contributions Net (Expense) Revenues and Changes in Net Assets Primary Government Governmental Business -type Activities Activities $1,630,300 $ 49,592 $ 205,449 $ $ (1,375,259) 1,707,655 185,173 5,695 (1,516,787) 1,286,433 235,189 (1,051,244) 786,467 825,721 39,254 904,724 280,451 69,966 460 (553,847) 21,500 - (21,500) 6,337,079 1,340,937 516,299 460 (4,479,383) 511,532 531,930 406,203 728,134 10,047 10,811 26,981 162,262 927,782 1,270,875 189,243 $7,264,861 $ 2,611,812 $ 516,299 $ 189,703 (4,479,383) General revenues: General sales and use tax Franchise tax Highway tax Transient room tax Resort community tax Energy tax Unrestricted investment earnings Miscellaneous Gain (loss) on sale of assets Total general revenues Change in net assets Net assets - beginning Net assets - ending 1,427,015 229,883 434,970 463,760 2,314,087 68,095 151,072 97,810 (69,696) 47,379 484,193 764 Total $ (1,375,259) (1,516,787) (1,051,244) 39,254 (553,847) (21,500) (4,479,383) 47,379 484,193 764 532,336 532,336 532,336 (3,947,047) 104,268 5,116,996 104,268 1,427,015 229,883 434,970 463,760 2,314,087 68,095 255,340 97,810 (69,696) 5,221,264 637,613 636,604 1,274,217 11,098,806 8,809,252 19,908,058 $ 11,736,419 $ 9,445,856 $ 21,182,275 The Notes to the Financial Statements are and integral part of this statement. City of Moab Balance Sheet Governmental Funds June 30, 2008 Capital Other Total General Projects Governmental Governmental Fund Fund Funds Funds ASSETS Cash and cash equivalents $1,582,429 $ 1,234,113 $ 99,097 $ 2,915,639 Receivables (net): Garbage 70,958 - 70,958 Franchise tax 15,702 - 15,702 Sales and use tax 476,253 - 476,253 Other 9,473 - 1,058 10,531 Deposits 6,119 - 6,119 Notes receivable - 519,689 519,689 Restricted assets: Cash and cash equivalents 228,362 141,521 369,883 Total assets $2,389,296 $ 1,895,323 $ 100,155 $ 4,384,774 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 8,212 $ - $ $ 8,212 Accrued Liabilities - 141,521 $ 141,521 Total liabilities 8,212 141,521 149,733 Fund Balances: Fund balances reserved for: Class "C" roads 228,362 - 228,362 Recreation - - 97,196 97,196 Youth city council - 2,959 2,959 Unreserved, reported in: General fund 2,152,722 - 2,152,722 Capital projects funds - 1,753,802 1,753,802 Total fund balances 2,381,084 1,753,802 100,155 4,235,041 Total liabilities and fund balances $2,389,296 $ 1,895,323 $ 100,155 $ 4,384,774 The Notes to the Financial Statements are an integral part of this statement. 5 City of Moab Reconciliation of Total Governmental Fund Balances to Net Assets of Governmental Activities June 30, 2008 Amounts reported for governmental activities in the statement of net assets are different because: Total fund balances - governmental fund types (page 5): $ 4,235,041 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 10,113,040 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. (2,611,662) Net assets of government activities (page 3): $ 11,736,419 The Notes to the Financial Statements are an integral part of this statement. 6 City of Moab Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2008 Capital Other Total General Projects Governmental Governmental Fund Fund Funds Funds REVENUES Taxes $ 4,937,810 $ $ $ 4,937,810 Licenses and permits 150,726 - - 150,726 Intergovernmental 240,884 205,449 69,966 516,299 Charges for services 920,272 - 185,900 1,106,172 Fines and forfeitures 84,039 - - 84,039 Contributions and donations - 460 - 460 Interest Income - 54,918 122 55,040 Miscellaneous revenue 151,804 44,005 - 195,809 Total revenues 6,485,535 304,832 255,988 7,046,355 EXPENDITURES Current: General government Public safety Highways and public works Sanitation Parks, recreation and public property Community and economic development Capital outlay Debt service: Principal retirement Interest and fiscal charges Total expenditures Excess revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Proceeds from debt issuance Proceeds from sale of assets Transfers in Transfers out Total other financing sources and uses Excess of revenues and other sources over (under) expenditures and other uses Fund balances - beginning Fund balances - ending 1,499,006 1,713,733 1,428, 354 786,467 527,957 21,500 455,481 1,499,006 - 1,713,733 - 1,428,354 - 786,467 354,579 882,536 - 21,500 - 455,481 63,000 63,000 48,200 - 48,200 5,977,017 566,681 354,579 6,898,277 508,518 (261,849) (98,591) 148,078 390,918 2,325 (605,439) (212,196) 390,918 - - 2,325 513,883 91,556 605,439 - - (605,439) 513,883 91,556 393,243 296,322 252,034 (7,035) 541,321 2,084,762 1,501,768 107,190 3,693,720 $ 2,381,084 $ 1,753,802 $ 100,155 $ 4,235,041 The Notes to the Financial Statements are an integral part of this statement. 7 City of Moab Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2008 Amounts reported for governmental activities in the statement of activities are different because: Net changes in fund balances - total governmental funds $ 541,321 Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay Depreciation expense Difference between proceeds from sale of assets and the actual gain(loss) Repayment of the principal on capital leases is an expenditure in the governmental funds, but the repayment reduces the liability in the statement of net assets. The issuance of new debt in the form of a capital leases and a bond is shown as revenue in the statement of revenues, expenditures and changes in fund balance, but the issuance increases the long term liabilities in the statement of net assets. 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 funds: Increase in Compensated Absences 881,400 (414,494) (73,988) 119,285 (390,918) (24,993) Change in net assets of governmental activities $ 637,613 The Notes to the Financial Statements are an integral part of this statement. 8 City of Moab Statement of Revenues, Expenditures and Changes in Fund Balance -- Budget and Actual General Fund For the Year Ended June 30, 2008 Taxes: Sales and use taxes Franchise taxes Highway taxes Transient room taxes Resort community taxes Energy taxes Total Taxes Budgeted Amounts Original Final Variance with Budget Budget Actual Final Budget $ 1,172,760 $ 1,407,760 $ 1,427,015 $ 19,255 192,770 192,770 229,883 37,113 329,980 329,980 434,970 104,990 335,800 335,800 463,760 127,960 1,991,531 2,131,031 2,314,087 183,056 77,890 77,890 68,095 (9,795) 4,100,731 4,475,231 4,937,810 462,579 Licenses and permits: Beer licenses 8,000 8,000 7,240 (760) Flat business licenses 48,000 48,000 48,176 176 Building permits - city 45,000 45,000 55,679 10,679 Building permits - commercial 15,000 15,000 34,363 19,363 Plan check fees 2,500 2,500 3,852 1,352 Other licenses and permits 1,000 1,000 1,416 416 Total licenses and permits 119,500 119,500 150,726 31,226 Intergovernmental revenue: Local grants Federal grants State grants Total intergovernmental revenue 15,000 5,695 258,000 15,000 5,695 258,000 278,695 278,695 Charges for services: Refuse collection charges 797,902 827,902 Swimming pool 32,000 32,000 Other 70,000 70,000 Total charges for services 899,902 929,902 Fines and forfeitures Miscellaneous: Interest Other Administration charges Total Miscellaneous 67,100 67,100 15,000 5,695 220,189 (37, 811) 240,884 (37,811) 825,721 25,452 69,099 (2,181) (6,548) (901) 920,272 (9,630) 84,039 16,939 65,000 65,000 96,032 31,032 68,237 68,237 55,772 (12,465) 133,237 133,237 151,804 18,567 Total Revenues $ 5,599,165 $ 6,003,665 $ 6,485,535 $ 481,870 9 The Notes to The Financial Statements are an integral part of this statement. City of Moab Statement of Revenues, Expenditures and Changes in Fund Balance -- Budget and Actual (continued) General Fund For the Year Ended June 30, 2008 Budgeted Amounts Original Final Variance with Budget Budget Actual Final Budget General Government: Executive and central $ 142,250 $ 142,250 $ 141,145 $ (1,105) Administrative 257,550 257,550 253,453 (4,097) Recorder 287,393 290,093 273,356 (16,737) General government 184,750 189,750 178,694 (11,056) Planning 252,100 271,710 268,035 (3,675) Engineering 156,975 156,975 142,709 (14,266) Treasurer 150,032 152,882 149,906 (2,976) Attorney 84,000 79,000 67,624 (11,376) Film Commission 43,232 43,232 24,084 (19,148) Total General government 1,558,282 1,583,442 1,499,006 (84,436) Public Safety: Police department Building inspection Animal control Total public safety 1,597,199 63,000 140,720 1,600,139 65,200 148,220 1,800,919 1,813,559 1,493,363 (106,776) 35,443 (29,757) 184,927 36,707 1,713,733 (99,826) Highways and public improvements: Storm drains - - - Streets 1,379,430 1,346,630 1,238,464 (108,166) Safety 25,140 25,140 20,755 (4,385) Class C road 387,000 387,000 169,135 (217,865) Total highways and public improvements 1,791,570 1,758,770 1,428,354 (330,416) Parks, recreation and public property 414,460 409,460 383,495 (25,965) Sanitation 760,000 790,000 786,467 (3,533) Swimming Pool 147,175 147,175 144,462 (2,713) Community and economic development 21,500 21,500 21,500 Total expenditures - general fund 6,493,906 6,523,906 5,977,017 (546,889) Excess (deficiency) of revenues over (under) expenditures: (894,741) (520,241) 508,518 1,028,759 Proceeds from debt 385,930 385,930 390,918 4,988 Transfers out (93,439) (448,539) (605,439) (156,900) Sale of equipment - 2,325 2,325 Total other financing sources (uses) 292,491 (62,609) (212,196) (149,587) Net change in fund balance: (602,250) (582,850) 296,322 879,172 Fund Balance - beginning of year 2,084,762 2,084,762 2,084,762 Fund Balance - end of year $ 1,482,512 $ 1,501,912 $ 2,381,084 $ 879,172 The Notes to The Financial Statements are an integral part of this statement. City of Moab Statement of Net Assets Proprietary Funds June 30, 2008 Business -Type Activities - Enterprise Funds Non -major Water Sewer (Storm Drain) Total ASSETS Current assets: Cash and cash equivalents $ - $ 393,066 $ - $ 393,066 Due from other funds - 1,517,184 - 1,517,184 Accounts receivable (net) 57,881 47,070 10,774 115,725 Total current assets 57,881 1,957,320 10,774 2,025,975 Noncurrent assets: Restricted cash and cash equivalents Capital assets Less: Accumulated depreciation Total noncurrent assets Total assets LIABILITIES Current liabilities: Compensated absences Customer deposits Due to other funds Current portion of bonds payable Total current liabilities 1,240,557 5,722,142 (2,729,066) 4,233,633 903,768 7,059,288 (3,109,244) 2,144,325 12,781,430 (5,838,310) 4,853,812 9,087,445 4,291,514 6,811,132 10,774 11,113,420 14,122 7,656 1,507,174 78,000 14,121 1,606,952 14,121 10,010 28,243 7,656 1,517,184 78,000 10,010 1,631,083 Noncurrent liabilities: Bonds payable 36,481 36,481 Total noncurrent liabilities 36,481 - 36,481 Total liabilities 1,643,433 14,121 10,010 1,667,564 NET ASSETS Invested in capital assets, net of related debt 2,878,595 3,950,044 - 6,828,639 Restricted for bond requirements 325,912 - - 325,912 Restricted for impact fees 303,194 903,768 - 1,206,962 Unrestricted (859,620) 1,943,199 764 1,084,343 Total net assets $ 2,648,081 $ 6,797,011 $ 764 $ 9,445,856 The Notes to the Financial Statements are an integral part of this statement. 11 City of Moab Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds For the Year Ended June 30, 2008 Business -Type Activities - Enterprise Funds Non -major Water Sewer (Storm Drain) Total Operating revenues: Charges for service $ 531,361 $ 656,811 $ 10,811 $ 1,198,983 Other operating income 569 71,323 - 71,892 Total operating revenues 531,930 728,134 10,811 1,270,875 Operating expenses: Salaries and wages 145,027 71,434 2,466 218,927 Employee benefits 86,292 39,812 211 126,315 Contractual services 13,266 42,629 7,000 62,895 Materials and supplies 13,495 20,217 33,712 Special department supplies 35,584 17,024 370 52,978 Depreciation 161,957 163,954 325,911 Other expenses 55,911 46,039 - 101,950 Total operating expenses 511,532 401,109 10,047 922,688 Operating income 20,398 327,025 764 348,187 Nonoperating revenues (expenses): Interest revenue 45,036 59,232 - 104,268 Interest expense - (5,094) - (5,094) Impact fees 26,981 162,262 - 189,243 Total nonoperating revenues (expenses) 72,017 216,400 - 288,417 Change in net assets Total net assets - beginning Total net assets - ending 92,415 543,425 764 636,604 2,555,666 6,253,586 - 8,809,252 $ 2,648,081 $ 6,797,011 $ 764 $ 9,445,856 The Notes to the Financial Statements are an integral part of this statement. 12 Cash Flows From Operating Activities Receipts from customers Payments to suppliers Payments to employees Net cash provided (used) by operating activities Cash Flows From Capital and Related Financing Activities Purchases of capital assets Principal paid on capital debt Interest paid on capital debt Increase/decrease in due to/from other funds Impact fees collected Net cash provided (used) by capital and related financing activities City of Moab Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2008 Business -Type Activities - Enterprise Funds Non -major Water Sewer (Storm Drain) Total $ 529,755 $ 728,346 $ 37 $ 1,258,138 (113,512) (122,309) (7,370) (243,191) (231,319) (111,246) (2,677) (345,242) 184,924 494,791 (10,010) 669,705 (232,419) (8,473) (79,000) (208,668) (5,094) 695,997 (706,007) 26,981 162,262 411,559 (765,980) - (240,892) - (287,668) - (5,094) 10,010 - 189,243 10,010 (344,411) Cash Flows From Investing Activities Interest and dividends received 45,036 59,232 - 104,268 Net cash provided (used) by investing activities 45,036 59,232 - 104,268 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - beginning Cash and cash equivalents - ending 641,519 (211,957) 429,562 599,038 1,508,791 2,107,829 $ 1,240,557 $ 1,296,834 $ $ 2,537,391 Reconciliation of operating income to net cash provided (used) by operating activities: Operating income $ 20,398 $ 327,025 $ 764 $ 348,187 Adjustments to reconcile operating income to net cash provided (used) by operating activities: Depreciation expense 161,957 163,954 325,911 (Increase)/decrease in accounts receivable (2,175) 212 (10,774) (12,737) Increase (decrease) in customer deposits 1,143 1,143 Increase (decrease) in compensated absences 3,601 3,600 7,201 Total adjustments 164,526 167,766 (10,774) 321,518 Net cash provided (used) by operating activities $ 184,924 $ 494,791 $ (10,010) $ 669,705 The Notes to the Financial Statements are an integral part of this statement. 13 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 INDEX NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Financial Reporting Entity B. Basis of Presentation C. Measurement Focus and Basis of Accounting D. Assets, Liabilities, and Equity E. Revenues, Expenditures, and Expenses NOTE 2. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Fund Accounting Requirements B. Deposits and Investments Laws and Regulations C. Revenue Restrictions D. Debt Restrictions and Covenants E. Fund Equity Restrictions F. Budgetary Basis of Accounting NOTE 3. DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS A. Cash and Investments B. Restricted Assets C. Accounts Receivable D. Capital Assets E. Accounts Payable F. Long-term Debt G. Interfund Transactions and Balances H. Fund Equity NOTE 4. OTHER NOTES A. Employee Pension and Other Benefit Plans B. Risk Management C. Landfill Agreement 14 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City complies 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. 