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FY2007 Audit Report City (2)City of Blair, Nebraska FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORTS For the year ended September 30, 2007 CITY OF BLAIR, NEBRASKA TABLE OF CONTENTS Page INDEPENDENT AUDITOR'S REPORT 4 - 5 MANAGEMENT'S DISCUSSION AND ANALYSIS 6-19 STATEMENTS Statement of net assets - government -wide 20 Statement of activities - government -wide 21 Balance sheet - governmental funds 22 Reconciliation of the balance sheet of governmental funds to the statement of net assets 23 Statement of revenues, expenditures, and changes in fund balances - governmental funds 24 Reconciliation of the statement of revenues, expenditures and changes in fund balances of governmental funds to the statement of activities 25 Statement of net assets - proprietary funds 26 Statement of revenues, expenses, and changes in fund net assets - proprietary funds 27 Statement of cash flows - proprietary funds 28 Statement of net assets - fiduciary funds 29 Statement of changes in net assets - fiduciary funds 30 NOTES TO FINANCIAL STATEMENTS 31-46 SUPPLEMENTAL INFORMATION Budgetary comparison schedule - general fund and major special revenue funds 48 Budgetary comparison schedule - general fund revenues 49 Budgetary comparison schedule - Street fund 50 Budgetary comparison schedule - KENO fund Schedule of expenditures of federal awards jJ 52 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GO VERNMENTA UDITING STANDARDS 53-54 REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 55-56 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 57-62 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS 63 Av ES &ASSOCIATES, L.L.C. Certified Public Accountants and Consultants 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, and each major fund, of the City of Blair, Nebraska, as of and for the year ended September 30, 2007, which collectively comprise the City of Blair, Nebraska's basic r 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, and each major fund of the City of Blair, Nebraska, as of September 30, 2007, and the respective changes in financial position and cash flows where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated July 31, 2008 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 • www.hayes-cpa.com The CPA. Never Underestimate The Value! The management's discussion and analysis and budgetary comparison information on pages 48 through 51, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquires of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Blair, Nebraska's basic financial statements. The accompanying schedule of expenditures of federal awards on page 52 is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Omaha, Nebraska July 31, 2008 -5- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS September 30, 2007 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, 2007. 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, 2007 by $25.6 million (net assets). Of this amount, $8.4 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 increased by $3.5 million for the year ended September 30, 2007. The increase in net assets can be attributed to grants, water revenue, and sales tax revenue used to purchase capital assets. • As of September 30, 2007, the City of Blair's governmental funds reported combined ending fund, balances of $8.7 million, an increase of $2.8 million in comparison with the prior fiscal year. • While the fund balances for the Street Fund and Debt Service Fund increased $943,906 and $2.3 million, respectively for the fiscal year ended September 30, 2007, the fund balance for the General Fund decreased $340,895 during the same period. • The City's total debt increased by $16.5 million during the current fiscal year. The City decreased its outstanding Registered Warrants by $3.6 million in 2007. OVERVIEW OF FINANCIAL STATEMENTS The discussion and analysis serves as an introduction to the City of Blair's basic financial statements. The City of Blair's basic financial statements are comprised of three components, government -wide financial statements, fund financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. M City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 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. Over time, 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 future 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. WE City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 Reporting the City's Most Significant Funds Fund Financial Statements The fund financial statements provide detailed information about the most significant funds - not the City as a whole. Some funds 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 is detailed in a reconciliation following the fund financial statements. The City of Blair maintains four 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 and the Keno fund all of which are considered to be major funds. City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 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 funds provide the same type of information as the government -wide financial statements, only in more detail and include some of the internal service fund type activity. The proprietary fund financial statements provide separate information for the water and sewer funds, both of which are considered to be major funds in the City. 