HomeMy Public PortalAbout2004-2005 Audit Final_DraftCITY OF MOAB, UTAH
INDEPENDENT AUDITORS' REPORT
BASIC FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2005
CITY OF MOAB, UTAH
TABLE OF CONTENTS
YEAR ENDED JUNE 30, 2005
Pages
INDEPENDENT AUDITORS' REPORT 1-2
MANAGEMENT'S DISCUSSION AND ANALYIS MDA-1 thru MDA-4
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 14-36
REQUIRED SUPPLEMENTARY INFORMATION:
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet — Non -major Governmental Funds 37
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances — Non -major Governmental Funds 38
Al
LARSON & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
September 23, 2005
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, 2005, 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,
2005, and the respective changes in financial position and cash flows, where applicable, thereof
for the year then ended in conformity with accounting principles generally accepted in the United
States of America.
SANDY. OFFICE
9065 SOUTH 1300 EAST
SANDY. UTAH 84094
18011 313-1900
FAX (801) 313-1912
SPANISH FORK OFFICE
765 NORTH MAIN
SPANISH FORK. UTAH 64660
(801 ) 798-3545
FAX (801) 798.3678
1
MOAB OFFICE
121 EAST 100 SOUTH SUITE 104
MOAB. UTAH 84532
(4351 259-9100
FAX (801 ) 259.9100
MEMBER OF THE INTERNATIONAL ACCOUNTING GROUP (TIAG) + WW1N.LAR5CO.COM
The Management's Discussion and Analysis on pages MDA-1 through MDA-4 is not a required part
of the basic financial statements but is supplementary information required by accounting principles
generally accepted in the United States of America. We have applied certain limited procedures,
which consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the information
and express no opinion on it.
In accordance with Government Auditing Standards, we have also issued a report dated September
23, 2005, 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. 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 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.
L., , 6,,,,,,„
Larson & Company
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, 2005. 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 $994,963 to $16,599,694.
The governmental net assets increased by $938,818 and the business -type net
assets increased by $56,145.
• The total net assets of $16,599,694 are made up of $12,316,047 in capital
assets net of related debt and $4,283,647 in other net assets.
• The General Fund (the primary operating fund) had an increase in its fund
balance of $399,313, due to greater than anticipated revenues over
expenditures for the fiscal year. Sales Tax —type revenues have come in
higher than expected.
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
MDA-1
reported as soon as the underlying event giving rise to the change occurs,
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 fund that the City of Moab
maintains is the Water and Sewer 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 $16,599,694.
The largest portion of the City of Moab's net assets (74%) 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.
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, 2005, the City's governmental funds (General, Capital Projects, &
Special Revenue) reported combined fund equity of $2,102,480. This represents an
increase of $34,470 from last year's ending balances; this increase is due to greater
than expected sales -tax -type revenues.
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 70% 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.
MDA-3
GENERAL FUND BUDGETARY HIGHLIGHTS
During the fiscal year, the General Fund budget was amended from an original budget
expenditure total of $4,621,910 to a final budget of $4,531,310. This decrease was
made because some of the road projects the City had anticipated did not occur.
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, 2005, amounts to $15,336,195 (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 City Center Renovation Project $2,700,000
o West Center Street Improvements Project $202,690
o Main Street Waterline Rebuild $1,300,000
Long-term debt — At June 30, 2005, the City had total bonded debt outstanding of
$3,020,148. All of this debt is revenue bond debt. The City of Moab has no general
obligation debt.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET AND RATES
• The unemployment rate for Grand County was 6.9% compared with a state
unemployment rate of 5.6% and a national rate of 3.7%. (Source: Utah Dept
of Workforce Services).