1.A. FINANCIAL REPORTING ENTITY Moab City is a political subdivision of the State of Utah. The City is governed by a mayor and an elected board of five council members. The financial statements of Moab City may include those of separately administered organizations that are controlled by or are dependent on the City (component units.) Control or dependence is determined on the basis of financial interdependence, selection of governing authority, designation of management ability to significantly influence operations and accountability for fiscal matters. Using these criteria no potential component units are included in the City's financial statements. The accounting policies of Moab City, Utah, conform to generally accepted accounting principles as applicable to governmental units. The following is a summary of the more significant of such policies. The City's financial reporting entity comprises the following: Primary Government: Component Units: City of Moab None 1.B. BASIS OF PRESENTATION Government -wide Financial 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: 15 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 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. The funds of the financial reporting entity are described below: Governmental Funds General Fund The General Fund is the primary operating fund of the City and always classified as a major fund. It is used to account for all activities except those legally or administratively required to be accounted for in other funds. Special Revenue Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for certain purposes. Capital Project Fund The Capital Project Fund is used to account for resources designated for the acquisition or construction of specific capital projects or items. The reporting entity includes only one Capital Project Fund and it is used to account for the acquisition of capital assets with transfers made from the General Fund. Proprietary Fund Enterprise Fund 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 and Sewer funds. Major and Nonmajor Funds The funds are further classified as major or non -major as follows: Fund Brief Description Major: General See above for description. Capital Projects Fund: Community Development Fund Accounts for activity with the City's Mill Creek Project Fund capital improvements. Capital Project Fund Sanitation Capital Project Fund 16 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Enterprise Funds: Water and Sewer Nonmajor: Special Revenue Funds: Recreation Fund Arts and Recreation Center Youth City Council Enterprise Fund Storm Drain Accounts for revenues and expenditures of water and sewer utilities. Accounts for revenues and expenditures for activities with the recreation, arts and recreation center and youth city council. Accounts for revenues and expenditures of the storm drain utility 1.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. c. Agency funds are not involved in the measurement of results of operations; therefore, measurement focus is not applicable to them. 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 17 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 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 from exchange and exchange -like transactions are recognized when the exchange takes place. In the fund financial statements, governmental funds and agency 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. 1.D. ASSETS, LIABILITIES, AND EQUITY Cash and Investments For the purpose of the Statement of Net Assets, "cash, including time deposits" 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. Investments of promissory note trustee accounts are not considered cash equivalents. 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. Additional cash and investment disclosures are presented in Notes 2.B. and 3.A. Interfund Receivables and Payables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services type transactions are classified as "due to and from other funds." Short-term interfund loans are reported as "interfund receivables and payables." Long-term interfund loans (noncurrent portion) are reported as "advances from and to other funds." Interfund receivables and payables between funds within governmental activities are eliminated in the Statement of Net Assets. See Note 3.G. for details of interfund transactions, including receivables and payables at year-end. Receivables In the government -wide statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Major receivable balances for the governmental activities include; sales taxes, garbage utilities, franchise taxes, and business licenses. Business -type activities report utilities as their major receivables. 18 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 In the fund financial statements, material receivables in governmental funds include revenue accruals such as sales tax, franchise tax, and grants and other similar intergovernmental revenues since they are usually both measurable and available. Non -exchange transactions collectible but not available are deferred in the fund financial statements in accordance with modified accrual, but not deferred in the government -wide financial statements in accordance with the accrual basis. Interest and investment earnings are recorded when earned only if paid within 60 days since they would be considered both measurable and available. Proprietary fund material receivables consist of all revenues earned at year-end and not yet received. Utility accounts receivable and interest earnings compose the majority of proprietary fund receivables. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Fixed Assets The accounting treatment over property, plant, and equipment (fixed assets) 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. Election Not to Report Infrastructure Retroactively Management of Moab City has elected not to report infrastructure retroactively. This is allowed by provisions of GASB Statement 34 for all governments with less than $10 million in revenues. The City began to report infrastructure prospectively during the fiscal year ended in 2004. 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. 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: Governmental Business -Type Activities Activities Description Estimated Lives Estimated Lives Buildings and Improvements 30-45 years 30-45 years Machinery and Equipment 10-15 years 10-15 years Vehicles 5-10 years 5-10 years Infrastructure 30 years 30 years 19 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Fund Financial Statements In the fund financial statements, fixed assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Fixed assets used in proprietary fund operations are accounted for the same as in the government -wide statements. Restricted Assets Restricted assets consist of various cash balances that are restricted as to their use. Certain cash balances are restricted by provisions of the bond resolutions. These include the bond, and emergency repairs accounts in the enterprise funds. Customer deposits are also restricted in the enterprise funds. Amounts are held in the agency fund for future burial and cemetery costs. Class C Road revenue not spent is restricted in the general fund to be used for future roadwork. 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 is reported as liabilities in the government -wide statements. The long-term debt consists primarily of notes payable, accrued compensated absences, and a court -assessed judgment. Long-term debt for governmental funds is not reported as liabilities in the fund financial statements. The debt proceeds are reported as other financing sources and payment of principle and interest reported as expenditures. The accounting for proprietary fund is the same in the fund statements as it is in the government -wide statements. Compensated Absences It is the City's policy to permit employees to accumulate earned but unused vacation and sick pay benefits. No liability is reported for unpaid accumulated sick leave. The liability for these 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. 20 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 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 those 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, with unreserved further split between designated and undesignated. Proprietary fund equity is classified the same as in the government -wide statements. See Note 3.H. for additional disclosures. 