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 $25.6 million as of September 30, 2007. Analyzing the net assets and net expenses of governmental and business -type activities separately, the business type activities net assets were $11.4 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 (36.8%) reflects its restricted capital assets (e.g., donations, grants, community betterment, and debt service). SEE TABLE 1 City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED SUMMARY OF NET ASSETS September 30, 2007 Amounts expressed in thousands -10- TABLE 1 Governmental Activities Business -type Activities Total Primary Government 2007 2006 2007 2006 2007 2006 ASSETS Current and other assets $ 8,889 $ 8,103 $ 10,818 $ 2,290 $ 19,706 $ 10,393 Capital assets 10,923 9,577 28,376 19,899 39,298 29,476 Total assets 19,812 17,680 39,194 22,189 59,004 39,869 LIABILITIES Long-term debt outstanding 5,390 3,220 26,142 10,187 31,532 13,407 Other liabilities 226 2,777 1,622 1,521 1,848 4,298 Total liabilities 5,616 5,997 27,764 11,708 33,380 17,705 NET ASSETS Invested in capital assets net of related debt 5,533 5,827 2,233 8,620 7,766 14,447 Restricted 4,101 1,122 6,131 267 10,232 1,389 Unrestricted (deficit) 4,562 4,734 3,065 1,593 7,626 6,327 Total net assets $ 14,196 $ 11,683 $ 11,429 $ 10,480$ 25,624 $ 22,163 -10- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 Governmental activities: Governmental activities increased the City's net assets by $2,512,693. Key elements of this increase are as follows: • The increase is a part due to the City investing in capital assets at a rate that exceeded the depreciation on the City's assets. The cost of the equipment and other assets are depreciated over their estimated useful lives. Depreciation on the City's assets was $1.35 million less than the City's capital outlay expenditures for the year. • The increase is also partially due to increased developers down payment receipts. • All governmental activities were financed in part by tax revenue. Administration and streets were the most effective at covering their costs due to fees charged, operating grants, capital grants, and contributions. The comparative financial analysis is provided for additional information. The City's general revenues increased when compared to the prior year by 35% or $1.9 million. The primary reason for this increase was due to increased developer's down payment revenue. The assessed value of the property in the City increased by $25.42 million or 6.6% as compared to the prior year while the City property tax rate of $.3569 per $100 assessed valuation went up by $.0005 per $100 assessed. Business -type Activities Revenues of the City's business -type activities were $4.9 million for the fiscal year ending September 30, 2007. Expenses for the City's business -type activities were $4.5 million for the year, resulting in net revenues of $.38 million. The net revenues are the result of several factors, including the following: • The City's water system recorded charges for services of $3.9 million, which exceeded expenses of $3.2 million by $.7 million. The business -type activities also received transfers from governmental funds of $.6 million. The most significant expenses of the water fund were $.9 million for operating expenses and $.7 million in salaries and benefits. SEE TABLE 2 - 11 - City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANAGES IN NET ASSETS September 30, 2007 Amounts expressed in thousands -12- TABLE 2 Governmental Activities Business -type Activities Total Primary Government 2007 2006 2007 2006 2007 2006 REVENUES Program revenues Charges for services $ 372 $ 461 $ 4,790 $ 4,543 $ 5,162 $ 461 Operating grants and contributions 88 125 - - 88 125 Capital grants and contributions 587 397 587 397 General revenues Taxes 4,320 3,521 - 4,320 3,521 hiterest income 316 333 140 55 456 333 Special assessments 1,802 832 - 1,802 - Other 947 846 - - 947 1,678 Total revenues 8,432 6,515 4,930 4,598 13,362 6,515 EXPENSES Administration 1,412 587 - - 1,412 587 Police 1,359 1,309 - - 1,359 1,309 Fire 177 198 - - 177 198 Parks 425 426 - - 425 426 Library 255 234 - - 255 234 Swimming pool 52 37 - - 52 109 Zoning 127 88 - - 127 37 Animal control 86 76 - - 86 88 Donated fund 55 109 - - 55 76 Streets 1,031 1,329 - - 1,031 1,329 Keno 161 23 - - 161 23 Interest expense 312 198 - - 312 198 Water - - 3,742 3,196 3,742 - Sewer - - 706 616 706 - Total expenses 5,452 4,614 4,448 3,812 9,900 4,614 CHANGE IN NET ASSETS BEFORE TRANSFERS 2,980 1,901 482 786 3,462 2,687 TRANSFERS (468) (898) 468 898 - - CHANGE IN NET ASSETS 2,512 1,003 950 1,684 3,462 2,687 NET ASSETS, BEGINNING OF YEAR 11,683 10,680 10,480 8,796 22,163 19,476 NET ASSETS, END OF YEAR $ 14,195 $ 11,683 $ 11,430 $ 10,480 $ 25,625 _$22163 -12- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of the fiscal year 2007, the City has nearly $55.34 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 $11.20 million or 25.4% over the prior fiscal year. Beginning October 1, 2003, the City began capitalizing general infrastructure assets and depreciating them over their useful lives as required by GASB 34. The general infrastructure assets capitalized in 2007 