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FY2013 Audit Report City City of Blair, Nebraska FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT For the year ended September 30, 2013 - 1 - TABLE OF CONTENTS Page INDEPENDENT AUDITOR’S REPORT 3 – 5 MANAGEMENT’S DISCUSSION AND ANALYSIS 6 – 16 BASIC FINANCIAL STATEMENTS Statement of net position - Government-wide 17 – 18 Statement of activities - Government-wide 19 Balance sheet - Governmental funds 20 Reconciliation of the balance sheet of the governmental funds to the statement of net position 21 Statement of revenues, expenditures, and changes in fund balances - Governmental funds 22 Reconciliation of the statement of revenues, expenditures and changes in fund balances of the governmental funds to the statement of activities 23 Statement of net position - Proprietary funds 24 Statement of revenues, expenses, and changes in fund net position - Proprietary funds 25 Statement of cash flows - Proprietary funds 26 Statement of net position - Fiduciary funds 27 Statement of changes in fiduciary net position – Fiduciary funds 28 NOTES TO FINANCIAL STATEMENTS 29 – 51 REQUIRED SUPPLEMENTAL INFORMATION Budgetary comparison schedule - General fund and major special revenue funds 53 – 54 Budgetary comparison schedule - General fund revenues 55 - 2 - TABLE OF CONTENTS – CONTINUED Page Budgetary comparison schedule - Street fund 56 Budgetary comparison schedule - Keno fund 57 SUPPLEMENTAL INFORMATION Combining balance sheet – General fund 59 Combining statement of revenues, expenditures, and changes in 60 Fund balance – general fund Schedule of Expenditures of Federal Awards 61 Notes to Schedule of Expenditures of Federal Awards 62 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 63 – 64 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 65 – 67 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 68 – 70 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 71 – 73 INDEPENDENT AUDITOR’S REPORT Honorable Members of the City Council City of Blair, Nebraska Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of City of Blair, Nebraska, as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City’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. Westroads Pointe |1015 N. 98th St. |Suite 200 |Omaha, NE 68114 |T 402.390.2480 |F402.390.0885 www.hayes-cpa.com - 4 - 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. 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, the business-type activities, and each major fund of the City of Blair, Nebraska, as of September 30, 2013, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. 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 - 17 and 54 - 58 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 City of Blair, Nebraska’s basic financial statements. The introductory section is presented for the purpose 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. - 5 - The combining and individual non-major fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 4, 2014, on our consideration of the City of Blair, Nebraska’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 City of Blair, Nebraska’s internal control over financial reporting and compliance. Hayes & Associates, L.L.C. Omaha, Nebraska February 4, 2014 City of Blair, Nebraska MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 6 - The discussion and analysis of the City of Blair’s financial performance provides an overview and analysis of the City’s financial activities for the fiscal year ended September 30, 2013. It should be read in conjunction with the accompanying basic financial statements. FINANCIAL HIGHLIGHTS  The assets of the City of Blair exceeded its liabilities at the close of the fiscal year ending September 30, 2013 by $32.7 million (net position). Of this amount, $6.4 million (unrestricted net position) may be used to meet the government’s ongoing obligations to citizens and creditors. The City of Blair’s total net position decreased by $12,490 for the year ended September 30, 2013. As of September 30, 2013, the City of Blair’s governmental funds reported combined ending fund balances of $4.2 million, an increase of $551,113 in comparison with the prior fiscal year.  The fund balances for the General Fund decreased $72,274 for the fiscal year ended September 30, 2013. The Debt Service Fund increased $625,755 primarily due to sale of the lots in Deerfield that the City had previously foreclosed on and the Street Fund decreased $24,373 during the same period primarily due to project construction.  The City’s total debt increased by $3.1 million during the current fiscal year. The City issued new debt of $4.9 million during the current year and continued to make debt payments this year totaling $1.8 million. The increase was primarily due to the issuance of new debt for infrastructure improvements to provide additional water treatment capacity for the benefit of the Bio Campus. OVERVIEW OF FINANCIAL STATEMENTS The discussion and analysis serves as an introduction to the City of Blair’s basic financial statements. The City of Blair’s basic financial statements are comprised of three components, government-wide financial statements, fund financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the City of Blair’s finances in a manner similar to a private- sector business. The statement of net position presents information on all of the City of Blair’s assets plus deferred outflows, and liabilities plus deferred inflows, with the difference between the two reported as net position. Over time, increases or decrease in net position may serve as a useful indicator of whether the financial position of the City of Blair is improving or deteriorating. City of Blair, Nebraska MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 7 - combines and consolidates governmental funds’ current financial resources (short-term spendable resources) with capital assets and long-term obligations. Other nonfinancial factors should also be taken into consideration, such as changes in the City’s property tax base and the condition of the City’s infrastructure (i.e. roads, drainage improvements, storm and sewer lines, etc.), to assess the overall health or financial condition of the City. The statement of activities presents information showing how expenses are taken into account regardless of when cash is received or paid. 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). Both the statement of net position and the statement of activities are prepared utilizing the full accrual basis of accounting as opposed to the modified accrual basis. In the statement of net position and the statement of activities, the City is divided into two kinds of activities, with the third activity (fiduciary) not included in the government-wide totals: Governmental Activities - Most of the City’s basic services are reported here, including the police, streets, fire, library, planning and development, parks and recreation, and general administration. Property taxes, sales taxes, and state allocations finance most of these activities. Business-type Activities - The City charges a fee to customers to help it cover all or most of the cost of certain services it provides. The City’s water and sewer system are reported here. Fiduciary Activities - The City accounts for Agency Funds for TIF District #1 Project which are held in restriction to pay the costs of the District. TIF District #1 bonds are held by the developer and do not carry the full faith and credit of the City. Reporting the City’s Most Significant Funds 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. Some funds are required to be established by state laws and by bond covenants. However, the City also establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grant and other money. The City’s three kinds of fund financial statements (governmental, proprietary and fiduciary) utilize different accounting approaches. Governmental funds - The majority of the City’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 City’s general governmental 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 City’s programs. City of Blair, Nebraska MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 8 - By comparing information presented for governmental funds with similar information presented for governmental activities in the government-wide statements, readers may better understand the long - term effect of the government’s near term financing decisions. The relationships of differences between governmental activities (reported in the statement of net position and the statement of activities) and governmental funds are detailed in a reconciliation following the fund financial statements. The City of Blair maintains five individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the general fund, debt service fund, street fund, keno fund and capital projects fund, all of which are considered to be major funds by management. Proprietary funds - The City charges customers for the services it provides, whether to outside customers or to other units within the City. These services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the statement of net position and the statement of activities. In fact, the City’s enterprise funds (a component of proprietary funds) are identical to the business-type activities that are reported in the government- wide statements but provide more detail and additional information, such as cash flows, for proprietary funds. The City of Blair maintains two individual enterprise funds. The City uses enterprise funds to account for its water and sewer. The funds provide the same type of information as the government- wide financial statements, only in more detail and include some of the internal service fund type activity. The proprietary fund financial statements provide separate information for the water and sewer funds, both of which are considered to be major funds in the City. Fiduciary fund - The City accounts for Agency Funds for TIF District #1 Project which are held in restriction to pay the costs of the District. TIF District #1 bonds are held by the developer and do not carry the full faith and credit of the City. Notes to 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. The notes to the financial statements can be found immediately following the basic financial statements. THE CITY AS A WHOLE - Government-Wide Financial Analysis The City’s combined net position were $32.7 million as of September 30, 2013. Analyzing the net position and net expenses of governmental and business-type activities separately, the governmental activities net position were $18.8 million and the business type activities net position were $13.9 million. This analysis focuses on the net position (table 1) and changes in general revenues (table 2) and significant expenses of the City’s governmental and business-type activities. The comparative government-wide results are provided in the tables for additional analysis. 2013 2012 2013 2012 2013 2012 ASSETS Current and other assets 6,507$ 7,207$ 6,826$ 10,816$ 13,333$ 18,023$ Capital assets 18,321 16,057 41,971 36,611 60,292 52,668 Total assets 24,828 23,264 48,797 47,427 73,625 70,691 LIABILITIES Long-term debt outstanding 5,275 5,730 33,210 29,642 38,485 35,372 Other liabilities 718 639 1,690 1,957 2,408 2,596 Total liabilities 5,993 6,369 34,900 31,599 40,893 37,968 DEFERRED INFLOWS - - - - - - NET POSITION Net investment in capital assetst 13,045 10,370 8,761 10,283 21,806 20,653 Restricted 1,172 608 3,140 1,930 4,312 2,538 Unrestricted (deficit) 4,432 5,916 1,997 3,615 6,429 9,531 Total net position 18,649$ 16,894$ 13,898$ 15,828$ 32,547$ 32,722$ City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 9 - Governmental Activities Business-type Activities Total Primary Government TABLE 1 City of Blair, Nebraska MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 10 - By far the largest portion of the City’s net position (80%) reflects its restricted and capital assets (e.g., donations, community betterment, debt service, and capital projects). Governmental Activities Governmental activities increased the City’s net position by $1.94 million, while Business-type Activities decreased by $1.93 million. Key elements of this increase are as follows: The revenue in governmental funding activities did increase along with expenses. The General Fund was the most effective at covering their costs due to sales tax, fees charged, operating grants, capital grants, and contributions, which was generally a positive increase. The comparative financial analysis is provided for additional information. The City’s governmental revenues increased when compared to the prior year by 1.7% or $121,499. The primary reason for this increase was the receipt of grants, contributions and other miscellaneous revenues over the prior year. The assessed value of the City of Blair decreased slightly by $966,388 or 0.2% as compared to the prior year, while the City property tax rate of $0.355629 per $100 assessment remained the same. The dip in assessed value was the result of County Board of Equalization exempting some of the facilities on the former Dana Campus that had been placed on the tax rolls the previous year. Business-type Activities Revenues of the City’s business-type activities were $7.42 million for the fiscal year ending September 30, 2013. Expenses for the City’s business-type activities were $6.2 million for the year, resulting in a net operating income of $1.2 million before transfers. The net increase was the result of increase in income and decrease in expenses. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of the fiscal year 2013, the City had nearly $87.6 million invested in a broad range of capital assets, including police and fire equipment, buildings, park facilities, and water and sewer plants. (See Table 3) This amount represents a net increase (including increases and decreases) of $9.49 million or 12% over the prior fiscal year. Beginning October 1, 2003, the City began capitalizing general infrastructure assets and depreciating them over their useful lives as required by GASB 34. 2013 2012 2013 2012 2013 2012 REVENUES Program revenues Charges for services 511$ 697$ 7,038$ 6,681$ 7,549$ 7,378$ Operating grants and contributions 851 48 222 4,339 1,073 4,387 Capital grants and contributions 99 493 - - 99 493 General revenues Taxes 4,469 4,523 - - 4,469 4,523 Intergovernmental - 640 - - - 640 Interest income 68 102 11 6 79 108 Other 1,390 535 147 480 1,537 1,015 Total revenues 7,388 7,038 7,418 11,506 14,806 18,544 EXPENSES Administration 723 1,685 - - 723 1,685 Police 2,119 1,816 - - 2,119 1,816 Fire 369 539 - - 369 539 Parks 581 522 - - 581 522 Library 388 324 - - 388 324 Swimming pool 66 84 - - 66 84 Zoning 219 189 - - 219 189 Animal control 107 98 - - 107 98 Donated fund 30 25 - - 30 25 Rescue squad - 479 - - - 479 Streets 1,211 1,481 - - 1,211 1,481 Keno 17 28 - - 17 28 Interest expense 148 300 - - 148 300 Water - - 5,110 7,010 5,110 7,010 Sewer - - 1,106 1,081 1,106 1,081 Total expenses 5,978 7,570 6,216 8,091 12,194 15,661 CHANGE IN NET POSITION BEFORE TRANSFERS 1,410 (532) 1,202 3,415 2,612 2,883 TRANSFERS 573 591 (573) (591) - - CHANGE IN NET POSITION 1,983 59 629 2,824 2,612 2,883 NET POSITION, BEGINNING 16,895 14,098 15,850 13,004 32,745 27,102 PRIOR PERIOD ADJUSTMENT (43) 2,738 (2,582) - (2,625) 2,738 NET POSITION, BEGINNING OF YEAR, RESTATED 16,852 16,836 13,268 13,004 30,120 29,840 NET POSITION, END OF YEAR 18,835$ 16,895$ 13,897$ 15,828$ 32,732$ 32,723$ City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 -11- TABLE 2 Governmental Activities Business-type Activities Total Primary Government City of Blair, Nebraska MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 12 - Debt At year-end, the City had $38.49 million in General Obligation Bonds, Revenue Bonds, and General Registered Warrants outstanding as compared to $35.4 million at the end of the prior fiscal year, resulting in an increase of $3.1 million shown in Table 4. The Water Revenue Bonds outstanding were increased by $3.0 million. The City has a 25 year take or pay contract with Cargill to secure the debt. The expanded plant has a 20 million gallons per day (MPD) capacity with 15.5 MPD contracted to Cargill. THE CITY’S FUND At the close of the City’s fiscal year on September 30, 2013, the governmental funds of the City reported a combined fund balance of $4.2 million. The city’s general fund balance was reduced slightly by $72,274. The primary reason for the general fund’s reduction is the reduction of principle on OPPD note. It should be noted that the final payment from OPPD for the note from the sale of the former electric system will be made in April of 2014. General Fund Budgetary Highlights General Fund had revenues over expenditures of $845,185. This was primarily accomplished from the fact expenses were below budgeted projections and sales tax revenue was slightly higher than projected. Debt Service had expenditures of $196,329 more than revenues. This was primarily due to the fact that bond payments where greater than revenues from assessments. Assessment revenues were down due to the fact that the City had foreclosed on delinquent assessments in Deerfield the previous year. Ending fund balance in Debt was actually increased by $625,755 primarily from the sale of the lots in Deerfield. Street Fund had an operating loss of $1.29 million. This was offset with the transfer in of $1.26 million in sales taxes for capital projects which resulted in a net decrease of $24,373. Keno and Capital Projects Fund had no major deviations in revenues or expenditures. Water and Sewer Funds had no major deviation of revenues or expenditures. Water and Sewer both finished the year with a ratio of operating income before depreciation, divided by Debt Service greater than 1.25 as required by the covenants in the authorizing Ordinances. The City had $1.2 million in Construction funds available as part of the Water Plant expansion project at the close of the fiscal year. It is anticipated that all dollars available from the Construction fund will be utilized as part of the project. Internal Service Fund from previous financial statements was combined into the General Fund, Fund Balance as the City no longer maintains a self-funded health insurance program for funding the City Employee health insurance benefit program. Balance Decreases / Balance September 30, 2012 Increases Recharacterization September 30, 2013 GOVERNMENTAL ACTIVITIES Land 296$ 1,434$ (457)$ 1,273$ Construction in progress 185 121 (185) 121 Infrastructure 12,894 1,278 - 14,172 Buildings 5,504 606 (3) 6,107 Equipment 4,596 335 (373) 4,558 Total governmental 23,475 3,774 (1,018) 26,231 BUSINESS-TYPE ACTIVITIES Water assets 45,840 7,178 (1,071) 51,947 Sewer assets 8,839 623 - 9,462 Total business-type 54,679 7,801 (1,071) 61,409 Totals 78,154$ 11,575$ (2,089)$ 87,640$ -13- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 TABLE 3 City of Blair, Nebraska MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 14 - The health care program and contracts have previously operated on a calendar year bases and effective January 1, 2013 the City entered into a commercial health plan through Blue Cross and Blue Shield of Nebraska at a saving of approximately $90,000 a year. Effective October 1, 2013 the City entered into a revised contract with Blue Cross & Blue Shield to extend the coverage’s until September 30, 2014, thus putting the City’s employee health insurance renewal on a fiscal year bases for future budgeting purposes. Summary of future projects and funding needs The City of Blair is currently in the process of evaluating a number of future infrastructure projects that will require significant future funding. The Council has made a commitment to fund a new library in cooperation with the Blair Library Foundation. The Council has pledged up to $2.0 million towards the project assuming the Foundation can raise another $2.0 million. The City’s share of the funds are anticipated to come through either a 30 year USDA Library facilities loan or a 20 year lease purchase, with the payments to be funded by the use of Sales tax. Work also continues on the development of a Near South By Pass to help get trucks off of the Washington Street corridor. This section of Highway 30 currently carries over 20% truck traffic in comparison to a State average of less than 10% on other State Highways. A recent study was completed on Pool improvements that got public input as to what the Community wanted in an aquatic facility. The summary of the study was clear that the majority of the Citizens, at least those that participated in the study, felt the City needs to replace the current pool that is over 70 years old with a new modern zero depth pool and aquatics facility . The City staff continues to monitor and participate in discussions with other Communities on potential future environmental regulations by Nebraska DEQ, EPA, and other Federal agencies that could inversely effect the future water and sewer rates. Economic factors and next year’s budgets and rates Current economic conditions continue to point toward solid growth in the community that will allow for a stable budget environment. The City valuation for taxable year 2012 was reduced slightly from the previous year’s value due to the County reducing the value it had previously placed on the vacant Dana College that closed in June of 2010, but the 2013 City valuation increased about 2.3% or nearly $11.0 million. With the purchase of the Dana College Campus by Midland University through a private development partner the taxable valuation should remain stable and continue to grow over the next year or two. Once Midland University executes their purchase of the Campus from the Development partner the current $3.6 million valuation placed on the Campus property will in likely hood be eliminated which will limit valuation growth in a future fiscal year. Previous discussions with Midland University indicate that they hope to complete the transaction for full ownership in 2015 or 2016. The positive side is that with the reopening of the College, it is anticipated to have a positive effect on home sales, valuations and sales tax receipts. The City’s sales tax continues to remain stable. It appears that the industrial growth of the Bio industries on the Cargill Bio Campus along with the new retail stores over the past couple of years will help maintain a solid base for continued growth of the City’s tax base. In addition to the industrial development, interest in potential new retail establishments remains strong with interest in the development of a new motel and other retail businesses. Balance Balance September 30, September 30, 2012 Additions Reductions 2013 General Obligation Bonds 5,730 - (455) 5,275 Water Revenue Bonds 27,192 4,260 (1,196) 30,255 Sewer Revenue Bonds 2,451 663 (158) 2,956 Totals 35,373$ 4,923$ (1,810)$ 38,486$ -15- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 Description TABLE 4 City of Blair, Nebraska MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended September 30, 2013 - 16 - The City of Blair property tax request for fiscal year 2013/2014 remained stable with a property valued at $200,000 in the City of Blair being assessed an annual property tax of $709.58, for City operations as compared to $711.25 for 2012/2013. As stated previously, the City’s property valuation seems to have stabilized. Although new construction continues to grow, with over 25 new housing starts in fiscal year 2013. The potential to increase that number of housing starts for 2014 looks very positive. Developers are again looking at development of new housing subdivisions and the City’s short term (1-5 years) forecast continues to be solid. The City budgets about 50% annually of the estimated $2.0 million in sales tax receipts for recurring projects such as property tax relief, fire bond payment and economic development. The balance of the sales tax dollars are available for discretionary capital projects and equipment that are important to the citizens of the City. Although the $481,000 annual payment the City has been receiving the past 25 plus years, from the sale of the City’s electrical system to OPPD, will be ending in Fiscal year 2015, the City will be able to maintain the current and projected needs to the City with the passage of the ballot issue at the November 2012 general election allowing for the extension of the 1.5% Sales Tax without a sunset clause. This will allow for continued stability of the City’s financial condition. The City continues to work to create additional retail opportunities through the promotion of solid economic development. The extension of the sales tax beyond 2015 will allow for a continued reasonable property tax levy and the construction of future infrastructure improvements such as a highway bypass, street overlays, new library, and improved pool. It is anticipated the City’s infrastructure that was damage from the flood of 2011 should be repaired in the calendar years 2014 and 2015. The City has recently been granted FEMA mitigation grant funds to build permanent flood prevention to protect and keep the City’s Water and Sewer plants operational in the future should flooding reoccur. Planned improvements include elevating part of Fairview drive to double, as a flood levy, levies with flood gates around the plants, pumping station, site drainage for interior water drainage, and stand by generators in case of power lose. The total mitigation project is estimated at about $5.9 million, with City required to pay 25% of the cost. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the City of Blair, 218 S. 16th Street, Blair, NE 68008. Governmental Business-type Activities Activities Total ASSETS Current Assets Cash and cash equivalents 2,470,374$ 2,757,090$ 5,227,464$ Accounts receivable 372,891 762,969 1,135,860 Grants receivable 108,537 158,155 266,692 Property tax receivable 153,198 - 153,198 Accrued interest receivable 19,892 - 19,892 Prepaid expense 12,692 8,033 20,725 Special assessments receivable 1,300,425 - 1,300,425 Total Current Assets 4,438,009 3,686,247 8,124,256 Noncurrent Assets Contract receivable 442,033 - 442,033 Notes receivable 350,000 - 350,000 Restricted cash and cash equivalents 1,277,164 3,139,623 4,416,787 Capital assets Non-depreciable Land 1,273,015 423,783 1,696,798 Construction in progress 120,971 6,779,245 6,900,216 Depreciable Infrastructure 14,172,856 9,189,501 23,362,357 Buildings 6,107,363 42,624,757 48,732,120 Equipment 4,558,304 2,391,673 6,949,977 Accumulated depreciation (7,912,071) (19,437,697) (27,349,768) Net Capital Assets 18,320,438 41,971,262 60,291,700 Total Noncurrent Assets 20,389,635 45,110,885 65,500,520 Total assets 24,827,644$ 48,797,132$ 73,624,776$ See accompanying notes and independent auditor's report. - 17 - City of Blair, Nebraska STATEMENT OF NET POSITION September 30, 2013 GOVERNMENT - WIDE LIABILITIES Current Liabilities Accounts payable 236,181$ 1,207,385$ 1,443,566$ Accrued expenses 359,537 135,500 495,037 Accrued interest 31,706 345,015 376,721 Deposits payable 90,550 1,700 92,250 Total Current Liabilities 717,974 1,689,600 2,407,574 Noncurrent Liabilities Bonds payable Due within one year 515,000 1,291,507 1,806,507 Due in more than one year 4,760,000 31,918,789 36,678,789 Total Noncurrent Liabilities 5,275,000 33,210,296 38,485,296 Total Liabilities 5,992,974 34,899,896 40,892,870 NET POSITION Net investment in capital assets 13,045,438 8,760,966 21,806,404 Restricted: Capital outlay - 1,209,450 1,209,450 Debt service 807,962 1,930,173 2,738,135 Donated projects 32,429 - 32,429 Rescue Squad 144,484 - 144,484 Reuse funds 25,003 - 25,003 Economic Development 161,671 - 161,671 Committed: Capital projects 74,727 - 74,727 Community betterment 111,037 - 111,037 Unrestricted 4,431,919 1,996,647 6,428,566 Total net position 18,834,670 13,897,236 32,731,906 Total liabilities and net position 24,827,644$ 48,797,132$ 73,624,776$ GOVERNMENT - WIDE September 30, 2013 - 18 - See accompanying notes and independent auditor's report. City of Blair, Nebraska STATEMENT OF NET POSITION O p er a t i n g Ca p it a l Ch a r g es f o r Gr a n t s a n d Gr a n t s a n d Go v e r n m e n t a l Bu s i n e s s - t ype Ex p en s e s S e r v i c e s C o n t r i b u t i o n s Co n t r i b u t i o n s Ac t i v i t i e s Activitie s Tota l FU N C T I O N S / P R O G R A M S Go v e r n m e n t a l a c t i v i t i e s Ad m i n i s t r a t i o n 72 3 , 2 5 3 $ 2 9 9 , 6 3 8 $ - $ - $ (42 3 , 6 1 5 ) $ - $ (423,615 )$ Po l i c e 2, 1 1 8 , 6 3 7 9 , 7 3 9 7 1 , 3 8 1 - (2, 0 3 7 , 5 1 7 ) - (2,037,517 ) Fi r e 36 9 , 3 2 0 1 4 8 , 3 7 6 - - (22 0 , 9 4 4 ) - (220,944 ) Pa r k s 5 8 1 , 0 8 1 4 1 , 4 8 5 - - (53 9 , 5 9 6 ) - (539,596 ) Lib r a r y 38 7 , 6 8 5 1 2 , 4 1 3 1 , 5 6 4 - (37 3 , 7 0 8 ) - (373,708 ) Sw i m m i n g p oo l 66 , 1 0 1 - - - (66 , 1 0 1 ) - (66,101 ) Zo n i n g 21 9 , 0 4 5 - - - (21 9 , 0 4 5 ) - (219,045 ) An i m a l c o n t r o l 10 6 , 5 7 7 - - - (10 6 , 5 7 7 ) - (106,577 ) Do n a t e d f u n d s 30 , 2 0 0 - - - (30 , 2 0 0 ) - (30,200 ) St r e e t s 1 , 2 1 1 , 2 4 2 - 7 7 8 , 0 8 2 9 8 , 8 6 5 (33 4 , 2 9 5 ) - (334,295 ) Ke n o 1 7 , 3 3 1 - - - (17 , 3 3 1 ) - (17,331 ) In t e r e s t o n l o n g -t e r m d e b t 14 8 , 2 4 6 - - - (14 8 , 2 4 6 ) - (148,246 ) To t a l g ov e r n m e n t a l a c t i v i t i e s 5, 9 7 8 , 7 1 8 5 1 1 , 6 5 1 8 5 1 , 0 2 7 9 8 , 8 6 5 (4, 5 1 7 , 1 7 5 ) - (4,517,175 ) Bu s i n e s s - t yp e a c t i v i t i e s Wa t e r 5, 1 0 9 , 7 3 7 6 , 0 6 3 , 6 9 5 2 2 2 , 1 1 4 - - 1 , 1 7 6 , 0 7 2 1 , 1 7 6 , 0 7 2 Se w e r 1, 1 0 6 , 3 1 8 9 7 4 , 3 4 2 - - - (131,976 ) (131,976 ) To t a l b u s i n e s s - t yp e a c t i v i t i e s 6, 2 1 6 , 0 5 5 7 , 0 3 8 , 0 3 7 2 2 2 , 1 1 4 - - 1 , 0 4 4 , 0 9 6 1 , 0 4 4 , 0 9 6 To t a l p r i m a r y g o v e r n m e n t 1 2 , 1 9 4 , 7 7 3 $ 7 , 5 4 9 , 6 8 8 $ 1 , 0 7 3 , 1 4 1 $ 9 8 , 8 6 5 $ ( 4 , 5 1 7 , 1 7 5 ) 1 , 0 4 4 , 0 9 6 ( 3 , 4 7 3 , 0 7 9 ) Ge n e r a l r e v e n u e s Ta x e s P r o p er t y t a x e s 1, 7 5 0 , 1 4 7 - 1 , 7 5 0 , 1 4 7 S a l e s t a x 2, 1 4 3 , 8 8 5 - 2 , 1 4 3 , 8 8 5 O c c u p at i o n a n d f r a n c h i s e t a x e s 26 1 , 3 3 0 - 2 6 1 , 3 3 0 O t h e r t a x e s 31 3 , 9 0 5 - 3 1 3 , 9 0 5 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 gs 67 , 9 3 4 1 1 , 2 7 9 7 9 , 2 1 3 Ot h e r i n c o m e 1, 2 9 0 , 0 8 2 1 4 6 , 2 8 6 1 , 4 3 6 , 3 6 8 Ga i n o n s a l e o f a s s e t s 99 , 9 6 2 - 9 9 , 9 6 2 Tr a n s f e r s 57 3 , 0 4 8 (573,048 ) - T o t a l g en e r a l r e v e n u e s a n d t r a n s f e r s 6, 5 0 0 , 2 9 3 (415,483 ) 6 , 0 8 4 , 8 1 0 C h a n g es i n n e t p os i t i o n 1, 9 8 3 , 1 1 8 6 2 8 , 6 1 3 2 , 6 1 1 , 7 3 1 Ne t p os i t i o n , b e g in n i n g o f y ea r 1 6 , 8 9 4 , 5 0 1 1 5 , 8 4 9 , 8 9 5 3 2 , 7 4 4 , 3 9 6 Ch a n g e i n a c c o u n t i n g p ri n c i p l e (42 , 9 4 9 ) (314,793 ) (357,742 ) Pr i o r p er i o d a d j us t m e n t - (2,266,479 ) (2,266,479 ) Ne t p os i t i o n , b e g in n i n g o f y ea r , r e s t a t e d 1 6 , 8 5 1 , 5 5 2 1 3 , 2 6 8 , 6 2 3 3 0 , 1 2 0 , 1 7 5 Ne t p o s i t i o n , e n d o f y e a r 18 , 8 3 4 , 6 7 0 $ 1 3 , 8 9 7 , 2 3 6 $ 3 2 , 7 3 1 , 9 0 6 $ 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 9 - Ch a n g e s i n N e t P o s i t i o n Ci t y o f B l a i r , N e b r a s k a ST A T E M E N T O F A C T I V I T I E S 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 Pr o g r a m R e v e n u e s Ca p it a l Ge n e r a l De b t S e r v i c e S t r e e t Ke n o P r o j ec t s Fu n d Fu n d Fu n d Fu n d Fu n d Tota l AS S E T S Ca s h a n d c a s h e q ui v a l e n t s 2, 2 5 2 , 4 1 7 $ - $ 2 1 7 , 9 5 7 $ - $ - $ 2 , 4 7 0 , 3 7 4 $ Re c e i v a b l e s S p ec i a l a s s e s s m e n t s 2 , 4 9 8 1 , 2 9 9 , 1 2 9 - - - 1 , 3 0 1 , 6 2 7 Ac c r u e d i n t e r e s t 19 , 8 9 2 - - - - 1 9 , 8 9 2 Ot h e r 36 9 , 2 5 9 - - 3 , 6 3 2 - 3 7 2 , 8 9 1 Pr o p er t y t a x r e c e i v a b l e 12 1 , 2 8 6 3 , 8 8 4 2 8 , 0 2 8 - - 1 5 3 , 1 9 8 Re s t r i c t e d c a s h a n d c a s h e q uiv a l e n t s Ca s h 3 1 7 , 0 5 5 8 0 2 , 7 0 4 1 0 7 , 4 0 5 - 1 , 2 2 7 , 1 6 4 Ce r t i f i c a t e s o f D e p os i t 50 , 0 0 0 50,000 Co n t r a c t r e c e i v a b l e - O P P D 4 4 2 , 0 3 3 - - - - 4 4 2 , 0 3 3 To t a l a s s e t s 3 , 5 7 4 , 4 4 0 $ 2 , 1 0 5 , 7 1 7 $ 2 4 5 , 9 8 5 $ 1 1 1 , 0 3 7 $ - $ 6 , 0 3 7 , 1 7 9 $ LI A B I L I T I E S Ac c o u n t s p a y ab l e 94 , 8 2 0 $ - $ 1 4 1 , 3 6 1 $ - $ - $ 2 3 6 , 1 8 1 $ Ac c r u e d e x p en s e s 1 3 3 , 7 7 6 - 2 , 8 9 1 - 6 , 6 0 7 1 4 3 , 2 7 4 De p os i t s p a y ab l e 3 4 , 5 5 0 - - - - 3 4 , 5 5 0 To t a l l i a b i l i t i e s 2 6 3 , 1 4 6 - 1 4 4 , 2 5 2 - 6 , 6 0 7 4 1 4 , 0 0 5 DE F E R R E D I N F L O W S O F R E S O U R C E S Un a v a i l a b l e r e v e n u e - s p ec i a l a s s e s s m e n t s 2, 4 9 8 1 , 2 9 7 , 7 5 5 - - - 1 , 3 0 0 , 2 5 3 Un a v a i l a b l e r e v e n u e - p ro p er t y t a x e s 85 , 9 3 3 - 2 7 , 0 0 6 - - 1 1 2 , 9 3 9 To t a l d e f e r r e d i n f l o w s o f r e s o u r c e s 88 , 4 3 1 1 , 2 9 7 , 7 5 5 2 7 , 0 0 6 - - 1 , 4 1 3 , 1 9 2 FU N D B A L A N C E S Re s t r i c t e d De b t s e r v i c e - 8 0 7 , 9 6 2 - - - 8 0 7 , 9 6 2 Do n a t e d f u n d s 32 , 4 2 9 - - - - 3 2 , 4 2 9 Ec o n o m i c d e v e l o p me n t 16 1 , 6 7 1 - - - - 1 6 1 , 6 7 1 Re u s e f u n d s 25 , 0 0 3 - - - - 2 5 , 0 0 3 Re s c u e S q ua d 1 4 4 , 4 8 4 - - - - 1 4 4 , 4 8 4 Co m m i t t e d Ca p it a l p ro j ec t s - - 7 4 , 7 2 7 - - 7 4 , 7 2 7 Co m m u n i t y b e t t e r m e n t - - - 1 1 1 , 0 3 7 - 1 1 1 , 0 3 7 Un a s s i g ne d 2, 8 5 9 , 2 7 6 - - - (6,607 ) 2 , 8 5 2 , 6 6 9 To t a l f u n d b a l a n c e s 3, 2 2 2 , 8 6 3 8 0 7 , 9 6 2 7 4 , 7 2 7 1 1 1 , 0 3 7 (6,607 ) 4 , 2 0 9 , 9 8 2 To t a l l i a b i l i t i e s , d e f e r r e d i n f l o w s a n d f u n d b a l a n c e s 3 , 5 7 4 , 4 4 0 $ 2 , 1 0 5 , 7 1 7 $ 2 4 5 , 9 8 5 $ 1 1 1 , 0 3 7 $ - $ 6 , 0 3 7 , 1 7 9 $ Ci t y o f B l a i r , N e b r a s k a GO V E R N M E N T A L F U N D S BA L A N C E S H E E T Se 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 - 2 0 - Fu n d b a l a n c e s o f g o v e r n m e n t a l f u n d s 4,209,982 $ Am o u n t s r e p o r t e d f o r g o v e r n m e n t a l a c t i v i t i e s i n t h e s t a t e m e n t o f ne t p o s i t i o n a r e d i f f e r e n t b e c a u s e Lo n g - t e r m r e c e i v a b l e s a r e n o t c u r r e n t f i n a n c i a l r e s o u r c e s a n d th e r e f o r e i s n o t r e p o r t e d i n t h e f u n d s . 457,335 Pr e p a i d e x p e n s e s a r e n o t a c u r r e n t f i n a n c i a l r e s o u r c e . T h e r e f o r e , th e y a r e n o t i n c l u d e d i n t h e g o v e r n m e n t a l f u n d s . 12,692 Ca p i t a l a s s e t s , n e t o f d e p r e c i a t i o n , a r e n o t c u r r e n t f i n a n c i a l re s o u r c e s a n d a r e n o t i n c l u d e d i n t h e g o v e r n m e n t a l f u n d s . 1 8 , 3 2 0 , 4 3 8 Ac c r u e d c o m p e n s a t e d a b s e n c e s a r e n o t d u e a n d p a y a b l e i n t h e cu r r e n t p e r i o d a n d t h e r e f o r e a r e n o t r e p o r t e d i n t h e f u n d s . (216,263) Ac c r u e d i n t e r e s t d o e s n o t r e q u i r e c u r r e n t f i n a n c i a l r e s o u r c e s a n d th e r e f o r e i s n o t r e p o r t e d i n t h e f u n d s . (31,706) No n r e f u n d a b l e p r e p a i d d e p o s i t s a r e r e p o r t e d a s c u r r e n t r e s o u r c e s i n t h e go v e r n m e n t f u n d s , b u t a r e d e f e r r e d i n v l o w s o n t h e g o v e r n m e n t - w i d e s t a t e m e n t s . ( 5 6 , 0 0 0 ) Bo n d s p a y a b l e a r e n o t a c u r r e n t f i n a n c i a l r e s o u r c e . T h e r e f o r e , th e y a r e n o t i n c l u d e d i n t h e g o v e r n m e n t a l f u n d s . (5,275,000) Ta x e s a n d s p e c i a l a s s e s s m e n t s r e c e i v a b l e t h a t a r e n o t a v a i l a b l e t o p a y f o r c u r r e n t p e r i o d ex p e n d i t u r e s a r e r e c o r d e d a s d e f e r r e d r e v e n u e s i n t h e g o v e r n m e n t a l f u n d s . 1 , 4 1 3 , 1 9 2 Ne t p o s i t i o n o f g o v e r n m e n t a l a c t i v i t i e s 18,834,670 $ 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 . - 2 1 - Ci t y o f B l a i r , N e b r a s k a GO V E R N M E N T A L F U N D S RE C O N C I L I A T I O N O F T H E B A L A N C E S H E E T O F G O V E R N M E N T A L F U N D S Se p t e m b e r 3 0 , 2 0 1 3 TO T H E S T A T E M E N T O F N E T P O S I T I O N Ca p i t a l Ge n e r a l De b t S e r v i c e S t r e e t Ke n o P r o j ec t s Fu n d Fu n d Fu n d Fu n d Fu n d Tota l RE V E N U E S Ta x e s 3 , 9 6 6 , 8 7 8 $ 5 3 , 6 6 5 $ 1 , 0 7 0 , 6 6 0 $ - $ 7 1 , 4 8 1 $ 5 , 1 6 2 , 6 8 4 $ Ke n o p ro c e e d s - - - 8 7 , 9 4 4 - 8 7 , 9 4 4 Ch a r g es f o r s e r v i c e s 54 5 , 1 3 8 - - - - 5 4 5 , 1 3 8 S p ec i a l a s s e s s m e n t - 2 3 1 , 1 1 9 - - - 2 3 1 , 1 1 9 S p ec i a l a s s e s s m e n t i n t e r e s t - 1 0 7 , 0 4 7 - - - 1 0 7 , 0 4 7 In t e r e s t i n c o m e 67 , 0 7 4 6 7 1 5 5 3 0 - 6 7 , 8 3 0 In t e r g ov e r n m e n t a l 6 3 , 2 7 3 - 1 2 1 , 2 8 5 - - 1 8 4 , 5 5 8 Oth e r r e v e n u e s 20 2 , 4 5 8 6 , 0 6 4 8 4 , 7 3 8 - - 2 9 3 , 2 6 0 To t a l r e v e n u e s 4,8 4 4 , 8 2 1 3 9 8 , 5 6 6 1 , 2 7 6 , 7 3 8 8 7 , 9 7 4 7 1 , 4 8 1 6 , 6 7 9 , 5 8 0 EX P E N D I T U R E S Ad m i n i s t r a t i o n 87 6 , 0 8 0 9 9 , 1 1 0 4 5 0 , 4 1 9 - 7 0 0 1 , 4 2 6 , 3 0 9 Po l i c e D e p ar t m e n t 1,7 3 6 , 5 9 7 - - - - 1 , 7 3 6 , 5 9 7 Fi r e D e p ar t m e n t 21 2 , 8 7 7 - - - - 2 1 2 , 8 7 7 Pa r k s D e p ar t m e n t 49 9 , 1 4 7 - - - - 4 9 9 , 1 4 7 Li b r a r y 32 9 , 4 1 9 - - - - 3 2 9 , 4 1 9 Sw i m m i n g P o o l 44 , 7 5 7 - - - - 4 4 , 7 5 7 Zo n i n g 17 9 , 3 5 3 - - - - 1 7 9 , 3 5 3 An i m a l c o n t r o l 91 , 2 0 6 - - - - 9 1 , 2 0 6 Do n a t e d f u n d s 30 , 2 0 0 - - - - 3 0 , 2 0 0 Ke n o e x p en s e - - - 1 7 , 3 3 1 - 1 7 , 3 3 1 St r e e t - - 2 , 1 1 4 , 7 8 8 - - 2 , 1 1 4 , 7 8 8 De b t s e r v i c e Pr i n c i p a l - 3 7 5 , 0 0 0 - - 8 0 , 0 0 0 4 5 5 , 0 0 0 In t e r e s t - 1 2 0 , 7 8 5 - - 4 2 , 4 9 5 1 6 3 , 2 8 0 To t a l e x p en d i t u r e s 3,9 9 9 , 6 3 6 5 9 4 , 8 9 5 2 , 5 6 5 , 2 0 7 1 7 , 3 3 1 1 2 3 , 1 9 5 7 , 3 0 0 , 2 6 4 EX C E S S ( D E F I C I E N C Y ) O F R E V E N U E S OV E R E X P E N D I T U R E S 84 5 , 1 8 5 (19 6 , 3 2 9 ) (1, 2 8 8 , 4 6 9 ) 7 0 , 6 4 3 (51,714 ) (620,684 ) OT H E R F I N A N C I N G S O U R C E S ( U S E S ) Sa l e o f a s s e t s - 5 4 6 , 5 2 0 - - - 5 4 6 , 5 2 0 Op e r a t i n g t r a n s f e r s - i n 64 0 , 2 0 1 2 7 5 , 5 6 4 1 , 2 6 4 , 0 9 6 - 4 3 , 0 0 0 2 , 2 2 2 , 8 6 1 Op e r a t i n g t r a n s f e r s - o u t (1,5 5 7 , 6 6 0 ) - - (39 , 9 2 4 ) - (1,597,584 ) To t a l o t h e r f i n a n c i n g s o u r c e s (91 7 , 4 5 9 ) 8 2 2 , 0 8 4 1 , 2 6 4 , 0 9 6 (39 , 9 2 4 ) 4 3 , 0 0 0 1 , 1 7 1 , 7 9 7 NE T C H A N G E I N F U N D B A L A N C E S (7 2 , 2 7 4 ) 6 2 5 , 7 5 5 ( 2 4 , 3 7 3 ) 3 0 , 7 1 9 ( 8 , 7 1 4 ) 5 5 1 , 1 1 3 FU N D B A L A N C E S , B E G I N N I N G O F Y E A R 3,2 9 5 , 1 3 7 1 8 2 , 2 0 7 9 9 , 1 0 0 8 0 , 3 1 8 2 , 1 0 7 3 , 6 5 8 , 8 6 9 FU N D B A L A N C E S , E N D O F Y E A R 3,2 2 2 , 8 6 3 $ 8 0 7 , 9 6 2 $ 7 4 , 7 2 7 $ 1 1 1 , 0 3 7 $ ( 6 , 6 0 7 ) $ 4 , 2 0 9 , 9 8 2 $ Ci t y o f B l a i r , N e b r a s k a ST A T E M E N T O F R E V E N U E S , E X P E N D I T U R E S , A N D C H A N G E S I N FU N D B A L A N C E - G O V E R N M E N T A L F U N D S 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 - 2 2 - Net changes in fund balance - total governmental funds 551,113$ Amounts reported for governmental activities in the statement of activities differ from the amounts reported in the statement of revenues, expenditures, and changes in fund balances because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets are allocated over their estimated useful lives as functional expense when the cost is above the capitalization threshhold. The activity is reconciled as follows: Cost of assets capitalized, net of retirements 3,136,869 Depreciation expense (863,691) Repayment of bond principal is an expenditure in the govermental funds, but the repayment reduces long-term liabilities in the statement of net position 455,000 Income that is recognized as current financial resources, but are not reported as revenue at the government-wide statements (1,214,205) Income recognized at the government-wide statements that is not a current financial resource in the government funds. 