1.E. REVENUES, EXPENDITURES, AND EXPENSES Franchise taxes, licenses, interest and special assessments are susceptible to accrual. Sales taxes collected and held by the state at year-end on behalf of the City are also recognized as revenue. Other receipts and taxes become measurable and available when cash is received by the City and are recognized as revenue at that time. Entitlements and shared revenues are recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expenditure -driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other grant requirements have been met. The City does not levy property taxes. Sales taxes are collected by the Utah State Tax Commission and are remitted to the City monthly. Operating Revenues and Expenses Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services. It also includes all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. Expenditures/Expenses In the government -wide financial statements, expenses are classified by function for both governmental and business -type activities. 21 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 In the fund financial statements, expenditures are classified as follows: Governmental Funds —By Character: Current (further classified by function) Debt Service Capital Outlay Proprietary Fund —By Operating and Non -operating In the fund financial statements, governmental funds report expenditures of financial resources. Proprietary funds report expenses relating to use of economic resources. Interfund Transfers Permanent reallocation of resources between funds of the reporting entity are classified as interfund transfers. For the purposes of the Statement of Activities, all interfund transfers between individual governmental funds have been eliminated. NOTE 2. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY By its nature as a local government unit, the City is subject to various federal, state, and local laws and contractual regulations. An analysis of the City's compliance with significant laws and regulations and demonstration of its stewardship over City resources follows. 2.A. FUND ACCOUNTING REQUIREMENTS The City complies with all state and local laws and regulations requiring the use of separate funds. The legally required funds used by the City include the following: Fund General Fund Required By State Law 2.B. DEPOSITS AND INVESTMENTS LAWS AND REGULATIONS The City maintains a cash and investment pool that is available for use by all funds. In addition, investments are separately held by several of the City funds. Deposits are not collateralized, nor are they required to be by State statute. The City follows the requirements of the Utah Money Management Act (Utah Code Annotated 1953, Section 51, Chapter 7) in handling its depository and temporary investment transactions. This law requires the deposit of City funds in a "qualified depository." The Act defines a "qualified depository" as any financial institution whose deposits are insured by an agency of the federal government and which has been certified by the Commissioner of Financial Institutions as meeting the requirements of the Utah Money Management Act and adhering to the rules of the Utah Money Management Council. 22 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 The Utah Money Management Act also defines the types of securities allowed as appropriate temporary investments for the City and the conditions for making investment transactions. Investment transactions are to be conducted through qualified depositories or primary reporting dealers. Deposits Custodial Credit Risk is the risk that, in the event of a bank failure, the City's deposits may not be returned to it. The City does not have a formal deposit policy for custodial credit risk. As of June 30, 2008, $915,540 of the City's bank balances of $1,115,540 were uninsured and uncollateralized. At June 30, 2008, the carrying amount and the bank balance of the City's bank deposits was $712,898, and $1,115,540 respectively. Investments Certain assets are restricted by provisions of the revenue bond resolutions. The resolutions also describe how these restricted assets may be deposited and invested. Restricted cash may only be deposited in state or national banks meeting certain minimum net worth requirements or invested in securities representing direct obligations of or obligations guaranteed by the U.S. government, agencies of the U.S. government, any state within the territorial United States of America, repurchase agreements or interest bearing time deposits with state or national banks meeting certain minimum net worth requirements, or certain other investments. The Utah Public Treasurers' Investment Fund (UPTIF) is an external deposit and investment pool wherein governmental entities are able to pool the moneys from several entities to improve investment efficiency and yield. These moneys are invested primarily in money market securities and contain no withdrawal restrictions. As such, the moneys invested in this fund are not insured and are subject to the same market risks as any similar investment in money market funds. Interest Rate Risk — Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The City's policy for managing its exposure to fair value loss arising from increasing interest rates is to comply with the State's Money Management Act. Section 51-7-11 of the Act requires that the remaining term to maturity of investments may not exceed the period of availability of the funds to be invested. Credit Risk — The City follows the requirements of the Utah Money Management act (Section 61, chapter 7 of the Utah Code) in handling its depository and investing transactions. City funds are deposited in qualified depositories as defined by the Act. The Act also authorizes the City to invest in the Utah Public Treasurers' Investment Fund (UPTIF), trade commercial paper, bankers' acceptances, repurchase agreements, corporate bonds, restricted mutual funds, and obligation of government entities within the State of Utah. The UPTIF is invested in accordance with the Act. The State Money Management Council provides regulatory oversight for the UPTIF. The degree of risk of the UPTIF depends upon the underlying portfolio. The act and Council rules govern the financial reporting requirements of qualified depositories in which public funds may be deposited and prescribe the conditions under which the designation of a depository shall remain in effect. If a qualified depository should become ineligible to hold public funds, public treasurers are notified immediately. The City considers the actions of the Council to be necessary and sufficient for adequate protection of its investments. The City has no investment policy that would further limit its investment choices. The UPTIF is unrated. 23 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 2.C. REVENUE RESTRICTIONS The City has various restrictions placed over certain revenue sources from state or local requirements. The primary restricted revenue sources include: Revenue Source Sales Tax Water and Sewer B & C Road Funds Federal & State Grants Legal Restrictions of Use See Note 1.E. Debt Service and Utility Operations Eligible B & C Roads Specific to Grant For the year ended June 30, 2008, the City complied, in all material respects, with these revenue restrictions. 