• Some capital improvements expected in the FY 2005-06 budget include:
o Construction of Animal Shelter
o North Area Trunk Sewer Line
o East Center Street Improvement Project
o Swanny City Park Restrooms
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-4
BASIC FINANCIAL STATEMENTS
City of Moab
Statement of Net Assets
June 30, 2005
ASSETS
Cash and cash equivalents
Accounts receivable - (net of allowance)
Deposits
Restricted cash and cash equivalents
Capital assets (net of accumulated depreciation):
Land
Buildings
Improvements
Machinery and equipment
Automobiles and trucks
Office equipment
Water shares
Infrastructure
Total assets
LIABILITIES
Accounts payable and accrued liabilities
Customer deposits
Accrued interest payable
Compensated absences
Noncurrent liabilities:
Due within one year
Due in more than one year
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for:
Class "C" roads
Bond requirements
Impact fees
Capital projects
Unrestricted
Total net assets
Primary Government
Governmental
Activities
$ 1,109,591
417,086
6,119
606,707
371,977
3,787,281
1,159,502
846,503
676,481
376,461
1,552,214
10,909,922
37,023
215,841
92,296
2,023,084
2,368,244
6,720,419
204,638
402,069
1,214,552
$ 8,541,678
Business -type
Activities
$ 1,050,544
92,586
1,358,303
244,935
279,394
5,839,792
154,431
28,356
868
18,000
9,067,209
5,413
12,590
21,042
279,000
691,148
1,009,193
5,595,628
674,723
678,167
1,109,498
Total
$ 2,160,135
509,672
6,119
1,965,010
616,912
4,066,675
6,999,294
1,000,934
704,837
377,329
18,000
1,552,214
19,977,131
37,023
5,413
12,590
236,883
371,296
2,714,232
3,377,437
12,316,047
204,638
674,723
678,167
402,069
2,324,050
$ 8,058,016 $ 16,599,694
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
Total business -type activities
Total primary government
Expenses
$1,036,460
1,217,243
970,868
653,507
680,755
39,500
4,598,333
City of Moab
Statement of Activities
For the Year Ended June 30, 2005
Program Revenues
Charges for
Services
$ 398,415
111,485
684,708
164,180
Operating
Grants and
Contributions
Net (Expense) Revenues and Changes in Net Assets
Capital Primary Government
Grants and
Contributions Total
$ 19,009 $
182,605
61,260
1,358,788 262,874
735,554 558,037
644,123 709,324
1,379,677 1,267, 361
$5,978,010 $ 2,626,149 $ 262,874
General revenues:
General sales and use tax
Franchise tax
Highway tax
Transient room tax
Resort community tax
Energy tax
Unrestricted investment earnings
Gain or loss on sale of capital assets
Miscellaneous
Total general revenues
Change in net assets
Net assets - beginning
Net assets - ending
161,200
Governmental Business -type
Activities Activities
$ (619,036) $
(1,105,758)
(788,263)
31,201
(294,115)
(39, 500)
161,200 (2,815,471)
32,839
71,930
104,769
$ 265,969 (2,815,471)
1,081,461
116,293
326,331
215,688
1,846,213
54,797
85,502
(29,857)
57,861
(144, 678)
137,131
(7,547)
(7,547)
63,692
3,754,289 63,692
938,818 56,145
7,602,860 8,001,871
$ (619,036)
(1,105,758)
(788,263)
31,201
(294,115)
(39,500)
(2,815,471)
(144,678)
137,131
(7,547)
(2,823,018)
1,081,461
116,293
326,331
215,688
1,846,213
54,797
149,194
(29,857)
57,861
3,817,981
994,963
15,604,731
$ 8,541,678 $ 8,058,016 $ 16,599,694
The Notes to the Financial Statements are and integral part of this statement.
City of Moab
Balance Sheet
Governmental Funds
June 30, 2005
Capital Other Total
General Projects Governmental Governmental
Fund Fund Funds Funds
ASSETS
Cash and cash equivalents $ 688,053 $ 397,055 $ 24,483 $ 1,109,591
Receivables (net):
Garbage 59,594 59,594
Franchise tax 15,702 - 15,702
Sales and use tax 334,113 - 334,113
Other 7,677 - 7,677
Deposits 6,119 - 6,119
Restricted assets:
Cash and cash equivalents 204,638 402,069 606,707
Total assets $ 1,315,896 $ 799,124 $ 24,483 $ 2,139,503
LIABILITIES AND FUND BALANCES
Liabilities:
Accounts payable $ 37,023 $ - $ $ 37,023
Total liabilities 37,023 37,023
Fund Balances:
Fund balances reserved for:
Class "C" roads 204,638 - 204,638
Recreation - - 21,999 21,999
Youth city council - - 2,484 2,484
Capital projects - 402,069 402,069
Unreserved, reported in:
General fund 1,074,235 - 1,074,235
Capital projects funds - 397,055 397,055
Total fund balances 1,278,873 799,124 24,483 2,102,480
Total liabilities and fund balances $1,315,896 $ 799,124 $ 24,483 $ 2,139,503
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, 2005
Amounts reported for governmental activities in the statement of net assets are
different because:
Total fund balances - governmental fund types (page 5):
Capital assets used in governmental activities are not financial resources and, therefore,
are not reported in the funds.
