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FY2010 Audit Report Airport    Blair Airport Authority FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORTS For the year ended September 30, 2010       TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS’ REPORT 3 - 4 MANAGEMENT’S DISCUSSION AND ANALYSIS 5 - 11 BASIC FINANCIAL STATEMENTS Statement of net assets 12 Statement of activities 13 Balance sheet - governmental funds 14 Reconciliation of the balance sheet of governmental funds to the statement of net assets 15 Statement of revenues, expenditures, and changes in fund balance - governmental funds 16 Reconciliation of the statement of revenues, expenditures and changes in fund balances of governmental funds to the statement of activities 17 NOTES TO FINANCIAL STATEMENTS 18 - 30 SUPPLEMENTAL INFORMATION Schedule of expenditures of federal awards 32 Notes to schedule of expenditures of federal awards 33 Budgetary comparison schedule - general fund 34 Fund balances for the last five years 35       TABLE OF CONTENTS - CONTINUED INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 36 - 37 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 38 - 39 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 40 - 42 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 43 Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS September 30, 2010 - 5 -  As management of the Blair Airport Authority, (“Airport”), we offer readers of the Airport’s financial statements this narrative overview and analysis of the financial activities of the Airport for the fiscal year ended September 30, 2010. OVERVIEW OF FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the Blair Airport Authority’s basic financial statements. The Airport’s basic financial statements include three components: 1) government-wide financial statements; 2) fund financial statements; and 3) notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the Airport’s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all of the Airport’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 economic position of the Airport is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and incurred but unpaid interest). Both of the government-wide financial statements distinguish functions of the Airport that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities are the operations of a municipal airport. Fund Financial Statements 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 Airport, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the Airport are governmental funds. Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2010 - 6 -  OVERVIEW OF FINANCIAL STATEMENTS - CONTINUED Governmental Funds: Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The majority of the Airport’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method identified as the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted into cash. The governmental fund statements provide a detailed short-term view of the Airport’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the Airport’s programs. By comparing information presented for governmental funds with similar information presented for long-term effect of the government’s near term financing decisions. The relationships of differences between governmental activities (reported in the statement of net assets and the statement of activities) and governmental funds is detailed in a reconciliation following the fund financial statements. The Airport adopts an annual appropriated budget for all governmental funds. A budgetary comparison schedule has been provided for general funds to demonstrate compliance with the state budget statutes. Notes to the financial statements: The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Government-wide Financial Analysis: Capital assets (i.e. land, buildings, and equipment) account for over 98% of the total assets. The Airport uses these assets to provide services to its customers. Accordingly, these assets are not an available source for payment of future spending. Of the remaining assets, less than 1% of the governmental assets are cash and equivalents. The following chart shows the Airport’s net assets for 2010: SEE TABLE 1 2010 2009 Current and other assets 186,223$ 512,307$ Capital assets 15,001,792 13,063,975 Total assets 15,188,015$ 13,576,282$ Other liabilities 1,296,432$ 1,159,967$ Long-term debt outstanding 1,797,765 1,881,585 Total liabilities 3,094,197$ 3,041,552$ NET ASSETSInvested in capital assets net related debt 11,959,372$ 10,372,484$ Unrestricted (deficit)134,446 162,246 Total net assets 12,093,818$ 10,534,730$ - 7 - ASSETS LIABILITIES Blair Airport AuthorityMANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED SUMMARY OF NET ASSETS September 30, 2010 TABLE 1 Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2010 - 8 -  OVERVIEW OF FINANCIAL STATEMENTS - CONTINUED At the end of the current fiscal year, the Airport reported a positive balance in both net assets invested in capital assets and in unrestricted net assets. The following chart is a summary of financial information relating to the Airport’s statement of activities: SEE TABLE 2 Governmental activities: Governmental activities increased the Airport’s net assets by $1,559,088. Key elements of the decrease are as follows:  The increase is due in part to grants for the addition of capital assets.  