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FY2013 Audit Report Airport Blair Airport Authority FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORTS For the year ended September 30, 2013 TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS’ REPORT 3 - 5 MANAGEMENT’S DISCUSSION AND ANALYSIS 6 - 12 BASIC FINANCIAL STATEMENTS Statement of net position 13 Statement of activities 14 Balance sheet - governmental funds 15 Reconciliation of the balance sheet of governmental funds to the statement of net position 16 Statement of revenues, expenditures, and changes in fund balance - governmental funds 17 Reconciliation of the statement of revenues, expenditures and changes in fund balances of governmental funds to the statement of activities 18 NOTES TO FINANCIAL STATEMENTS 19 - 31 REQUIRED SUPPLEMENTAL INFORMATION Budgetary comparison schedule - general fund 33 SUPPLEMENTAL INFORMATION Schedule of expenditures of federal awards 35 Notes to schedule of expenditures of federal awards 36 OTHER INFORMATION Fund balances for the last five years 38 TABLE OF CONTENTS - CONTINUED PAGE 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 39 - 40 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 41 - 42 SCHEDULE OF FINDINGS AND QUESTIONED COST 43 - 44 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 45 INDEPENDENT AUDITOR’S REPORT Honorable Chairman and Board Members Blair Airport Authority Blair, Nebraska Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, and each major fund of Blair Airport Authority (the Airport), as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the Airport’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Westroads Pointe |1015 N. 98th St. |Suite 200 |Omaha, NE 68114 |T 402.390.2480 |F 402.390.0885 www.hayes-cpa.com - 4 - We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, and each major fund of the Blair Airport Authority as of September 30, 2013, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis and budgetary comparison information on pages 6 - 12 and 33 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Blair Airport Authority’s basic financial statements. The fund balances for the last five years is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. - 5 - The fund balances for the last five years has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 3, 2014, on our consideration of the Blair Airport Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Blair Airport Authority’s internal control over financial reporting and compliance. Hayes & Associates Omaha, Nebraska January 3, 2014 Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 6 - 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, 2013. 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 position presents information on all of the Airport’s assets, deferred outflows, liabilities, and deferred inflows with the difference between the remainder reported as net position. Over time, increases or decreases in net position 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 position changed during the most recent fiscal year. All changes in net position 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 For the year ended September 30, 2013 - 7 - 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 reconciliation between governmental activities (reported in the statement of net position 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 2% of the governmental assets are cash and equivalents. The following chart shows the Airport’s net position for 2013: SEE TABLE 1 2013 2012 Change Current and other assets 176,815$ 191,251$ (14,436)$ Capital assets 15,785,340 14,915,174 870,166 Total assets 15,962,155$ 15,106,425$ 855,730$ Other liabilities 2,637,331$ 1,970,458$ 666,873$ Long-term debt outstanding 1,678,961 1,620,125 58,836 Total liabilities 4,316,292$ 3,590,583$ 725,709$ NET POSITION Net investment in capital assets 11,520,315$ 11,375,540$ 144,775$ Restricted 67,298 39,859 27,439 Unrestricted 58,250 100,443 (42,193) Total net position 11,645,863$ 11,515,842$ 130,021$ MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED Blair Airport Authority - 8 - TABLE 1 ASSETS LIABILITIES September 30, 2013 SUMMARY OF NET POSITION Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED For the year ended September 30, 2013 - 9 - OVERVIEW OF FINANCIAL STATEMENTS - CONTINUED At the end of the current fiscal year, the Airport reported a positive balance in both net position invested in capital assets and in unrestricted net position. 