Long-term liabilities, including bonds payable, are not due and payable in the current
period and therefore are not reported in the funds.
$ 2,102,480
8,770,419
(2,331,221)
Net assets of government activities (page 3): $ 8,541,678
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, 2005
Capital Other Total
General Projects Governmental Governmental
Fund Fund Funds Funds
REVENUES
Taxes $ 3,640,783 $ $ $ 3,640,783
Licenses and permits 105,020 - - 105,020
Intergovernmental 182,605 19,009 61,260 262,874
Charges for services 753,199 - 95,689 848,888
Fines and forfeitures 54,880 - - 54,880
Contributions and donations - 161,200 - 161,200
Interest Income - 52,069 61 52,130
Miscellaneous revenue 441,233 - - 441,233
Total revenues 5,177,720 232,278 157,010 5,567,008
EXPENDITURES
Current:
General government 1,083,871 1,083,871
Public safety 1,237,325 - - 1,237,325
Highways and public works 807,941 807,941
Sanitation 653,507 - - 653,507
Parks, recreation and public property 448,362 224,180 672,542
Community and economic development 39,500 - - 39,500
Capital outlay 73,952 3,061,541 3,135,493
Debt service:
Principal retirement 33,869 33,869
Interest and fiscal charges 479 - - 479
Total expenditures 4,378,806 3,061,541 224,180 7,664,527
Excess revenues over (under)
expenditures 798,914 (2,829,263) (67,170) (2,097,519)
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets
Proceeds from debt issuance
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
Prior period adjustment
Fund balances - ending
8,037
73,952
(481,590)
- 8,037
2,050,000 - 2,123,952
395,000 86,590 481,590
- - (481,590)
(399,601) 2,445,000
86,590 2,131,989
399,313 (384,263) 19,420 34,470
879,560 640,832 5,063 1,525,455
542,555 - 542,555
$ 1,278,873 $ 799,124 $ 24,483 $ 2,102,480
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, 2005
Amounts reported for governmental activities in the statement of activities are
different because:
Net changes in fund balances - total governmental funds $ 34,470
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
3,371,280
(364,197)
Governmental funds only report the disposal of fixed assets to the extent proceeds
are received from the sale. In the statement of activities, a gain or loss is reported
for each disposal. (37,894)
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. 49,968
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:
Compensated Absences
(2,123,952)
9,143
Change in net assets of governmental activities $ 938,818
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, 2005
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
$ 965,000 $ 965,000 $ 1,081,461 $ 116,461
100,000 100,000 116,293 16,293
290,000 290,000 326,331 36,331
195,000 195,000 215,688 20,688
1,620,000 1,620,000 1,846,213 226,213
48,000 48,000 54,797 6,797
3,218,000 3,218,000 3,640,783 422,783
Licenses and permits:
Beer licenses 8,000 8,000 7,770 (230)
Flat business licenses 43,000 43,000 48,057 5,057
Building permits - city 14,000 14,000 32,223 18,223
Building permits - commercial 14,000 14,000 14,717 717
Plan check fees 1,500 1,500 1,895 395
Other licenses and permits 3,000 3,000 358 (2,642)
Total licenses and permits 83,500 83,500 105,020 21,520
Intergovernmental revenue:
Local grants
State grants
Total intergovernmental revenue
8,000 8,000 - (8,000)
201,600 201,600
209,600 209,600
182,605 (18,995)
182,605 (26,995)
Charges for services:
Refuse collection charges 677,250 685,750 684,708 (1,042)
Swimming pool 32,500 32,500 39,824 7,324
Golf course 15,000 15,000 13,382 (1,618)
Other 38,200 38,200 15,285 (22,915)
Total charges for services 762,950 771,450 753,199 (18,251)
Fines and forfeitures
44,500 44,500
54,880 10,380
Miscellaneous:
Interest 23,800 23,800 33,372 9,572
Other 10,050 50,050 57,861 7,811
Administration charges 350,000 350,000 350,000
Total Miscellaneous 383,850 423,850 441,233 17,383
Total Revenues $ 4,702,400 $ 4,750,900 $ 5,177,720 $ 426,820
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, 2005
Budgeted Amounts
Original Final Variance with
Budget Budget Actual Final Budget
General Government:
Executive and central $ 124,400 $ 124,400 $ 121,443 $ (2,957)
Administrative 160,000 161,630 160,975 (655)
Recorder 227,511 209,511 219,126 9,615
General government 130,310 140,710 135,166 (5,544)
Planning 245,420 245,420 239,239 (6,181)
Engineering - 26,320 10,858 (15,462)
Treasurer 131,113 131,113 125,642 (5,471)
Attorney 79,000 76,000 71,422 (4,578)
Total General government 1,097,754 1,115,104 1,083,871 (31,233)
Public Safety:
Police department
Building inspection
Animal control
Total public safety
1,036,884
62,000
130,665