were $1.77 million. SEE TABLE 3 -13- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANGES IN CAPITAL ASSETS September 30, 2007 Amounts expressed in thousands TABLE 3 -14- Balance Balance September 30, 2006 Additions Deletions September 30, 2007 GOVERNMENTAL ACTIVITIES Land $ 191 $ - $ - $ 191 Street infrastructure 4,996 1,689 - 6,685 Buildings 5,487 17 - 5,504 Equipment 2,847 62 (30) 2,879 Total Governmental 13,521 1,768 (30) 15,259 BUSINESS -TYPE ACTIVITIES Water assets 24,996 8,154 (10) 33,140 Sewer assets 5,626 1,339 (28) 6,937 Total Business -type 30,622 9,493 (38) 40,077 Totals $ 44,143 $ 11,261 $ (68) $ 55,336 -14- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 Debt At year-end, the City had $5.4 million in General Obligation Bonds and register warrants outstanding as compared to $5.6 million at the end of the prior fiscal year, a decrease of 3.7% as shown in Table 4. The Water Revenue Bonds outstanding were increased to finance improvements to the water system including main extensions and expansion of the water treatment plant to meet the expanding industrial needs of the community. The City has a 25 years 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. SEE TABLE 4 -15- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED CHANGES IN OUTSTANDING DEBT September 30, 2007 Amounts expressed in thousands Description General Registered Warrants General Obligation Bonds Water Revenue Bonds Sewer Revenue Bonds Totals TABLE 4 Balance Balance September 30, September 30, 2006 Additions Dispositions 2007 $ 1,849 $ 1,750 $ (3,579) $ 20 3,750 2,805 (1,165) 5,390 10,425 14,500 (1,038) 2307 855 1,455 (55) 2,255 $ 16,879 $ 20,510 $ (5,837) $ 31,552 -16- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 THE CITY'S FUND At the close of the City's fiscal year on September 30, 2007, the governmental funds of the City reported a combined fund balance of $8.7 million. This ending balance includes a reduction in fund balance of $340,895 in the City's general and an increase in fund balance of $2.3 million in Debt Service funds, respectively. The primary reason for the general fund's reduction is the transfer of cash to other funds for the purchase of capital improvements. The increase in debt service funds was due to the increase in bond revenues and transfers of cash from other funds to finance capital improvements. General Fund Budgetary Highlights Variance Positive Account (Negative) Reason State Grants $(199,333) Budget includes $225,000 grant receipt for a project at California Bend that did not materialize. Project was not completed. Business license and permits (5,257) Actual value for construction was less than anticipated. Therefore revenues were less. Other Miscellaneous revenue (32,485) Revenue projections anticipated $37,500 in grant funds from NRD to pay half of local cost of California Bend Project. Project did not materialize. Consulting (1,959) Fees for several projects were greater than anticipated, the budget is based on a projection of historical and actual projects and costs vary. Park - Other improvements (1,679) Actual cost of resurfacing of the tennis court was greater than the budget estimate. -17- City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 THE CITY'S FUND - CONTINUED Street Engineering $ (11,366) The cost of engineering studies and minor design of Street projects was greater than estimate at time of budget adoption. Special Assessment income 1,421,786 Budget is based on cash budgeting and the budget projected receiving $304,000 in special assessment income. Actual income received was $519,698. This increase was attributed to the finalizing of special assessments for the sidewalk project and land owners down payment. The balance of approximately 102 million is accrued special assessments. This is due to financials being reported on a modified accrual base and budget on cash. The 102 million is assessments owed to the City. Water Major Maintenance 43,393 Actual costs were less than historical and budgeted number due to a number of items being updated as part of the major plant renovation and charged off to plant construction. City of Blair, Nebraska MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED September 30, 2007 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. The property tax request for fiscal year 2007/2008 was increased 6.8%, which with the valuation increase caused the levy per valuation dollar to increase only .14% over the prior year. The increase was to stabilize necessary cash reserves and cover costs subject to inflation. Continued future stability of the City property tax rate has been improved beyond fiscal year 2007 by the favorable 2005 vote to extend the City's sales tax for street improvements, public safety, economic development, payment of debt service, and general property tax relief. 