Governmental principal and interest payments were financed in part by tax revenue. The Airport’s charges for services include the resale of fuel and rent income from hangar and other Airport owned property. The prior year comparative financial data is provided in each table to provide additional information. Financial Analysis of the Airport’s Funds As mentioned earlier in this analysis, the Airport uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds: The focus of the Airport’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the Airport’s financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the Airport’s governmental funds reported combined unreserved ending fund balances of $134,446, a decrease of $27,800 from the prior year. This decrease in unreserved ending fund balances was due to the increase of net assets invested in capital assets, net of related debt, due to the continued expansion of the Airport facilities. The Airport’s fund balances for the past five years are presented in a table format on page 35. 2010 2009 Program revenues Charges for services 179,636$ 169,325$ Capital grants and contributions 1,906,178 942,357 General revenues Property taxes 140,704 114,339 Other taxes 19,162 15,766 Interest and other revenue 18,287 8,261 Total revenues 2,263,967 1,250,048 EXPENSES General government 566,425 361,076 Interest on debt 138,454 98,550 Total expenses 704,879 459,626 CHANGE IN NET ASSETS 1,559,088 790,422 NET ASSETS, BEGINNING OF YEAR, AS PREVIOUSLY REPORTED 10,534,730 9,711,104 PRIOR PERIOD ADJUSTMENT - 33,204 NET ASSETS, BEGINNING OF YEAR, AS RESTATED 10,534,730 9,744,308 NET ASSETS, END OF YEAR 12,093,818$ 10,534,730$ Blair Airport Authority MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANAGES IN NET ASSETS September 30, 2010 REVENUES - 9 - TABLE 2 Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2010 - 10 -  OVERVIEW OF FINANCIAL STATEMENTS - CONTINUED Budget variances in the General Fund: The Airport General Fund expenditures did not exceed budget. Significant budget variances are detailed as follow: Variance Favorable Account (Unfavorable) Reason Federal Grant Income 460,869 Airport received a grant from the FAA to reimburse the Airport for a project that was not anticipated to occur until fiscal year 2011. Miscellaneous income (23,224) The Airport budgeted to receive a reimbursement on a water line project of $50,000. The final project called for a reimbursement of approximately $73,200. The reimbursement of the final $50,000 was not billed and received until after fiscal year end. Capital Outlay expense 344,021 Costs to date for Airport Expansion were not as high as projected. These additional costs should be incurred in fiscal year 2011. Debt principle expense 363,435 Airport obtained less refinancing than previously projected. Interest Expense (39,551) Airport had $39,551 of interest expense that had not been separately budgeted. This expense was budgeted with the debt principle expense. Debt Proceeds (411,327) Airport obtained less refinancing than previously projected. Capital assets: The Airport’s government-wide capital assets, net of accumulated depreciation, increased due to Airport improvement projects during the current year. Additional information Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2010 - 11 -  as well as a detailed classification of the Airport’s net capital assets can be found in the notes to the Financial Statements. Long-term debt: The long-term debt of the Airport decreased by $83,820 due to the payment of $83,820 of principle on long term debt (bonds and NDA long term loans). The Airport continues to move forward with capital projects that extend from one fiscal year to another that will be financed with short term Bond Anticipation Notes that will be turned into long term debt in two to three years. These projects will provide greater airport safety and expand the necessary facilities to make the airport more viable to business category aircraft, thus increasing the opportunity to increase income and profitability. OVERVIEW OF FINANCIAL STATEMENTS - CONTINUED Next year’s budget and rates: The property tax levy request for the City of Blair for the fiscal year beginning October 1, 2009, was set at $0.356863 per one hundred dollars of valuation. The property tax levy request for the Airport Authority for the fiscal year beginning October 1, 2009 was set at $0.032994 per one hundred dollars of valuation, or a total City and Airport levy of $0.389857. The Airport levy continues to solely support long term debt and the Airport would anticipate reaching the statutory levy limit of $0.035 per hundred dollars of actual valuation before all capital improvements are completed. Additional Notes: The Airport is still working to complete the acquisition of Tract E (Petersen Property). The condemnation case is still in Washington County District Court. The Authority Board has authorized staff and legal Counsel to try to negotiate a settlement that would be acceptable to the Airport and funding agencies. In addition, the Airport will have relocation costs that have been estimated at somewhere between $300,000 and $400,000. Hopefully the case will be resolved within the new fiscal year. The Airport is also currently working to remove obstructions on the Petersen property to allow the Airport approach slope to be reduced to 31 to 1, rather than the current 20 to 1 for improved safety. Current FAA Airport Improvement Program funding is 95% for all eligible costs. The only non-eligible cost to date is the interest cost of $40,000 to $50,000 per year on interim