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 position by $130,021. Key elements of the increase are as follows:  The increase is the result of grant funds received for the reimbursement on the acquisition of tract S in the previous fiscal year and the receipt of additional property taxes from the previous year. 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, unassigned 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 ending fund balances of ($2,447,107), a decrease of $659,492 from the prior year. The Airport’s fund balances for the past five years are presented in a table format on page 38. 2013 2012 Change Program revenues Charges for services 194,291$ 195,172$ (881)$ Capital grants and contributions 328,830 - 328,830 General revenues Property taxes 165,368 139,185 26,183 Other taxes 8,703 18,795 (10,092) Interest and other revenue 1,319 21,096 (19,777) Total revenues 698,511 374,248 324,263 EXPENSES General government 409,262 592,887 (183,625) Interest on debt 159,228 113,142 46,086 Total expenses 568,490 706,029 (137,539) CHANGE IN NET POSITION 130,021 (331,781) 461,802 NET POSITION, BEGINNING OF YEAR 11,515,842 11,847,623 (331,781) NET POSITION, END OF YEAR 11,645,863$ 11,515,842$ 130,021$ September 30, 2013 - 10 - TABLE 2 REVENUES Blair Airport Authority MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANGES IN NET POSITION Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED For the year ended September 30, 2013 - 11 - 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 P o s i t i v e Account (Negative) Reason Rent income ($8,455) Income was lower than expected due to not getting as much rent from the new hangar as expected. Miscellaneous income ($4,438) Miscellaneous income was less than projected as we did not receive as much franchise fee (gas flowage) as had been anticipated. Grant Income ($862,680) Grant income was less than the amount proposed in the budget as we did not receive grant funds for the acquisition of property from the Petersen’s land purchase. Debt principle expense $2,525,920 The principle on the short term note that had to be renewed was not as high as anticipated due to delay in condemnation appeals. Interest expense ($10,158) Interest costs were slightly higher due in part to increased borrowing to pay for the settlement agreement approved on the Petersen. Capital Out Lay ($150,160) Capital expenses weren’t as high due to the settlement agreement with the Petersen’s for less than what had be proposed in the budget. Debt proceeds ($605,199) The total was greater than expected due to the Airport having to refinance the existing Draw down bonds rather than issue permanent bonds. Capital assets: The Airport’s government-wide capital assets, net of accumulated depreciation, increased due to the continued acquisition of property and the construction of an additional hangar. Additional information as well as a detailed classification of the Airport’s net capital assets can be found in the notes to the Financial Statements. Blair Airport Authority MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED For the year ended September 30, 2013 - 12 - OVERVIEW OF FINANCIAL STATEMENTS - CONTINUED Long-term debt: The long-term debt of the Airport increased by $58,836 due primarily to the addition of NDA Hangar loan for the partial payment of a new hangar. 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. Next year’s budget and rates: The property tax levy request for the City of Blair for the fiscal year beginning October 1, 2012, was set at $0.355629 per one hundred dollars of valuation. The property tax levy request for the Airport Authority for the fiscal year beginning October 1, 2012 was set at $0.034638 per one hundred dollars of valuation, or a total City and Airport levy of $0.390267. The budget for fiscal year 2014 began October 1, 2013 required a levy for City operations of $.354788 and Airport levy of $.034988 or a combined levy of $.389776. 