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FY2008 Audit Report City (2)City of Blair, Nebraska FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORTS For the year ended September 30, 2008 CITY OF BLAIR, NEBRASKA TABLE OF CONTENTS Page INDEPENDENT AUDITOR'S REPORT 3 - 4 MANAGEMENT'S DISCUSSION AND ANALYSIS 5-17 STATEMENTS Statement of net assets - government -wide 18 Statement of activities - government -wide 19 Balance sheet - governmental funds 20 Reconciliation of the balance sheet of governmental funds to the statement of net assets 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 governmental funds to the statement of activities 23 Statement of net assets - proprietary funds 24 Statement of revenues, expenses, and changes in fund net assets - proprietary funds 25 Statement of cash flows - proprietary funds 26 Statement of net assets - fiduciary funds 27 NOTES TO FINANCIAL STATEMENTS 28-49 SUPPLEMENTAL INFORMATION Budgetary comparison schedule - general fund and major special revenue fiends 51 Budgetary comparison schedule - general fund revenues 52 Budgetary comparison schedule - Street fiend 53 Budgetary comparison schedule - KENO fund 54 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS 55-56 SCHEDULE OF FINDINGS AND RESPONSES 57-59 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 60 EWES & ASSOCIATES, LLC. Ceni6edPuMoAc oIDtantsandC016Vltuts INDEPENDENT AUDITOR'S REPORT Honorable Mayor and Members Of the City Council City of Blair, Nebraska We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Blair, Nebraska, as of and for the year ended September 30, 2008, which collectively comprise the City of Blair, Nebraska 's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Blair's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the 'standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions: In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Blair, Nebraska, as of September 30, 2008, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated January 22, 2009 on our consideration of the City of Blair'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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Westroads Pointe • 1015 N. 98th St., Suite 200 • Omaha, Nebraska 68114 • 402.390.2480 TEL . 402.390.0885 FAX • wxviv.hayes-cpa.com _D The CPA. Nmr Underesnmale The Value' City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2008 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, 2008. It should be read in conjunction with the accompanying basic financial statements. All amounts in this discussion, unless otherwise indicated, are expressed in thousands of dollars. FINANCIAL HIGHLIGHTS • The assets of the City of Blair exceeded its liabilities at the close of the fiscal year ending September 30, 2008 by $23.2 million (net assets). Of this amount, $4.0 million (unrestricted net assets) may be used to meet the government's ongoing obligations to citizens and creditors. • The City of Blair's total net assets decreased by $2.4 million for the year ended September 30, 2008. The decrease in net assets of $2.4 million can be attributed to a prior period adjustment 3.5 million, even though assets increased 1.1 million attributable to grants, water revenue, and sales tax revenue used to purchase capital assets. • As of September 30, 2008, the City of Blair's governmental funds reported combined ending fund balances of $4.3 million, a decrease of $4.3 million in comparison with the prior fiscal year. This decrease is attributed in part to a prior year adjustment decreasing the beginning assets by $3.29 million. • The fund balances for the Street Fund decreased $4,121 for fiscal year ended September 30, 2008. The fund balance for the General Fund decreased $473,671 during the same period. • The City's total debt increased by $828,000 during the current fiscal year. This increase can be attributed to the issuance of $1,140,000 in TIF Bonds for TIF Project #2 and $700,000 for Public Safety Bonds for the purchase of a new Aerial ladder truck for the Fire Department. 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, fiend financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. -5- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 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 assets presents information on all of the City of Blair's assets and liabilities, with the difference between the two reported as net assets. Overtime, increases or decrease in net assets may serve as a useful indicator of whether the financial position of the City of Blair is improving or deteriorating. The Statement of Net Assets 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 fixture fiscal periods (e.g., uncollected taxes). Both the statement of net assets and the statement of activities are prepared utilizing the accrual basis of accounting as opposed to the modified accrual basis. In the statement of net assets and the statement of activities, the City is divided into two kinds of activities: 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. mom City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 Reporting the City's Most Significant Funds Fund Financial Statements The fund financial statements provide detailed information about the most significant Rinds - not the City as a whole. Some fiends are required to be established by state laws and by bond covenants. However, the City 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 two kinds of funds - governmental and proprietary - 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. 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 assets 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 Rind, all of which are considered to be major funds. -7- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 Fund Financial Statements - Continued 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 Assets 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 finds 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. 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 assets were $23.2 million as of September 30, 2008. Analyzing the net assets and net expenses of governmental and business -type activities separately, the business type activities net assets were $12.0 million. This analysis focuses on the net assets (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. By far the largest portion of the City's net assets (82.6%) reflects its restricted capital assets (e.g., donations, community betterment, debt service, and capital projects). SEE TABLE 1 -8- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED SUMMARY OF NET ASSETS September 30, 2008 Amounts expressed in thousands TABLE 1 -9- Governmental Activities Business -type Activities Total Primary Government 2008 2007 2008 2007 2008 2007 ASSETS Current and other assets $ 8,319 $ 8,889 $ 1,745 $ 10,818 $ 10,064 $ 19,707 Capital assets 13,415 10,923 36,461 28,376 49,876 39,299 Total assets 21,734 19,812 38,206 39,194 59,940 59,006 LIABILITIES Long-term debt outstanding 6,005 5,390 23,881 26,142 29,886 31,532 Other liabilities 4,579 227 2,257 1,622 6,836 1,849 Total liabilities 10,584 5,617 26,138 27,764 36,722 33,381 NET ASSETS Invested in capital assets net of related debt 6,795 5,533 11,435 2,233 18,230 7,766 Restricted 501 4,101 444 6,131 945 10,232 Unrestricted (deficit) 3,854 4,561 189 3,066 4,043 7,627 Total net assets $ 11,150 $ 14,195 _J__j2,068 $ 11,430 $ 23,218 _J__L,6_25 -9- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 Governmental activities: Governmental activities decreased the City's net assets by $3.04 million. Key elements of this decrease are as follows: The decrease is in part due to a prior year adjustment of $3.29 million. This prior year adjustment was summarized in Footnote "O". The decrease was minimized by the fact that all governmental activities were financed in part by tax revenue. General Fund and Streets were the most effective at covering thein 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 general revenues decreased when compared to the prior year by 24% or $2.1 million. The primary reason for this decrease was due to reduction of capital grants and contributions by $521,000, reduction of special assessment income of $1,459,000 and reduction of other income by $269,000. The assessed value of the property in the City increased by $24.58 million or 6.0% as compared to the prior year while the City property tax rate of $.3569 per $100 assessed valuation stayed the same. Business -type Activities Revenues of the City's business -type activities were $5.5 million for the fiscal year ending September 30, 2008. Expenses for the City's business -type activities were $5.2 million for the year, resulting in net revenues of $.30 million. The net revenues are the result of several factors, including the following: The City's water system recorded charges for services of $4.4 million, which exceeded expenses of $3.4 million, which included $1.06 million in depreciation, by $1.0 million. The most significant expenses of the water fund were $668,880 for operating expenses, $890,208 for salaries and benefits and $818,415 for material and supplies. The sewer fund had a net operating income of $429,028 before depreciation. SEE TABLE 2 -10- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANAGES IN NET ASSETS September 30, 2008 Amounts expressed in thousands TABLE2 in Governmental Activities Business -type Activities Total Primary Government 2008 2007 -2008 2007 2008 2007 REVENUES Program revenues Charges for services $ 356 $ 372 $ 5,331 $ 4,790 $ 5,687 $ 5,162 Operating grants and contributions 119 88 - - 119 88 Capital grants and contributions 66 587 66 587 General revenues Taxes 4,562 4,320 - - 4,562 4,320 Interest income 242 316 173 140 415 456 Special assessments 343 1,802 - - 343 1,802 Other 678 947 - - 678 947 Total revenues 6,366 8,432 5,504 4,930 _ 11,870 13,362 EXPENSES Administration 773 1,412 - - 773 1,412 Police 1,576 1,359 - 1,576 1,359 Fire 213 177 - 213 177 Parks 447 425 - 447 425 Library 267 255 - - 267 255 Swimming pool 68 52 - - 68 52 Zoning 137 127 - - 137 127 Animal control 94 86 - - 94 86 Donated fund 95 55 - - 95 55 Streets 1,547 1,031 - - 1,547 1,031 Keno 68 161 - - 68 161 Interest expense 280 312 - - 280 312 Water - - 4,437 3,742 4,437 3,742 Sewer 773 706 773 706 Total expenses 5,565 5,452 5,210 4,448 10,775 9,900 CHANGE IN NET ASSETS BEFORE TRANSFERS 801 2,980 294 482 1,095 3,462 TRANSFERS (554) (468) 554 468 - - CHANGE IN NET ASSETS 247 2,512 848 950 1,095 3,462 NET ASSETS, BEGINNING OF YEAR 14,195 11,683 11,430 10,480 25,625 22,163 PRIOR PERIOD ADJUSTMENT (3,292) (210) - (3,502) BEGINNING NET ASSETS, RESTATED 10,903 11,683 11,220 10,480 22,123 22,163 NET ASSETS, END OF YEAR $ 11.150 $ 14,195 $ 12.068 $ 11,430 $ 23,218 $ 25,625 in City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of the fiscal year 2008, the City has nearly $67.464 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 additions and deductions) of $12.13 million or 22% over the prior fiscal year. Beginning October 1, 2003, the City began capitalizing general infrastructure assets and depreciating them over their usefiil lives as required by GASB 34. The general infrastructure assets capitalized in 2008 were $3.03 million. SEE TABLE 3 -12 City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANGES IN CAPITAL ASSETS September 30, 2008 Amounts expressed in thousands TABLE 3 -13- Balance Balance September 30, 2007 Additions Deletions September 30, 2008 GOVERNMENTAL ACTIVITIES Land $ 191 $ - $ - $ 191 Street infrastructure 6,685 2,021 - 8,706 Buildings 5,503 - - 5,503 Equipment 2,879 1,011 (235) 3,655 Total governmental 15,258 3,032 (235) 18,055 BUSINESS -TYPE ACTIVITIES Water assets 33,140 8,179 (21) 41,298 Sewer assets 6,937 1,174 - 8,111 Total business -type 40,077 9,353 (21) 49,409 Totals $ 55,335 $ 12,385 $ (256) $ 67,464 -13- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 Debt At year-end, the City had $7.4 million in General Obligation Bonds and registered warrants outstanding as compared to $5.4 million at the end of the prior fiscal year, an increase of 37% as shown in Table 4. The Water Revenue Bonds outstanding were decreased by $1.061 million. The City has a 25 year take or pay contract with Cargill to secure the debt. The expanded plant will have a 17 million gallons per day (MPD) capacity with 12.5 MPD contracted to Cargill and was designed to be easily expanded to 20 million gallon per day. SEE TABLE 4 -14- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANGES IN OUTSTANDING DEBT September 30, 2008 Amounts expressed in thousands TABLE 4 -15- Balance Balance September 30, September 30, Description 2007 Additions Dispositions 2008 General Registered Warrants $ 20 $ 738 $ (24) $ 734 General Obligation Bonds 5,390 1,840 (610) 6,620 Water Revenue Bonds 23,887 - (1,061) 22,826' Sewer Revenue Bonds 2,255 - (55) 2,200 Totals $ 31,552 $ 2,578 $ (1,750) $ 32,380 -15- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 THE CITY'S FUND At the close of the City's fiscal year on September 30, 2008, the governmental funds of the City reported a combined fund balance of $4.339 million. This ending balance included an adjustment to the beginning balance of $3.196 million. The primary reason for the general fiind's reduction is the transfer of cash to other funds for the purchase of capital improvements. General Fund Budgetary Highlights General Fund had revenues over expenditures of $176,181. This was primarily accomplished from the fact revenues received were above budgeted projections and expenses were below budget projections. Debt Service had expenditures of $340,098 more than revenues. This was primarily result of special assessments, including interest, was less than what had been budgeted. In addition, the city had additional costs for the acquisition of the new, aerial ladder truck that was purchased for the Fire Department. Street Fund had an operating loss of $2,313,248. This was offset with the transfer in of $2,305,685 in sales taxes for capital projects and the sale of $26,166 of assets. 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 finished the year with a 1.36 ratio of operating income before depreciation, plus interest income and operating transfers in divided by Debt Service. Sewer had a net operating income to debt ratio of 3.79. Internal Service Fund had a find balance of $237,526. The fund was created to manage the city's partially self funded employee health insurance program. The balance reflects positive management of the fund and savings over the previous commercial employee health plan. The Fund balance represents a snap shot of the fund on Sept. 30, 2008 and doesn't include any accrued liabilities or refunds from reinsurance. It does show the success the City has had in helping manage the City's employee health care costs the past two and three quarter years. The health care program and contracts operate on a calendar year bases. For the first three years of the insurance program, it is estimated the City will have over $300,000 in cash savings reserves above the expected medical costs to help hold down future premium costs. -16- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2008 ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Current economic conditions point toward a continued growth in the community that will allow for a stable budget environment in spite of the national economy down turn. The property tax request for fiscal year 2008/2009 was increased 3.3%, which with the valuation increase caused the levy per valuation dollar to not increase over the prior year. The city's property valuation continues to grow at a 4% to 6% annual increase and sales taxes continue to be stable. The city's short term (1-5 years) forecast continues to be solid as the city budgets only $620,000 annually of the estimated $1,600,000 in sales tax receipts for ear marked projects such as property tax relief, fire bond payment and economic development. The balance of the sales tax dollars are currently available for discretionary capital projects and equipment that are important to the citizens of the City. The 6 to 10 year projections also appear to remain solid with exception that the city currently uses the $481,000 annual payment from OPPD, from the sale of the city's electric system in 1984, for property tax relief. This $481,000 asset will go away in 2014. The Council, in annual discussion on the issue at budget preparation time, is intent on expanding the City's economic growth in sales and property tax base through economic development to offset the loss of revenue from the OPPD payment in FY 2015. In addition, the City's current sales tax authorization is scheduled to expire on Sept. 30, 2015. The extension of the sales tax beyond 2015 will be imperative to maintaining a reasonable property tax levy. 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. -17- City of Blair, Nebraska STATEMENT OF NET ASSETS September 30, 2008 ASSETS Cash and cash equivalents Accounts receivable Due from County Treasurer Accrued interest receivable Prepaid expense Special assessments receivable Interfund balances Contract receivable Capital assets Land Street infrastructure Buildings Equipment Accumulated depreciation Restricted assets Total assets LIABILITIES Accounts payable Accrued expenses Accrued interest Deposits payable Registered warrants Deferred revenue Bonds payable Due within one year Due in more than one year Total liabilities NET ASSETS Investment in capital assets net of related debt Donated projects Debt service Community betterment Capital projects Unrestricted Total net assets Governmental Business -type 59,371 - Activities Activities Total $ 2,144,420 $ 145,956 $ 2,290,376 2 86,3 97 1,084,054 1,3 70,451 139,392 - 139,392 97,262 5,052 102,314 - 6,249 6,249 2,395,184 - 2,395,184 (59,579) 59,579 - 2,161,384 - 2,161,384 190,641 423,783 614,424 8,706,752 - 8,706,752 5,503,145 46,961,104 52,464,249 3,654,302 2,023,924 5,678,226 (4,639,793) (12,947,080) (17,586,873) 1,154,002 443,687 1,597,689 21,733,509 38,206,308 59,939,817 549,888 226,601 55,169 34,100 733,713 2,364,548 615,000 6,005,000 10,584,019 628,332 153,029 328,479 1,700 1,144,836 23,881,373 26,137,749 1,178,220 379,630 383,648 35,800 733,713 2,364,548 1,759,836 29,886,373 36,721,768 6,795,047 11,43 5,522 18,230, 569 59,371 - 59,371 - 443,687 443,687 129,853 - 129,853 312,089 - 312,089 3,853,130 189,350 4,042,480 $ 11,149,490 $ 12,068,559 $ 23,218,049 See accompanying notes and independent auditor's report. -18- 04 .5 .5 eo 0i C qa V .ly O 6C�,+ >¢a°wa.avN �� ro N O O b GD O O b 00 n N i0 V' O S D N h O 00 ti Q\ vi t` l� to M �O M G1 h .