1,036,884
62,000
130,665
1,229,549 1,229,549
1,053,055
59,629
124,641
16,171
(2,371)
(6,024)
1,237,325 7,776
Highways and public improvements:
Storm drains 6,900 6,900 4,443 (2,457)
Streets 712,545 700,545 698,643 (1,902)
Safety 16,400 16,400 16,223 (177)
Class C road 290,800 194,800 88,632 (106,168)
Total highways and public improvements 1,026,645 918,645 807,941 (110,704)
Parks, recreation and public property 472,162 463,712 448,362 (15,350)
Sanitation 645,000 653,500 653,507 7
Community and economic development 42,500 42,500 39,500 (3,000)
Capital outlay 73,952 73,952 73,952
Debt service:
Principal retirement 33,869 33,869 33,869
Interest and fiscal charges 479 479 479
34,348 34,348 34,348
Total expenditures - general fund 4,621,910 4,531,310 4,378,806 (149,511)
80,490 219,590 798,914
576,331
Proceeds from debt 73,952 73,952
Transfers out (438,490) (481,590) (481,590) -
Sale of equipment 12,000 12,000 8,037 (3,963)
Total other financing sources (uses) (426,490) (469,590) (399,601) 69,989
(346,000) (250,000)
879,560
399,313 649,313
879,560 879,560
$ 533,560 $ 629,560 $ 1,278,873 $ 649,313
The Notes to The Financial Statements are an integral part of this statement. 10
City of Moab
Statement of Net Assets
Proprietary Funds
June 30, 2005
ASSETS
Current assets:
Cash and cash equivalents
Due from other funds
Accounts receivable (net)
Total current assets
Noncurrent assets:
Restricted cash and cash equivalents
Capital assets
Less: Accumulated depreciation
Total noncurrent assets
Total assets
LIABILITIES
Current liabilities:
Compensated absences
Customer deposits
Accrued interest payable
Due to other funds
Current portion of bonds payable
Total current liabilities
Noncurrent liabilities:
Bonds payable
Total noncurrent liabilities
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted for bond requirements
Restricted for impact fees
Unrestricted
Total net assets
Business -Type Activities - Enterprise Funds
Water
$
Sewer
Total
- $ 1,050,544 $ 1,050,544
875,564 875,564
48,219 44,367 92,586
48,219 1,970,475 2,018,694
525,605
5,432,559
(2,204,942)
3,753,222
3,801,441
832,698
5,962,860
(2,624,701)
4,170,857
6,141, 332
1,358,303
11,395,419
(4,829,643)
7,924,079
9,942,773
10,521
5,413
875,564
78,000
969,498
271,480
271,480
1,240,978
10,521
12,590
201,000
224,111
419,668
419,668
643,779
21,042
5,413
12,590
875,564
279,000
1,193,609
691,148
691,148
1,884,757
2,878,137 2,717,491 5,595,628
329,519 345,204 674,723
190,673 487,494 678,167
(837,866) 1,947,364 1,109,498
$ 2,560,463 $ 5,497,553 $ 8,058,016
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, 2005
Business -Type Activities - Enterprise Funds
Water
Sewer Total
Operating revenues:
Charges for service $ 514,616 $ 596,712 $ 1,111,328
Other operating income 43,421 112,612 156,033
Total operating revenues 558,037 709,324 1,267,361
Operating expenses:
Salaries and wages
Employee benefits
Contractual services
Materials and supplies
General fund overhead
Special department supplies
Depreciation
Other expenses
Total operating expenses
Operating income
Nonoperating revenues (expenses):
Interest revenue
Interest expense
Impact fees
Total nonoperating revenues (expenses)
Change in net assets
Total net assets - beginning
Total net assets - ending
167,889
93,525
87,849
12,646
150,000
42,282
141,359
40,004
735,554
(177,517)
57,836
33,539
79,381
13,961
200,000
38,456
155,988
38,672
225,725
127,064
167,230
26,607
350,000
80,738
297,347
78,676
617,833 1,353,387
91,491 (86,026)
32,284 31,408 63,692
(26,290) (26,290)
32,839 71,930 104,769
65,123 77,048 142,171
(112,394) 168,539 56,145
2,672,857 5,329,014 8,001,871
$ 2,560,463 $ 5,497,553 $ 8,058,016
The Notes to the Financial Statements are an integral part of this statement. 12
City of Moab
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2005
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
Cash Flows From Investing Activities
Interest and dividends received
Net cash provided (used) by
investing activities
Net increase (decrease) in cash and
cash equivalents
Cash and cash equivalents - beginning
Cash and cash equivalents - ending
Reconciliation of operating income to
net cash provided (used) by operating
activities:
Operating income
Adjustments to reconcile operating
income to net cash provided (used) by
operating activities:
Depreciation expense
(Increase)/decrease in
Increase (decrease) in
Increase (decrease) in
Increase (decrease) in
Total adjustments
Net cash provided (used) by
operating activities
accounts receivable
compensated absences payable
customer deposits
accrued interest payable
Business -Type Activities - Enterprise Funds