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. Per Airport statues the Airport could levy up to $0.07 per $100 dollars of valuation with concurrence of the City Council. Additional Notes: The Airport is still working to complete the acquisition and relocation of Tract B (Petersen Property). The Airport reached a settlement with the Petersen’s in May that settled all claims on the acquisition and all claims on relocation except any payment for relocation benefits that may be available for moving of purported nursery inventory. The landowner has appealed the business inventory relocation benefit payment of $720,000. Federal funds will ultimately cover 90% of the cost. The Airport has seen an increase in traffic since Skywerx Aviation, LLC has located their FBO business at the Airport. Skywerx provides maintenance, fuel sales, and charter flights operating from the airport. The Airport continues to negotiate with the individuals and/or businesses on land leases to build additional hangars. Request for information: The financial report is designed to provide a general overview of the Airport’s finances for all those with an interest in the government’s finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Blair Airport Authority, 218 S. 16th Street, Blair, NE 68008. Cash and cash equivalents 147,882$ Due from County Treasurer 10,786 Other receivables 12,657 Prepaid expenses 5,490 Capital assets Land 6,304,797 Construction in Progress 15,795 Buildings and runways 11,416,300 Accumulated depreciation (1,951,552) Total assets 15,962,155$ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND NET POSITION Accounts payable 5,881$ Accrued interest 25,764 Prepaid leases 13,843 Deposits 5,779 Short term notes payable 2,586,064 Long-term debt Due within one year 109,612 Due in more than a year 1,569,349 Total liabilities 4,316,292 NET POSITION Net investment in capital assets 11,520,315 Restricted 67,298 Unrestricted 58,250 Total net position 11,645,863 Total liabilities, deferred inflow, and net position 15,962,155$ Blair Airport Authority STATEMENT OF NET POSITION September 30, 2013 ASSETS AND DEFERRED OUTFLOWS OF RESOURCES - 13 - See accompanying notes and independent auditor's report. N et (Expenses)Revenues and Changes in N et Assets Ch a r g e s f o r Gr a n t s a n d Governmenta l FU N C T I O N S / P R O G R A M S E x p e n s e s S e r v i c e s C o n t r i b u t i o n s A c t i v i t i e s Go v e r n m e n t a l a c t i v i t i e s Ge n e r a l g o v e r n m e n t 40 9 , 2 6 2 $ 1 9 4 , 2 9 1 $ 3 2 8 , 8 3 0 $ 1 1 3 , 8 5 9 $ In t e r e s t o n l o n g - t e r m d e b t 15 9 , 2 2 8 - - ( 1 5 9 , 2 2 8 ) To t a l G o v e r n m e n t a c t i v i t i e s 5 6 8 , 4 9 0 $ 1 9 4 , 2 9 1 $ 3 2 8 , 8 3 0 $ ( 4 5 , 3 6 9 ) Ge n e r a l r e v e n u e s Ta x e s Pr o p e r t y t a x e s 1 6 5 , 3 6 8 Ot h e r t a x e s 8,703 Un r e s t r i c t e d i n v e s t m e n t e a r n i n g s 39 Ot h e r i n c o m e 1,280 To t a l g e n e r a l r e v e n u e s 1 7 5 , 3 9 0 CH A N G E S I N N E T P O S I T I O N 1 3 0 , 0 2 1 N ET P O S I T I O N , B E G I N N I N G O F Y E A R 1 1 , 5 1 5 , 8 4 2 N ET P O S I T I O N , E N D O F Y E A R 1 1 , 6 4 5 , 8 6 3 $ ST A T E M E N T O F A C T I V I T I E S Bl a i r A i r p o r t A u t h o r i t y Fo r t h e y e a r e n d e d S e p t e m b e r 3 0 , 2 0 1 3 Se e a c c o m p a n y i n g n o t e s a n d i n d e p e n d e n t a u d i t o r ' s r e p o r t . - 1 4 - Re v e n u e s Pr o g r a m General Debt Fund Fund Total Cash and cash equivalents 84,505$ 63,377$ 147,882$ Due from County Treasurer - 10,786 10,786 Other receivables 12,657 - 12,657 Total assets 97,162$ 74,163$ 171,325$ LIABILITIES Accounts payable 5,881$ -$ 5,881$ Prepaid leases 13,843 - 13,843 Deposits 5,779 - 5,779 Short term notes payable 2,586,064 - 2,586,064 Total liabilities 2,611,567 - 2,611,567 DEFERRED INFLOW OF RESOURCES Unavailable revenue - 6,865 6,865 FUND BALANCE Restricted - 67,298 67,298 Unassigned (2,514,405) - (2,514,405) Total fund balance (2,514,405) 67,298 (2,447,107) Total liabilities, deferred inflows, and fund balance 97,162$ 74,163$ 171,325$ September 30, 2013 See accompanying notes and independent auditor's report. - 15 - ASSETS Blair Airport Authority BALANCE SHEET GOVERNMENTAL FUNDS Fund balance of governmental funds (2,447,107)$ 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 15,785,340 Deferred revenues that are not current financial resources but that are recognized in the government wide statements 6,865 Notes and bonds payable are not current financial liabilities. Therefore, they are not included in the governmental funds (1,678,961) Prepaid