-: lV N M �O T i w M 00 N W 7 I N �D l� o � I � h ti N 00 00 I. N 00 N M D\ V ^� t h N O v l� N o F b 7 W h 00 7 t` G, g N O , h 00 N M N F V h v .-. .-� h •--� N N N v .._. N ¢ p o 00 ti Ci M M �O f�I O\ cl N N M V' 'n N N N O� " yj v .-� V1 7 M O •--� U � b GCli� N N N 1 1 U cs � v v • fV t` o M Ni` b to '7 h Vi y ❑ fA pp O b ttl O V � .O O O M M C4 t- N C\ r+ ll N le M iv� 00 V1 7 O O V to le .N.�^ r r t` r M Vi b 00 C � & r b hl g 'st` y � 'p T � b �y � � y b � N L.• h .moi .5 .5 eo 0i C qa V .ly O 6C�,+ >¢a°wa.avN �� ro City of Blair, Nebraska GOVERNMENTALFUNDS BALANCE SHEET September 30, 2008 See accompanying notes and independent auditors report. -20- Capital General Debt Service Street Keno Projects Fund Fund Fund Fund Fund Total ASSETS Cash and cash equivalents $ 1,945,455 $ - $ 198,965 $ $ $ 2,144,420 Receivables Special assessments 1,775 2,393,409 - 2,395,184 Accrued interest 97,262 97,262 Other 283,938 - - 2,459 286,397 Due from County Treasurer 62,696 4,095 14,207 - 80,998 Reserved assets - cash and - investments - at cost 59,371 411,192 - 130,705 312,565 913,833 Contract receivable - OPPD 2,161,384 -$-_-:2:1:3 2,161,384 Total assets $ 6,881 4. 11 $ 2.808,696 172 $ 133,164 $ 312,565 $ 8,079,478 LIABILITIES Accounts payable $ 493,021 $ - $ 50,437 $ 3,311 $ 476 $ 547,245 Accrued expenses 46,333 5,547 8,704 - - 60,584 Deposits payable 34,100 - - 34,100 Registered warrants - 733,713 733,713 Deferred revenues 1,775 2,362,773 2,364,548 Total liabilities 575,229 3,102,033 59,141 3,311 476 3,740,190 FUND BALANCES Reserved for Donated funds 59,371 - - - - 59,371 Debt service - - Community betterment 129,853 - 129,853 Capital projects - 312,089 312,089 Unreserved undesignated General funds 3,977,281 (293,337) - - 3,683,944 Special revenue funds (deficit) - 154,031 - 154,031 Total fund balances 4,036,652 (293,337) 154,031 129,853 312,089 4,339,288 Total liabilities and fund equity $ 4,611,881 $ 2,808,696 $ 213.172 $ 133,164 $ 312,565 $ 8,079,478 See accompanying notes and independent auditors report. -20- City of Blair, Nebraska GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS September 30, 2008 Fund balances of governmental funds Amounts reported for governmental activities in the statement of net assets are different because Capital assets, net of depreciation, are not current financial resources and are not included in the governmental fiends. Bonds payable are not a current financial resource. Therefore, they are not included in the governmental fiends. Internal service finds are used by management to charge the costs of insurance to individual funds. The assets and liabilities of internal service fiends are included in governmental activities in the statement of net assets. Taxes receivable that are not available to pay for current period expenditures are not included in the governmental funds. Accrued interest does not require current financial resources and therefore is not reported in the funds. Accrued compensated absences are not due and payable in the current period and therefore are not reported in the funds. Net assets of governmental activities See accompanying notes and independent auditor's report. -21- $ 4,339,288 13,415,047 (6,620,000) 177,947 58,394 (49,622) (171,564) $ 11,149,490 City of Blair, Nebraska STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS For the year ended September 30, 2008 See accompanying notes and independent auditors report. -22- Capital General Debt Service Street Keno Projects Fund Fund Fund Fund Fund Total REVENUES Taxes $ 3,509,890 $ 52,160 $ 981,477 $ $ 12,507 $ 4,556,034 Keno proceeds - - - 72,355 - 72,355 Charges for services 284,113 - - 284,113 Special assessment 1,659 276,833 278,492 Special assessment interest - 64,349 - - - 64,349 Interest income 238,700 14,264 3,237 134 19,648 275,983 Other revenues 324,879 79,526 59,664 15,000 479,069 Total revenues 4,359,241 487,132 1,044,378 72,489 47,155 6,010,395 EXPENDITURES Administration 722,948 431 - 114 723,493 Police Department 1,524,549 - - 1,524,549 Fire Department 883,541 883,541 Parks Department 432,556 432,556 Library 261,073 261,073 Swimming Pool 47,161 47,161 Zoning 137,083 137,083 Animal control 78,931 78,931 Donated funds 95,218 - 95,218 Keno expense 40,677 40,677 Community betterment 27,717 - 27,717 Street expense 3,357,626 - 79,192 3,436,818 Debt service Bonding costs 10,850 10,850 Redemption of bonds 610,000 610,000 Bond interest 205,949 24,117 230,066 Total expenditures 4,183,060 827,230 _ 3,357,626 68,394 103,423 8,539,733 REVENUES OVER (UNDER) EXPENDITURES 176,181 (340,098) (2,313,248) 4,095 (56,268) (2,529,338) OTHER FINANCING SOURCES (USES) Bond proceeds - 700,000 - - 1,140,000 1,840,000 Sale of assets 90,000 - 26,166 - 116,166 Operating transfers - in 2,694,930 189,578 2,305,685 - 5,190,193 Operating transfers - out (3,502,748) (1,481,638) (25,005) (734,937) (5,744,328) Total other financing sources (717,818) (592,060) 2,306,846 - 405,063 1,402,031 REVENUES AND OTHER SOURCES OVER (UNDER) EXPENDITURES AND OTHER USES (541,637) (932,158) (6,402) 4,095 348,795 (1,127,307) NET ASSETS, BEGINNING OF YEAR AS PREVIOUSLY REPORTED 4,510,323 3,868,421 158,152 125,758 8,662,654 ADJUSTMENTS TO BEGINNING NET ASSETS 67,966 (3,229,600) 2,281 (36,706) (3,196,059) NET ASSETS, BEGINNING OF YEAR, AS RESTATEI 4,578,289 638,821 160,433 125,758 (36,706) 5,466,595 NET ASSETS, END OF YEAR $ 4,036,652 _L293,337) $ 154,031 $ 129,853 $ 312,089 $ 4,339,288 See accompanying notes and independent auditors report. -22- 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, 2008 Net changes in fund balance - total governmental funds $ (1,127,307) Amounts reported for governmental activities in the statement of activities differ from the amounts reported in the statement of revenues, expenditures, and changes in Rind balances because Governmental finds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as functional expense when the cost is below the capitalization threshold. This activity is reconciled as follows: Cost of assets capitalized 3,023,868 Depreciation expense (539,738) In the statement of activities, only the gain on the sale of assets is reported, whereas in the governmental funds, the proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balance by the cost of the asset sold. 8,185 Bonds payable are reported as expenditures when made and as revenue when repaid in the governmental funds. However, there is no impact in the statement of activities when loans are made or repaid. This amount represents the change in the long-term loans receivable. (1,230,000) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore (74,674) are not reported as expenditures in governmental funds. Revenues in the statement of activities that do not provide current financial resources are not reported as revenue in the funds. 6,069 Internal service funds are used by management to charge the cost of certain activities, such as insurance, to individual funds. The net revenue of certain internal service funds is reported with governmental activities. 