Water Sewer Total
$ 557,221 $ 804,774 $ 1,361,995
(332,742) (375,617) (708,359)
(261,414) (91,375) (352,789)
(36,935) 337,782 300,847
(1,599,339)
(78,000)
875,564
32,839
(768,936)
32,284
32,284
(23,014)
(193,000)
(26,290)
(875,564)
71,930
(1,622,353)
(271,000)
(26,290)
104,769
(1,045,938) (1,814,874)
31,408
31,408
63,692
63,692
(773,587) (676,748) (1,450,335)
1,299,192 2,559,990 3,859,182
$ 525,605 $ 1,883,242 $ 2,408,847
$ (177,517) $
141,359
(816)
916
(877)
140,582
91,491 $ (86,026)
155,988
95,450
883
(6,030)
246,291
297,347
94,634
1,799
(877)
(6,030)
386,873
$ (36,935) $ 337,782 $ 300,847
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, 2005
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
D. Prior Period Adjustment
Page
15
22
26
34
14
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
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, 2005
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
Fund
Major:
General
Capital Projects Fund:
Community Development Fund
Mill Creek Project Fund
Capital Project Fund
Sanitation Capital Project Fund
as major or non -major as follows:
Brief Description
See above for description.
Accounts for activity with the City's
capital improvements.
16
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Enterprise Funds:
Water and Sewer Accounts for revenues and expenditures of
water and sewer utilities.
Nonmajor:
Special Revenue Funds:
Recreation Fund
Arts and Recreation Center
Youth City Council
Accounts for revenues and expenditures for
activities with the recreation, arts and
recreation center and youth city council.
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
accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred
17
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
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.
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
18
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
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
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.
19
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
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, 2005
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, 2005
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, 2005
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,
2005, $2,781,071 of the City's bank balances of $2,981,071 were uninsured and uncollateralized.
At June 30, 2005, the carrying amount and the bank balance of the City's bank deposits was $2,334,622,
and $2,981,071, 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 City's investments are categorized as follows to give an indication of the level of risk assumed by the
entity at year-end. Category 1 includes investments that are insured or registered or for which the
securities are held by the City or its agent in the City's name. Category 2 includes uninsured and
unregistered investments for which the securities are held by the broker's or dealers trust department or
agent in the City's name. Category 3 includes uninsured and unregistered investments for which the
securities are held by the broker or dealer, or by its trust department or agency, but not in the City's name
The City currently has no investments that are required to be categorized.
The Utah Public Treasurers' Investment Fund (PTIF) 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
23
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
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.
As of June 30, 2005 the government had the following investments and maturities:
Investments in Public
Treasurers' Investment Fund
Cash in Banks
Cash on Hand
Total Fair Value
Fair Value
Investment Maturity in Years
Less
Than 1
1-5 6-10
$1,789,874 $ 1,789,874 $
2,334,622 2,334,622
650 650
More
Than 10
$ - $
$ 4,125,146 $ 4,125,146 $ - $ - $
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, 2005, 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, 2005, the City had $281,221 of outstanding general obligation debt.
24
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
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, 2005, the City had $3,020,149 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, 2005.
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.
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 was within the limitations allowed by law. The City also did not
have any deficit fund balances in any of its funds.
The General fund balance exceeded the maximum allowed by $159,014.
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.