expenses are counted as assets on the statement of net assets and are reported as expenses in governmental funds 5,490 Interest accrued on long-term debt (25,764) Net position of governmental activities 11,645,863$ Blair Airport Authority RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS For the year ended September 30, 2013 TO THE STATEMENT OF NET POSITION - 16 - See accompanying notes and independent auditor's report. General Debt Fund Fund Total REVENUES Taxes -$ 175,230$ 175,230$ Charges for services 194,291 - 194,291 Grants 328,830 - 328,830 Interest income 39 - 39 Other revenues 1,280 - 1,280 Total revenues 524,440 175,230 699,670 EXPENDITURES Administration 189,890 3,226 193,116 Capital outlay 1,080,159 - 1,080,159 Debt service Principal 29,084 70,000 99,084 Interest 70,158 74,565 144,723 Total expenditures 1,369,291 147,791 1,517,082 REVENUES OVER (UNDER) EXPENDITURES (844,851) 27,439 (817,412) OTHER FINANCING SOURCES Proceeds from debt 157,920 - 157,920 NET CHANGE IN FUND BALANCES (686,931) 27,439 (659,492) FUND BALANCE, BEGINNING OF YEAR (1,827,474) 39,859 (1,787,615) FUND BALANCE, END OF YEAR (2,514,405)$ 67,298$ (2,447,107)$ See accompanying notes and independent auditor's report. - 17 - For the year ended September 30, 2013 Blair Airport Authority STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS Net changes in fund balance - total governmental funds (659,492)$ 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 1,152,312 Depreciation expense (282,146) Revenue reported in the statement of activities that do not provide current financial resources are not reported as revenue in the governmental funds (1,159) 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 (58,836) Prepaid expenses are counted as assets on the statement of net assets and are reported as expenses in governmental funds (903) 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 (19,755) Change in net assets of governmental activities 130,021$ Blair Airport Authority RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For the year ended September 30, 2013 - 18 - See accompanying notes and independent auditor's report. TO THE STATEMENT OF ACTIVITIES Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 19 - 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 position and a statement of activities (including changes in net position). These statements are prepared using the standards of the Governmental Accounting Standards Board (GASB), General Accepted Accounting Principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 20 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of Accounting/Measurement Focus - Continued Government-Wide Financial Statements - Continued On October 1, 2012, the Airport implemented the provisions of GASB Statement No. 62, Codification of Accounting and Financial Reporting guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB No. 62 incorporates into the GASB’s authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: Financial Accounting Standards Boards (FASB) Statements and Interpretations, Accounting Principles Board Opinions and Accounting Research Bulletins of the American Institute of Certified Public Accountants (AICPA) Committee of Accounting Procedure. 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 position. The statement of activities presents changes in net position. 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 position and internal transactions in the statement of activities have been eliminated. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 21 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of Accounting/Measurement Focus - Continued 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 position as presented in these statements to the net position presented in the government-wide financial statements. The Airport has presented all major funds that met the qualifications of GASB Statement No. 34. 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 For the year ended September 30, 2013 - 22 - 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 For the year ended September 30, 2013 - 23 - 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 Buildings and runways 40 Road overlays and concrete 15-25 Machinery and equipment 10 Vehicles 5 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, 2012 valuation was included with the City of Blair’s valuation of $471,856,616. The levy for the Airport for the year ending September 30, 2013 was $0.034639 per $100 of value. The total tax levy was $163,445. 