179,710 Change in net assets of governmental activities $ 246,113 See accompanying notes and independent auditor's report. -23- ASSETS CURRENT ASSETS Cash Accounts receivable user fees Accrued interest receivable Prepaid expense Total current assets NON-CURRENT ASSETS Restricted assets Bond and interest sinking fund cash and investments CAPITAL ASSETS Land Buildings Equipment Accumulated depreciation Total capital assets Total assets LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable Deposits Accrued interest Accrued expenses Bonds payable - current Total current liabilities NON-CURRENT LIABILITITES Bonds payable Total liabilities City of Blair, Nebraska STATEMENT OF NET ASSETS PROPRIETARY FUNDS September 30, 2008 Enterprise Funds Internal Water Sewer Total Service Fund $ 58,550 $ 87,406 $ 145,956 $ 926,139 157,915 1,084,054 1,327 3,725 5,052 4,176 2,073 6,249 _ 990,192 251,119 1,241,311 183,187 260,500 443,687 240,169 240,169 373,908 49,875 423,783 - 39,998,420 6,962,684 46,961,104 - 925,391 1,098,533 2,023,924 - (9,513,128) (3,433,952) (12,947,080) - 31,784,591 4,677,140 36,461,731 - $ 32,957,970 $ 5,188,759 $ 38,146,729 $ 240,169 $ 591,483 $ 36,849 $ 628,332 $ 2,643 1,700 - 1,700 - 289,460 39,019 328,479 - 114,651 38,378 153,029 - 1,084,836 60,000 1,144,836 2,082,130 174,246 2,256,376 2,643 21,741,373 2,140,000 23,881,373 23,823,503 2,314,246 26,137,749 2,643 NET ASSETS Investment in capital assets net of related debt 8,958,382 2,477,140 11,435,522 - Restricted for debt service 183,187 260,500 443,687 - Unrestricted (7,102) 136,873 129,771 237,526 Total net assets $ 9,134,467 $ 2,874,513 12,008,980 $ 237,526 RECONCILIATION Eliminating entry between business -type activities and governmental activities 59,579 $ 12,068,559 See accompanying notes and independent auditor's report. -24- City of Blair, Nebraska STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For the year ended September 30, 2008 OPERATING REVENUES Charges for services Sale of merchandise Forfeited discounts Other Total operating revenues EXPENSES Personnel Operating expenses Materials and supplies Rental expense Insurance claims and expenses Depreciation Total expenses OPERATING INCOME NONOPERATING REVENUES (EXPENSES) Interest income Interest expense Bonding costs Total nonoperating revenues (expenses) Income(loss) before transfers Operating transfers - in Operating transfers - out CHANGE IN NET ASSETS NET ASSETS, BEGINNING OF YEAR AS PREVIOUSLY REPORTED ADJUSTMENTS TO BEGINNING NET ASSETS 700,185 74,775 774,960 - (183,625) (37,200) (220,825) - 569,278 220,305 789,583 239,289 8,755,732 2,673,497 11,429,229 - (190,543) (19,289) (209,832) (1,763) NET ASSETS, BEGINNING OF YEAR, AS RESTATED 8,565,189 2,654,208 11,219,397 (1,763) NET ASSETS, END OF YEAR $ 9,134,467 $ 2,874,513 $ 12,008,980 $ 237,526 RECONCILIATION Change in net assets $ 789,583 Eliminating entry behveen business -type activities and governmental activities 59,579 Change in net assets business -type activities $ 849,162 See accompanying notes and independent auditor's report. -25- Enterprise Funds Internal Water Sewer Total Service Fund $ 4,327,198 $ 915,825 $ 5,243,023 $ 794,346 28,013 - 28,013 - 14,105 - 14,105 - 16,559 29,506 46,065 110,309 4,385,875 945,331 5,331,206 904,655 890,208 312,424 1,202,632 - 668,880 191,921 860,801 - 818,415 10,073 828,488 - 6,305 1,885 8,190 - - - - 666,254 1,059,615 187,443 1,247,058 - 3,443,423 703,746 4,147,169 666,254 942,452 241,585 1,184,037 238,401 149,332 23,954 173,286 888 (978,686) (82,809) (1,061,495) - (60,380) - (60,380) - (889,734) (58,855) (948,589) 888 52,718 182,730 235,448 239,289 700,185 74,775 774,960 - (183,625) (37,200) (220,825) - 569,278 220,305 789,583 239,289 8,755,732 2,673,497 11,429,229 - (190,543) (19,289) (209,832) (1,763) NET ASSETS, BEGINNING OF YEAR, AS RESTATED 8,565,189 2,654,208 11,219,397 (1,763) NET ASSETS, END OF YEAR $ 9,134,467 $ 2,874,513 $ 12,008,980 $ 237,526 RECONCILIATION Change in net assets $ 789,583 Eliminating entry behveen business -type activities and governmental activities 59,579 Change in net assets business -type activities $ 849,162 See accompanying notes and independent auditor's report. -25- City of Blair, Nebraska STATEMENT OF CASH FLOWS PROPRIETARY FUNDS September 30, 2008 CASH FLOWS FROM NON -CAPITAL FINANCIAL ACTIVITIES Operating transfers - in Operating transfers - out Cash used from non -capital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING Bond proceeds Acquisition of capital assets Repayment of long-term debt Interest payment long-term debt Bonding costs Cash used from capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES 'Proceeds from interest earnings Disbursements to restricted assets Cash provided from investing activities CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR Reconciliation of operating income to net cash from operating activities Operating income Adjustments to reconcile operating income to net cash from operating activities Depreciation Change in receivables Change in prepaid expenses Change in accounts payable Change in accrued expenses Total adjustments CASH PROVIDED FROM OPERATING ACTIVITIES 700,185 74,775 774,960 (183,625) (37,200) (220,825) 516,560 37,575 554,135 (8,159,551) (1,173,694) (9,333,245) Enterprise Funds (55,000) (1,115,910) Internal (67,795) (1,038,426) Water Sewer Total Service Fund CASH FLOWS FROM OPERATING ACTIVITIES 888 Cash received from customers $ 4,051,726 $ 915,517 $ 4,967,243 $ 904,655 Cash payments to suppliers (1,947,101) (420,788) (2,367,889) (574,791) Cash payments to employees (787,740) (278,406) (1,066,146) (90,583) Cash provided from operating activities 11316,885 216,323 1,533,208 239,281 CASH FLOWS FROM NON -CAPITAL FINANCIAL ACTIVITIES Operating transfers - in Operating transfers - out Cash used from non -capital financing activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING Bond proceeds Acquisition of capital assets Repayment of long-term debt Interest payment long-term debt Bonding costs Cash used from capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES 'Proceeds from interest earnings Disbursements to restricted assets Cash provided from investing activities CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR Reconciliation of operating income to net cash from operating activities Operating income Adjustments to reconcile operating income to net cash from operating activities Depreciation Change in receivables Change in prepaid expenses Change in accounts payable Change in accrued expenses Total adjustments CASH PROVIDED FROM OPERATING ACTIVITIES 700,185 74,775 774,960 (183,625) (37,200) (220,825) 516,560 37,575 554,135 (8,159,551) (1,173,694) (9,333,245) (1,060,910) (55,000) (1,115,910) (970,631) (67,795) (1,038,426) (60,380) (60,380) (10,251,472) (1,296,489) (11,547,961) 177,173 34,175 211,348 888 4,800,096 887,445 5,687,541 4,977,269 921,620 5,898,889 888 (3,440,758) (120,971) (3,561,729) 240,169 3,499,308 208,377 3,707,685 - $ 58,550 $ 87,406 $ 145,956 $ 240,169 $ 942,452 $ 241,585 $ 1,184,037 $ 238,401 869,072 168,154 1,037,226 - (143,606) (10,525) (154,131) (550) (197) (747) - (452,951) (216,712) (669,663) 880 102,468 34,018 136,486 374,433 (25,262) 349,171 880 $ 1,316,885 $ 216,323 $ 1,533,208 $ 239.281 See accompanying notes and independent auditor's report. -26- City of Blair, Nebraska STATEMENT OF NET ASSETS - FIDUCIARY FUNDS September 30, 2008 ASSETS Cash TIF Fund 1 $ 3,862 NET ASSETS Net Assets (Deficit) Held in Trust for Tax Incentive Funds (TIF) $ 3,862 See accompanying notes and independent auditor's report. -27- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS September 30, 2008 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies of the City of Blair, Nebraska (the City): 1. Reporting_ Entity The City of Blair is a Municipal Corporation which was founded and incorporated in 1869. With a population of 7,612, the City of Blair fiunctions as a City of the First Class under Nebraska Statutes. This report includes all funds of the City (the "primary government"). 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. 2., Basis of Accountiniz/MeasurementFocus The accounts of the City are organized on the basis of fiends, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. Governmental resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. Government -Wide Financial Statements The City's government -wide financial statements include a statement of net assets and a statement of activities (including changes in net assets). These statements are prepared using the standards of the Governmental Accounting Standards Board (GASB), General Accepted Accounting Principles (GAAP), as well as FASB pronouncements issued through November 30, 1989. These statements present summaries of governmental activities for the City. Fiduciary activities of the City are not included in these statements. These statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. -28- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of Accounting/Measurement Focus - Continued Government -Wide Financial Statements - Continued Accordingly, all of the City's assets and liabilities, including capital assets and infrastructure as well as long-term debt, are included in the accompanying statement of net assets. The statement of activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program 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 assets and internal transactions in the statement of activities have been eliminated. The purpose of transfers between funds was to record proper allocation of expenses. The City applies all applicable Financial Accounting Standards Board (FASB) pronouncements issued on or before November 30, 1989 in accounting and reporting for its proprietary operations. 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. -29- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 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 assets presented in the government -wide financial statements. The City has presented all major fiends that met the qualifications of GASB Statement No. 34. All governmental finds are accounted for on a spending or "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 net current assets. Under modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 -days after year-end are recognized when due. The primary sources susceptible to accrual are property tax, sales tax, transient occupancy tax, investment income, and grant revenues. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. An exception to this general rule is principal and interest on general long-term debt which is recognized when due. The City reports the following major governmental funds: The General Fund is the government's primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund. 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. -30- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of Accounting/Measurement Focus - Continued Governmental Fund Financial Statements - Continued 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 TIF 2 Fund is a capital projects fund and is used to record transactions in the TIF 2 development area, as the funds are required to be accounted for separately. Proprietary Fund Financial Statements Proprietary Fund Financial Statements include a statement of net assets, a statement of revenues, expenses and changes in fund net assets, and a statement of cash flows for each major proprietary fund. A column representing internal service Rinds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government -Wide financial 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 assets. The statement of revenues, expenses and changes in fund net assets presents increases (revenues) and decreases (expenses) in total net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Proprietary funds distinguish operating revenues and expense from non-operating items. Operating revenues and expense 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. -31- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of Accounting/Measurement Focus - Continued Proprietary Fund Financial Statements - Continued 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. Internal service funds of the City (which provide services primarily to other funds of the City) are presented, in summary. form, as part of the proprietary fund financial statements. Since the principal users of the internal services are the City's governmental activities, financial activities of the internal service funds 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 assets. 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. 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 fiend: The TIF 1 Fund is 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. -32- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Budaetary Policy and Control Budgetary Basis of Accountin 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 funds appropriated budget is prepared on a detailed line item basis. Revenues are budgeted by source. Expenditures are budgeted by department. Expenditures at the fund level constitute the legal level of control. Expenditures may not exceed appropriations at this level. All budget revisions at this level are subject to final review by the Council. No revisions to the budget were made for the year ended September 30, 2008. 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. 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, 2008. -33- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 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 market 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. The requirement to capitalize and depreciate these assets has been applied as of October 1, 2003. Depreciation is recorded in the government -wide financial statements on a straight-line basis over the useful life of the assets as follows: Assets Years Equipment 10 Vehicles 5 Buildings 40 Street infrastructure 40 7. Property Taxes Property tax revenue is recognized when collected by the County as the City's agent within the current period. There are no property taxes due which are not delinquent and all delinquent taxes are considered collectible. The City' December 31, 2007 valuation was $433,928,223. The levy for the City for the year ending September 30, 2008 was $0.3569 per $100 of value. The total tax levy was $1,548,534. Property taxes are collected by the County and are due December 31 of each year and delinquent in halves at May I and September 1 of the following year. In -lieu of tax receipts are equivalent in value to payments for service provided. -34- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 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 Assets. The portion of the liability, which will be liquidated with expendable, available financial resources, if any, is reflected as a liability of applicable governmental funds. 9. 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 assets are available. Restricted assets in the debt service fund represent assets available only for payment of general obligation debt or related expenses. The City of Blair has sponsored a licensed Keno operation and the restricted funds are the accumulation of net proceeds to be used only for community betterment projects. -35- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 10. Restricted Assets - Continued The City of Blair has received donations toward specific projects. The undisbursed funds with specific restrictions are accounted for in the donated fund balance. The Water and Sewer restricted cash is a sinking fund required by conditions of Revenue Bonds. These funds will become unrestricted in the year 2010. 11. Transfers Transfers are used to move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them and to move unrestricted revenue collected. in, the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. NOTE B. DEPOSITS AND INVESTMENTS The City maintains a cash pool that is available for all funds. The carrying amount of the City's cash deposits was $3,372,058 at September 30, 2008. The bank balances of the City's cash deposits at September 30, 2008 was $3,246,200. The City's investments were made up of $336,682 of Certificates of Deposit and $183,187 of United States Treasury Notes. 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 City has no formal policy for handling credit risk, interest rate risk, or concentration risk; however, deposits and investments consist of demand deposits, Certificates of Deposits, and United States Treasury Notes. 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%. -36- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE C. CAPITAL ASSETS A summary of changes in capital assets is as follows: Governmental Activities Capital assets not depreciated Land Other capital assets Street infrastructure Buildings Equipment Total other capital assets Less accumulated depreciation Street infrastructure Buildings Equipment Total accumulated depreciation Balance 10,732,091 2,492,315 - Balance September 30, $ 10,922,732 $2,492,315 $ - September 30, 2007 Additions Deletions 2008 $ 190,641 $ - $ - $ 190,641 6,685,583 2,021,169 - 8,706,752 5,503,145 - - 5,503,145 2,878,812 1,010,884 (235,394) 3,654,302 15,067,540 3,032,053 (235,394) 17,864,199 (297,716) (227,829) - (525,545) (1,844,879) (137,579) - (1,982,458) (2,192,854) (174,330) 235,394 (2,131,790) (4,335,449) (539,738) 235,394 (4,639,793) Other capital assets, net 10,732,091 2,492,315 - 13,224,406 Governmental activities capital assets, net $ 10,922,732 $2,492,315 $ - $13,415,047 -37- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE C. CAPITAL ASSETS - CONTINUED Business -Type Activities Capital assets not depreciated Land Other capital assets Infrastructure Equipment Total other capital assets Less accumulated depreciation Infrastructure Equipment Total accumulated depreciation Balance September 30, 2007 Additions $ 215,833 $ 207,950 Balance September 30, Deletions 2008 $ - $ 423,783 37,861,054 9,100,050 - 46,961,104 2,000,069 44,699 (20,844) 2,023,924 39,861,123 9,144,749 (20,844) 48,985,028 (10,180,760) (1,188,818) - (11,369,578) (1,520,652) (58,240) 090 (1,577,502) (11,701,412) (1„247,058) 1,390 (12,947,080) Other capital assets, net 28,159,711 7,897,691 (19,454) 36,037,948 Business -Type activities capital assets, net $ 28,375,544 $8,105,641 $ (19,454) $ 36,461,731 Depreciation expense was charged to functions as follows: Governmental Activities: Administration Police Fire Parks Library Swimming pool Animal control Streets Total depreciation $ 39,970 40,471 122,608 35,233 3,079 20,806 8,114 269.457 $ 539.738 -38- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE D. 