25
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
The following departments exceeded budgeted expenditures for the fiscal year ending June 30, 2005:
Public Safety
Amount
$7,776
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
Deposits
As of June 30, 2004 and 2005, deposits with Wells Fargo Bank totaled $462,952 and $130,270
respectively. The carrying amount on the City's books was $(41,080) and $(407,679) respectively. As of
June 30, 2004 and 2005, deposits with Zions Bank totaled $2,486,510 and $2,850,801 respectively. The
carrying amount on the City's books was $2,350,519 and $2,802,436 respectively. These deposits were
covered by Federal Depository Insurance up to $200,000. These deposits are not collateralized nor are
they required to be by State Statute.
Investments
The City has investments with the Utah Public Treasurers' Fund (PTIF) which are not subject to
categorization. The carrying amount and market value of the investments at June 30, 2004 and 2005, were
$2,441,390and $1,789,873, respectively.
The City's policies regarding deposits of cash are discussed in Note 1.E. The table presented below is
designed to disclose the level of custody credit risk assumed by the City based upon how its deposits were
insured or secured with collateral at June 30, 2005. The categories of credit risk are defined as follows:
Category 1—Insured by FDIC or collateralized with securities held by the City (or public trust) or by its
agent in its name
Category 2—Uninsured but collateralized with securities held by the pledging financial institution's trust
department or agent in the City's name
Category 3—Uninsured and uncollateralized; or collateralized with securities held by the pledging
financial institution, or by its trust department or agent but not in the City's name; or collateralized with
no written or approved collateral agreement.
The City currently has no investments that are required to be categorized. Investments not subject to
categorization at June 30, 2005, were as follows:
Investments in Utah State Treasurers' Investment Fund $ 1,789,873
26
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Reconciliation to Government -wide Statement of Net Assets:
Investments $ 1,789,873
Cash on Hand 650
Deposits 2,334,622
Total $ 4,125,145
Per Statement of Net Assets:
Unrestricted Cash $ 2,160,135
Restricted Cash 1,965,010
Total $ 4,125,145
3.B. RESTRICTED ASSETS
The restricted assets as of June 30, 2005, are as follows:
Type of Restricted Asset Cash/Time Deposits Investments Accrued Int. Total
Business -Type Activities:
Bond Requirements $ 674,723 $ - $ - $ 674,723
Customer Deposits 5,413 5,413
Impact Fees 678,167 - - 678,167
Total 1,358,303 - - 1,358,303
Governmental Activities:
Capital projects 402,069 - - 402,069
Class "C" Roads 204,638 - - 204,638
Total 606,707 - - 606,707
Grand Totals $ 1,965,010 $ - $ - $ 1,965,010
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, 2005, is as follows:
Governmental Activities Business -Type Activities Total
Accounts Receivable $ 417,086 $ 95,923 $ 513,009
Allowance for
Doubtful Accounts - (3,337) (3,337)
Net Accounts Receivable $ 417,086 $ 92,586 $ 509,672
27
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
3.D. CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2005, was as follows:
Governmental Activities:
Land
Buildings
Improvements Other Than Bldgs
Machinery & Equipment
Autos & Trucks
Office Equipment
Infrastructure
Construction in Process
Totals at historical cost
Less Accum. Depreciation
Buildings
Improvements Other Than Bldgs
Machinery & Equipment
Autos & Trucks
Office Equipment
Infrastructure
Total Accum. Depreciation
Governmental Activities
capital assets, net
Business -type activities:
Land
Water Shares
Sewage Plant
Improvements
Machinery & Equipment
Autos & Trucks
Office Furniture
Construction in Process
Totals at historical cost
Less Accum. Depreciation
Sewage Plant
Improvements
Machinery & Equipment
Autos & Trucks
Office Furniture
Total Accum. Depreciaiton
Business -type activities
capital assets, net
Balance at
July 1, 2004
$ 366,827
1,291,759
1,341,133
1,135,288
914,746
379,060
1,102,550
651,989
7,183,352
(172,480)
(123,533)
(221,052)
(244,240)
(4,759)
(73,504)
(839,568)
$ 6,343,784
Additions
Disposals
$ 5,150 $
2,740,555
64,871
4,057
73,952
3,156
588,972
3,480,713
(72,554)
(122,970)
(43,060)
(58,812)
(997)
(65,804)
(364,197)
(57,540)
(31,701)
(651,989)
(741,230)
28,810
22,536
51,346
Balance at
June 30, 2005
$ 371,977
4,032,314
1,406,004
1,081,805
956,997
382,216
1,691,522
9,922,835
(245,034)
(246,503)
(235,302)
(280,516)
(5,756)
(139,308)
(1,152,419)
$ 3,116,516 $ (689,884) $ 8,770,416
$ 244,935 $
18,000
1,390,124
7,437,684
467,937
164,714
13,088
36,582
9,773,064
(1,112,558)
(2,988,997)
(294,647)
(124,260)
(11,833)
36,582
1,605,582
16,773
1,658,937
(34,753)
(214,478)
(35,632)
(12,097)
(387)
(4,532,295) (297,347)
(36,582)
(36,582)
$ 244,935
18,000
1,426,706
9,043,266
484,710
164,714
13,088
11,395,419
(1,147,311)
(3,203,475)
(330,279)
(136,357)
(12,220)
(4,829,642)
$ 5,240,769 $ 1,361,590 $ (36,582) $ 6,565,777
28
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Depreciation expense was charged to governmental activities as follows:
General Government $ 82,354
Public Safety 46,424
Highways and Streets 188,500
Parks, Recreation and Public Property 45,213
Total depreciation expense $362,491
Depreciation on capital assets acquired under a capital lease:
Equipment $ 148,283
Accumulated Amortization 26,998
Net Book Value $ 121,285
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.