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. -19- City of Blair, Nebraska STATEMENT OF NET ASSETS September 30, 2007 LIABILITIES Accounts payable Accrued expenses Accrued interest Deposits payable Registered warrants 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 Grant projects Debt service Community betterment Unrestricted Total net assets 106,993 Governmental Business -type 68,660 16,543 Activities Activities Total ASSETS 31,300 1,700 33,000 Cash and cash equivalents $ 1,805,188 $ 3,707,685 $ 5,512,873 Accounts receivable 321,640 929,923 1,251,563 Due from County Treasurer 67,942 - 67,942 Accrued interest receivable 109,123 43,114 152,237 Prepaid expense - 5,502 5,502 Special assessments receivable 3,229,897 - 3,229,897 Contract receivable 2,424,953 - 2,424,953 Capital assets 3,064,576 7,626,285 Land 190,641 215,833 406,474 Street infrastructure 6,685,583 - 6,685,583 Buildings 5,503,145 37,861,054 43,364,199 Equipment 2,878,812 2,000,069 4,878,881 Accumulated depreciation (4,335,451) (11,701,412) (16,036,863) Restricted assets 929,987 6,131,228 7,061,215 Total assets 19,811,460 39,192,996 59,004,456 LIABILITIES Accounts payable Accrued expenses Accrued interest Deposits payable Registered warrants 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 Grant projects Debt service Community betterment Unrestricted Total net assets 106,993 1,297,995 1,404,988 68,660 16,543 85,203 - 305,410 305,410 31,300 1,700 33,000 19,123 - 19,123 610,000 1,115,910 1,725,910 4,780,000 25,026,209 29,806,209 5,616,076 27,763,767 33,379,843 5,532,730 2,233,425 7,766,155 45,664 - 45,664 61,102 - 61,102 3,868,421 6,131,228 9,999,649 125,758 - 125,758 4,561,709 3,064,576 7,626,285 $ 14,195,384 $ 11,429,229 $ 25,624,613 See accompanying notes and independent auditor's report. -20- N m In o V1 t� N --' r/1 O ID O M M t M (71'00 W O O .--r N 'D Vl 01 V Ch O M Dl M N \O cl� M r �' r .-r <f --' h O� Ul t- n 00 10 (FQ( y � y n C,� N N 'D ,-: o 'o .-• V1 N p1 M 10 01 p, h W 10 ID VN l N V ro P �+ z N .D C7 0 0 b ND M� .-. O Q1 V' 10 N w M M N V'1 O 7 10 10 N aa 0F��H H O M -+ --' M O I l� N 0 T Vl N 7 0 cq cq b 60 N N i r r i i r r r r i r r N O M M r r i r N r r I CA r o N �z �-+ l-- 00 O, ol a0 M (71 w 00 o O V� 0\ O M M cl lD lD M M f T N t� 'D .-: O 1D .-. V1 O Vl O 'o O\ 0, I- tb to '0 r- t N Vl 00 M M N O d' b 00 0, � �D M •-"� O M d' d' V� h N V'1 N M oo O� � O� vl �O �-. 4. > .mi .Ni .N+ D 0 q 69 It b C oo00 ❑A^ O P h W h U U o sv sv � N 0 N r r y8 Oy O Opb ❑ 'G r r rlc r r r r r 10 tt��77 N OM 3 rn 10 -4 N rn o0 0o ry -) b N z a a, w y r CA CY\O CD �� , 7 M b N y p -u T1 N � �j W y r� O XNX ti Ysd3 W D r b WO y V 00 O w ~ oq N m w ol r y p W 2 J 0 W U w m n D on 1>1 A 1 t>J O w t/pI N m ❑ V a 1 q N N N N o .-• r M 10 O O m 00 O Vl W 10 0 00 00 O O N m O h h .+ 00 td yy i-1 vNy� rtr//o�� Nq N ao N O W W V m Ci 'It M �--� l M '� 'a' y •p N N W 0 O y pp i. U vVi •-• p1 1� •R 'I N h 1D vi O .-r N Vl NVl-N00-M1D H N 'n oo O N cl Q N--� O --r M 'cY l� t� O� H a3 o V wa2ti0x0 lqr ll� ol a aH C7H �rn0H N m rn v t v d V N (FQ( y � y �> o d w rn q D ro P �+ z N .D C7 0 0 b ND G W O 7d N n '4)� �Qa°waavic�¢r'A°viaGrS aa 0F��H H •G3v, City of Blair, Nebraska GOVERNMENTALFUNDS BALANCE SHEET September 30, 2007 See accompanying notes and independent auditor's report, -22- General Debt Service Street Keno Fund Fund Fund Fund Total ASSETS Cash and cash equivalents $ 1,621,413 $ - $ 183,775 $ - $ 1,805,188 Receivables Special assessments - 3,229,897 - - 3,229,897 Accrued interest 109,123 - - - 109,123 Other 319,820 - - 1,820 321,640 Due from County Treasurer 54,248 1,577 12,117 - 67,942 Reserved assets - cash and investments - at cost 106,766 695,435 - 127,786 929,987 Contract receivable - OPPD 2,424,953 - - - 2,424,953 Total assets $ 4,636,323 $ 3,926,909 $ 195,892 $ 129,606 $ 8,888,730 LIABILITIES Accounts payable $ 65,615 $ 5,610 $ 31,920 $ 3,848 $ 106,993 Accrued expenses 29,085 33,755 5,820 - 68,660 Deposits payable 31,300 - - - 31,300 Registered warrants - 19,123 - - 19,123 Total liabilities 126,000 58,488 37,740 3,848 226,076 FUND BALANCES Reserved for Donated funds 45,664 - - - 45,664 Grant funds 61,102 - - - 61,102 Debt service - 3,868,421 - - 3,868,421 Community betterment - - - 125,758 125,758 Unreserved undesignated General funds 4,403,557 - - - 4,403,557 Special revenue funds (deficit) - - 158,152 - 158,152 Total fund balances 4,510,323 3,868,421 158,152 125,758 8,662,654 Total liabilities and fund equity$ 4,636,323 $ 1926,909 $ 195,892 $ 129,606 $ 8,888,730 See accompanying notes and independent auditor's report, -22- City of Blair, Nebraska GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS September 30, 2007 Fund balances of governmental funds Amounts reported for governmental activities in the statement of net assets are difference because Capital assets, net of depreciation, are not current financial resources and are not included in the governmental funds Bonds payable are not a current financial resource. Therefore, they are not included in the governmental funds Net assets of governmental activities See accompanying notes and independent auditor's report. -23- $ 8,662,654 10,922,730 (5,390,000) 14,195,384 City of Blair, Nebraska STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS For the year ended September 30, 2007, REVENUES Taxes Street revenues Keno proceeds Charges for services Special assessment Special assessment interest Interest income Other revenues Total revenues EXPENDITURES Administration Contingency allowance Police Department Fire Department Parks Department Library Swimming Pool Zoning Animal control Donated funds Keno expense Community betterment Street expense Debt service Bonding costs Redemption of bonds Bond interest Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Bond