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 E. NET ASSETS In the Government -Wide financial statements net assets are classified in the following categories: Invested in Capital Assets This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation on these assets reduces this category. Restricted Net Assets This category presents external restrictions 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 Assets This category represents the net assets of the City that are not restricted for any project or other purpose. In the Fund financial statements, reserves and designations segregate portions of fund balance that are either not available or have been earmarked for specific purposes. The various designations are established by actions of the City Council and Management and can be increased, reduced, or eliminated by similar actions. Following is a summary of reservations of fund balance and components of unreserved fund balance at September 30, 2008: Reserved for: Donated Funds Debt Service Community Betterment Capital Projects Governmental Funds $ 59,371 129,853 312,089 -39- Business-Type Activities 443,687 Q Li] H' Z 00 op U O I N cn O � H M z, t z H a W "d w $ z Oa,�or00- M " 'n In O �o r d N On M N M O — O r O d' d' ti �p N 00 M In en "o N O> O\ 00 00 00 M 0 E 0 �o a, 00 In o a MMM�ONIn 00 cn It It O� N d� 01 1:t In O CL 00 O M r C4 m N O .--� .-I \o ll 00 C — ,--� — v -i '--. N N .0 N P. 69 69 CD r 0 r 0 q O O N O N N O Ori O O N V O N d' O O O D W O N p O\ N o O N b Ga C M N 00 N �n O 00 r d N M N a 00 N O .O N H W b C) ai � 0 0 N U Y `O U 00 Cn 69 ff3 69 69 O O O O 61101 h O\ O �-+ h O N N O Q 69 69 fA 69 G O b .b Q S9 69 64 09 r ,--i O 00 O O O 0 0 O O O O O Q O O O O O In [� O O r O In Vl � OV) O 00 In N Q MO Q\ 000 'd 'n N b , 00 Y COO IA 69 69 69 0 o c y o In r o o N o N M Vl 4 O M o n llo o � o Oa,�or00- M " 'n In O �o r d N On M N M O — O r O d' d' ti �p N 00 M In en "o N O> O\ 00 00 00 M 0 E 0 �o a, 00 In o a MMM�ONIn 00 cn It It O� N d� 01 1:t In O CL 00 O M r C4 m N O .--� .-I \o ll 00 C — ,--� — v -i '--. N N .0 N P. 69 69 r 0 r 0 q O N O N V O N N W 0 b Ga PG 3 a H W b C) 0 0 0 N `O d 00 Oa,�or00- M " 'n In O �o r d N On M N M O — O r O d' d' ti �p N 00 M In en "o N O> O\ 00 00 00 M 0 E 0 �o a, 00 In o a MMM�ONIn 00 cn It It O� N d� 01 1:t In O CL 00 O M r C4 m N O .--� .-I \o ll 00 C — ,--� — v -i '--. N N .0 N P. 69 69 City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED For the year ended September 30 2008 NOTE F. BONDS PAYABLE - CONTINUED Year ending September 30, 2009 2010 2011 2012 2013 2014-2018 2019-2023 Total Principal Interest $ 60,000 $ 85,790 60,000 84,065 1,520,000 52,614 60,000 21,028 65,000 18,791 365,000 53,360 70,000 1,488 $ 2,200,000 $ 317,136 Sinking fiord requirements for Water and Sewer debt were a reserve of $266,405 at September 30, 2008. Networking capital of Water and Sewer funds is ($1,091,938) and $76,873, respectively. All liabilities on the balance sheet of governmental funds are current. -41- 00 O O o Cl O O o O o O O O O O o O 0 N I O O Cl O O O O O OON O if It O In O O O O U M 000 N N V' N Y � ss cys O O O O C—> O O rn O O O O O O 1 I 0 Vl O to In O N O O d- 00 N N �--� A O O Cl a O o O ° r 000f Gs 59 O N O O O O O O I 1 O V) O O Vl V'i Vl O 00 to OQO � Pa N Y rn bs ss Y O O O O O O O O 000 VO• N N M O \ N In 00 rr o 0 0 o 0 i� N Ocd f-. S.. 4. 3-• L.' app cd of R. o, Q, O. P. Q. ani O O O O00 O O C N O O O O l� O 00 O QNQ N c N 1I) 00 �O A - -+ N N 0 \-- V - 01 C14 N N d' I City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED For the year ended September 30, 2008 NOTE F. BONDS PAYABLE - CONTINUED -43- Principal Interest Total Year ending September 30, 2009 $ 615,000 $ 277,620 $ 892,620 2010 490,000 253,140 743,140 2011 520,000 234,315 754,315 2012 550,000 213,845 763,845 2013 430,000 191,680 621,680 2014-2018 1,830,000 710,043 2,540,043 2019-2023 1,475,000 356,507 1,831,507 2024-2028 710,000 90,750 800,750 $ 61620,000 $ 2,327,900 $ 8,947,900 -43- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE G. ALLOWANCE FOR DOUBTFUL ACCOUNTS The City uses the direct write-off for uncollectable accounts. The doubtful accounts at September 30, 2008 were not significant. NOTE H. PENSION PLANS The City has three pension plans covering substantially all of its employees. Employees other than policemen are covered by a defined contribution plan, either a 414(h) or 457(b) plan. 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 fiom 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 it. Contributions for the year ended September 30, 2008, totaled $187,351 which consisted of $97,008 contributed by employees and $90,343 contributed by the City. 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 1 to 1 match between the 457(b) and 414(h) plans. 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, 2008, totaled $10,311 which consisted of $9,057 contributed by employees and $1,254 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. City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE H. PENSION PLANS - CONTINUED 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 $101,732 for 2008, were 12% of gross wages, which complies with statutory requirements. The City contributed 6% of gross wages and the policemen contributed 6%. The City has no material pension benefit obligations as of September 30, 2008. The City does expect contributions to remain relatively level from year to year. The contributions are not actuarially determined. All qualifying police payroll was covered in 2008. NOTE I. CONTRACT RECEIVABLE In April 1984, the City of Blair 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 of Blair facilities for the sum of $5,950,000. The terms of payment shall be $1,000,000 payable at the date of the contract and the balance of $4,950,000 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 J. LANDFILL CLOSURE The City has closed its landfill operations. All material were accrued over the remaining life of the landfill. The 1993 and any remaining monitoring costs will be paid anticipated to be material to the financial statements. -45- closing and monitoring costs Landfill closed October 31, from City funds but are not City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE K. SPECIAL ASSESSMENTS RECEIVABLE The City's special assessments outstanding as of September 30, 2008, are composed of special assessment principle of $2,395,184. The delinquent special assessments at September 30, 2008 are 11% 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. NOTE L. CONCENTRATION OF CREDIT RISK All of the receivables of the City of Blair proprietary funds and special assessments in the debt service fiend are from the local Blair area therefore creating a concentration of credit risk. If the Blair area economy was depressed this could have an adverse effect on the collection of the outstanding accounts receivable: Cargill, Inc. is a major water customer for the City. Cargill, Inc. represents 85.46% of water sales for the year ended September 30, 2008. Although Cargill. represents 85.46% of water sales, the City of Blair has a 25 year take or pay contract that secures the revenue stream for payment of the water debt which minimizes the risk for payment of water bonds. NOTE M. RELATED PARTY TRANSACTIONS The City hold a Certificates of Deposit in the amount of $90,000 as of September 30, 2008 and has conducted other Certificate of Deposit business throughout the fiscal year with Two Rivers State Bank, obtained through a process of requesting deposit rates from several banks and selecting the best rate. The city council chair Lloyd Scheve is an employee of Two Rivers State Bank. In the ordinary course of business, the City has and expects to continue to have transactions with the elected officials' employer. In the opinion of management, such transactions were on substantially the same terms, including interest rates and collateral, as those prevailing at the time of comparable transactions with other persons and did not involve more than a normal risk of collectability or present any other unfavorable features to the City. City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE N. 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. Claims expense as reported in the fund was reported based on actual expenses paid during the year fiscal year ended September 30, 2008. The City has not recorded a liability for insurance claims expected to be paid in future years, as the amount of these future claims cannot be reasonably estimated. For fiscal year 2008, the Fund received interfund premiums of $598,745 from various City departments in monthly payments. Additionally, the fund received premiums $114,524 from employees of the City. These total premiums of $713,269 exceeded claims expense for the year which totaled $666,254. The City has purchased insurance for claims expenses incurred over a certain dollar amount each year in order to limit its risk of loss. For the year ended September 30, 2008, the City received $110,309 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 assets, proprietary funds. NOTE O. PRIOR PERIOD ADJUSTMENTS Governmental Activities: In the Government -Wide statements, several adjustments were required which had differing effects on the beginning net assets, as previously stated. Prior period adjustments were required for the following reasons: In the prior year, the City did not record a liability for accumulated compensated absences. This liability has since been determined and would have amounted