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 For the year ended September 30, 2013 - 24 - 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 Position. 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. 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 For the year ended September 30, 2013 - 25 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 11. 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 position. 12. 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, 2013. 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, 2013, was $147,882. 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. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 26 - NOTE D. CAPITAL ASSETS Beginning Ending Balance Increases Decreases Balance Capital assets not depreciated Land $ 5,552,799 $ 751,998 $ - $ 6,304,797 Construction in Progress 103,733 15,795 (103,733) 15,795 Total capital assets not depreciated 5,656,532 767,793 (103,733) 6,320,592 Other capital assets Buildings and runways 10,928,048 488,252 - 11,416,300 Less accumulated depreciation Buildings and runways (1,669,406) (282,146) - (1,951,552) Other capital assets, net 9,258,642 206,106 - 9,464,748 Governmental activities capital assets, net $ 14,915,174 $ 973,899 $ - $ 15,785,340 Depreciation expense of $282,146 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. NOTE F. NET POSITION CATEGORIES In the government-wide financial statements net position are classified in the following categories: Invested in Capital Assets This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation on these assets reduces this category. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 27 - NOTE F. NET POSITION CATEGORIES - CONTINUED Restricted Net Position 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 Position This category represents the net position 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 January 19, 2012, a bond anticipation note was issued in the amount of $3,500,000. Two additional bond anticipation notes were issued on January 18, 2013. The 2013 Series A bond anticipation note was issued for $1,741,700 and the 2013 Series B bond anticipation note was issued for $1,758,300 for a total amount of $3,500,000. Proceeds from the 2013 Series A bond anticipation note were used to pay off the 2012 anticipation note. Proceeds from the 2013 Series B bond anticipation note were used to manage the temporary cash flow deficits that occur due to the timing of expenditures related to federal funds applied for which do not coincide with the timing of reimbursement on these projects. The remaining bond anticipation notes are due within one year of issuance. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 28 - NOTE G. SHORT-TERM DEBT - CONTINUED Short term debt activity for the year ended September 30, 2013, was as follows: Interest Beginning Ending Dated Description Rate Balance Additions Reductions Balance 1/19/2012 Note 2012 3.65% 1,919,509$ 108,636$ (2,028,145)$ -$ 1/18/2013 Note 2013 A 3.35% - 1,741,700 - 1,741,700 1/18/2013 Note 2013 B 3.35% - 844,364 - 844,364 Total 1,919,509$ 2,694,700$ (2,028,145)$ 2,586,064$ The 2013 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, 2013 consisted of the following: Interest Beginning Ending Dated Description Rate Balance Additions Reductions Balance 4/23/2003 Refunding Bonds 1.40-4.35% $ 180,000 ` $ - $ (35,000) 145,000$ 11/6/2006 Refunding Bonds 4.00-5.25% 1,255,000 - (35,000) 1,220,000 8/23/2006 Project F-29 Note 0% 46,375 - (10,500) 35,875 8/23/2006 Project H-01 Note 0% 138,750 - (13,320) 125,430 6/20/2013 Project H-02 Note 0% - 157,920 (5,264) 152,656 1,620,125$ 157,920$ (99,084)$ 1,678,961$ Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 29 - 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, 2013, annual debt service requirements of governmental activities to maturity are as follows: Year ending September 30, Principal Requirements Interest Requirements Total 2014 109,612$ 66,402$ 176,014$ 2015 114,612 63,295 177,907 2016 114,612 59,994 174,606 2017 113,487 56,500 169,987 2018 114,112 52,619 166,731 2019-2023 617,526 193,919 811,445 2024-2027 495,000 53,682 548,682 1,678,961$ 546,411$ 2,225,372$ NOTE I. 