financing (short term). The Authority continues to look at ways to finance additional hanger construction. The construction of additional hangars continues to hinder development. The Airport continues to maintain a waiting list for good hangers. The viability of a good Fixed Based Operator (FBO) still hangs on the Authority’s ability to increase based aircraft. Request for information: The financial report is designed to provide a general overview of the Airport’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Blair Airport Authority, 218 S. 16th Street, Blair, NE 68008. Cash and cash equivalents 121,933$ Due from County Treasurer 10,950 Other receivables 10,953 Fuel inventory 42,387 Capital assets Land 5,201,538 Buildings and runways 10,919,855 Accumulated depreciation (1,119,601) Total assets 15,188,015$ LIABILITIES Accounts payable 13,894$ Accrued interest 25,806 Deferred revenue 8,937 Deposits 3,140 Short term notes payable 1,244,655 Long-term debt Due within one year 88,820 Due in more than a year 1,708,945 Total liabilities 3,094,197 NET ASSETS Investment in capital assets net of related debt 11,959,372 Unrestricted (deficit)134,446 Total net assets 12,093,818 Total liabilities and net assets 15,188,015$ Blair Airport Authority STATEMENT OF NET ASSETS September 30, 2010 ASSETS - 12 - See accompanying notes and independent auditor's report. Net (Expenses) Revenues and Changes in Net Assets Charges for Grants and Governmental FUNCTIONS/PROGRAMS Expenses Services Contributions Activities Governmental activities General government 566,425$ 179,636$ 1,906,178$ 1,519,389$ Interest on long-term debt 138,454 - - (138,454) Total Government activities 704,879$ 179,636$ 1,906,178$ 1,380,935 General revenues Taxes Property taxes 140,704 Other taxes 19,162 Unrestricted investment earnings 121 Other income 18,166 Total general revenues 178,153 CHANGES IN NET ASSETS 1,559,088 NET ASSETS, BEGINNING OF YEAR 10,534,730 NET ASSETS, END OF YEAR 12,093,818$ STATEMENT OF ACTIVITIES Blair Airport Authority For the year ended September 30, 2010 See accompanying notes and independent auditor's report. - 13 - Revenues Program General Debt Fund Fund Total Cash and cash equivalents 122,583$ -$ 122,583$ Due from County Treasurer - 10,950 10,950 Other receivables 10,953 - 10,953 Fuel inventory 42,387 - 42,387 Total assets 175,923$ 10,950$ 186,873$ LIABILITIES Accounts payable 13,894$ 650$ 14,544$ Accrued interest 4,512 - 4,512 Deferred revenue - 5,568 5,568 Deposits 3,140 - 3,140 Short term notes payable 1,244,655 - 1,244,655 Total liabilities 1,266,201 6,218 1,272,419 FUND BALANCE Unreserved (1,090,278) - (1,090,278) Reserved for debt service - 4,732 4,732 Total fund balance (1,090,278) 4,732 (1,085,546) Total liabilities and fund balance 175,923$ 10,950$ 186,873$ September 30, 2010 See accompanying notes and independent auditor's report. - 14 - ASSETS Blair Airport Authority BALANCE SHEET GOVERNMENTAL FUNDS Fund balance of governmental funds (1,085,546)$ Amounts reported for governmental activities in the statement of net assets are different because: Capital assets, net of depreciation, are not current financial resources and are not included in the governmental funds 15,001,792 Deferred revenues are not a current financial resources and are not included in the government funds. (3,369) Notes and bonds payable are not current financial liabilities. Therefore, they are not included in the governmental funds (1,797,765) Interest accrued on long-term debt (21,294) Net assets of governmental activities 12,093,818$ Blair Airport Authority RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS September 30, 2010 TO THE STATEMENT OF NET ASSETS - 15 - See accompanying notes and independent auditor's report. General Debt Fund Fund Total REVENUES Taxes -$ 158,608$ 158,608$ Charges for services 180,570 - 180,570 Grants 1,906,178 - 1,906,178 Interest income 121 - 121 Other revenues 25,446 - 25,446 Total revenues 2,112,315 158,608 2,270,923 EXPENDITURES Administration 189,569 2,872 192,441 Capital outlay 2,319,081 - 2,319,081 Debt service Principal 23,820 60,000 83,820 Interest 61,538 76,910 138,448 Total expenditures 2,594,008 139,782 2,733,790 REVENUES OVER (UNDER) EXPENDITURES (481,693) 18,826 (462,867) FUND BALANCE, BEGINNING OF YEAR (608,585) (14,094) (622,679) FUND BALANCE, END OF YEAR (1,090,278)$ 4,732$ (1,085,546)$ See accompanying notes and independent auditor's report. - 16 - For the year ended September 30, 2010 Blair Airport Authority STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS Net changes in fund balance - total governmental funds (462,867)$ Amounts reported for governmental activities in the statement of activities are different because: 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 as a functional expense when the cost is above the capitalization threshold. The activity is reconciled as follows: Cost of assets capitalized 2,180,064 Depreciation expense (242,247) Revenue reported in the statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds 324 Bonds are reported as expenditures when paid and as revenue when received in the governmental funds. However, there is no impact in the statement of activities when loans are made or repaid. This amount represents the change in the long-term debt 83,820 Interest accrued on long-term debt does not require the use of current financial resources and is not reported as an expenditure in govermental funds (6) Change in net assets of governmental activities 1,559,088$ Blair Airport Authority RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For the year ended September 30, 2010 - 17 - See accompanying notes and independent auditor's report. TO THE STATEMENT OF ACTIVITIES Blair Airport Authority NOTES TO FINANCIAL STATEMENTS September 30, 2010 - 18 -  NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies of the Blair Airport Authority (the Airport). 