to $146,512 in the prior year. The effect on this adjustment on prior year net assets is a reduction of $146,512. In the current year it was determined that the balance of special assessments receivable in the prior year was misstated by $588,136. Additionally, special assessments were improperly recorded as revenues in prior year when they should have been shown as deferred revenues. The amount of deferred revenues which should have been recognized at the end of the prior year was $2,641,761. Both adjustments reduced the prior year net assets and the total adjustment amounted to $3,229,897. -47- NOTE O. City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 PRIOR PERIOD ADJUSTMENTS - CONTINUED In the prior year, property tax revenues and receivables were understated by $50,280. Correcting this understatement resulted in an increase of prior year net assets in the amount of $50,280. In the prior year, the City did not record $70,826 in occupancy taxes which were due at year end. The effect on this adjustment on prior year net assets is an increase of $70,826. In the prior year, the operations of the TIF 2 fund were improperly excluded from reporting in the government wide financial statements. An adjustment was made to include this fund in the government funds, resulting in a decrease of prior year net assets of $36,706. Governmental Activities Net Assets, as previously reported $ 14,195,386 Restatements for: Compensated absences (146,512) Special assessments (3,229,897) Property tax revenues 50,280 Occupancy tax revenues 70,826 Capital improvements fund (36,706) Total adjustments (3,292,009) Net Assets, as restated $ 10,903,377 Business -Type Activities: In the Government -Wide statements, several adjustments were required which had differing effects on the beginning net assets, as previously stated. Prior period adjustments were required for the following reasons: In the prior year, the City paid refilndable deposits for the right to issue bonds. These deposits were improperly recorded as an expense. The effect of this adjustment is a decrease in net assets of $65,000. -48- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2008 NOTE O. PRIOR PERIOD ADJUSTMENTS - CONTINUED Prior year revenues and receivables from utility sales were overstated by $27,877. The effect of this adjustment on prior year net assets is a decrease of $27,877. In the prior year, the City did not record a liability for accumulated compensated absences. This liability has since been determined and would have amounted to $116,955 in the prior year. The effect on this adjustment on prior year net assets is a reduction of $116,955. Business -type Activities Net Assets, as previously reported $ 11,429,229 Restatements for Deposits for bond issuance (65,000) Utility revenues (27,877) Compensated absences (116,955) Total adjustments (209,832) Net Assets, as restated $ 11,219,397 SUPPLEMENTAL INFORMATION City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE GENERAL FUND AND MAJOR SPECIAL REVENUE FUNDS For the year ended September 30, 2008 REVENUES Taxes Charges for services Interest income Other revenues Total revenues EXPENDITURES Administration Contingency allowance Police Department Fire Department Parks Department Library Swimming Pool Zoning Animal control Donated Funds Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Operating transfers - in Operating transfers - out REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER SOURCES Original and Variance Final Favorable Budget Actual (Unfavorable) $ 3,319,363 $ 3,591,190 $ 271,827 282,260 284,113 1,853 37,200 32,315 (4,885) 1,442,234 1,628,959 186,725 5,081,057 5,536,577 455,520 3,461,453 3,062,846 398,607 20,000 4,050 15,950 1,519,413 1,494,876 24,537 95,050 104,896 (9,846) 735,686 427,087 308,599 277,630 256,828 20,802 41,400 47,161 (5,761) 140,210 134,217 5,993 89,080 77,786 11,294 81,518 138,838 (57,320) 6,461,440 5,748,585 712,855 (1,380,383) (212,008) 1,168,375 654,600 654,600 - (645,000) (597,914) (47,086) (1,370,783) (155,322) $ 1,121,289 FUND BALANCE - September 30, 2007 1,561,705 1,561,705 FUND BALANCE - September 30, 2008 $ 190,922 $ 1,406,383 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 $ 2,948,618 reserves rather than fund balance. (2,604,342) Accrual adjustments made because the City budgets for revenues and expenditures on the cash basis, rather than on the modified accrual basis. Adjustments for expenses paid out of the general fund that were for other funds. 2,285,993 General Fund Balance $ 4,036,652 -51- City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE GENERAL FUND REVENUES For the year ended September 30 2008 Charges for services Business licenses and permits Original and 147,033 Variance Library Final 14,036 Favorable Equipment rental Budget Actual (Unfavorable) REVENUES 20,000 15,600 (4,400) Taxes 22,000 25,825 3,825 Property tax $ 1,174,763 $ 1,082,150 $ (92,613) Sales tax 1,656,000 1,867,972 211,972 Motor vehicle tax 128,600 131,784 3,184 Occupation and franchise tax 257,000 359,111 102,111 Other taxes 103,000 150,173 47,173 Total 3,319,363 3,591,190 271,827 Charges for services Business licenses and permits 157,160 147,033 (10,127) Library 13,500 14,036 536 Equipment rental 19,000 19,751 751 Cemetery lots 20,000 15,600 (4,400) Grave openings 22,000 25,825 3,825 Towing 17,500 35,647 18,147 Other fees and charges 11,600 5,100 (6,500) Sales of fireworks 15,000 15,000 - RV park 6,500 6,121 (379) Total 282,260 284,113 1,853 INTEREST INCOME 37,200 32,315 (4,885) OTHER REVENUES State grants 318,440 68,942 (249,498) Federal grants - - - Donations 54,000 152,545 98,545 Reimbursements 29,200 882,860 853,660 Other miscellaneous revenue 1,040,594 524,612 (515,982) Total 1,442,234 1,628,959 186,725 Total revenues $ 5,081,057 $ 5,536,577 $ 455,520 -52- City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE STREET FUND For the year ended September 30 2008 REVENUES Highway allocation Property tares Othertaxes Incentive payment State maintenance agreement In -Lieu of tax Homestead exemption Interest income Other revenue Total revenues EXPENDITURES Salaries FICA Employee insurance Retirement Legal Auditing Engineering Office expense Utilities Telephone Travel Training Insurance Maintenance Street lighting County fees Car expense Contract mowing Gas, diesel, and oil Materials and supplies Rental Capital outlay Equipment Street improvements Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Payment of warrant liabilities Purchase of land Sale of assets Operating transfers - in REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER SOURCES Original and Variance Final Favorable Budget Actual (Unfavorable) $ 530,000 $ 576,872 $ 46,872 298,685 279,443 (19,242) 836,600 97,133 (739,467) 6,000 6,000 21,798 21,798 - 12,000 16,682 4,682 - 11,538 11,538 2,000 3,237 1,237 2,437,300 205,564 (2,231,736) 4,144,383 1,218,267 (2,926,116) 317,855 297,853 20,002 24,000 21,201 2,799 81,500 91,261 (9,761) 17,900 18,472 (572) 3,000 1,950 1,050 3,300 5,988 (2,688) 10,000 23,494 (13,494) 5,150 4,541 609 7,000 6,972 28 2,000 2,542 (542) 2,800 5,978 (3,178) 1,600 353 1,247 20,200 20,917 (717) 38,750 52,199 (13,449) 130,000 145,832 (15,832) - 3,057 (3,057) 3,000 1,499 1,501 20,000 14,954 5,046 26,000 30,651 (4,651) 109,900 163,692 (53,792) 35,500 22,479 13,021 28,000 29,848 (1,848) 2,214,000 259,284 1,954,716 3,101,455 1,225,017 1,876,438 1,042,928 (6,750) (1,049,678) 1,290,000 25,004 (1,264,996) - 9,600 9,600 1,000 26,166 25,166 194,000 14,318 (179,682) 2,527,928 68,338 FUND BALANCE - September 30, 2007 131,445 131,445 FUND BALANCE - September 30, 2008 $ 2,659,373 $ 199,783 An explanation of the differences between budgetary inflows and outflows and revenues and expenditures determined in accordance with generally accepted accounting principles follows: $ 26,707 The budget fund balance at the beginning of the year is a based on cash reserves rather than fund balance. Accrual adjustments made because the City budgets for revenues and expenditures on the cash basis, rather than on the modified accrual basis. (13,318) Street Fund Balance $ 213,172 53- City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE KENO FUND For the year ended September 30 2008 GROSS PROCEEDS PRIZES Declared prizes Unclaimed wins Net Prizes paid NET HOLD ALLOWABLE EXPENSES PAID Lottery Operator's Commission KENO RECEIPTS Revenues TOTAL RECEIPTS EXPENSES PAID BY CITY State taxes Other expenses TOTAL EXPENSES PAID PROCEEDS AVAILABLE FOR DISTRIBUTION TRANSFER FROM (TO) PRIZE RESERVES COMMUNITY BETTERMENT - Direct TRANSFER TO DEBT SERVICE NET AFTER TRANSFERS Beginning Keno account Fund balance Interest Reimbursements KENO ACCOUN FUND BALANCE PRIZE RESERVE FUND RECONCILIATION FOR THE REPORTING PERIOD Beginning reserve balance Increase in reserve Withdrawals from reserve Ending reserve balance (deficit) -54- Original and Variance Final Favorable Budget Actual (Unfavorable) $ - $ 783,846 $ 783,846 571,708 571,708 (1,843) (1,843) 569,865 569,865 - 213,981 213,981 - (109,738) (109,738) 96,000 104,243 8,243 19,000 15,712 3,288 5,100 - 5,100 24,100 15,712 8,388 71,900 88,531 16,631 - (31,853) (31,853) 165,000 27,717 (137,283) 25,000 25,000 (118,100) 3,961 122,061 128,998 125,758 (3,240) 500 134 (366) $ 11,398 $ 129,853 $ 118,455 $ 12,475 36,189 (4,337) $ 44,327 L/ S &ASSOCIATES, L.L.C. Cef iW Abbe Accountants and ConsWt"Is REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Mayor and Members of the City Council City of Blair, Nebraska We have audited the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of City of Blair, Nebraska, as of and for the year ended September 30, 2008, which collectively comprise City of Blair, Nebraska's basic financial statements and have issued our report thereon dated January 22, 2009. 