proceeds Sale of assets Operating transfers - in Operating transfers - out Total other financing sources REVENUES AND OTHER SOURCES OVER (UNDER) EXPENDITURES AND OTHER USES FUND BALANCE, BEGINNING OF YEAR FUND BALANCE, END OF YEAR General Debt Service Street Keno Fund Fund Fund Fund Total $ 3,310,397 $ 48,874 $ 961,188 $ $ 4,320,459 - - 104,937 104,937 267,328 - - - 267,328 - 1,725,786 1,725,786 - 76,145 - - 76,145 293,377 20,314 2,708 146 316,545 774,552 29,246 811,529 - 1,615,327 4,645,654 1,900,365 1,775,425 105,083 8,426,527 1,322,933 6,035 - - 1,328,968 9,958 - - - 9,958 1,330,730 - - - 1,330,730 116,984 - - - 116,984 434,737 - - - 434,737 250,983 - - - 250,983 31,694 - - - 31,694 127,313 - - - 127,313 78,114 - - - 78,114 55,430 - - - 55,430 - - - 48,211 48,211 - - - 112,894 112,894 - - 2,522,039 - 2,522,039 - 38,569 - - 38,569 - 1,165,000 - - 1,165,000 - 311,558 - - 311,558 3,758,876 1,521,162 2,522,039 161,105 7,963,182 886,778 379,203 (746,614) (56,022) 463,345 - 2,805,000 - - 2,805,000 - - 6,000 - 6,000 966,826 1,010,619 890,673 - 2,868,118 (2,197,915) (1,137,725] - - (3,335,640) (1,231,089) 2,677,894 896,673 - 2,343,478 (344,311) 3,057,097 150,059 (56,022) 2,806,823 4,854,634 811,324 8,093 181,780 5,855,831 $ 4,510,323 $ 3,868,421 $ 158,152 $ 125,758 $ 8,662,654 See accompanying notes and independent auditor's report. -24- 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, 2007 Net changes in fund balance - total governmental funds $ 2,806,823 Amounts reported for governmental activities in the statement of activities differ from the amounts reported in the statement of revenues, expenditures, and changes in fund balances because Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets 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 1,767,585 Depreciation expense (421,716) 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. (1,640,000) Change in net assets of governmental activities $ 2,512,692 See accompanying notes and independent auditor's report. -25- City of Blair, Nebraska STATEMENT OF NET ASSETS PROPRIETARY FUNDS September 30, 2007 ASSETS CURRENT ASSETS Cash Accounts receivable user fees Accrued interest receivable Prepaid expense Other receivable 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 Revenue bonds payable Total current liabilities NON-CURRENT LIABILITITES Revenue bonds payable Total liabilities NET ASSETS Water Sewer Total $ 3,499,308 637,533 29,168 3,626 145,000 4,314,635 $ 208,377 $ 3,707,685 147,390 784,923 13,946 43,114 1,876 5,502 - 145,000 371,589 4,686,224 4,983,283 1,147,945 6,131,228 165,958 49,875 215,833 32,046,287 5,814,767 37,861,054 927,313 1,072,756 2,000,069 (8,454,903) (3,246,509) (11,701,412) 24,684,655 3,690,889 28,375,544 $ 33,982,573 $ 5,210,423 $ 39,192,996 $ 1,044,434 $ 253,561 $ 1,297,995 1,700 - 1,700 281,405 24,005 305,410 12,183 4,360 16,543 1,060,910 55,000 1,115,910 1,339,722 281,926 1,621,648 22,826,209 2,200,000 25,026,209 24,165,931 2,481,926 26,647,857 Investment in capital assets net of related debt 797,536 1,435,889 2,233,425 Restricted for debt service 4,983,283 1,147,945 6,131,228 Unrestricted 2,974,913 89,663 3,064,576 Total net assets 8,755,732 2,673,497 11,429,229 Total liabilities and net assets $ 32,921,663 $ 5,155,423 $ 38,077,086 See accompanying notes and independent auditor's report, -26- City of Blair, Nebraska STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For the year ended September 30, 2007 OPERATING REVENUES User fees Sale of merchandise Forfeited discounts Other Total operating revenues EXPENSES Personnel Operating expenses Materials and supplies Rental expense 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 NET ASSETS, END OF YEAR Water Sewer Total $ 3,727,192 $ 899,747 $ 4,626,939 25,098 - 25,098 15,496 - 15,496 116,964 5,264 122,228 3,884,750 905,011 4,789,761 780,644 282,731 1,063,375 889,657 218,061 1,107,718 619,228 6,610 625,838 10,104 3,373 13,477 859,878 156,691 1,016,569 3,159,511 667,466 3,826,977 725,239 237,545 962,784 123,202 17,029 140,231 (519,280) (38,515) (557,795) (63,664) - (63,664) (459,742) (21,486) (481,228) 265,497 216,059 481,556 40,634 (125,000) 181,131 551,888 592,522 - (125,000) 767,947 949,078 8,574,601 1,905,550 10,480,151 $ 8,755,732 $ 2,673,497 $ 11,429,229 See accompanying notes and independent auditor's report. -27- City of Blair, Nebraska STATEMENT OF CASH FLOWS PROPRIETARY FUNDS September 30, 2007 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash payments to suppliers Cash payments to employees Cash provided from operating activities 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 1XI-f- 'Z--, TMl $ 3,895,259 $ 898,687 $ 4,793,946 (864,582) 13,502 (851,080) (783,859) (282,123) (1,065,982) 2,246,818 630,066 2,876,884 40,634 551,888 592,522 (125,000) - (125,000) (134,491) (6,324) (84,366) 551,888 467,522 1,541 798,059 241,353 14,500,000 1,455,000 15,955,000 (8,153,721) (1,339,252) (9,492,973) (1,037,545) (55,000) (1,092,545) (371,239) (29,654) (400,893) (63,664) - (63,664) 4,873,831 31,094 4,904,925 104,110 6,289 110,399 (4,805,896) (1,057,945) (5,863,841) (4,701,786) (1,051,656) (5,753,442) 2,334,497 161,392 2,495,889 1,164,811 46,985 1,211,796 $ 3,499,308 $ 208,377 $ 3,707,685 $ 725,239 $ 237,545 $ 962,784 859,878 156,691 1,016,569 (134,491) (6,324) (140,815) 