1. Description of the Reporting Entity This report includes all funds of the Airport, which is the “primary government.” The Airport operates under a Board of Trustees form of government and provides airport services. The Airport is a body corporate and politic, constituting a public corporation and an agency of the City. The Board has full and exclusive jurisdiction and control. The Board and its corporate existence shall continue only for a period of twenty years and therein after until all its liabilities have been met and its bonds paid in full. All administrative duties are handled by the City Administration until such time as the Airport can hire its own staff. As per Nebraska Statues, the Airport Board has appointed the City Treasurer, as treasurer for the Airport. 2. Basis of Accounting/Measurement Focus The accounts of the Airport are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Government-Wide Financial Statements The Airport government-wide financial statements include a statement of net assets and a statement of activities (including changes in net assets). These statements are prepared using the standards of the Governmental Accounting Standards Board (GASB), General Accepted Accounting Principles (GAAP), as well as FASB pronouncements issued through November 30, 1989. These statements present summaries of governmental activities for the Airport. Fiduciary activities of the Airport are not included in these statements. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 19 -  NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of Accounting/Measurement Focus - Continued Government-Wide Financial Statements - Continued These statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the Airport’s assets and liabilities including capital assets and infrastructure as well as long-term debt, are included in the accompanying statement of net assets. The statement of activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The Statement of Activities demonstrates the degree to which the direct expenses of a given function are offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function. The types of transactions reported as program revenues for the Airport are reported in three categories: 1) charges for services, 2) operating grants and contributions, and 3) capital grants and contributions. Charges for services include revenues from customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function. Grant and contributions include revenues restricted to meeting the operational or capital requirements of a particular function. Taxes or other items not included among program revenues are reported instead as general revenues. All internal balances in the statement of net assets and internal transactions in the statement of activities have been eliminated. Governmental Fund Financial Statements Governmental fund financial statements include a balance sheet and a statement of revenues, expenditures, and changes in fund balances for all major governmental funds. An accompanying schedule is presented to reconcile and explain the differences in net assets as presented in these statements to the net assets presented in the government-wide financial statements. The Airport has presented all major funds that met the qualifications of GASB Statement No. 34. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 20 -  NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of Accounting/Measurement Focus - Continued All governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses in net current assets). Under modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary sources susceptible to accrual are property tax, investment income, and grant revenues. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. An exception to this general rule is principal and interest on general long-term debt which is recognized when due. The Airport reports the following major governmental funds: The general fund is the government’s primary operating fund. It is a governmental fund that is used to account for all financial resources except those required to be accounted for in another fund. The debt service fund is a governmental fund that is used to account for funds needed to make principal and interest payments on outstanding debt issues. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 21 -  NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 3. Budgetary Policy and Control Budgetary Basis of Accounting The Airport’s legally adopted budget is not in conformity with accounting principles generally accepted in the United States of America. The budget is prepared and adopted using the cash basis of accounting whereby revenues budgeted are expected to be received rather than earned and expenditures budgeted are expected to be disbursed rather than incurred. Differences between the budgeted basis of accounting and the generally accepted basis are reconciled in the budget to actual schedule in the required supplementary information. The Board sets the property tax levy needed to support the coming year’s budget in August of each year and submit its budget as required by State statute. Budgetary Control Each funds appropriated budget is prepared on a detailed line item basis. Revenues are budgeted by source. Expenditures are budgeted by department. Expenditures at the fund level constitute the legal level of control. Expenditures may not exceed appropriations at this level. All budget revisions at this level are subject to final review by the Board. 4. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 5. Deposits and Investments The Airport’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 22 -  NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 6. Capital Assets Capital assets, which include land, buildings, machinery and equipment (furniture, vehicles, computers, etc.) and infrastructure assets (runways), are reported in Governmental Activities column of the Government-Wide Financial Statement. Capital assets are defined by the Airport as assets with an initial, individual cost of more than $5,000. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated or annexed capital assets are recorded at estimated market value at the date of donation or annexation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. The Airport qualifies for the exemption under GASB 34 to not retroactively apply the capitalization requirements of general infrastructure assets. The requirement to capitalize and depreciate these assets has been applied as of October 1, 2003. Depreciation is recorded in the Government-Wide Financial Statements on a straight-line basis over the useful life of the assets as follows: Assets Years Machinery and equipment 10 Vehicles 5 Buildings and runways 40 7. Property Taxes Property tax revenue is recognized when collected by the County as the Airport’s agent when measurable and available. There are no property taxes due which are not delinquent and all delinquent taxes are considered collectible. The Airport’s December 31, 2009 valuation was included with the City of Blair’s valuation of $457,537,882. The levy for the Airport for the year ending September 30, 2010 was $0.032994 per $100 of value. The total tax levy was $150,960. Property taxes are collected by the County and are due December 31 of each year and delinquent in halves at May 1 and September 1 of the following year. In-lieu of tax receipts are equivalent in value to payments for services provided. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 23 -  NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 8. Claims and Judgments Payable The Airport records a liability for litigation, judgments, and claims when it is probable that an asset has been impaired or a liability has been incurred prior to year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. The liability, if any, is reported in the Government-Wide Statement of Net Assets. The portion of the liability, which will be liquidated with expendable, available financial resources, if any, is reflected as a liability of applicable governmental funds. 9. Restricted Assets Assets are reported as restricted when limitations on their use change the nature or normal understanding of the availability of the asset. Such constraints are either externally imposed by creditors, contributions, grantors, or laws of other governments, or are imposed by law through constitutional provisions or enabling legislation. The Airport’s policy is to first apply restricted resources to an expense when incurred for purposes for which both restricted and unrestricted net assets are available. 10. Inventory Inventories are valued at cost which approximates market, using the first-in/first- out (FIFO) method. The costs of inventories are recorded as expenditures when used (consumption method). 11. Transfers Transfers are used to move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and to move unrestricted revenue collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 24 -  NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 12. 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 are eliminated in the statement of net assets. NOTE B. DEPOSITS Deposits consist of demand deposits and certificates of deposit with current maturities. These deposits have no restrictions. The deposits are entirely insured or collateralized with securities held by the entity’s agent. Custodial credit risk is the risk that in the event of a bank failure, the Airport’s deposits may not be returned. The statutes of the State of Nebraska require that local governmental units follow the “prudent man” rule with deposits, and that deposits be secured by collateral valued at market or par whichever is lower less the amount insured by the Federal Deposit Insurance Corporation. The Airport has no investment policy that would further limit its deposits. The carrying amount of bank balances at September 30, 2010, was $152,563. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 25 -  NOTE C. RELATED PARTIES The Airport’s operating, administrative, and accounting functions are performed by the administrative offices of the City of Blair. The Airport incurs no cost for the resources used by the City of Blair in performing these functions. NOTE D. CAPITAL ASSETS Balance Balance September 30, 2009 Increases Decreases September 30, 2010 Capital assets not depreciated Land $ 4,318,471 $ 890,347 $ (7,280) $ 5,201,538 Construction in Progress 977,839 - (977,839) - Total capital assets not depreciated 5,296,310 890,347 (985,119) 5,201,538 Other capital assets Buildings and runways 8,645,019 2,274,836 - 10,919,855 Less accumulated depreciation Buildings and runways (877,354) (242,247) - (1,119,601) Other capital assets, net 7,767,665 2,032,589 - 9,800,254 Governmental activities capital assets, net $ 13,063,975 $ 2,922,936 $(985,119) $ 15,001,792 Depreciation expense of $242,247 was charged to general government expenses on the statement of activities. NOTE E. RISK MANAGEMENT The Airport is exposed to various risks of loss related to torts; theft; damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. These risks are covered by the purchase of commercial insurance. The Airport assumes liability for any deductibles and claims in excess of coverage limitations. Settled claims from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 26 -  NOTE F. NET ASSET CATEGORIES In the government-wide financial statements net assets are classified in the following categories: Invested in Capital Assets This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation on these assets reduces this category. Restricted Net Assets This category presents external restrictions imposes by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Unrestricted Net Assets This category represents the net assets of the Airport that are not restricted for any project or other purpose. In the governmental fund financial statements, reserves and designations segregate portions of fund balance that are either not available or have been earmarked for specific purposes. The various reserves and designations are established by actions of the Airport Board and Management and can be increased, reduced, or eliminated by similar actions. NOTE G. SHORT-TERM DEBT On April 22, 2009 and August 1, 2009, the Airport entered into an agreement with Washington County Bank in which the financial institution would provide up to $500,000 in each of two bond anticipation notes to manage the temporary cash flow deficits that occur due to the timing of expenditures related to federal funds received which do not coincide with the timing of reimbursement on these projects. An additional bond anticipation note was issued on January 20, 2010 in the amount of $2,500,000. Proceeds from the note issued January 20, 2010 were applied to pay off the April 22, 2009 and August 1, 2009 notes. The bond anticipation note is due within one year of issuance. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 27 -  NOTE G. SHORT-TERM DEBT - CONTINUED Short term debt activity for the year ended September 30, 2010, was as follows: Interest Beginning Ending Dated Description Rate Balance Additions Reductions Balance 04/22/2009 Note 2009 3.95% $ 437,215 $ 6,711 $ (443,926) $ - 08/01/2009 Note 2009B 4.15% 372,691 47,177 (419,868) - 01/20/2010 Note 2010 4.50% - 1,952,955 (708,300) 1,244,655 Total $ 809,906 $ 2,006,843 $(1,572,094) $ 1,244,655 The 2010 note is secured by a pledge of the revenues and all monies derived from the operation of the Airport’s facility, including the authorized levy of taxes. NOTE H. LONG TERM DEBT Long term debt at September 30, 2010 consisted of the following: 4/23/2003 Refunding bonds 12/1/09 - 12/1/16 1.40-4.35% 275,000$ -$ (30,000)$ 245,000$ 11/6/2006 Refunding bonds 12/1/09 - 12/1/26 4.00-5.25% 1,350,000 - (30,000) 1,320,000 8/23/2006 Project F-29 Note Monthly through 2017 0.00% 77,875 - (10,500) 67,375 8/23/2006 Project H-01 Note Monthly through 2023 0.00% 178,710 - (13,320) 165,390 Total 1,881,585$ -$ (83,820)$ 1,797,765$ Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 28 -  NOTE H. LONG TERM DEBT - CONTINUED The 2003 and 2006 bonds are secured by a pledge of the revenues, income, receipts, profits and other monies derived by the Airport for the operation, management, and ownership of its airport facility, including monies derived from the authorized levy of taxes. As of September 30, 2010, annual debt service requirements of governmental activities to maturity are as follows: Principal Interest Requirements Requirements Total Year ending September 30, 2011 88,820 74,571 163,391 2012 88,820 72,036 160,856 2013 93,820 69,315 163,135 2014 93,820 66,402 160,222 2015 98,820 63,295 162,115 2016-2020 506,475 261,238 767,713 2021-2025 567,190 141,561 708,751 2026-2030 260,000 13,912 273,912 $ 1,797,765 $ 762,330 $ 2,560,095 NOTE I. ALLOWANCE FOR DOUBTFUL ACCOUNTS The Airport uses the direct write-off for uncollectable accounts. While the direct write- off method is not GAAP, management has determined that there is no material difference between the direct write-off method and the allowance method. There were no significant doubtful accounts at September 30, 2010. NOTE J. CONCENTRATION OF CREDIT RISK All of the revenue from charges for services of the Airport is from the local Blair area therefore creating a concentration of credit risk. If the Blair area economy was depressed this could have an adverse effect on the collection of the revenue. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 29 -  NOTE K. GASBS No. 54 In March 2009, the GASB approved Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions (Statement). Certain of the significant changes in the Statement will require the following: Fund balances for each of the Airport’s governmental funds (general fund, and debt service fund) will be displayed in the following classifications depicting the relative strength of the spending constraints placed on the purposes for which resources can be used: Non-spendable fund balance - amounts that cannot be spent because they are either not in a spendable form (such as inventories and prepaid amounts) or are legally or contractually required to be maintained intact. Restricted fund balance - amounts that can be spent only for specific purposes because of constraints imposed by external providers (such as grantors, bondholders, and higher levels of government), or imposed by constitutional provisions or enabling legislation. Committed fund balance - amounts that can be spent only for specific purposes determined by a formal action of the government’s highest level of decision-making authority. Assigned fund balance - amounts the government intends to use for specific purposes that do not meet the criteria to be classified as restricted or committed. Unassigned fund balance - amounts that are available for any purpose; these amounts can be reported only in the Airport’s General Fund. The Statement also establishes several new presentation and disclosure requirements, including requirements related to stabilization arrangements (i.e., “rainy day” amounts). In addition, the Statement clarifies the definitions of the various types of governmental funds. The provisions of GASBS No. 54 must be implemented by the Airport no later than the fiscal year beginning October 1, 2010. Implementation will require the Airport to restate existing fund balances for the governmental funds. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2010 - 30 -  NOTE L. CONTINGENCIES The Airport participates in a federal programs, which are subject to financial and compliance audits by the granting agencies. The amount of expenses, if any, which may be disallowed by the granting agencies, is not determinable at this time; however, management does not believe that such amount, if any, would be significant. The Airport is currently involved in a condemnation action to acquire land necessary to complete a plan for expansion of the airport. The condemnation is currently in active litigation and management intends to pursue the case vigorously. At this point, management believes that any estimate of a potential loss would be highly speculative; as such, no estimate for any future potential loss as a result of the condemnation has been made.   SUPPLEMENTAL INFORMATION Federal CFDA Federal Federal Grantor/Pass-through Grantor/Program Title Number Expenditures U.S. Department of Transportation Pass-through Programs Nebraska Department of Aeronautics Airport Improvement Program 20.106 1,880,733$ Total expenditures of federal awards 1,880,733$ -32- SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30, 2010 Blair Airport Authority See notes to the schedule of expenditures of federal awards and independent auditor's report. Blair Airport Authority NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30, 2010 - 33 -    NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Presentation The accompanying schedule presents expenditures paid or accrued, or passed through, for each federal awards program in accordance with the Office of Management and Budget (OMB) Circular A-133. Federal programs in titles are reported as presented in the Catalog of Federal Domestic Assistance (CFDA), whenever possible. 2. Basis of Accounting The schedule of expenditures of federal awards is presented on the full accrual basis of accounting. 3. Contingencies During the normal course of business, the Blair Airport Authority receives funds from the United States Government for program services. Substantially all of these funds are subject to future audit by the U. S. Department of Transportation, however, it is management’s opinion that resulting adjustments, if any, would not have a material effect upon the accompanying financial statements. Variance Original Final Favorable Budget Budget Actual (Unfavorable) REVENUES Rent income 109,500$ 109,500$ 102,214$ (7,286)$ Gas sales 80,000 80,000 72,820 (7,180) Interest 100 100 121 21 Grants 1,120,135 1,781,306 2,242,175 460,869 Miscellaneous income 50,500 50,500 27,276 (23,224) Total revenues 1,360,235 2,021,406 2,444,606 423,200 EXPENDITURES General government 187,236 205,425 206,210 (785) Capital outlay 2,455,932 2,959,351 2,615,330 344,021 Debt principal 1,012,320 1,718,414 1,354,979 363,435 Interest expense - - 39,551 (39,551) Total expenditures 3,655,488 4,883,190 4,216,070 667,120 REVENUES OVER (UNDER) EXPENDITURES (2,295,253) (2,861,784) (1,771,464) 1,090,320 OTHER FINANCING SOURCES (USES) Debt proceeds 2,285,797 2,817,926 2,406,599 (411,327) REVENUES AND OTHER SOURCES OVER (UNDER) EXPENDITURES AND OTHER USES (9,456) (43,858) 635,135 678,993$ FUND BALANCE, BEGINNING OF YEAR 214,436 214,436 214,436 FUND BALANCE, END OF YEAR 204,980$ 170,578$ 849,571$ (823,021) (1,116,828) General Fund balance (1,090,278)$ - 34 - See independent auditor's report. An explanation of the differences between budgetary inflows and outflows and revenues and expenditures determined in accordance with generally accepted accounting principles follows: The budget fund balance at the beginning of the year is a based on cash reserves rather than fund balance. Blair Airport Authority BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For the year ended September 30, 2010 Accrual adjustments made because the Authority budgets for revenues and expenditures on the cash basis, rather than on the modified accrual basis. Year ending September 30,Fund Balances Property Taxes Gas Sales Gas Cost Rent Income Operating Expenses 2006 80,548$ 44,167$ 38,816$ 32,654$ 55,207$ 98,616$ 