108,537 Reduction of certain liabilities reported in the statement of activities that do not require the use of current financial resources, and therefore, the reduction of expensesare not reported as reduced expenditures in governmental funds. 11,059 Activity of the internal service fund activities that are on the proprietary fund statements, but at are reported as part of the governmental activities at the government-wide statements. (201,564) Change in net position of governmental activities 1,983,118$ See accompanying notes and independent auditor's report. - 23 - City of Blair, Nebraska GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS For the year ended September 30, 2013 TO THE STATEMENT OF ACTIVITIES Internal Water Sewer Total Service Fund CURRENT ASSETS Cash 2,408,833$ 348,257$ 2,757,090$ -$ Accounts receivable - Utilities/user fees 603,006 159,963 762,969 - Grants receivable 158,155 - 158,155 - Prepaid expense 5,586 2,447 8,033 - Total current assets 3,175,580 510,667 3,686,247 - NON-CURRENT ASSETS Restricted assets Bond and interest sinking fund cash and investments 1,675,673 254,500 1,930,173 - Capital project bond reserve 1,209,450 - 1,209,450 - Total non-current assets 2,885,123 254,500 3,139,623 - CAPITAL ASSETS Land 373,908 49,875 423,783 - Construction in progress 6,779,245 - 6,779,245 - Infrastructure 6,758,064 2,431,437 9,189,501 - Buildings 36,711,909 5,912,848 42,624,757 - Equipment 1,324,078 1,067,595 2,391,673 - Accumulated depreciation (14,928,450) (4,509,247) (19,437,697) - Total capital assets 37,018,754 4,952,508 41,971,262 - TOTAL ASSETS 43,079,457$ 5,717,675$ 48,797,132$ -$ CURRENT LIABILITIES Accounts payable 1,194,602$ 12,783$ 1,207,385$ -$ Accrued expenses 88,468 47,032 135,500 - Accrued interest 298,673 46,342 345,015 - Deposits 1,700 - 1,700 - Bonds payable, current portion 1,189,937 101,570 1,291,507 - Total current liabilities 2,773,380 207,727 2,981,107 - NON-CURRENT LIABILITIES Bonds payable, net of current portion 29,064,956 2,853,833 31,918,789 - Total liabilities 31,838,336 3,061,560 34,899,896 - NET POSITION Net investment in capital assets 6,763,861 1,997,105 8,760,966 - Restricted for debt service 1,675,673 254,500 1,930,173 - Restricted for capital projects 1,209,450 - 1,209,450 - Unrestricted 1,592,137 404,510 1,996,647 - Total net position 11,241,121 2,656,115 13,897,236 - Total liabilities and net position 43,079,457$ 5,717,675$ 48,797,132$ -$ City of Blair, Nebraska STATEMENT OF NET POSITION PROPRIETARY FUNDS September 30, 2013 See accompanying notes and independent auditor's report. - 24 - ASSETS LIABILITIES AND NET POSITION Enterprise Funds Internal Water Sewer Total Service Fund OPERATING REVENUES Charges for services 6,025,280$ 974,342$ 6,999,622$ 241,740$ Sale of merchandise 24,699 - 24,699 - Forfeited discounts 13,716 - 13,716 - Intergovernmental 222,114 - 222,114 - Other 52,939 93,347 146,286 - Total operating revenues 6,338,748 1,067,689 7,406,437 241,740 EXPENSES Personnel 870,309 475,351 1,345,660 - Operating expenses 422,610 183,580 606,190 - Utilities 580,177 55,146 635,323 - Chemicals 1,024,600 40,731 1,065,331 - Materials and supplies 47,376 9,187 56,563 - Rental expense 6,034 4,252 10,286 - Insurance claims and expenses - - - 369,408 Depreciation 1,131,765 237,801 1,369,566 - Total expenses 4,082,871 1,006,048 5,088,919 369,408 OPERATING INCOME 2,255,877 61,641 2,317,518 (127,668) NON-OPERATING REVENUES (EXPENSES) Interest income 10,272 1,007 11,279 104 Interest expense (944,275)(100,270) (1,044,545) - Bonding costs (82,591) - (82,591) - Total nonoperating revenues (expenses)(1,016,594) (99,263) (1,115,857) 104 INCOME (LOSS) BEFORE TRANSFERS 1,239,283 (37,622) 1,201,661 (127,564) OPERATING TRANSFERS Operating transfers - out (573,048) - (573,048) (52,229) Total operating transfers (573,048) - (573,048) (52,229) CHANGE IN NET POSITION 666,235 (37,622) 628,613 (179,793) 13,156,158 2,693,737 15,849,895 179,793 CHANGE IN ACCOUNTING PRINCIPLE (314,793) - (314,793) - PRIOR PERIOD ADJUSTMENT (2,266,479) - (2,266,479) - NET POSITION, BEGINNING OF YEAR, RESTATED 10,574,886 2,693,737 13,268,623 179,793 NET POSITION, END OF YEAR 11,241,121$ 2,656,115$ 13,897,236$ -$ - 25 - City of Blair, Nebraska STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUNDS For the year ended September 30, 2013 See accompanying notes and independent auditor's report. Enterprise Funds NET POSITION, BEGINNING OF YEAR Internal Water Sewer Total Service Fund Cash received from customers 6,526,909$ 1,064,612$ 7,591,521$ -$ Cash received from interfund services provided - - - 241,740 Cash payments to suppliers (2,304,174) (338,694) (2,642,868) - Cash payments to employees (886,861) (486,044) (1,372,905) - Cash paid for interfund services used - - - (399,382) Cash provided from operating activities 3,335,874 239,874 3,575,748 (157,642) CASH FLOWS FROM NON-CAPITAL FINANCIAL ACTIVITIES Operating transfers (573,048) - (573,048) (52,229) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (6,107,604) (622,286) (6,729,890) - Repayment of warrants - - - - Receipt of debt proceeds 4,259,865 662,987 4,922,852 - Repayment of long-term debt (1,196,495) (158,347) (1,354,842) - Interest payment long-term debt (970,032) (97,354) (1,067,386) - Bonding costs - - - - Cash used from capital and related financing activities (4,014,266) (215,000) (4,229,266) - CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from interest earnings 10,272 1,007 11,279 104 Disbursements from (to) restricted assets 1,790,517 - 1,790,517 - Cash provided from investing activities 1,800,789 1,007 1,801,796 104 CHANGE IN CASH AND CASH EQUIVALENTS 549,349 25,881 575,230 (209,767) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,859,484 322,376 2,181,860 209,767 CASH AND CASH EQUIVALENTS, END OF YEAR 2,408,833$ 348,257$ 2,757,090$ -$ Reconciliation of operating income to net cash from operating activities Operating income 2,255,877$ 61,641$ 2,317,518$ (127,668)$ Adjustments to reconcile operating income to net cash from operating activities Depreciation 1,131,765 237,801 1,369,566 - Extraordinary expense Change in receivables 219,138 (3,077) 216,061 - Change in prepaid expenses (298) (46) (344) - Change in accounts payable (223,079) (45,752) (268,831) (29,974) Change in accrued expenses (16,552) (10,693) (27,245) - Change in unearned revenues (30,977) - (30,977) - Total adjustments 1,079,997 178,233 1,258,230 (29,974) CASH PROVIDED FROM OPERATING ACTIVITIES 3,335,874$ 239,874$ 3,575,748$ (157,642)$ See accompanying notes and independent auditor's report - 26 - City of Blair, Nebraska STATEMENT OF CASH FLOWS PROPRIETARY FUNDS September 30, 2013 CASH FLOWS FROM OPERATING ACTIVITIES Enterprise Funds Pension TIF Trust Fund Fund 1 ASSETS Cash -$ 23$ Investment in fiscal agent: Principal investment accounts 5,957,889 - Guaranteed interest accounts 74,915 - Total Assets 6,032,804$ 23$ LIABILITIES Assets held for others -$ 23$ NET POSITION Net position held in trust for retirement 6,032,804$ -$ Total Net Position 6,032,804$ -$ City of Blair, Nebraska STATEMENT OF NET POSITION September 30, 2013 See accompanying notes and independent auditor's report. - 27 - FIDUCIARY FUNDS Pension Trust Fund Additions Contributions Employer 217,753$ Employee 231,612 Rollover 4,642 Total Contributions 454,007 Investment Earnings Dividends 5,392 Net increase in the fair value of investments 973,924 Total Additions 1,433,323 Deductions Benefits 8,700 Administrative expenses 4,010 Terminations 501,847 Contribution credit-forfeitures 99 Total Deductions 514,656 Change in Net Position 918,667 Net Position, Beginning of Year 5,114,137 Net Position, End of Year 6,032,804$ City of Blair, Nebraska FIDUCIARY FUNDS For the year ended September 30, 2013 See accompanying notes and independent auditor's report. - 28 - STATEMENT OF CHANGES IN FIDUCIARY NET POSITION City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 29 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies of the City of Blair, Nebraska: 1. Reporting Entity The City of Blair, Nebraska (the City) is a Municipal Corporation which was founded and incorporated in 1869. With a population of 8,013, the City of Blair functions as a City of the First Class under Nebraska Statutes. The City operates under a Mayor/Council form of government and provides the following services: public safety, streets, culture and recreation, public improvements, planning and zoning, water and sewer services, and general administrative services. This report includes all funds of the City (the “primary government”). There are no component units. 2. Basis of Accounting/Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. Governmental resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). On October 1, 2012, the City of Blair 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. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 30 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 2. Basis of Accounting/Measurement Focus – Continued Government-Wide Financial Statements All of the City’s assets and liabilities, including capital assets and infrastructure, as well as long-term debt, are included in the 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 revenues. Direct expenses are those that are clearly identifiable with a specific function. The types of transactions reported as program revenues for the City 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 and other items not properly 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. The purpose of transfers between funds was to record proper allocation of expenses. Amounts reported as program revenues include (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 31 - 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 fund balances as presented in these statements to the net position presented in the government-wide financial statements. The City has presented all major funds that meet the qualifications of GASB Statement No. 34, and has chosen to optionally present as major certain other funds (Keno and Capital Projects) that do not meet the major fund requirements. All governmental funds are accounted for on the current financial resources measurement focus and the modified accrual basis of accounting. Accordingly, capital assets and bonds payable are not 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 fund balances. 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. Measurable means knowing or being able to reasonably estimate the amount. Available means collectible within the current period or within 60 days after year end. Expenditures (including capital outlay) are recorded 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 City reports the following major governmental funds: The General Fund is the government’s main operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 32 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 2. Basis of Accounting/Measurement Focus – Continued Governmental Fund Financial Statements – Continued The Debt Service Fund is used to account for the payment of principal and interest on general long-term debt. The primary sources of revenue are property taxes and special assessments. The Street Fund is used to record transactions in the Street department, as the State of Nebraska requires an accounting to verify the matching of funds it provides for this purpose. The Keno Fund maintains an accounting of Keno gambling activity because the funds earned are restricted to community betterment projects and require special state reporting. The Capital Projects Fund is used to fund capital project construction, development, improvement, and repairs. Proprietary Fund Financial Statements Proprietary Fund Financial Statements include a statement of net position, a statement of revenues, expenses and changes in fund net position, and a statement of cash flows for each major proprietary fund. A column representing internal service funds is also presented in these statements. Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the statement of net position. The statement of revenues, expenses and changes in fund net position presents increases (revenues) and decreases (expenses) in total 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. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 33 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 2. Basis of Accounting/Measurement Focus – Continued Proprietary Fund Financial Statements – Continued Proprietary funds distinguish operating revenues and expenses from non- operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. Operating expenses for enterprise funds include the cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses. The City reports the following major proprietary funds: The Water and Sewer Fund accounts for the activities related to the operation of the City’s water delivery and sewage systems. It operates the water treatment and sewer treatment plants, water distribution systems, sewer collection systems, and pump stations. The Self Insurance Fund of the City (which provides services primarily to other funds of the City) is presented, in summary form, as part of the proprietary fund financial statements. Since the principal users of the self-funded insurance are the City’s governmental activities, financial activities of the Self Insurance Fund are presented in the governmental activities column when presented at the government-wide level. The costs of these services are allocated to the appropriate function/program (public safety, streets, culture and recreation, public improvements, planning and zoning, water and sewer services, and general administrative services) in the statement of activities. Fiduciary Fund Financial Statements Fiduciary fund financial statements include a statement of net position. The City’s Fiduciary fund represents an agency fund, which is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. Accordingly, it presents only a statement of fiduciary net position and does not present a statement of changes in fiduciary net position. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 34 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 2. Basis of Accounting/Measurement Focus – Continued Fiduciary Fund Financial Statements – Continued The agency fund is accounted for on a spending or “economic resources” measurement focus and the accrual basis of accounting as is the proprietary funds explained above. The City reports the following fiduciary fund: TIF 1 Fund - An agency fund that accounts for the activities related to redevelopment costs financed by tax incremental finance bonds. The tax incremental finance bonds are to be paid by the taxes of the redeveloped area. Pension Trust Funds – Trust funds account for assets held by the City for the members and beneficiaries of defined benefit and contribution pension plans and deferred compensation plan. The reporting entity includes the following trust funds: Police Pension Accounts for the administration of the police pension fund under the defined contribution plan. General Government Accounts for the administration of the non- police Pension employees' pension funds under the defined contribution plan. Deferred Compensation Accounts for the administration of employees that want Plan to make additional contributions into a plan under the deferred compensation plan. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 35 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 3. Budgetary Policy and Control Budgetary Basis of Accounting The City’s legally adopted budget is not in conformity with accounting principles generally accepted in the United States of America, but meets the requirements of the Nebraska Budget Act. 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 City Council sets the property tax levy needed to support the coming year’s budget in August of each year and submits its budget as required by State statute. Budgetary Control Each fund’s 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 Council. No revisions to the budget were made for the year ended September 30, 2013. 4. The 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 City’s cash and cash equivalents are considered to be cash on hand, demand deposit and short-term investments with original maturities of three months or less from the date of acquisition. Investments are restricted and consist of certificates of deposit shown at cost. There are no significant differences in cost and fair values at September 30, 2013. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 36 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED 6. Capital Assets Capital assets, which include land, buildings, and equipment (furniture, vehicles, etc.) and infrastructure assets (street systems, storm drains, etc.), are reported in governmental activities column of the government-wide financial statements. Capital assets are defined by the City 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 fair value at the date of donation or annexation. The costs of normal maintenance or 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 City qualifies for the exemption under GASB 34 to not retroactively apply the capitalization requirements of general infrastructure assets. 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 Equipment 10 Small Vehicles 5 Large Vehicles (i.e. Ambulance & Fire Truck) 10 to 20 Buildings 40 Infrastructure 40 7. Property Taxes Property tax revenue is recognized when collected by the County, as the City’s agent, within the current period and when available 60 days after the City’s year end. There are no property taxes due which are not delinquent and all delinquent taxes are considered collectible. The City’s December 31, 2012, valuation was $471,314,721. The levy for the City for the year ending September 30, 2013, was $0.3556 per $100 of value. The total tax levy was $1,676,132. 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 service provided. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 37 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 8. Claims and Judgments Payable The City 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. Compensated Absences General leave for the City includes both vacation and sick pay. Vacation leave is based on an employee’s length of employment. An employee is allowed to carry forward each year, on their anniversary date, that year’s earned vacation, plus 40 hours. Sick leave is earned at a rate approved by the personnel manual, which is currently six (6) hours per month. Sick leave can be accumulated to a maximum of 840 hours and can only be used for illness, medical care, and care of sick members of the immediate family per the personnel manual. Upon termination of employment, an employee is entitled to be compensated for all accumulated unused vacation pay. Unused sick leave is compensated as follows: (1) Upon death or retirement, 50% (2) Upon resignation in good standing, 5% after 10 years of employment increasing to a maximum of 50% after 20 years of employment. 10. 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 City’s policy is to first apply restricted resources to an expense when incurred for purposes for which both restricted and unrestricted net position are available. Restricted assets in the governmental funds are related to the reserved fund balances. Restricted assets in the proprietary funds are related to the restricted for debt service fund balances. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 38 - NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 11. Allowance for Doubtful Accounts The City uses the direct write-off for uncollectable accounts. The City determined that all receivable balances at September 30, 2013, were collectible. 12. 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. Transfers are related to funding for capital projects, debts service, or reallocations of special revenues. They are intended to maintain fund balances and allocate the City’s resources. Interfund transfers were as follows for the year ended September 30, 2013: Transfers Out: General Fund Debt Service Street Fund Capital Projects Fund Total General Fund -$ 250,564$ 1,264,096$ 43,000$ 1,557,660$ Water 573,048 - - - 573,048 Internal Service Fund 52,229 - - - 52,229 Keno Fund 14,924 25,000 - - 39,924 640,201$ 275,564$ 1,264,096$ 43,000$ 2,222,861$ Transfers In : NOTE B. DEPOSITS AND INVESTMENTS Deposits and investments consist of demand deposits and certificates of deposit. The City maintains a cash pool that is available for all funds. The City’s cash deposits and certificates of deposit were either entirely insured or collateralized with securities held by the pledging financial institutions in the City’s name. The carrying amount of the City’s cash deposits was $9,637,307 at September 30, 2013. The bank balances of the City’s cash deposits as September 30, 2013, was $9,653,002. The City’s carrying amount and bank balances include $1,980,173 of certificates of deposit that are part of the Certificate of Deposit Account Registry Service (CDARS). Each of the certificates of deposit has a maturity date less than one year. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 39 - NOTE B. DEPOSITS AND INVESTMENTS - CONTINUED The following is detail of amounts included in cash, which are restricted for specific purposes: Fund Amount General-Reuse 25,003$ General-Rescue Squad 147,952 General-Economic Development 161,671 General-Donations 32,429 Debt Service 802,704 Keno 107,405 Water 2,885,123 Sewer 254,500 4,416,787$ The City has no formal policy for handling credit risk, interest rate risk, or concentration risk; however, deposits and investments consist of demand deposits and certificates of deposits. 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 City has no deposit and investment policy that would further limit its deposits, but the City administratively has required all deposits to be collateralized at 105%. The City of Blair has a number of cash funds and investments that are restricted due to donor imposed restrictions or for purposes related to the fund. The cash in the Reuse fund is restricted and can only be used per the Reuse plan or be forfeited to the Nebraska Department of Economic Development. The cash in the Rescue Squad Fund is restricted for the use of the City Fire and Rescue Departments. The cash in the Economic Development Fund is restricted for economic development and can only be used if it is approved via vote per the City Council. The City Council annually decides how much to budget for the fund. The budget is set not to exceed 1/10 of one per cent of the annual City valuation. The cash in the Donations Fund are restricted based on the donor imposed restrictions. The cash in the Debt Service Fund are restricted for the special assessments pledged for the payment of the G.O. bonds. The cash in the Keno Fund is restricted by Nebraska State Statute and must be maintained in a separate bank account. The certificates of deposit of $1,930,173 are restricted for the enterprise funds (Water and Sewer) for bond and interest expenditures. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 40 - NOTE B. DEPOSITS AND INVESTMENTS - CONTINUED The cash in the Water Fund is restricted to pay for the construction and related costs of the water plant expansion contract. If any funds are still available upon completion of the plant expansion project, the unused funds could only be used to pay principle and interest on the bond notes. These funds were received per the bond anticipation note. The Water fund has a $1,209,450 capital project bond reserve account which is restricted for this purpose. The cash in the Capital Projects (TIF 1) are restricted to pay for the construction projects. If a balance exists after the completion of the projects at the end of the 15 years, those funds would be required to be returned to the County Treasurer for distribution to all taxing entities. NOTE C. CAPITAL ASSETS A summary of changes in capital assets is as follows: Governmental Activities Balance September 30, 2012 Increases Decreases Balance September 30, 2013 Capital assets not depreciated Land 296,001$ 1,433,572$ (456,558)$ 1,273,015$ Construction in progress 185,424 120,971 (185,424) 120,971 Total capital assets not depreciated 481,425 1,554,543 (641,982) 1,393,986 Other capital assets Infrastructure 12,894,589 1,278,267 - 14,172,856 Buildings 5,504,383 606,366 (3,386) 6,107,363 Equipment 4,595,508 335,877 (373,081) 4,558,304 Total other capital assets 22,994,480 2,220,510 (376,467) 24,838,523 Less accumulated depreciated Infrastructure (2,142,778) (418,440) (2,561,218) Buildings (2,542,636) (144,058) 1,713 (2,684,981) Equipment (2,733,232) (301,193) 368,553 (2,665,872) Total accumulated depreciation (7,418,646) (863,691) 370,266 (7,912,071) Other capital assets, net 15,575,834 1,356,819 (6,201) 16,926,452 Governmental activities capital assets, net 16,057,259$ 2,911,362$ (648,183)$ 18,320,438$ City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 41 - NOTE C. CAPITAL ASSETS - CONTINUED Depreciation expense was charged to governmental activities functions as follows: Governmental Activities: Administration 70,202$ Police 52,505 Fire 122,539 Parks 43,402 Library 4,829 Swimming pool 21,343 Animal control 12,314 Rescue Squad 41,013 Streets 495,544 Total Depreciation 863,691$ Business-Type Activities Balance September 30, 2012 Increases Decreases Balance September 30, 2013 Capital assets not depreciated Land 423,783$ -$ -$ 423,783$ Construction in progress 2,867,763 4,982,600 (1,071,118) 6,779,245 Total capital assets not depreciated 3,291,546 4,982,600 (1,071,118) 7,203,028 Other capital assets Infrastructure 6,418,568 2,770,933 - 9,189,501 Buildings 42,624,757 - - 42,624,757 Equipment 2,344,197 47,476 - 2,391,673 Total other capital assets 51,387,522 2,818,409 - 54,205,931 Less accumulated depreciated Infrastructure (946,177) (189,170) - (1,135,347) Buildings (15,317,202) (1,095,481) - (16,412,683) Equipment (1,804,751) (84,916) - (1,889,667) Total accumulated depreciation (18,068,130) (1,369,567) - (19,437,697) Other capital assets, net 33,319,392 1,448,842 - 34,768,234 Business-type activities, net 36,610,938$ 6,431,442$ (1,071,118)$ 41,971,262$ NOTE D. BONDS PAYABLE A summary of the changes followed by principal and interest schedules and is as follows: Governmental Activities Balance Balance Interest September 30, September 30,Due within Dated Description Rate 2012 Additions Reductions 2013 One year 12/14/2007 Tax increment financing bond 4.48% 975,000$ - (80,000)$ 895,000$ 80,000$ 2/26/2008 Public safety tax anticipation bonds 3.20 - 4.25% 550,000 - (40,000) 510,000 40,000 5/18/2010 General Obligation 0.85% - 4.25% 1,130,000 - (75,000) 1,055,000 75,000 11/15/2011 General Obligation Refunding Bond 0.45-3.60% 3,075,000 - (260,000) 2,815,000 320,000 Total 5,730,000$ -$ (455,000)$ 5,275,000$ 515,000$ City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED For the year ended September 30, 2013 - 42 - NOTE D. BONDS PAYABLE (CONTINUED) Business-type Activities Balance Balance Interest September 30, September 30,Due within Dated Description Rate 2012 Additions Reductions 2013 One year WATER DEBT 6/15/2000 Refunding Bonds 5.50% 260,000$ -$ (160,000)$ 100,000$ 100,000$ 4/29/2002 DEQ Bonds 3.03% 2,619,457 - (720,499) 1,898,958 742,496 6/1/2006 NRD Bonds 4.45% 947,988 - (315,996) 631,992 315,996 6/15/2010 SRF Loan 2010 2.75% 6,500,000 - - 6,500,000 - 9/28/2010 2010B Revenue Bonds 3.25% 770,000 - - 770,000 - 9/28/2010 2010C Revenue Bonds 2.30% 1,614,078 1,059,865 - 2,673,943 31,445 6/5/2012 2012A Revenue Bonds 2.20% 9,480,000 - - 9,480,000 - 9/28/2012 2012 Bond Anticipation Notes 2.50% 5,000,000 - - 5,000,000 - 5/15/2013 2013 Bond Anticipation Notes 2.25% - 3,200,000 - 3,200,000 - Total water 27,191,523$ 4,259,865$ (1,196,495)$ 30,254,893$ 1,189,937$ Balance Balance Interest September 30, September 30, Dated Description Rate 2012 Additions Reductions 2013 SEWER DEBT 12/15/2004 2004 Revenue Bonds 3.80% 500,000$ -$ (65,000)$ 435,000$ 65,000$ 8/17/2010 2010 Revenue Bonds 2.70% 1,645,000 - - 1,645,000 - 2/17/2011 2011 Revenue Bonds 2.10% 305,763 662,987 (93,347) 875,403 36,570 Total sewer 2,450,763$ 662,987 (158,347)$ 2,955,403$ 101,570$ NOTES TO FINANCIAL STATEMENTS - CONTINUED For the year ended September 30, 2013 - 43 - City of Blair, Nebraska NOTE D. BONDS PAYABLE - CONTINUED Governmental Activities Principal Interest Total 515,000$ 155,491$ 670,491$ 525,000 146,230 671,230 530,000 135,685 665,685 390,000 123,287 513,287 405,000 111,775 516,775 1,990,000 356,081 2,346,081 920,000 75,424 995,424 5,275,000$ 1,103,973$ 6,378,973$ Business-type Activities Principal Interest Total 1,189,937$ 956,325$ 2,146,262$ 1,145,835 862,911 2,954,071 1,077,436 906,348 1,983,784 1,447,635 1,259,015 2,706,650 9,659,165 1,167,389 10,826,554 6,265,021 2,598,555 8,863,576 4,078,821 1,523,203 5,602,024 4,262,805 628,965 4,891,770 517,587 103,801 621,388 610,651 38,698 649,349 30,254,893$ 10,045,210$ 41,245,428$ Principal Interest Total 101,570$ 99,312$ 200,882$ 107,522 95,760 203,282 113,314 92,103 205,417 119,123 88,155 207,278 124,949 83,978 208,927 628,411 285,984 914,395 781,301 252,594 1,033,895 951,765 90,264 1,042,029 27,448 288 27,736 2,955,403$ 1,088,438$ 4,043,841$ Water Bonds Sewer Bonds Year ending September 30, Year ending September 30, 2039-2043 2019-2023 2024-2028 2029-2033 2034-2038 2018 - 44 - Total Bonds issued for the Water and Sewer funds are collateralized by a pledge of revenues derived and to be derived from the operations of the Water and Sewer fund. Sinking fund requirements for Water and Sewer debt were a total reserve of $1,930,173 at September 30, 2013. 2014 2015 2016 2017 2014 2015 Total City of Blair, NebraskaNOTES TO FINANCIAL STATEMENTS - CONTINUEDFor the year ended September 30, 2013 Year ending September 30, 2014 2015 2016 Total 2018 2017 2019-2023 2024-2027 2016 2017 2019-2023 2024-2028 2029-2033 2034-2037 2018 City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 45 - NOTE E. RISK MANAGEMENT The City of Blair 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 City 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 AND FUND BALANCES In the government-wide financial statements net position are classified in the following categories: Net Investment 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. Restricted Net Position - This category presents external restrictions imposed 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 City that is not restricted for any project or other purpose. In the fund financial statements, certain significant changes in the statement require the City to classify fund balances in the following categories: Nonspendable - 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 - 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 - amounts that can be spent only for specific purposes determined through an ordinance by the City Council, the government’s highest level of decision-making authority. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 46 - NOTE F. NET POSITION AND FUND BALANCES - CONTINUED Assigned - amounts the government intends to use for specific purposes that do not meet the criteria to be classified as restricted or committed. Unassigned - amounts that are available for any purpose; these amounts can be reported only in the City’s General Fund. The formal spending processes adopted by the City Council allow departments to encumber funds to make specific purchases that will actually be paid for in the next fiscal year. The encumbrance must be in the form of an approved purchase order before the end of the budget fiscal year. Department managers are authorized to make encumbrances in their respective departments. They are included in restricted, committed, or assigned fund balances as appropriate. Encumbrances can be made in any fund and do not lapse at year end. NOTE G. PENSION PLANS The City has four pension plans covering substantially all of its employees. Employees other than policemen, volunteer firefighters or rescue personnel are covered by a defined contribution plan, either a 414(h) or 457(b) plan. Policemen are covered under a defined contribution plan established by the statutes of the State of Nebraska. Firefighters or rescue personnel are covered by the Blair Fire and Rescue Volunteers’ Service Award Program. This plan is intended to comply with the Volunteer Emergency Responders Recruitment and Retention Act as set forth in Nebraska Revised Statute and Internal Revenue Code section 457(e)(11). The 414(h) pension plan was established on April 1, 1996 and last restated on August 25, 2008 (effective January 1, 2008). All contributions from a minimum of 3% up to 6% of gross wages in employee contributions and up to a 6% match of gross wage in contributions from the City are invested with an investment manager. The employees must have accumulated six months of service, be at least age 21, and work 40 hours per week to participate in the plan. Employees are 100% vested in employer contributions after six years of service. The plan is a single employer plan with the City maintaining fiduciary responsibility for administration of the plan. Contributions for the year ended September 30, 2013, $189,494 which consisted of $94,747 contributed by employees and $94,747 contributed by the City. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 47 - NOTE G. PENSION PLANS – CONTINUED Contributions are expected to remain relatively level from year to year. The City may amend, modify, or terminate the 414(h) plan. Funds in the plan cannot be diverted to any purposes other than for the exclusive benefit of the participants or their beneficiaries or estates. The 457(b) pension plan was established on July 1, 2008. The 457(b) plan allows employees to contribute additional dollars to their pension above the 414(h) requirement and match. The City will contribute a maximum match of 6% based on a one-to-one match. An employee can contribute voluntary pre-tax amounts up to the legal limits as established by IRS code. The plan is a single employer plan with the City maintaining fiduciary responsibility for it. Contributions for the year ended September 30, 2013, totaled $102,685 which consisted of $86,327 contributed by employees and $16,358 contributed by the City. Contributions are expected to remain relatively level from year to year. The City may amend, modify, or terminate the 457(b) plan. Funds in the plan cannot be diverted to any purposes other than for the exclusive benefit of the participants or their beneficiaries or estates. The policemen are covered under a defined contribution plan established by the statues of the State of Nebraska. Policemen terminating before retirement age receive payment for their contributions to date of termination plus interest accrued and the vested portion of the City’s contributions based on the statues of the State of Nebraska. The City has fiduciary responsibility for the plan and it is a single employer plan only. Contributions of $114,470 for 2013 were 12% of gross wages, which complies with statutory requirements. The City contributed 6% of gross wages and the policemen contributed 6%. The City expects contributions to remain relatively level from year to year. The contributions are not actuarially determined. All qualifying police payroll was covered in 2013. The Blair Fire and Rescue Volunteers’ Service Award Program became effective October 1, 2008 and covers firefighters or rescue personnel. This plan complies with the Volunteer Emergency Responders Recruitment and Retention Act as set forth in Nebraska Revised Statute and Internal Revenue Code section 457(e)(11).To qualify as a participant for any year of service, one must accumulate at least fifty points during such year of service. For each year of service in which one qualifies as a participant, the City will determine contribution amount and allocated to the account which shall not exceed $3,000 and shall not be less than $100. The City’s contribution for the year ended September 30, 2013, totaled $53,476. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 48 - NOTE G. PENSION PLANS – CONTINUED Combining financial statements for the pension plans as of and for the year ending are as follows: 457 Civilian Police 457 Fire & Rescue Total Assets Investments with fiscal agent: Principal investment accounts 3,606,535$ 1,571,417$ 467,099$ 312,839$ 5,957,889$ Gauranteed interest accounts 70,816 4,099 - - 74,915 Total Assets 3,677,351 1,575,516 467,099 312,839 6,032,804 Net Position Net position held in trust for pension benefits 3,677,351$ 1,575,516$ 467,099$ 312,839$ 6,032,804$ COMBINING STATEMENT OF NET POSITION 457 Civilian Police 457 Fire & Rescue Total Additions Contributions Employer 91,392$ 57,235$ 15,650$ 53,476$ 217,753$ Employee 91,392 57,235 82,985 - 231,612 Rollover - - 4,642 - 4,642 Total Contributions 182,784 114,470 103,277 53,476 454,007 Investment Earnings Dividends - - - 5,988 5,988 Net increase in the fair value of investments 625,647 244,608 67,289 35,784 973,327 Total Additions 625,647 244,608 67,289 41,772 979,316 Deductions Withdrawals 8,700 - - - 8,700 Cash retirements - - - - - Terminations 292,372 166,096 43,379 - 501,847 Contribution credit-forfeitures 99 - - - 99 Administrative Expenses 225 80 3,705 - 4,010 Total Deductions 301,396 166,176 47,085 - 514,656 Changes in Net Position 507,035 192,903 123,482 95,247 918,667 Net Position, Beginning of Year 3,170,315 1,382,613 343,618 217,591 5,114,137 Net Position, End of Year 3,677,350$ 1,575,516$ 467,100$ 312,838$ 6,032,804$ COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 49 - NOTE H. RECEIVABLES 1. Accounts Receivable Accounts receivable of the business-type activities consists of utilities accounts receivable (82.8%) and grants receivable (17.2%). Accounts receivable of the governmental activities consists of sales tax (97.4%) and other (2.6%) receivables. The City has considered collection history and determined that an allowance is not necessary. 2. Contract Receivable In April 1984, the City contracted to sell its electrical transmission and distribution generating facilities to the Omaha Public Power District. The terms of the agreement were as follows: Omaha Public Power District agreed to buy the City facilities for the sum of $5.95 million. The terms of payment shall be $1.0 million payable at the date of the contract and the balance of $4.95 million amortized over thirty years at nine percent interest per annum, with annual payments of $481,815 commencing in April 1985. This contract is unsecured. This contract also provided for the Omaha Public Power District to supply electrical service directly to the City and its residents. The transfer of electrical services was completed on September 30, 1984. NOTE I. SPECIAL ASSESSMENTS RECEIVABLE The City’s special assessments outstanding as of September 30, 2013, are composed of special assessment principle of $1,300,425. The delinquent special assessments at September 30, 2013, are 19.2% of those outstanding. No special assessments have been pledged to specific debt, although special assessments principle and interest is reserved for various purpose bonds payments only. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 50 - NOTE J. CONCENTRATION OF CREDIT RISK All of the receivables of the City proprietary funds and special assessments in the debt service fund are from the local Blair area, thereby creating a concentration of credit risk. If the Blair area economy was depressed, this could have an adverse effect on the collection of the outstanding accounts receivable. Cargill, Inc. is a major water customer for the City. Cargill, Inc. represents 82.35% of water sales for the year ended September 30, 2013. Although Cargill represents 82.35% of water sales, the City has a contract with the company that secures a minimum monthly revenue stream for payment of the water debt through June 2032, which minimizes the risk for payment of water bonds. NOTE K. SELF INSURANCE The City’s Self Insurance Fund is used to account for employee health, dental, and vision liability claims and is accounted for as an internal service fund. The City utilized the Self Insurance fund from October to December 2012. Effective January 1, 2013, the City discontinued the Self Insurance Fund and purchased insurance from an outside vendor. Claims expense as reported in the fund was reported based on actual expenses paid during the period. For the period ending December 31, 2012, the Self Insurance Fund received inter-fund premiums of $172,098 from various City departments in monthly payments. Additionally, the fund received premiums $69,642 from employees of the City. Claims expense for the period, which totaled $224,737. The City has purchased insurance for claims expenses incurred over a certain dollar amount each year in order to limit its risk of loss. The cost of this insurance for the fiscal year was $569,670, $105,281 of which was incurred in the period up to December 31, 2012. The remainder of the insurance represents insurance premiums on the City’s new insurance policy. For the year ended September 30, 2013, the City received $87,258 in insurance recoveries from claims. These recoveries have been reported as other operating revenues in the statement of revenues, expenses, and changes in fund net position, proprietary funds. NOTE L. PRIOR PERIOD ADJUSTMENT – PROPRIETARY FUNDS Certain estimates overstated grant revenue and receivables for the prior fiscal year. An adjustment to reduce prior year grant receivables and the Water fund net position of $2,266,479 has been made to restate beginning net position. City of Blair, Nebraska NOTES TO THE FINANCIAL STATEMENTS For the year ended September 30, 2013 - 51 - NOTE M. NEW GASB STANDARD AND RESTATEMENT OF NET ASSETS TO NET POSITION In the fiscal year ending September 30, 2013, the City implemented GASB Statements No. 61, The Financial Reporting Entity: Omnibus, No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, 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. Implementation of GASB Statements No. 61, No. 62, and No. 63 had no material effect on the October 1, 2012 beginning balance of net position for the government-wide financial statements and fund financial statements. Early implementation of GASB Statement No. 65 had a material effect on the October 1, 2012 beginning balance of net position for the government-wide financial statements and fund financial statements, due to unamortized bond issuance costs no longer being classified as assets. Adjustments have been made to reduce bond issue costs to zero and starting net position of $314,793 in the Water fund and $42,949 in the governmental activities. REQUIRED SUPPLEMENTAL INFORMATION Original and Variance Final Positive Budget Actual (Negative) REVENUES Taxes 4,021,600$ 3,953,003$ (68,597)$ Charges for services 443,750 458,458 14,708 Interest income 10,250 8,994 (1,256) Other revenues 3,695,674 744,871 (2,950,803) Total revenues 8,171,274 5,165,326 (3,005,948) EXPENDITURES Administration 2,126,311 530,344 1,595,967 Police Department 2,011,680 1,689,707 321,973 Fire Department 161,150 105,509 55,641 Parks Department 639,990 489,914 150,076 Library 3,387,580 322,562 3,065,018 Swimming Pool 68,550 44,757 23,793 Zoning 303,174 173,973 129,201 Animal control 127,944 89,190 38,754 Donated Funds 21,723 30,200 (8,477) Rescue Squad 224,298 107,368 116,930 Reuse 50,000 33,753 16,247 Economic Development 410,000 249,755 160,245 Total expenditures 8,848,102 3,867,032 5,371,946 REVENUES OVER (UNDER) EXPENDITURES (676,828) 1,298,294 1,975,122 OTHER FINANCING SOURCES (USES) Operating transfers - in 1,896,761 1,886,509 (10,252) Operating transfers - out (2,603,541) (2,803,968) 200,427 Total other financing sources (uses)(706,780) (917,459) 190,175 REVENUES AND OTHER SOURCES OVER (UNDER) EXPENDITURES AND OTHER USES (1,383,608) 380,835 2,165,297$ FUND BALANCE - BEGINNING 2,130,268 2,130,268 FUND BALANCE - ENDING 746,660$ 2,511,103 - 53 - City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE For the year ended September 30, 2013 GENERAL FUND See independent auditor's report. FUND BALANCE - ENDING 2,511,103$ 1,164,869 Accrual adjustment for receivables (320,505) Accrual adjustments for payables (132,604) 3,222,863$ - 54 - 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. General Fund Balance See independent auditor's report. Accrual adjustments made because the City budgets for revenues and expenditures on the cash basis, rather than on the modified accrual basis. City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE GENERAL FUND - CONTINUED For the year ended September 30, 2013 Original and Variance Final Positive Budget Actual (Negative) REVENUES Taxes Property tax 1,371,100$ 1,359,893 (11,207)$ Sales tax 2,195,000 2,131,888 (63,112) Motor vehicle tax 135,500 140,092 4,592 Occupation and franchise tax 257,000 260,010 3,010 Other taxes 63,000 61,121 (1,879) Total 4,021,600 3,953,003 (68,597) Charges for services Business licenses and permits 169,450 177,013 7,563 Library 13,400 12,413 (987) Equipment rental 49,500 49,459 (41) Cemetery lots 14,000 12,250 (1,750) Grave openings 22,000 23,300 1,300 Towing 6,500 9,739 3,239 Rescue Squad 140,000 148,376 8,376 Other fees and charges 4,900 4,973 73 Sales of fireworks 15,000 15,000 - RV park 9,000 5,935 (3,065) Total 443,750 458,458 14,708 INTEREST INCOME 10,250 8,994 (1,256) OTHER REVENUES State grants 50,500 58,978 8,478 Federal grants - 2,731 2,731 Donations 22,560 41,863 19,303 Reimbursements 74,000 107,750 33,750 Other miscellaneous revenue 3,548,614 533,549 (3,015,065) Total 3,695,674 744,871 (2,950,803) Total revenues 8,171,274$ 5,165,326$ (3,005,948)$ City of Blair, Nebraska GENERAL FUND REVENUES For the year ended September 30, 2013 BUDGETARY COMPARISON SCHEDULE - 55 - See independent auditor's report. Original and Variance Final Positive Budget Actual (Negative) REVENUES Property taxes 321,000$ 315,473 (5,527)$ Other local taxes 104,320 105,433 1,113 State funds 660,000 656,797 (3,203) Interest income 100 55 (45) Other revenue 2,385,295 206,021 (2,179,274) Total revenues 3,470,715 1,283,779 (2,186,936) EXPENDITURES Salaries 392,970 398,189 (5,219) FICA 29,000 29,189 (189) Employee insurance 142,219 126,800 15,419 Retirement 24,400 25,206 (806) Legal 3,000 2,400 600 Auditing 8,000 9,562 (1,562) Engineering 517,600 41,667 475,933 Office expense 10,100 6,639 3,461 Utilities 8,200 8,128 72 Telephone 2,200 1,936 264 Travel 7,000 5,433 1,567 Training 4,000 2,596 1,404 Insurance 13,250 13,164 86 Maintenance 88,800 110,092 (21,292) Street lighting 150,000 148,952 1,048 County fees - 3,196 (3,196) Car expense 3,400 3,330 70 Contract landscaping 57,500 37,380 20,120 Gas, diesel, and oil 43,000 40,587 2,413 Materials and supplies 146,500 125,878 20,622 Rental 10,000 9,640 360 Capital outlay Equipment 87,700 224,621 (136,921) Street improvements 799,600 1,174,709 (375,109) Total expenditures 2,548,439 2,549,295 (856) REVENUES OVER (UNDER) EXPENDITURES 922,276 (1,265,516) 2,187,792 OTHER FINANCING SOURCES (USES) Operating transfers - in 1,527,850 1,264,096 263,754 Operating transfers - out (170,000) - (170,000) REVENUES AND OTHER SOURCES OVER (UNDER) EXPENDITURES 2,280,126 (1,420) 2,281,546$ FUND BALANCE - BEGINNING 107,070 107,070 FUND BALANCE - ENDING 2,387,196$ 105,650 (7,970) Accrual adjustment for receivables (7,041) Accrual adjustments for payables (15,912) 74,727$ An explanation of the differences between budgetary inflows and outflows and revenues and expenditures determined in accordance with generally accepted accounting principles follows: - 56 - Accrual adjustments made because the City budgets for revenues and expenditures on the cash basis, rather than on the modified accrual basis. Street Fund Balance City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE STREET FUND For the year ended September 30, 2013 See independent auditor's report. The budget fund balance at the beginning of the year is based on cash reserves rather than fund balance. Original and Variance Final Positive Budget Actual (Negative) REVENUES Keno/lottery proceeds 84,000$ 86,779$ (2,779)$ Other revenue 40 30 10 Total Revenue 84,040 86,810 (2,770) EXPENDITURES Community Betterment Project 25,000 - 25,000 Other expenses 18,100 17,331 769 Total expenditures 43,100 17,331 25,769 REVENUES OVER EXPENDITURES 40,940 69,479 (28,539) OTHER FINANCING USES Operating transfers - out (80,000) (39,924) (40,076) REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER USES (39,060) 29,555 (68,615)$ FUND BALANCE - BEGINNING 77,851 77,851 FUND BALANCE - ENDING 38,791$ 107,406 The budget fund balance at the beginning of the year is based on cash 2,467 reserves rather than fund balance. Accrual adjustment for receivables 1,164 Keno Fund Balance 111,037$ City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE KENO FUND For the year ended September 30, 2013 - 57 - 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: Accrual adjustments made because the City budgets for revenues and expenditures on the cash basis, rather than on the modified accrual basis. SUPPLEMENTAL INFORMATION Economic Total Ge n e r a l R e s c u e S a l e s T a x I n s u r a n c e H o t e l / M o t e l C D B G D o n a t i o n s C a p i t a l O u t l a y R e u s e D e v e l o p m e n t General Fu n d Sq u a d F u n d Fu n d Fu n d Ta x F u n d F u n d Fu n d Re s e r v e F u n d Fu n d Fun d Fund AS S E T S Ca s h a n d c a s h e q u i v a l e n t s 4 2 7 , 3 9 8 $ - $ 1 , 6 8 8 , 1 7 1 $ 1 0 9 , 5 8 6 $ 1 4 , 6 0 1 $ 1 0 0 $ - $ 1 2 , 5 6 1 $ - $ - $ 2,252,417 $ Re c e i v a b l e s Sp e c i a l a s s e s s m e n t s 2 , 4 9 8 - - - - - - - - - 2,498 Ac c r u e d i n t e r e s t - - - - - - - 1 9 , 8 9 2 - - 19,892 Ot h e r - - 3 6 3 , 1 6 1 - 6 , 0 9 8 - - - - - 369,259 Pr o p e r t y t a x r e c e i v a b l e 1 2 1 , 2 8 6 - - - - - - - - - 121,286 Re s t r i c t e d c a s h a n d c a s h e q u i v a l e n t s - - - - - - - - - - - Ca s h - 9 7 , 8 5 8 - - - - 3 2 , 5 2 3 - 2 5 , 0 0 3 1 6 1 , 6 7 1 317,055 Ce r t i f i c a t e s o f D e p o s i t - 5 0 , 0 0 0 - - - - - - - - 50,000 Co n t r a c t r e c e i v a b l e - O P P D - - - - - - - 4 4 2 , 0 3 3 - - 442,033 To t a l a s s e t s 5 5 1 , 1 8 2 $ 1 4 7 , 8 5 8 $ 2 , 0 5 1 , 3 3 2 $ 1 0 9 , 5 8 6 $ 2 0 , 6 9 9 $ 1 0 0 $ 3 2 , 5 2 3 $ 4 7 4 , 4 8 6 $ 2 5 , 0 0 3 $ 1 6 1 , 6 7 1 $ 3,574,440 $ LI A B I L I T I E S Ac c o u n t s p a y a b l e 9 1 , 3 5 2 $ 3 , 3 7 4 $ - $ - $ - $ - $ 9 4 $ - $ - $ - $ 94,820 $ Ac c r u e d e x p e n s e s 1 3 3 , 7 7 6 - - - - - - - - - 133,776 De p o s i t s p a y a b l e 3 4 , 5 5 0 - - - - - - - - - 34,550 To t a l l i a b i l i t i e s 2 5 9 , 6 7 8 3 , 3 7 4 - - - - 9 4 - - - 263,146 DE F E R R E D I N F L O W S O F R E S O U R C E S Un a v a i l a b l e r e v e n u e - s p e c i a l a s s e s s m e n t s 2 , 4 9 8 - - - - - - - - - 2,498 Un a v a i l a b l e r e v e n u e - p r o p e r t y t a x e s 8 5 , 9 3 3 - - - - - - - - - 85,933 To t a l d e f e r r e d i n f l o w o f r e s o u r c e s 8 8 , 4 3 1 - - - - - - - - - 88,431 FU N D B A L A N C E S Re s t r i c t e d Do n a t e d f u n d s - - - - - - 3 2 , 4 2 9 - - - 32,429 Ec o n o m i c d e v e l o p m e n t - - - - - - - - - 1 6 1 , 6 7 1 161,671 Re u s e f u n d s - - - - - - - - 2 5 , 0 0 3 - 25,003 Re s c u e s q u a d - 1 4 4 , 4 8 4 - - - - - - - - 144,484 Un a s s i g n e d 20 3 , 0 7 3 - 2 , 0 5 1 , 3 3 2 1 0 9 , 5 8 6 2 0 , 6 9 9 1 0 0 - 4 7 4 , 4 8 6 - - 2,859,276 To t a l f u n d b a l a n c e s 2 0 3 , 0 7 3 1 4 4 , 4 8 4 2 , 0 5 1 , 3 3 2 1 0 9 , 5 8 6 2 0 , 6 9 9 1 0 0 3 2 , 4 2 9 4 7 4 , 4 8 6 2 5 , 0 0 3 1 6 1 , 6 7 1 3,222,863 To t a l l i a b i l i t i e s a n d f u n d b a l a n c e s 5 5 1 , 1 8 2 $ 1 4 7 , 8 5 8 $ 2 , 0 5 1 , 3 3 2 $ 1 0 9 , 5 8 6 $ 2 0 , 6 9 9 $ 1 0 0 $ 3 2 , 5 2 3 $ 4 7 4 , 4 8 6 $ 2 5 , 0 0 3 $ 1 6 1 , 6 7 1 $ 3,574,440 $ Cit y o f B l a i r , N e b r a s k a CO M B I N I N G B A L A N C E S H E E T GE N E R A L F U N D Se p t e m b e r 3 0 , 2 0 1 3 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 . - 5 9 - Ec o n o m i c T o t a l Ge n e r a l R e s c u e S a l e s T a x I n s u r a n c e H o t e l / M o t e l C D B G D o n a t i o n s C a p i t a l O u t l a y R e u s e D e v e l o p m e n t G e n e r a l Fu n d S q u a d F u n d F u n d F u n d T a x F u n d F u n d F u n d R e s e r v e F u n d F u n d F u n d E l i m i n a t i o n F u n d RE V E N U E S Ta x e s 1 , 7 6 9 , 1 4 1 $ - $ 2 , 1 4 3 , 8 8 5 $ - $ 5 3 , 8 5 2 $ - $ - $ - $ - $ - $ - $ 3,966,878 $ Ch a r g e s f o r s e r v i c e s 3 1 0 , 0 8 2 1 4 8 , 3 7 6 - 6 6 9 , 3 3 4 - - - - - - ( 5 8 2 , 6 5 4 ) 545,138 In t e r g o v e r n m e n t a l 6 0 , 5 4 2 - - - - 2 , 7 3 1 - - - - - 63,273 In t e r e s t i n c o m e 6 , 6 8 4 - 2 , 0 6 4 4 8 3 4 - 4 7 5 8 , 0 3 2 7 1 5 8 - 67,074 Ot h e r r e v e n u e s 1 1 2 , 1 5 8 - - - - - 40 , 3 0 0 - 5 0 , 0 0 0 - - 202,458 To t a l r e v e n u e s 2 , 2 5 8 , 6 0 7 1 4 8 , 3 7 6 2 , 1 4 5 , 9 4 9 6 6 9 , 3 8 2 5 3 , 8 8 6 2 , 7 3 1 4 0 , 3 4 7 5 8 , 0 3 2 5 0 , 0 0 7 1 5 8 ( 5 8 2 , 6 5 4 ) 4,844,821 EX P E N D I T U R E S Ad m i n i s t r a t i o n 4 8 8 , 2 0 8 - 6 6 , 2 6 2 6 1 2 , 0 2 5 6 , 0 0 0 2 , 7 3 1 - - 3 3 , 7 5 3 24 9 , 7 5 5 ( 5 8 2 , 6 5 4 ) 876,080 Po l i c e D e p a r t m e n t 1 , 7 3 6 , 5 9 7 - - - - - - - - - - 1,736,597 Fi r e D e p a r t m e n t 1 0 5 , 5 0 9 1 0 7 , 3 6 8 - - - - - - - - - 212,877 Pa r k s D e p a r t m e n t 4 9 9 , 1 4 7 - - - - - - - - - - 499,147 Lib r a r y 3 2 9 , 4 1 9 - - - - - - - - - - 329,419 Sw i m m i n g P o o l 4 4 , 7 5 7 - - - - - - - - - - 44,757 Zo n i n g 1 7 9 , 3 5 3 - - - - - - - - - - 179,353 An i m a l c o n t r o l 9 1 , 2 0 6 - - - - - - - - - - 91,206 Do n a t e d f u n d s - - - - - - 3 0 , 2 0 0 - - - - 30,200 To t a l e x p e n d i t u r e s 3 , 4 7 4 , 1 9 6 1 0 7 , 3 6 8 6 6 , 2 6 2 6 1 2 , 0 2 5 6 , 0 0 0 2 , 7 3 1 3 0 , 2 0 0 - 3 3 , 7 5 3 2 4 9 , 7 5 5 ( 5 8 2 , 6 5 4 ) 3,999,636 EX C E S S ( D E F I C I E N C Y ) O F R E V E N U E S OV E R E X P E N D I T U R E S (1 , 2 1 5 , 5 8 9 ) 4 1 , 0 0 8 2 , 0 7 9 , 6 8 7 5 7 , 3 5 7 4 7 , 8 8 6 - 1 0 , 1 4 7 5 8 , 0 3 2 1 6 , 2 5 4 ( 2 4 9 , 5 9 7 ) - 845,185 OT H E R F I N A N C I N G S O U R C E S ( U S E S ) Op e r a t i n g t r a n s f e r s - i n 1 , 2 4 1 , 2 3 2 - 3 7 3 , 0 4 8 5 2 , 2 2 9 - - - 1 0 , 0 0 0 - 2 1 0 , 0 0 0 ( 1 , 2 4 6 , 3 0 8 ) 640,201 Op e r a t i n g t r a n s f e r s - o u t ( 1 0 , 0 0 0 ) - ( 2 , 2 7 2 , 1 5 3 ) - ( 4 0 , 0 0 0 ) - - ( 4 8 1 , 8 1 5 ) - - 1 , 2 4 6 , 3 0 8 (1,557,660) To t a l o t h e r f i n a n c i n g s o u r c e s 1 , 2 3 1 , 2 3 2 - ( 1 , 8 9 9 , 1 0 5 ) 5 2 , 2 2 9 ( 4 0 , 0 0 0 ) - - ( 4 7 1 , 8 1 5 ) - 2 1 0 , 0 0 0 - (917,459) NE T C H A N G E I N F U N D B A L A N C E S 1 5 , 6 4 3 4 1 , 0 0 8 1 8 0 , 5 8 2 1 0 9 , 5 8 6 7 , 8 8 6 - 1 0 , 1 4 7 ( 4 1 3 , 7 8 3 ) 1 6 , 2 5 4 ( 3 9 , 5 9 7 ) - (72,274) FU N D B A L A N C E S , B E G I N N I N G 1 8 7 , 4 3 0 $ 1 0 3 , 4 7 6 $ 1 , 8 7 0 , 7 5 0 $ - $ 1 2 , 8 1 3 $ 1 0 0 $ 2 2 , 2 8 2 $ 8 8 8 , 2 6 9 $ 8 , 7 4 9 $ 2 0 1 , 2 6 8 $ - $ 3,295,137 $ FU N D B A L A N C E S , E N D O F Y E A R 20 3 , 0 7 3 $ 1 4 4 , 4 8 4 $ 2 , 0 5 1 , 3 3 2 $ 1 0 9 , 5 8 6 $ 2 0 , 6 9 9 $ 1 0 0 $ 3 2 , 4 2 9 $ 4 7 4 , 4 8 6 $ 2 5 , 0 0 3 $ 1 6 1 , 6 7 1 $ - $ 3,222,863 $ Ci t y o f B l a i r , N e b r a s k a C O M B I N I N G S T A T E M E N T O F R E V E N U E S , E X P E N D I T U R E S , A N D C H A N G E S I N FU N D B A L A N C E - G E N E R A L F U N D 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 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 . - 6 0 - Fe d e r a l A g e n c y o r CF D A P a s s - t h r o u g h F e d e r a l Nu m b e r N um b e r Expenditures U. S . D e p a r t m e n t o f J u s t i c e : Di r e c t P r o g r a m s : OJ P V e s t G r a n t 1 6 . 