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 For the year ended September 30, 2013 - 30 - NOTE J. FUND BALANCES Fund balances for each of the Airport’s governmental funds (general fund, and debt service fund) are 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. NOTE K. 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. Blair Airport Authority NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2013 - 31 - NOTE L. IMPLEMENTATION OF CHANGE IN ACCOUNTING PRINCIPLE On October 1, 2013, the Airport implemented GASB Statements No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and No. 65, Items Previously Reported as Assets and Liabilities. These statements establish accounting and financial reporting requirements for items previously reported as assets and liabilities that will now be reported as deferred outflows and deferred inflows. In addition, GASB Statement No. 63 addresses the financial reporting of the item previously reported as net assets will now be reported as net position. REQUIRED SUPPLEMENTAL INFORMATION Variance Original/Final Positive Budget Actual (Negative) REVENUES Rent income 182,628$ 174,173$ (8,455)$ Interest 50 39 (11) Grants 1,191,510 328,830 (862,680) Miscellaneous income 15,600 11,162 (4,438) Total revenues 1,389,788 514,204 (875,584) EXPENDITURES General government 176,650 184,562 (7,912) Capital outlay 930,000 1,080,160 (150,160) Debt principal 2,525,920 29,084 2,496,836 Interest expense 60,000 70,158 (10,158) Total expenditures 3,692,570 1,363,964 2,328,606 REVENUES OVER (UNDER) EXPENDITURES (2,302,782) (849,760) 1,453,022 OTHER FINANCING SOURCES (USES) Transfer from debt fund 50,400 - 50,400 Debt proceeds 2,244,890 2,850,089 605,199 REVENUES AND OTHER SOURCES OVER (UNDER) EXPENDITURES AND OTHER USES (7,492) 2,000,329 2,007,821$ FUND BALANCE, BEGINNING OF YEAR 124,713 124,713 FUND BALANCE, END OF YEAR 117,221$ 2,125,042$ (1,952,187) (2,687,260) (2,514,405)$ Accrual adjustments made because the Authority budgets for revenues and expenditures on the cash basis, rather than on the modified accrual basis. - 33 - See independent auditor's report. Blair Airport Authority BUDGETARY COMPARISON SCHEDULE - GENERAL FUND For the year ended September 30, 2013 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. SUPPLEMENTAL INFORMATION Federal Agency or CFDA Pass-through Federal Number Number Expenditures U.S. Department of Transportation Federal Aviation Administration Passed through State of Nebraska Land acquistion grant to expand airport 20.106 Department of Transportation 668,825$ Snow removal equipment grant 20.106 Department of Transportation 15,795 Total expenditures of federal awards 684,620$ -35- Blair Airport Authority SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30, 2013 Federal grantor/passed-through grantor program title 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, 2013 - 36 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. General The accompanying schedule of expenditures of federal awards (the Schedule) presents the activity of all federal financial assistance programs of Blair Airport Authority (the Airport). The Airport’s reporting entity is defined in note A to the Airport’s financial statements. Federal financial assistance received directly from federal agencies, as well as passed through other governmental agencies, is included on the Schedule. The Schedule presents total expenditures for each federal financial award program in accordance with U.S. Office of Management and Budget (OMB) Circular A- 133. Federal program titles are reported as presented in the Catalog of Federal Domestic Assistance (CFDA) whenever possible. 2. Basis of Accounting The Schedule is prepared on the accrual basis of accounting. NOTE B. CONTINGENCIES The Airport receives funds under various federal grant programs, and such awards are to be expended in accordance with the provisions of the various grants. Compliance with the grants is subject to audit by various government agencies, which may impose sanctions in the event of noncompliance. Management believes that is has complied with all aspects of the various grant provisions and the results of adjustments, if any, relating to such audits would not have any material financial impact. OTHER INFORMATION Ye a r e n d i n g S e p t e m b e r 3 0 , Fu n d B a l a n c e s P r o p e r t y T