2007 17,069 58,201 47,121 52,009 72,679 141,976 2008 129,073 99,504 101,865 92,837 121,129 155,829 2009 (622,679) 125,795 61,212 56,315 108,113 107,743 2010 (1,085,546) 158,608 72,820 63,797 107,750 125,772 Blair Airport Authority FUND BALANCES FOR THE LAST FIVE YEARS September 30, 2010 - 35 - See independent auditor's report. Blair Airport Authority SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended September 30, 2010 - 40 -    I. SUMMARY OF AUDIT RESULTS Financial Statements Type of auditors’ report issues: Unqualified Internal controls over financial reporting:  Material weaknesses identified: Yes  Significant deficiencies identified that are not considered to be material weaknesses: No Noncompliance material to financial statements noted: No Federal Awards Internal control over major programs:  Material weaknesses identified: No  Significant deficiencies identified that are not considered to be material weaknesses: No Type of auditors’ report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133: No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 20.106 Airport Improvement Program Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Audit qualified as low-risk auditee: No Blair Airport Authority SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED Year ended September 30, 2010 - 41 -    II. FINDINGS—FINANCIAL STATEMENTS Finding 10-01: Financial Statements and Adjustments Criteria - Many organizations, including the Airport, rely on their auditor to generate the annual financial statements including footnotes. We assisted in the proper presentation of the financials and proposed material adjusting entries to present fairly the financial statements of the Airport. Material audit adjustments were required to properly record debt, inventory, accounts payable, accounts receivable, and prior period adjustments. Condition - The Airport keeps it books on a cash basis and has not developed the expertise and controls to prepare the financial statements. Cause - Lack of the required expertise and controls in preparing the basic set of financial statements. Effect - Material adjusting entries are required to be made during the audit for the proper presentation of the Airport’s financial statements. Questioned Costs - None Recommendation - The Airport may consider gathering the necessary expertise to prepare a required set of financial statements in a format acceptable for GAAP reporting. Officials Response – The Airport Treasurer has started a process to develop government- wide and fund financial statements using its accounting software for fund financials and an excel worksheet for government-wide financials. This process should be in place for next year’s financial statement preparation. Blair Airport Authority SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED Year ended September 30, 2010 - 42 -    Finding 10-02: Documentation of Policies and Procedures Criteria - The Airport should have formalized policies and procedures for its key administrative functions. A standard operating procedure (SOP) can be an effective catalyst to drive performance improvements and improving overall results. SOP’s will ensure that Airport operations are done consistently, approved procedures are being followed in compliance with Airport regulations, they will serve as training documents for teaching users about processes, and they will serve as a historical record of the how, where, when, and why of the Airport’s operations and information.   Condition - Employees do not have documentation of key procedures to support their job duties. Cause - Lack of formalized standard operating procedures and controls. Effect - Reliance on informal information from City Administrator and City Treasurer on majority of Airport’s accounting procedures and information. Questioned Costs – None Recommendation - We recommend that the Airport formalize and maintain a policies and procedures manual for key activities. This manual should include all areas of activities, including administration and operations. A policy and procedures manual will document how the Airport operates and will support cross-training and reduce training issues relating to employee turnover. Officials Response – The Airport has drafted up formal policy and procedure documents in the current fiscal year. These documents are still in draft stage but the Airport anticipates that they will be formally adopted during the next fiscal year. III. FINDINGS AND QUESTIONED COSTS—MAJOR FEDERAL AWARD PROGRAMS None Blair Airport Authority SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS Year ended September 30, 2010 - 43 -    Finding 09-01: Condition - The Airport keeps it books on a cash basis and relies on its auditors to prepare the financial statements. Recommendation - The Airport may consider gathering the necessary expertise to prepare a required set of financial statements in a format acceptable for GAAP reporting. Current Status - See current year finding 10-01. Finding 09-02: Condition - Employees do not have documentation of procedures to support their job duties. Recommendation - We recommend that the Airport formalize and maintain a policy and procedures manual. This manual should include all areas of activities, including administration and operations. A policy and procedures manual will document how the Airport operates and will support cross-training and reduce training issues relating to employee turnover. Current Status - See current year finding 10-02.