2.D. DEBT RESTRICTIONS AND COVENANTS General Obligation Debt No debt in excess of total revenue for the current year shall be created by any city unless the proposition to create such debt shall have been submitted to a vote of qualified electors. Cities shall not contract for debt to an amount exceeding four percent of the fair market value of taxable property in their jurisdictions. For the year ended June 30, 2008, the City had no outstanding general obligation debt. Other Long-term Debt Cities may incur a larger indebtedness for the purpose of supplying such city water, sewer, or electricity when such public works are owned and controlled by the municipality. The additional indebtedness shall not exceed four percent for first and second class cities and eight percent for third class cities. For the year ended June 30, 2008, the City had $2,754,386 of such indebtedness. Notes Payable The various loan agreements relating to the notes payable issuances contain some restrictions or covenants that are financial related. These include covenants such as debt service coverage requirement and required reserve account balances. The following schedule presents a brief summary of the most significant requirements and the Authority's level of compliance thereon as of June 30, 2008. Requirement Level of Compliance a. Note Payable Coverage: 1. Net water operating revenues (excluding depreciation) must equal 1.25 (1.20 for the 1996 Bonds) times the annual debt service plus the unfunded portion of the Debt Service Reserve Requirement to be due and payable for the forthcoming year on the 1993 Water Revenue Bonds, Series A & B and the 1996 Sewer Revenue Bond. b. Reserve Account Requirement: Various escrows are set up as reserves to make the annual debt payments. Minimum balances are required to be kept in each of the escrows. 24 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 2.E. FUND EQUITY RESTRICTIONS Deficit Prohibition Utah Code 10-6-116(4) indicates that only the "fund balance in excess of 5% of total revenues of the general fund may be utilized for budget purposes." The remaining 5% must be maintained as a minimum fund balance. The maximum in the general fund may not exceed 18% of the total estimated revenue of the general fund. (10-6-116(2)) The City exceeded the limitations allowed by law. Appropriations in the final budgets may not be made for any fund in excess of the estimated expendable revenues for the budgeted year. In other words, deficits in any fund are illegal. The City had no funds in the deficit position at year end. 2.F. BUDGETARY BASIS OF ACCOUNTING While the City is reporting financial position, results of operations and changes in fund balance on the basis of generally accepted accounting principles (GAAP), the budgetary basis as provided by law is based upon accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances. The Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual presented for the general fund is presented on the budgetary basis to provide a meaningful comparison of actual results with the budget. NOTE 3. DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS The following notes present detail information to support the amounts reported in the basic financial statements for its various assets, liabilities, equity, revenues, and expenditures/expenses. 3.A. CASH AND INVESTMENTS As of June 30, 2008 the government had the following investments and maturities: Fair Value Investment Maturity in Years Less Than 1 1-5 6-10 More Than 10 Investments in Public Treasurers' Investment Fund $5,109,362 $ 5,109,362 $ $ $ Total Fair Value $ 5,109,362 $ 5,109,362 $ - $ - $ 25 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Reconciliation to Government -wide Statement of Net Assets: Investments $ 5,109,362 Cash on hand 652 Deposits (overdraft) 712,898 Total $ 5,822,912 Government -wide Statement of Net Assets Cash and Cash Equivalents $ 3,308,704 Restricted Cash and Cash Equivalents 2,514,208 $ 5,822,912 3.B. RESTRICTED ASSETS The restricted assets as of June 30, 2008, are as follows: Type of Restricted Asset Cash/Time Deposits Investments Accrued Int. Total Business -Type Activities: Bond Requirements $ 325,912 $ - $ - $ 325,912 Customer Deposits 7,656 - - 7,656 Impact Fees 1,206,962 - - 1,206,962 Total 1,540,530 - - 1,540,530 Governmental Activities: Class "C" Roads 228,362 - - 228,362 Total 228,362 228,362 Grand Totals $ 1,768,892 $ $ - $ 1,768,892 3.C. ACCOUNTS RECEIVABLE Accounts receivable for the business -type activities consist of utilities receivable from the water and sewer utilities. Accounts receivable of the governmental activities consist of sales tax, garbage utilities, franchise taxes, and business licenses. Receivables detail at June 30, 2008, is as follows: Governmental Activities Business -Type Activities Total Accounts Receivable $ 573,444 $ 121,225 $ 694,669 Allowance for Doubtful Accounts - (5,500) (5,500) Net Accounts Receivable $ 573,444 $ 115,725 $ 689,169 26 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 3.D. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2008, was as follows: Balance at Balance at July 1, 2007 Additions Disposals June 30, 2008 Govemmental Activities: Land $ 371,977 $ - $ $ 371,977 Buildings 4,797,699 55,664 (46,670) 4,806,693 Improvements Other Than Bldgs 1,655,106 303,628 - 1,958,734 Machinery & Equipment 1,115,445 26,086 (95,570) 1,045,961 Autos & Trucks 1,297,739 399,322 (153,116) 1,543,945 Office Equipment 410,710 35,998 (12,669) 434,039 Infrastructure 2,235,391 60,702 - 2,296,093 Totals at historical cost 11,884,067 881,400 (308,025) 12,457,442 Less Accum. Depreciation Buildings (614,841) (79,548) 46,670 (647,719) Improvements Other Than Bldgs (436,755) (63,543) (500,298) Machinery & Equipment (314,365) (29,142) 74,725 (268,782) Autos & Trucks (476,798) (135,549) 106,154 (506,193) Office Equipment (9,443) (14,859) 8,455 (15,847) Infrastructure (313,710) (91,853) - (405,563) Total Accum. Depreciation (2,165,912) (414,494) 236,004 (2,344,402) Governmental Activities capital assets, net $ 9,718,155 $ 466,906 $ (72,021) $ 10,113,040 Business -type activities: Land $ 244,935 $ - $ - $ 244,935 Water Shares 18,000 - - 18,000 Sewage Plant 1,426,706 - 1,426,706 Improvements 10,152,957 223,944 10,376,901 Machinery & Equipment 520,140 16,947 - 537,087 Autos & Trucks 164,714 - - 164,714 Office Furniture 13,088 - - 13,088 Totals at historical cost 12,540,540 240,891 12,781,431 Less Accum. Depreciation Sewage Plant (1,216,817) (34,753) (1,251,570) Improvements (3,727,389) (257,007) (3,984,396) Machinery & Equipment (396,275) (28,665) - (424,940) Autos & Trucks (159,081) (5,236) - (164,317) Office Furniture (12,838) (250) (13,088) Total Accum. Depreciaiton (5,512,400) (325,911) (5,838,311) Business -type activities capital assets, net $ 7,028,140 $ (85,020) $ - $ 6,943,120 27 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Depreciation expense was charged to governmental activities as follows: General Government $ 75,214 Public Safety 121,166 Highways and Streets 156,677 Parks, Recreation and Public Property 61,437 Total depreciation expense $ 414,494 Depreciation on capital assets acquired under a capital lease: Equipment $ 637,450 Accumulated Amortization 152,991 Net Book Value $ 484,459 Amortization of capital leases is included in depreciation expense. 3.E. ACCOUNTS PAYABLE Payables in the general fund and non -major governmental funds are composed of payables that have to do with the building inspector and a parking escrow. 3.F. LONG-TERM DEBT The reporting entity's long-term debt is segregated between the amounts to be repaid from governmental activities and amounts to be repaid from business -type activities. 