Governmental Activities:
As of June 30, 2005, the City had $2,331,221 governmental long-term debt.
29
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Compensated Absences $ 215,841
Sales Tax Revenue Bond 2,050,000
Capital Leases
2005 Ford Motor Credit
Original Amt $24,448, Pmts $8,760
24,448
2005 F-150 Ford Motor Credit
Original Amt $49,504, Pmts $17,193 32,311
2004 Police Ford Motor Credit
Original Amt $25,864, Pmts $8,621 8,621
Total Governmental Long -Term Debt $ 2,331,221
Business -type Activities:
As of June 30, 2005, the long-term debt payable from proprietary fund resources
consisted of the following:
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)
Sewer Revenue Bonds Dated 1996
4.5%, (Original amount $1,821,000)
$ 163,240
186,240
620,668
Total Business -type debt $ 970,148
30
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Changes in Long-term Debt
The following is a summary of changes in long-term debt for the year ended
2005:
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, 2004
$ 224,984
7,337
34,059
$ 266,380
$ 19,275
970,149
271,000
$ 1,289,863
Additions Deductions
73,952
2,050,000
60,000
$2,183,952
$ 1,768
8,000
$ 9,768
$ (9,143)
(48,205)
(60,000)
(1,763)
$(119,111)
(279,000)
June 30,
Balance
June 30, 2005
$ 215,841
33,084
1,990,000
92,296
$ 2,331,221
$ 21,043
691,149
279,000
$(279,000) $ 991,192
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.
Annual Debt Service Requirements
The annual debt service requirements to maturity, including principal and interest, for
long-term debt as of June 30, 2005, are as follows:
Capital Leases:
June 30
2006
2007
2008
2009
2010
Thereafter
Governmental
Activities
$ 32,296
24,637
8,447
Total Commitment 65,380
Less Interest Portion 3,905
Net Capital Lease $ 61,475
31
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Bonds and Notes Payable:
Business -type Activities
Year Ending
June 30 Principal
2006 $ 279,000
2007 289,000
2008 287,669
2009 81,240
2010 33,240
2011-2015
2016-2020
2021-2025
2026-2030
Total $ 970,149
Interest
$ 28,485
19,440
9,945
$ 57,870
Governmental Activities
Principal Interest
$ 60,000
62,000
63,000
65,000
66,000
357,000
405,000
457,000
515,000
$ 49,750
49,750
48,200
46,625
45,000
199,325
152,375
99,225
39,275
$ 2,050,000 $ 729,525
3.G. INTER -FUND TRANSACTIONS AND BALANCES
Operating Transfers
The City had the following inter -fund transactions for the year ended June 30, 2005:
FUND
General Fund
Recreation
Community Development
Capital Projects
TOTALS
TRANSFER OUT
$ 481,590
TRANSFER IN
86,590
26,000
369,000
$ 481,590 $ 481,590
32
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Due to/from other funds
The City had the following inter -fund transactions for the year ended June 30, 2005:
FUND
Water Fund
Sewer Fund
TOTALS
3.H. FUND EQUITY
Restricted Fund Equity
Due From Other Funds Due To Other Funds
$
875,564
$ 875,564
$ 875,564
$ 875,564
Government Business -Type
Activities Activites
Net Assets
Invested in Capital Assets, Net of Related Debt $
Restricted for:
Class "C" Roads
Bond Requirements
Impact Fees
Capital Projects
Unrestricted (Deficit)
Totals
6,706,968 $ 5,595,628 $ 12,302,596
204,638
402,069
1,214,552
674,723
678,167
1,109,498
204,638
674,723
678,167
402,069
2,324,050
Total Net Assets $ 8,528,227 $ 8,058,016 $ 16,586,243
33
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
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.