1,348 193 1,541 798,059 241,353 1,039,412 (3,215) 608 (2,607) 1,521,579 392,521 1,914,100 $ 2,246,818 $ 630,066 $ 2,876,884 See accompanying notes and independent auditor's report. -28- City of Blair, Nebraska STATEMENT OF NET ASSETS - FIDUCIARY FUNDS September 30, 2007 LIABILITIES Accounts payable Net Assets (Deficit) Held in Trust for Tax Incentive Funds (TIF) See accompanying notes and independent auditor's report. -29- TIF Funds $ 33,914 $ (33,914) City of Blair STATEMENT OF CHANGES IN NET ASSETS - FIDUCIARY FUND For the year ended September 30, 2007 ADDITIONS Other income DEDUCTIONS Other CHANGE IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR See accompanying notes and independent auditor's report. -30- TIF -- J - d, ccn fill i 693,985 (33,914) $ (33,914) City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS September 30, 2007 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. Rgportin Eg ntit_y This report includes all funds of the City (the "primary government"), The City operates under a Board of Trustees 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 Accounting/Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self -balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures. Governmental resources are allocated to and accounted for in individual funds based upon the 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. -31- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 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 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. 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. -32- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 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 funds that met the qualifications of GASB Statement No. 34. All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, 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. -33- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 2. Basis of AccountinWMeasurement 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. 3. Budgetary and Control Budgetary Basis of Accounting The City's legally adopted budget is not in conformity with accounting principles generally accepted in the United States of Nebraska. 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. There are no significant differences between the budgeted basis of accounting and the generally accepted basis. The Board 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 stature. 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 government -wide 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, 2007. 4. 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 shown at cost. There are no significant differences in cost and fair values at September 30, 2007. -34- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 5. 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 6. 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 not considered collectible as of September 30, 2007. The City' December 31, 2006 valuation was $433,928,223. The levy for the City for the year ending September 30, 2007 was .3569 per $100 of value. The total tax levy was $1,460,797. Property taxes are collected by the County and are due December 31 of each year and delinquent in halves at May 1 and September 1 of the following year. In -lieu of tax receipts are equivalent in value to payments for service provided. 11012 City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED 7. 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. 8. Compensated Absences The City of Blair does not accrue compensated absences because the amount cannot be reasonably estimated. 9. Restricted Assets 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. The City of Blair has received donations toward specific projects. The undisbursed funds with specific restrictions are accounted for in the donated fund balance. Grants have been received by the City which are required to be spent on certain projects. The grant fund balance represents these restricted funds not spent at September 30, 2007. 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 Water and Sewer restricted cash is a sinking fund required by conditions of Revenue Bonds. These funds will become unrestricted in the year 2010. -36- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 NOTE B. DEPOSITS AND INVESTMENTS The statutes of the State of Nebraska require that local governmental units follow the "prudent man" rule with deposits. The City requires that it has deposits one hundred and five percent secured by collateral valued at market or par whichever is lower less the amount of the Federal Deposit Insurance Corporation Insurance. The carrying amount of deposits and bank balances at September 30, 2007, were $5,947,945 and $6,418,604, respectively. The City has no formal policy for handling credit risk, interest rate risk, or concentration risk; however, deposits and investments consist of savings accounts and certificates of deposit with current maturities. The deposits and investments are entirely insured or collateralized with securities held by the entity's agent. There is no significant difference between the deposits and investments fair value and the presented amounts. -37- po o00vdi N Vl •--� 00 V� l n 00 00 y 0 0 k'i Cl) 00 t` t- d• N vi N N C m100 ~ � n O N 00 M t- cc� b v1 N V) N O O Phi N � 69 69 00 00 0.0. 