6 0 7 D r u g E n f o r c e m e n t A d m i n i s t r a t i o n 7 6 5 $ U. S . D e p a r t m e n t o f T r a n s p o r t a t i o n : Di r e c t P r o g r a m s : Hi g h w a y S a f e t y C l u s t e r : Al c o h o l I m p a i r e d D r i v i n g C o u n t e r m e a s u r e r s I n c e n t i v e G r a n t s 2 0 . 6 0 1 D e p a r t m e n t o f T r a n s p o r t a t i o n 2 , 7 7 1 Pa s s T h r o u g h P r o g r a m s Hi g h w a y P l a n n i n g a n d C o n s t r u c t i o n 2 0 . 2 0 5 N eb r a s k a D e p a r t m e n t o f R o a d s 6 4 6 To t a l U . S . D e p a r t m e n t o f T r a n s p o r t a t i o n 3,417 U. S . D e p a r t m e n t o f E n v i r o n m e n t a l P r o t e c t i o n A g e n c y : Pa s s e d t h r o u g h S t a t e o f N e b r a s k a : Ca p i t a l i z a t i o n G r a n t s f o r C l e a n W a t e r S t a t e R e v o l v i n g F u n d s 6 6 . 4 5 8 S t a t e o f N e b r a s k a 5 8 7 , 7 1 4 Ca p i t a l i z a t i o n G r a n t s f o r D r i n k i n g W a t e r S t a t e R e v o l v i n g F u n d s 6 6 . 4 6 8 S t a t e o f N e b r a s k a 1 , 0 1 0 , 9 9 2 Op e r a t i o n a l G r a n t f o r D r i n k i n g W a t e r S t a t e R e v o l v i n g F u n d s 6 6 . 4 6 8 S t a t e o f N e b r a s k a 1 0 , 0 0 0 To t a l U . S . D e p a r t m e n t o f E n v i r o n m e n t a l P r o t e c t i o n A g e n c y 1,608,706 U. S . D e p a r t m e n t o f E n e r g y Ex e c u t i v e O f f i c e o f t h e P r e s i d e n t Pa s s e d t h r o u g h S t a t e o f N e b r a s k a : Hi g h I n t e n s i t y D r u g T r a f f i c k i n g A r e a s P r o g r a m 9 5 . 0 0 1 S t a t e o f N e b r a s k a 5 3 , 4 0 6 U. S . D e p a r t m e n t o f H o m e l a n d S e c u r i t y Pa s s e d t h r o u g h S t a t e o f N e b r a s k a : Di s a s t e r G r a n t s - P u b l i c A s s i s t a n c e 9 7 . 0 3 6 S t a t e o f N e b r a s k a 1 7 2 , 1 3 7 To t a l e x p e n d i t u r e s o f f e d e r a l a w a r d s 1,838,431 $ Ci t y o f B l a i r , N e b r a s k a SC H E D U L E O F E X P E N D I T U R E S O F F E D E R A L A W A R D S 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 Fe d e r a l g r a n t o r / p a s s e d - t h r o u g h g r a n t o r p r o g r a m t i t l e -6 1 - Se e n o t e s t o t h e s c h e d u l e o f e x p e n d i t u r e s o f f e d e r a l a w a r d 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 . City of Blair, Nebraska NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30, 2013 - 62 - 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 City of Blair, Nebraska (the City). The City’s reporting entity is defined in note A to the City’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 City 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. 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 Members of the City Council City of 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, the business-type activities, and each major fund of the City of Blair, Nebraska, as of and for the year ended September 30, 2013, and the related notes to the financial statements, which collectively comprise the City of Blair, Nebraska’s basic financial statements, and have issued our report thereon dated February 4, 2014. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered City of Blair, Nebraska’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 City of Blair, Nebraska’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of City of Blair, Nebraska’s internal control over financial reporting. 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 over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Westroads Pointe |1015 N. 98th St. |Suite 200 |Omaha, NE 68114 |T 402.390.2480 |F402.390.0885 www.hayes-cpa.com - 64 - Our consideration of internal control 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 over financial reporting that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether City of Blair, Nebraska’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 over financial reporting 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 over financial reporting and compliance. Accordingly, this communication is not suitable for any other purpose. Hayes & Associates, L.L.C. Omaha, Nebraska February 4, 2014 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Honorable Members of the City Council City of Blair, Nebraska Report on Compliance for Each Major Federal Program We have audited City of Blair, Nebraska’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 each of City of Blair, Nebraska’s major federal programs for the year ended September 30, 2013. City of Blair, Nebraska’s major federal programs are 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 City of Blair, Nebraska’s major federal programs 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 City of Blair, Nebraska’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. Westroads Pointe |1015 N. 98th St. |Suite 200 |Omaha, NE 68114 |T 402.390.2480 |F402.390.0885 www.hayes-cpa.com - 66 - We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of City of Blair, Nebraska’s compliance. Opinion on Each Major Federal Program In our opinion, City of Blair, Nebraska, 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 programs for the year ended September 30, 2013. Report on Internal Control Over Compliance Management of City of Blair, Nebraska, 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 City of Blair, Nebraska’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 City of Blair, Nebraska’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. - 67 - 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, L.L.C. Omaha, Nebraska February 4, 2014 City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COST For the year ended September 30, 2013 - 68 - I. SUMMARY OF AUDIT RESULTS Financial Statements Type of auditors’ reports issued: Unmodified Internal controls over financial reporting:  Material weaknesses identified: No  Significant deficiencies identified: None Noted Noncompliance material to financial statements noted: No Federal Awards Internal control over major programs:  Material weaknesses identified: No  Significant deficiencies identified: None Noted Type of auditors’ report issued on compliance for each major program: 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 66.458 Capitalization Grants for Clean Water State Resolving Fund 66.468 Capitalization Grants for Drinking Water State Resolving Fund City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COST – CONTINUED For the year ended September 30, 2013 - 69 - I. SUMMARY OF AUDIT RESULTS – CONTINUED Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee: No City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COST - CONTINUED For the year ended September 30, 2013 - 70 - II. FINDINGS—FINANCIAL STATEMENTS None reported. III. FINDINGS AND QUESTIONED COSTS—MAJOR FEDERAL AWARD PROGRAMS None reported. City of Blair, Nebraska SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended September 30, 2013 - 71 - II. FINDINGS—FINANCIAL STATEMENTS Finding 2012-01: Financial Statements Condition – The City of Blair maintains its books on a cash basis and relies on its auditors to prepare the financial statements and footnotes in accordance with GAAP. As a result, the auditors posted modified and accrual entries, including accrual of expenses, compensated absences, salaries, utility expenses, tax receivables and deferred revenues, and grant receivables that are not booked at year end. Recommendation – The City of Blair should acquire or develop the necessary expertise to prepare a required set of financial statements in a format acceptable for GAAP reporting. Current Status – The City of Blair contracted with a CPA firm to provide education and training on how to adjust their cash basis financial records to modified and full accrual. The City provided the auditors with this information in the current year. Finding 2012-02: Material Audit Adjustments Condition - The trial balance provided by the City of Blair contained material misstatements. Audit adjustments were necessary to allow the financial statements to be presented in accordance with generally accepted accounting principles (GAAP). The City of Blair has relied on the auditor to provide assurance that the financial statements are not materially misstated. Adjustments identified by the auditors were related to modified and full accrual entries necessary to state the financial statements in accordance with GAAP. Adjustments were not identified to the client’s day-to-day cash basis accounting records. There were audit adjustments made to the Cargill reimbursement related to flood costs including adjusting federal expenditures related to FEMA projects and the related receivable, properly record warrants payable, current year payments and related interest, properly record capital asset additions, disposals, and related depreciation, record construction in progress, reclassify proprietary fund bond activity from the revenue and expense accounts to the payable account, and record a prior period adjustment for capital assets not previously identified in a prior year and special assessment revenues not recognized in a prior year. Adjustments discovered during the course of an audit are not uncommon; however, the auditor cannot be considered part of the City of Blair’s internal control. Recommendation – We recommend that the City of Blair implement internal controls that may include a closing procedures checklist to be reviewed and prepared, perform the procedures listed, and document the individual responsible for the procedures. City of Blair, Nebraska SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended September 30, 2013 - 72 - II. FINDINGS—FINANCIAL STATEMENTS – CONTINUED Finding 2012-02: Material Audit Adjustments - Continued Current Status – Corrected Finding 2012-03: Capital Assets Condition - The City of Blair had the following issues related to capital assets. There were fully depreciated assets that were traded in for the purchase of new assets; however, the old assets were not removed from the asset listing. Useful lives on certain capital assets were not in accordance with the City’s capitalization policy. There was a new rescue squad vehicle purchased that was not identified as a capital asset addition. The total expenses of the projects listed in the general ledger exceed the expenses listed in the construction in progress project report provided by the client. Recommendation – The City of Blair should perform a quarterly analysis of capital outlay expenditures and ensure that all additions are identified and recorded. The City Administration should perform a routine review of the capital asset listing to review for consistent useful lives of assets, consistent depreciation methods, and to ensure all additions and disposals are accounted for. The accounting department should review and evaluate internal controls over construction in progress (CIP) tracking and perform an annual reconciliation to the general ledger. Current Status – Corrected Finding 12-04: Schedule of Expenditures of Federal Awards Condition - The unaudited City of Blair SEFA contained material misstatements and was not supported by documented evidence. Recommendation - The City of Blair should develop adequate internal controls and ensure that regular communication occur between the various departments of the city in order to track and identify federal expenditures throughout the year. Current Status – Corrected City of Blair, Nebraska SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended September 30, 2013 - 73 - III. FINDINGS AND QUESTIONED COSTS—MAJOR FEDERAL AWARD PROGRAMS None reported.