a x e s G a s S a l e s G a s C o s t R e n t I n c o m e O p e r a t i n g E x p e n s e s 20 0 9 ( 6 2 2 , 6 7 9 ) 1 2 5 , 7 9 5 6 1 , 2 1 2 5 6 , 3 1 5 1 0 8 , 1 1 3 1 0 7 , 7 4 3 20 1 0 ( 1 , 0 8 5 , 5 4 6 ) 1 5 8 , 6 0 8 7 2 , 8 2 0 6 3 , 7 9 7 1 0 7 , 7 5 0 1 2 5 , 7 7 2 20 1 1 ( 1 , 1 4 7 , 2 7 3 ) 1 5 9 , 6 2 0 9 9 , 2 1 9 8 5 , 8 2 2 1 1 5 , 9 9 5 1 8 8 , 2 3 4 20 1 2 ( 1 , 7 8 7 , 6 1 5 ) 1 5 7 , 9 8 0 7 1 , 0 9 7 6 6 , 3 7 3 1 2 4 , 0 7 5 2 5 8 , 3 0 2 20 1 3 ( 2 , 4 4 7 , 1 0 7 ) 1 6 8 , 2 1 3 - - 1 8 4 , 4 0 9 1 8 9 , 8 9 0 Bl a i r A i r p o r t A u t h o r i t y FU N D B A L A N C E S F O R T H E L A S T F I V E Y E A R S Se p t e m b e r 3 0 , 2 0 1 3 - 3 8 - Se e i n d e p e n d e n t a u d i t o r ' s r e p o r t . 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 Honorable Chairman and Board Members Blair Airport Authority Blair, Nebraska We have audited, in accordance with the 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, the financial statements of the governmental activities, and each major fund of Blair Airport Authority, as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise Blair Airport Authority’s basic financial statements, and have issued our report thereon dated January 3, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Blair Airport Authority’s internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Blair Airport Authority’s internal control. Accordingly, we do not express an opinion on the effectiveness of Blair Airport Authority’s internal control. A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal controls over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Westroads Pointe |1015 N. 98th St. |Suite 200 |Omaha, NE 68114 |T 402.390.2480 |F402.390.0885 www.hayes-cpa.com - 40 - Compliance and Other Matters As part of obtaining reasonable assurance about whether Blair Airport Authority’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Hayes & Associates Omaha, Nebraska January 3, 2014 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Honorable Chairman and Board Members Blair Airport Authority Blair, Nebraska Report on Compliance for the Major Federal Program We have audited Blair Airport Authority’s compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on the Blair Airport Authority’s major federal program for the year ended September 30, 2013. Blair Airport Authority’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of Blair Airport Authority’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Blair Airport Authority’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of Blair Airport Authority’s compliance. Westroads Pointe |1015 N. 98th St. |Suite 200 |Omaha, NE 68114 |T 402.390.2480 |F402.390.0885 www.hayes-cpa.com - 42 - Opinion on Each Major Federal Program In our opinion, Blair Airport Authority, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal program for the year ended September 30, 2013. Report on Internal Control Over Compliance Management of Blair Airport Authority, is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Blair Airport Authority’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Blair Airport Authority’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Hayes & Associates Omaha, Nebraska January 3, 2014 Blair Airport Authority SCHEDULE OF FINDINGS AND QUESTIONS COST For the year ended September 30, 2013 - 43 - I. SUMMARY OF AUDIT RESULTS Financial Statements Type of auditor’s report issued: Unmodified Internal controls over financial reporting:  Material weaknesses identified: No  Significant deficiencies identified: No Noncompliance material to financial statements noted: No Federal Awards Internal control over major programs:  Material weaknesses identified: No  Significant deficiencies identified: No Type of auditor’s report issued on Compliance for major programs: Unmodified 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 Grant 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 For the year ended September 30, 2013 - 44 - II. FINDINGS—FINANCIAL STATEMENTS None reported. III. FINDINGS AND QUESTIONED COSTS—MAJOR FEDERAL AWARD PROGRAMS None reported. Blair Airport Authority SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended September 30, 2012 - 45 - II. FINDINGS—FINANCIAL STATEMENTS None reported. III. FINDINGS AND QUESTIONED COSTS—MAJOR FEDERAL AWARD PROGRAMS None reported.