00 00 0 O O O O •�-. M M m M N N A 69 � CII min0000 0 o0 00 U oo M Q 69 (Aad 7 O m�I'D Cl) O M Ln m N t-- M I'D .-+ O, O �O N \p .-� I" V� M O O� N 00 C> kokot�o ot-�om � � o U Q fn 0\ 0 It p 0 00 t m M cn E- '+zo Z C) koq Hm z00 a y U w O H O � z a 0 � w 0 c G � Cl) 00 O C) N �o ^ �o W00 � O — O, VY .ice O M 00 O� 00 00 m O dO- M o0 O N G �¢ 'I1 'L3 Y U 69 tr9 to 11,ty C�. c Q U N U y U 3 Q C cd y y. (/ Q { C �v�r�w y �H www ,cd p�InR'� •O cV cd O N 'tiy Jz O z U U U C7 A awaatnA oCf) Itrn�c O Cl) V1 1,0 V1 ty 09 O O O^ V2 O �O d m N 000 O O U y C, t- I kq O A O� O O� O 00 CO 0� Q 69 OM O 00 O M t- O N 00 �O O V O H N V) 00 \�O N Cl) y 6� O O tf) 0o N O t-- � N t` I Cl I N � m I` 01 Vl "t N M �O �O rn C 00 69 000 NO Q N N O m 00 N ON N d r o0 City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 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: Invest 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, 2007. Reserved for: Donated Funds Grant Funds Debt Service Community Betterment Governmental Funds $ 45,664 61,102 3,071,158 125,758 -40- Business -Type Activities 6,131,228 C) 00 O o rn o 0 0 Oo o o o — C, o rn 0 0 0 0 o O dam' N O 0O0 kr)In CO M Q\ ON kr) V) O 00 00 '$ N cd N vi N �O 00 N N W y [) tn V1 Cl C h O O m In m okf) o � � o a� Q 69 1.9 69 O O O O O O O O O O n O O O kn V1 O O V) '$ 't d Q p o64 :ty �Waz-i O 69 69 4N O U C> `00 0 o o m000r,c>o00o—W tn M O O O �O �O O � O M- 00 d' O O h C 00 v1 [� O 00 M M •,� z� N r O O n � �� O O N t h •-+ N o0 NM d' W •O N V') V� ke� �O O M d' 00 d" N �' kr � 00 kr; � 00 +' 00 .-. �O O, 00 t- N �O �O .fir O In-+ O O O\ O\ 00 N w0 V1 69 69 69 69 rAll U o a o \ mmm C, ON orn� O ooM' �t"t�N.I ~ � o �f a% �f C> - t� a O \ \ N \ �o 00O M l� D\ cA 00 O\ \O DD Vl d' O c!) 4 Vl • V O O �-• •--� .-� O M DD M O tn 4 4 kr) 4 Pa E-� z C) C) N � O to OD � O 0.1 o M A v !Ya to o UO a ¢> C, C> a N N N N N N N N N �p C) o �o t` � t` ami > 0 C. 0 0 0 0 0 (D rn N a p�q k4l) p�q vN�i W o N 00 W N C W oo A � � •�. a City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED For the year ended September 30 2007 NOTE F. BONDS PAYABLE - CONTINUED Year ending September 30, Principal Interest 2008 $ 55,000 $ 67,795 2009 60,000 85,790 2010 60,000 84,065 2011 1,520,000 52,614 2012 60,000 21,028 2013 65,000 18,792 2014 65,000 16,371 2015 70,000 13,770 2016 75,000 10,904 2017 80,000 7,764 2018 75,000 4,550 2019 70,000 1,487 $ 2,255,000 $ 384,928 Sinking fund requirements for Water and Sewer debt were a reserve of $266,405 at September 30, 2007. Net working capital of Water and Sewer funds is $2,829,913 and $89,663, respectively. All liabilities on the balance sheet of governmental funds are current. -42- s9 A � i 1 0 0 0 0 0 0 0 b .d � 0 0 OO V N C> 0 0 69 0 M 00 \�o cl m 0 N 0 o 0 z W F+ d ri) > U o � m aN vi d� � r r 0 0 Cl 0 0 U O u O kn w g l O� 1 opo r.y Y 1 1 z o 0 d' m 1 A 1 C z 0ra o 0 C9 A o 0 N N a S 00 rn O� rn rn O� 001 1.0 10 w A M O z Cl 0 0 0 0 0 0 0 0 0 0 0 0 0 0 �o 00 \�o cl m cV � a. > > > > r r 0 0 Cl 0 0 C p O C O kn l O� 1 opo r.y O O 1 1 1 C C9 oc N N S 1 1.0 10 rn M 0 0 0 o o H M O d N N 1 1 I 1 I IIR 0) cV (V M M 0 0 0 0 0 0 0 0 a. > > > > 0 0 0 0 0 NI l O� 1 opo City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED For the year ended September 30, 2007 NOTE F. BONDS PAYABLE - CONTINUED Principal Interest Total Year ending September 30, 2007 2008 $ 610,000 $ 220,936 $ 830,936 2009 580,000 201,192 781,192 2010 415,000 178,599 593,599 2011 425,000 162,926 587,926 2012 440,000 146,585 586,585 2013 310,000 129,075 439,075 2014 275,000 116,995 391,995 2015 285,000 105,920 390,920 2016 285,000 94,257 379,257 2017 140,000 83,852 223,852 2018 150,000 77,719 227,719 2019 155,000 71,118 226,118 2020 160,000 64,147 224,147 2021 145,000 57,338 202,338 2022 150,000 50,450 200,450 2023 155,000 43,250 198,250 2024 165,000 35,500 200,500 2025 175,000 27,250 202,250 2026 180,000 18,500 198,500 2027 190,000 9,500 199,500 $ 5,390,000 $ 1,895,107 $ 7,484,607 City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 NOTE G. ALLOWANCE FOR DOUBTFUL ACCOUNTS The City uses the direct write-off for uncollectable accounts. The doubtful accounts at September 30, 2007 were not significant. NOTE H. PENSION PLANS The City has two pension plans covering substantially all of its employees. Employees other than policemen are covered by a defined contribution plan. All contributions up to 6% of gross wage in employee contributions and 6% of gross wage in contributions from the City are invested with an investment manager. The employees must have accumulated six months of service, be at least age 21, and work 40 hours per week to participate in the plan. Employees are 100% vested in employer contributions after seven 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, 2007, were $177,221. Contributions are expected to remain relatively level from year to year. The 2007 covered payroll and total payroll were $1,420,266 and $1,648,128. respectively. 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 $90,925 for 2007, were 12% of gross wages, which compiles 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, 2007. 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 2007. 