28 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Governmental Activities: As of June 30, 2008, the City had $2,611,662 governmental long-term debt detailed as follows: Compensated Absences Sales Tax Revenue Bond $ 278,355 1,865,000 Capital Leases 2007 Dodge Chargers - Wells Fargo Original Amt $75,118, Pmts $27,326 51,172 2006 F353 - Wells Fargo Original Amt $27,485, Pmts $9,886 9,514 2 - 2006 Ford F 150 Trucks Original Amt $44,207, Pmts $15,960 14,736 2008 Equipment - Zions Bank Original Amt $305,385, Pmts $109,753 305,385 2008 Vehicles - Zions Bank Original Amt $87,500, Pmts $31,089 87,500 Total Governmental Long -Term Debt $ 2,611,662 Business -type Activities: As of June 30, 2008, the long-term debt payable from proprietary fund resources consisted of the following: Compensated Absences: $ 28,243 Water Revenue Bonds: Water Revenue Bonds, Series A, Dated 1993 0%, (original amount $765,000) Water Revenue Bonds Series A, Dated 1993 0%, (Original amount $764,000) $ 43,240 71,241 Total Business -type debt $ 142,724 29 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Changes in Long-term Debt The following is a summary of changes in long-term debt for the year ended June 30, 2007: Type of Debt Governmental Activities: Compensated Absences Capital Leases Payable Sales Tax Revenue Bonds Due Within One Year Total Governmental Debt Business -type Activities: Compensated Absences Revenue Bonds Payable Due Within One Year Total Enterprise Fund Debt Balance July 1, 2007 $ 253,362 75,422 1,865,000 119,285 $ 2,313,069 $ 21,042 115,481 286,668 Balance Additions Deductions June 30, 2008 $ 24,993 392,885 240,474 $ 658,352 $ 7,201 78,000 $ 423,191 $ 85,201 $ - $ 278,355 (175,474) 292,833 (65,000) 1,800,000 (119,285) 240,474 $ (359,759) $ 2,611,662 $ - (79,000) (286,668) $ 28,243 36,481 78,000 $ (365,668) $ 142,724 The revenue bonds are payable only from the net revenues of the water and sewer systems, as defined in the bond ordinances. The ordinances further provide that the City establish certain accounts and reserves for bond payment and that all revenues of the system are to be used for operation and maintenance costs of the systems, principal and interest on the bonds, and establishment of the defined debt repayment reserves and capital facilities replacement account. 30 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Annual Debt Service Requirements The annual debt service requirements to maturity, including principal and interest, for long-term debt as of June 30, 2008, are as follows: Capital Leases: June 30 Governmental Activities 2009 $ 194,013 2010 168,167 2011 140,841 2012 Thereafter Total Commitment 503,021 Less Interest Portion 34,714 Net Capital Lease $ 468,307 Bonds and Notes Payable: Business -type Activities Governmental Activities Year Ending June 30 Principal Interest Principal Interest 2009 78,000 - 65,000 46,625 2010 36,481 66,000 45,000 2011 - - 68,000 43,350 2012 - - 70,000 41,650 2013 71,000 39,900 2014-2018 - - 385,000 171,875 2019-2023 - - 435,000 121,250 2024-2028 491,000 64,125 2029-2030 - - 214,000 8,050 Total $ 114,481 $ - $ 1,865,000 $ 581,825 31 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 3.G. INTER -FUND TRANSACTIONS AND BALANCES Operating Transfers The City had the following inter -fund transactions for the year ended June 30, 2008: FUND TRANSFERS OUT TRANSFERS IN General Fund $ 605,439 $ - Recreation - 91,556 Community Development 28,000 Millcreek Project 80,000 Captial Projects 405,883 TOTALS $ 605,439 $ 605,439 Due to/from other funds The City had the following inter -fund transactions for the year ended June 30, 2008: Fund Water Fund Sewer Fund Storm Drain Fund Due From Other Funds 1,517,184 Due To Other Funds $ 1,507,174 10,010 $ 1,517,184 $ 1,517,184 32 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 3.H. FUND EQUITY Restricted Fund Equity Government Business -Type Activities Activities Totals Net Assets Invested in capital assets, net of related debt $ 8,248,040 $ 6,828,639 $ 15,076,679 Restricted for: Class "C" roads 228,362 - 228,362 Bond requirements - 325,912 325,912 Impact fees - 1,206,962 1,206,962 Unrestricted 3,260,017 1,084,343 4,344,360 Total net assets 11,736,419 9,445,856 21,182,275 NOTE 4. OTHER NOTES 4A. EMPLOYEE PENSION AND OTHER BENEFIT PLANS The City participates in the following employee pension systems: Local Governmental - Cost Sharing Defined Benefits Pension Plans Plan Description The City of Moab contributes to the Local Governmental Contributory Retirement System and Local Governmental Noncontributory Retirement System, Public Safety Retirement System for employers with Social Security coverage, cost -sharing multiple - employer defined benefit pensions plans administered by the Utah Retirement Systems (Systems). Utah Retirement Systems provide refunds, retirement benefits, annual cost of living adjustments, and death benefits to plan members and beneficiaries in accordance with retirement statutes. The Systems are established and governed by the respective sections of Chapter 49 of the Utah Code Annotated 1953, as amended. The Utah State Retirement Office Act, in Chapter 49, provides for the administration of the Utah Retirement Systems and Plans under the direction of the Utah State Retirement Board whose members are appointed by the Governor. The Systems issue a publicly available financial report that includes financial statements and required supplementary information for the Local Governmental Contributory Retirement System, Local Governmental Noncontributory Retirement System, and Public Safety Retirement System for employers with Social Security coverage. A copy of the report may be obtained by writing to the Utah Retirement Systems, 540 East 200 South, Salt Lake City, UT 84102 or by calling 1-800-365-8772. 33 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 Funding Policy In the Local Governmental Noncontributory Retirement System, Moab City is required to contribute 11.62% of their annual covered salary. In the Public Safety Noncontributory Retirement System for employers with Social Security coverage, Moab City is required to contribute 22.61% of their annual covered salary. The contribution rates are the actuarially determined rates. The contribution requirements of the Systems are authorized by statute and specified by the Board. Moab City's contributions to the various systems for the years ending June 30, 2008, 2007, and 2006 were as follows: Employer Paid Total Contributory System: for employee Employer Employer Local Government Division Contributions Contributions Contributions 2008 $ - $ - $ - 2007 2006 1,800 2,711 4,511 Noncontributory System: Local Government Division 2008 2007 2006 $ $ 183,919 $ 183,919 162,836 162,836 152,457 152,457 Public Safety System: Other Division A Noncontributory 2008 $ - $ 108,375 $ 108,375 2007 96,588 96,588 2006 - 73,063 73,063 The contributions were equal to the required contributions for each year. 457 Deferred Compensation Plan The Utah Retirement Systems (URS) have adopted Governmental Accounting Standards Board Statement 32, "Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans." This resulted in reporting the 457 Plans as a "Trust Fund" of URS rather than previously reported as an "Agency Fund" of Moab City. The assets and income of the 457 Plan are held in trust for the exclusive benefit of the participants or their beneficiaries and are not the assets of the employer. 34 CITY OF MOAB, UTAH NOTES TO BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008 4.B. RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City has purchased comprehensive general liability insurance through the Utah Local Governments' Trust. The City pays premiums to the Trust for its general insurance coverage, automobile liability, and personal injury protection. The Trust is self sustaining through member premiums. The City is subject to a minimal deductible for claims. 4.C. LANDFILL AGREEMENT Moab City entered into an agreement with the Grand County Solid Waste Management Special Service District No. 1 and Grand County in which the City agreed to guarantee the performance of closure and post -closure care at the Klondike and Moab Landfills. Should the escrow moneys set aside by the District not cover all costs associated with the closure and post -closure of the landfill, Moab would be liable for one half of the uncovered costs. Total closure and post -closure costs are currently estimated to be no more than $249,031 for the Klondike Landfill and for the Moab Landfill. 35 SUPPLEMENTARY INFORMATION City of Moab Combining Balance Sheet for Nonmajor Funds June 30, 2008 ASSETS Cash and cash equivalents Accounts receivable Total assets Special Revenue Funds Total Arts and Nonmajor Recreation Recreation Youth City Governmental Fund Center Council Funds $ 94,120 $ 2,018 $ 2,959 $ 99,097 1,058 - - 1,058 $ 95,178 $ 2,018 $ 2,959 $ 100,155 LIABILITIES AND FUND BALANCES Liabilities: Total liabilities FUND BALANCES Fund balances reserved for: Recreation 95,178 2,018 97,196 Youth city council - - 2,959 2,959 Total fund balances 95,178 2,018 2,959 100,155 Total Liabilities and fund balance $ 95,178 $ 2,018 $ 2,959 $ 100,155 The Notes to the Financial Statements are an integral part of this statement. 