Funding Policy
Plan members in the Local Governmental Contributory Retirement System are required to
contribute 1.30% of their annual covered salary (all or part may be paid by the employer
for the employee) and Moab City is required to contribute 7.08% of their annual covered
salary. In the Local Governmental Noncontributory Retirement System, Moab City is
required to contribute 11.09% of their annual covered salary. In the Public Safety
Noncontributory Retirement System for employers with Social Security coverage, Moab
City is required to contribute 19.08% 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.
34
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
Moab City's contributions to the various systems for the years ending June 30, 2005, 2004,
and 2003 were as follows:
Employer Paid Total
Contributory System: for employee Employer Employer
Local Government Division Contributions Contributions Contributions
2005 $ 1,741 $ 2,623 $ 4,364
2004 1,700 2,029 3,729
2003 1,522 1,515 3,037
Noncontributory System:
Local Government Division
2005
2004
2003
$
$ 139,737 $ 139,737
119,456 119,456
103,577 103,577
Public Safety System:
Other Division A Noncontributory
2005 $ - $ 81,879 $ 81,879
2004 - 69,466 69,466
2003 - 55,688 55,688
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.
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.
35
CITY OF MOAB, UTAH
NOTES TO BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2005
4.C. LANDFILL AGREEMENT
Moab City entered into an agreement with the Grand County Solid Waste Management
Special Service District No. 1 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 $295,000 for
the Klondike Landfill and $20,000 for the Moab Landfill.
4.D. PRIOR PERIOD ADJUSTMENT
During the fiscal year ended June 30, 2004 Moab City wrote a check to be deposited into
an escrow account along with the bond proceeds used to finance the new city building.
The check was recorded as a capital expenditure in the fund financial statements and
booked as construction in progress in the government wide financial statements, rather
than as a restricted cash account. This resulted in a prior period adjustment in the fund
financial statements in the amount of $542,555. The adjustment in the government -wide
financial statements will be to reduce capital assets (construction in progress) and
increase restricted cash and cash equivalents.
36
SUPPLEMENTARY INFORMATION
City of Moab
Combining Balance Sheet for Nonmajor Funds
June 30, 2005
Special Revenue Funds Total
Arts and Nonmajor
Recreation Recreation Youth City Governmental
Fund Center Council Funds
ASSETS
Cash and cash equivalents $ 19,981 $ 2,018 $ 2,484 $ 24,483
Total assets $ 19,981 $ 2,018 $ 2,484 $ 24,483
LIABILITIES AND FUND BALANCES
Liabilities:
Total liabilities -
FUND BALANCES
Fund balances reserved for:
Recreation 19,981 2,018 21,999
Youth City Council 2,484 2,484
Total fund balances 19,981 2,018 2,484 24,483
Total Liabilities and fund balance $ 19,981 $ 2,018 $ 2,484 $ 24,483
The Notes to the Financial Statements are an integral part of this statement. 37
City of Moab
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances
Non -major Governmental Funds
For the Year Ended June 30, 2005
Special Revenue Funds Total
Arts and Nonmajor
Recreation Recreation Youth City Governmental
Fund Center Council Funds
REVENUES
Intergovernmental revenues $ 61,260 $ - $ $ 61,260
Charges for service 95,689 - 95,689
Interest income - - 61 61
Total 156,949 - 61 157,010
EXPENDITURES
Parks, recreation and public property 224,180 - 224,180
Total 224,180 - 224,180
Excess of revenues over
(under) expenditures (67,231) - 61 (67,170)
OTHER FINANCING SOURCES (USES)
Transfers in
Total other financing sources (uses)
86,590 - 86,590
86,590 86,590
Excess of revenues and other sources
over (under) expenditures and other uses 19,359 - 61 19,420
Fund balances - beginning 622 2,018 2,423 5,063
Fund balances - ending
$ 19,981 $ 2,018 $ 2,484 $ 24,483
The Notes to the Financial Statements are an integral part of this statement. 38