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. Internal Control Over Financial Reportini; In planning and performing our audit, we considered City of Blair, Nebraska's internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinion of the financial statements, but not for the purpose of expressing an opinion of the effectiveness of City of Blair, Nebraska's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the City of Blair, Nebraska's internal control over financial reporting. Our consideration of internal control over financial reporting was for the limited purposes described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. However, as discussed below, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timelybasis. Westroads Pointe • 1015 N. 98th st,, suite 200 • Omaha, Nebraska 68114 • 402.390.2480 TEL • 402.390.0885 FAX • www.hayes-cpaxom r. The CPA Never UnderesUreate The Valo? A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City of Blair, Nebraska's ability to initiate, authorize, record, process, or report financial data reliably in accordance with accounting principles generally accepted in the United States of America, such that there is more than a remote likelihood that a misstatement of the City of Blair, Nebraska's financial statements that is more than inconsequential will not be prevented or detected by the City of Blair, Nebraska's internal control. We consider the deficiencies described in the accompanying schedule of findings and responses to be significant deficiencies.' A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the City of Blair, Nebraska's internal control. Our consideration of the internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies and, accordingly, would not necessarily disclose all significant deficiencies that are also considered to be material weaknesses. ' However, of the significant deficiencies referred to above, we considered items I., 2., and 3. to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Blair, Nebraska's financial statements are free of 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; We noted certain other matters that we reported to management of the City of Blair, Nebraska, in a separate letter dated January 22, 2009. City of Blair, Nebraska's response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. We did not audit the City of Blair, Nebraska's responses and, accordingly, we express no opinion on it. This report is intended solely for the information and use of management, City Council, others within the entity, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. Omaha, Nebraska 6 -c / C- January 22, 2009 -56- City of Blair, Nebraska SCHEDULE OF FINDINGS AND RESPONSES For the year ended September 30, 2008 Item 1. - Preparation of Supporting Schedules Criteria - Schedules that agree to the financial statements and the general ledger should be maintained and on hand for proper supporting documentation of the City's financial statements and footnotes. Condition - Certain schedules were prepared by the City for year-end financial statement preparation that needed material adjustments to properly support the financial statements. The schedules should be prepared during the closing process to assist the City in preparing adjusting entries for the preparation of the financial statements and to reconcile balances between the schedules and the general ledger. The schedules should also be prepared to support disclosures for the City's footnotes. Cause - Lack of internal control procedures to define the required schedules necessary and lack of processes for the maintenance of the financial statement supporting schedules. Effect - At the beginning of the audit process, there was no documented schedules for cash and investment holdings, fixed assets, bond activities, property taxes, compensated absences, or other various lead schedules that supported the amounts on the balance sheet that explained the necessary adjusting entries and full accrual balances for the City. Schedules were created during the audit by the client with our assistance based on the organization's documents which determined material audit adjustments and disclosures for the basic set of financial statements. Recommendation - Implement internal control policies to define schedules needed, and internal control procedures to create and maintain proper schedules to track city activities on a full accrual basis for financial statement reporting. Officials Response - The City's previous auditing firm maintained these schedules. The City has purchased necessary software and will create proper schedules to maintain necessary documentation and approval of all adjusting entries to maintain accrual balances. City will work with a consultant to help perfect applications. -57- City of Blair, Nebraska SCHEDULE OF FINDINGS AND RESPONSES - CONTINUED For the year ended September 30, 2008 Item 2. - Preparation of Basic Financial Statements Criteria - Many organizations, including the City, rely on their auditor to generate the annual financial statements including footnotes. We assisted in the proper presentation of the financials and proposed material adjusting entries to present fairly the financial statements of the City. With the issuance of Statement of Auditing Standards (SAS) No 112, the lack of expertise and controls to prepare the financial statements constitutes at least a significant deficiency in internal controls. Condition - The City of Blair keeps it books on a cash basis and relies on its auditors to prepare the financial statements. Cause - Lack of the required expertise in preparing the basic set of financial statements. Effect - Material adjusting entries are required to be made during the audit for the proper presentation of the City's financial statements. Recommendation - The City of Blair may consider gathering the necessary expertise to prepare a required set of financial statements in a format acceptable for GAAP reporting. Officials Response - The City will work to develop the ability to prepare necessary financial statements. This maybe through the hiring of additional staff or contracting with an independent entity. Item 3. - Documentation of Policies and Procedures Criteria - The City of Blair should have formalized policies and procedures for its key administrative fiinctions. A standard operating procedure (SOP) can be an effective catalyst to drive performance improvements and improving overall results. SOP's will ensure that City operations are done consistently, approved procedures are being followed in compliance with City regulations, they will serve as training documents for teaching users about processes, and they will serve as a historical record of the how, where, when, and why of City's operations and information. Condition - Employees do not have documentation of procedures to support their job duties. Cause - Lack of formalized standard operating procedures and controls. -58- City of Blair, Nebraska SCHEDULE OF FINDINGS AND RESPONSES - CONTINUED For the year ended September 30, 2008 Item 3. - Documentation of Policies and Procedures - Continued Effect - Reliance on informal information from City Administrator and City Treasurer on majority of City's accounting procedures and information. Recommendation - We recommend that the City formalize and maintain a policy and procedures manual. This manual should include all areas of activities, including administration and operations. A policy and procedures manual will document how the City operates and will support cross -training and reduce training issues relating to employee turnover. Officials Response - City will work to develop a policy and procedures manual for all areas of activities. -59- City of Blair, Nebraska SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended September 30, 2008 Item 1. - Preparation of Supporting Schedules listed in the schedule of findings and responses was a prior year finding. Item 2. - Preparation of Basic Financial Statements listed in the schedule of findings and responses was a prior year finding. Item 3. - Documentation of Policies and Procedures listed in the schedule of findings and responses was a prior year finding.