36 City of Moab Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non -major Governmental Funds For the Year Ended June 30, 2008 Special Revenue Funds Total Arts and Nonmajor Recreation Recreation Youth City Governmental Fund Center Council Funds REVENUES Intergovernmental revenues $ 69,966 $ - $ $ 69,966 Charges for service 185,900 - 185,900 Interest income - - 122 122 Total 255,866 - 122 255,988 EXPENDITURES Parks, recreation and public property 354,579 - 354,579 Total 354,579 - 354,579 Excess of revenues over (under) expenditures (98,713) - 122 (98,591) OTHER FINANCING SOURCES (USES) Transfers in 91,556 - 91,556 Total other financing sources (uses) 91,556 - 91,556 Excess of revenues and other sources over (under) expenditures and other uses (7,157) - 122 (7,035) Fund balances - beginning Fund balances - ending 102,335 2,018 2,837 107,190 $ 95,178 $ 2,018 $ 2,959 $ 100,155 The Notes to the Financial Statements are an integral part of this statement. 37 City of Moab Schedule of Impact Fees Collected and Spent and Capital Facilities Budget for 2009 thru 2014 June 30, 2008 Water Sewer Capactiy Treatment Fiscal Facilities Facilities Year Impact Fee Impact Fee 1999 Collected 3,693 11,273 Spent - 2000 Collected 75,308 145,686 Spent (9,072) - 2001 Collected 57,159 204,373 Spent (6,568) (456) 2002 Collected 14,818 43,139 Spent (5,050) (775) 2003 Collected 22,592 38,769 Spent (8,405) (10,762) 2004 Collected 22,323 39,889 Spent (10,000) (10,000) 2005 Collected 32,839 71,930 Spent - - 2006 Collected 23,864 122,490 Spent (2,173) (4,707) 2007 Collected 46,553 113,888 Spent (2,894) (225,589) 2008 Collected 29,981 162,262 Spent - (118,304) Ending Balance $ 284,969 $ 583,107 Capital Facilities Budget - 2009 thru 2014 Project 2009 2010 2011 2012 2013 2014 Water Projects - 1,200,000 - Sewer Projects - - - 1,600,000 38 CITY OF MOAB, UTAH INDEPENDENT AUDITORS' REPORT IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS, INDEPENDENT AUDITORS' REPORT ON LEGAL COMPLIANCE AND MANAGEMENT LETTER JUNE 30, 2008 CITY OF MOAB, UTAH TABLE OF CONTENTS JUNE 30, 2008 GOVERNMENT AUDITING STANDARDS REPORT Independent Auditors' Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance With Government Auditing Standards Pages 1-2 STATE COMPLIANCE REPORT Independent Auditors' Report on Legal Compliance with Applicable Utah State Laws and Regulations 3-4 MANAGEMENT LETTER Management Letter and comments on findings 5-10 GOVERNMENT AUDITING STANDARDS REPORT .. .. LARSON & ROSENBERGER LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS October 8, 2008 Honorable Mayor and City Council Members City of Moab, Utah We have audited the accompanying basic financial statements of the City of Moab, Utah (herein referred to as the "City"), as of and for the year ended June 30, 2008, and have issued our report thereon dated October 8, 2008. 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. Compliance As part of obtaining reasonable assurance about whether the City's basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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 that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the City'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's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City's internal control over financial reporting. SALT LAKE CITY OFFICE 9065 SOUTH 1300 EAST SANDY, UTAH 84094 1801)313-1900 FAX (801) 313-11112 LOS ANGELES OFFICE 801 NORTH BRAND BLVD STE 1180 GLENDALE, CALIFORNIA 91203 (818) 334-8623 FAX (818) 241-7353 SPANISH FORK OFFICE 765 NORTH MAIN SPANISH FORK, UTAH 84660 (801) 798-3545 FAX (801) 798-3678 1 MOAB OFFICE 115 WEST 200 SOUTH 44 MOAB. UTAH 84532 (435) 259-9100 FAX (43S) 259-1100 MENDER OF TFIE I N T E R N A T I O N A L ACCOUNTING GROUP ( T I A G) + W W W. L A R E C O. C O M Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the City's financial statements that is more than inconsequential will not be prevented or detected by the City's internal control. We consider the deficiencies described in the accompanying management letter to be significant deficiencies in internal control over financial reporting. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. However, we believe that none of the significant deficiencies described above is a material weakness. This report is intended for the information of the Mayor and City Council, management, and various federal and state funding and auditing agencies and is and is not intended to be and should not be used by anyone other than these specified parties. Larson & Rosenberger, LLP Certified Public Accountants 2 STATE COMPLIANCE REPORT LARSON & ROSENBERGER LLP CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT ON LEGAL COMPLIANCE WITH APPLICABLE UTAH STATE LAWS AND REGULATIONS October 8, 2008 Honorable Mayor and City Council Members City of Moab, Utah We have audited the basic financial statements of the City of Moab, Utah, as of and for the year ended June 30, 2008, and have issued our report thereon dated October 8, 2008. As part of our audit, we have audited the City of Moab's compliance with the requirements governing types of services allowed or un-allowed; eligibility; matching, level of effort, or earmarking; reporting; special tests and provisions applicable to each of its major State assistance programs as required by the State of Utah Legal Compliance Audit Guide for the year ended June 30, 2008. The City received the following major State assistance programs from the State of Utah: B and C Road Funds (Department of Transportation) Liquor Law Enforcement (State Tax Commission) Our audit also included test work on the City's compliance with those general compliance requirements identified in the State of Utah Legal Compliance Audit Guide, including: Public Debt Cash Management Purchasing Requirements Budgetary Compliance Other General Compliance Requirements Uniform Building Code Standards Impact Fees and Other Development Fees Asset Forfeiture The management of the City of Moab is responsible for the City's compliance with all compliance requirements identified above. Our responsibility is to express an opinion on compliance with those requirements based on our audit. SALT LAKE CITY OFFICE 9065 SOUTH 1300 EAST SANDY, UTAH 84094 1801)313-1900 FAX (801) 313-11112 LOS ANGELES OFFICE 801 NORTH BRAND BLVD STE 1180 GLENDALE, CALIFORNIA 91203 (818) 334-8623 FAX (818) 241-7353 SPANISH FORK OFFICE 765 NORTH MAIN SPANISH FORK, UTAH 84660 (801) 798-3545 FAX (801) 798-3678 3 MOAB OFFICE 115 WEST 200 SOUTH 44 MOAB. UTAH 84532 (435) 259-9100 FAX (43S) 259-1100 MENDER OF TFIE I N T E R N A T I O N A L ACCOUNTING GROUP ( T I A G) + W W W. L A R E C O. C O M We conducted our audit in accordance with generally accepted auditing standards, 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 material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures disclosed immaterial instances of noncompliance with the requirements referred to above, which are described in the management letter. We considered these instances of noncompliance in forming our opinion on compliance, which is expressed in the following paragraph. In our opinion, the City of Moab, Utah, complied, in all material respects, with the general compliance requirements identified above and the requirements governing types of services allowed or un-allowed; eligibility; matching, level of effort, or earmarking; reporting; and special tests and provisions that are applicable to each of its major State assistance programs for the year ended June 30, 2008. Larson &Rosenberger, LLP Certified Public Accountants 4 MANAGEMENT LETTER LARSON & ROSENBERGER LLP CERTIFIED PUBLIC ACCOUNTANTS October 8, 2008 The Honorable Mayor and Members of the City Council City of Moab, Utah Mayor and Council Members: We have audited the financial statements of the governmental activities and the business -type activities, of Moab City for the year ended June 30, 2008, and have issued our report thereon dated October 8, 2008. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards and Government Auditing Standards As stated in our engagement letter dated June 30, 2008, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by Moab City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during year. We noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. SALT LAKE CITY OFFICE 9065 SOUTH 1300 EAST SANDY, UTAH 84094 (801)313-1900 FAX (801) 313-1912 LOS ANGELES OFFICE 801 NORTH BRAND BLVD STE 1180 GLENDALE, CALIFORNIA 01203 (818) 334-8623 FAX (818) 241-7353 SPANISH FORK OFFICE 765 NORTH MAIN SPANISH FORK, UTAH 84660 (801) 798-3545 FAX (801) 798-3878 5 MOAB OFFICE 115 WEST 200 SOUTH 44 MOAB, UTAH 84532 (435) 259-9100 FAX (435) 259-1100 MEMBER OF THE INTERNATIONAL ACCOUNTING GROUP ( T I A G) + W W W. L A R S C❑. C❑ M Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Issues Discussed Prior to Retention of Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Internal Control Findings — Current Year Segregation of Duties — Significant Deficiency Finding: Proper segregation of duties is a key effective internal control because it can aid in reducing the risk of mistakes and inappropriate actions, and can help fight fraud through discouraging collusion. We noted during our audit that the City lacks proper segregation of duties which results in weaknesses in internal controls 6 Recommendation: We recommend that to the extent possible, the City segregate duties to serve as a check and balance to maintain the best control system possible. Due to the limited number of staff at the City we also recommend that the Mayor and Council provide oversight on the financial operations of the City. Client Response: The Mayor and all Council Members will, continue to, along with the Recorder and Treasurer, review all financial matters and promptly investigate anything unusual. Year end adjusting entries — Significant Deficiency Finding: Management does not currently record all year-end or closing journal entries, specifically revenue and grant accruals; debt adjustments including correct allocation of principal payments and interest accruals; and depreciation expense. Management relies on Auditors to propose journal entries to adjust necessary accounts, funds, and financial statements. Recommendation: It is recommended that the client develop a system or improve the current system for financial reporting to ensure that all necessary entries are made in a timely and accurate manner. This can be accomplished through additional training of Management or through work with the Auditors. Client Response: Management will work with the Auditors to post closing journal entries in the future. Drafting of financial statements — Significant Deficiency Finding: Management does not currently draft the City's basic financial statements and related footnotes. The Auditor, with oversight from Management, drafts the financial statements and footnotes. Management then reviews, approves, and accepts responsibility for the financial statements. Recommendation: Management should work both independently and with the Auditors to receive the training that will enable them to draft the financial statements and related footnotes, should that be their desire. Client Response: Management will consider the possibility of drafting the financial statements and work with the Auditor toward a viable solution. 7 State Compliance Findings — Current Year Public Treasurer's fidelity bond Finding: Every public treasurer shall secure a fidelity bond, based on the previous year's budgeted gross revenues, which includes all funds collected or handled by the public treasurer, in the amount set forth by the state (Utah Code 51-7-15). The City's fidelity bond was underfunded based on the previous year's budgeted gross revenue. Recommendation: We recommend that the City increase there fidelity bond to become compliant with State requirements. Client Response: Management is aware of the issue and has taken immediate action to correct the problem. General fund balance Finding: Municipalities may accumulate fund balances in any fund. However, the fund balance amounts must be within certain limits. For municipalities, Utah Code 10-6-116(4) indicates that only the "fund balance in excess of 5% of total revenues of the general fund may be utilized for budget purposes." The maximum in the general fund may not exceed 18% of the total estimated revenue of the general fund. The city exceeded the 18% limit in unreserved general fund balance. Recommendation: We recommend that the City monitor its general fund balance more closely, and make any necessary adjustments or transfers to appropriate capital project funds to ensure that it stays within the legal limits Client Response: Management is aware of the requirement and will take appropriate action in the future. Status of Internal Control Findings — Prior Year Year end adjusting entries — Significant Deficiency Finding: Management does not currently record all year-end or closing journal entries, specifically revenue and grant accruals; debt adjustments including correct allocation of principal payments and interest accruals; and depreciation expense. Management relies on Auditors to propose journal entries to adjust necessary accounts, funds, and financial statements. 8 Recommendation: It is recommended that the client develop a system or improve the current system for financial reporting to ensure that all necessary entries are made in a timely and accurate manner This can be accomplished through additional training of Management or through work with the Auditors. Status: See current year findings. Drafting of financial statements — Si,enificant Deficiency Finding: Management does not currently draft the City's basic financial statements and related footnotes. The Auditor, with oversight from Management, drafts the financial statements and footnotes. Management then reviews, approves, and accepts responsibility for the financial statements. Recommendation: Management should work both independently and with the Auditors to receive the training that will enable them to draft the financial statements and related footnotes. Status: See current year findings. Status of State Compliance Findings — Prior Year Public Treasurer's fidelity bond Finding: Every public treasurer shall secure a fidelity bond, based on the previous year's budgeted gross revenues, which includes all funds collected or handled by the public treasurer, in the amount set forth by the state (Utah Code 51-7-15). The City's fidelity bond was underfunded based on the previous year's budgeted gross revenue. Recommendation: We recommend that the City increase there fidelity bond to become compliant with State requirements. Status: See current year findings. 9 General fund balance Finding: Municipalities may accumulate fund balances in any fund. However, the fund balance amounts must be within certain limits. For municipalities, Utah Code 10-6-116(4) indicates that only the "fund balance in excess of 5% of total revenues of the general fund may be utilized for budget purposes." The maximum in the general fund may not exceed 18% of the total estimated revenue of the general fund. The city exceeded the 18% limit in unreserved general fund balance. Recommendation: We recommend that the City monitor its general fund balance more closely, and make any necessary adjustments or transfers to appropriate capital project funds to ensure that it stays within the legal limits. Status: See current year findings. This information is intended solely for the use of Moab City and management of Moab City and is not intended to be and should not be used by anyone other than these specified parties. Very truly yours, Larson & Rosenberger, LLP Certified Public Accountants 10