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. -45- City of Blair, Nebraska NOTES TO FINANCIAL STATEMENTS - CONTINUED September 30, 2007 NOTE I. CONTRACT RECEIVABLE - CONTINUED 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 closing and monitoring costs were accrued over the remaining life of the landfill. The Landfill closed October 31, 1993 and any remaining monitoring costs will be paid from City funds but are not anticipated to be material to the financial statements. NOTE K. SPECIAL ASSESSMENTS RECEIVABLE The City's special assessments outstanding as of September 30, 2007, are composed of special assessment principle of $3,229,897. The delinquent special assessments at September 30, 2007 are 20% 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 fund 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 72.6% of water sales for the year ended September 30, 2007. Although Cargill represents 72.6% of water sales, the City of Blair has a 25 years take or pay contract that secures the revenue stream for payment of the water debt which minimizes the risk for payment of water bonds. SUPPLEMENTAL INFORMATION City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE GENERAL FUND For the year ended September 30 2007 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 FUND BALANCE - September 30, 2006 FUND BALANCE - September 30, 2007 Original and Variance Final Favorable Budget Actual (Unfavorable) $ 3,023,180 $ 3,310,397 $ 287,217 257,455 267,328 9,873 60,150 293,377 233,227 1,049,696 774,552 (275,144) 4,390,481 4,645,654 255,173 2,832,291 1,322,933 1,509,358 25,000 9,958 15,042 1,330,855 1,330,730 125 100,250 116,984 (16,734) 739,652 434,737 304,915 255,630 250,983 4,647 18,700 31,694 (12,994) 140,271 127,313 12,958 82,570 78,114 4,456 172,880 55,430 117,450 5,698,099 3,758,876 1,939,223 (1,307,618) 886,778 2,194,396 946,814 966,826 20,012 (1,369,191) (2,197,915) 828,724 (1,729,995) (344,311) $ 3,043,132 4,250,151 4,854,634 $ 2,520,156 $ 4,510,323 -48- City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE GENERAL FUND REVENUES For the year ended September 30 2007 REVENUES Taxes Property tax Sales tax Motor vehicle tax Occupation and franchise tax Other taxes Total Charges for services Business licenses and permits Library Equipment rental Cemetery lots Grave openings Towing Other fees and charges Sales of fireworks RV park Total INTEREST INCOME OTHER REVENUES State grants Federal grants Donations Reimbursements Other miscellaneous revenue Total Total revenues Original and Final Budget Actual Variance Favorable (Unfavorable) $ 1,077,180 $ 1,049,120 $ (28,060) 1,520,000 1,789,431 269,431 121,500 132,366 10,866 255,000 239,151 (15,849) 49,500 100,329 50,829 3,023,180 3,310,397 287,217 156,455 151,198 (5,257) 13,500 14,005 505 2,000 20,801 18,801 20,000 11,000 (9,000) 23,000 18,750 (4,250) 17,300 16,582 (718) 3,600 14,243 10,643 15,000 15,000 - 6,600 5,749 (851) 257,455 267,328 9,873 60,150 293,377 233,227 292,400 93,067 (199,333) 505,000 520,743 15,743 123,376 60,945 (62,431) 85,000 88,362 3,362 43,920 11,435 (32,485) 1,049,696 774,552 (275,144) $ 4,390,481 $ 4,645,654 $ 255,173 -49- City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE STREET FUND For the year ended September 30 2007 REVENUES Highway allocation Property taxes Other taxes Incentive payment State maintenance agreement In -Lieu of tax Homestead exemption Federal grants Other grants 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: Street improvements Total expenditures REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Sale of assets Operating transfers - in REVENUES AND OTHER FINANCING SOURCES OVER (UNDER) EXPENDITURES AND OTHER SOURCES FUND BALANCE - September 30, 2006 FUND BALANCE - September 30, 2007 -50- Original and 272,366 Variance Final 19,655 Favorable Budget Actual (Unfavorable) $ 528,000 $ 537,575 $ 9,575 311,550 304,640 (6,910) 88,800 94,465 5,665 6,000 6,000 - 23,000 21,798 (1,202) 10,000 11,899 1,899 - 12,609 12,609 2,032,000 22,960 (2,009,040) 74,200 758,306 684,106 1,000 2,708 1,708 10,300 2,465 (7,835) 3,084,850 1,775,425 (1,309,425) 283,425 272,366 (11,059) 21,500 19,655 (1,845) 91,070 76,500 (14,570) 16,600 16,818 218 3,000 2,669 (331) 3,200 3,258 58 15,000 26,366 11,366 8,400 5,383 (3,017) 7,900 5,953 (1,947) 2,000 1,811 (189) 2,800 2,107 (693) 1,700 1,405 (295) 19,000 19,196 196 38,700 30,291 (8,409) 130,000 129,694 (306) - 3,206 3,206 3,000 1,163 (1,837) 16,000 26,562 10,562 26,000 23,374 (2,626) 94,400 139,134 44,734 25,500 25,738 238 2,120,000 1,689,390 (430,610) 2,929,195 2,522,039 (407,156) 155,655 (746,614) (902,269) - 6,000 6,000 254,000 1,684, 520 1,430, 520 409,655 943,906 $ 534,251 4,250,151 4,854,634 $ 4,659,806 $ 5,798,540 City of Blair, Nebraska BUDGETARY COMPARISON SCHEDULE KENO FUND For the year ended September 30 2007 GROSSPROCEEDS 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 - Transfers 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 r THE REPORTING PERIOD Beginning reserve balance Increase in reserve Withdrawals from reserve Ending reserve balance (deficit) i` i f -51- Original and Variance Final Favorable Budget Actual (Unfavorable) $ - $ 1,155,540 $ 1,155,540 - 922,301 922,301 - (939) (939) - 921,362 921,362 - 234,178 234,178 (161,776) (161,776) $ 70,000 $ 72,402 $ 2,402 70,000 72,402 2,402 15,000 23,111 100 100 - 15,100 23,211 (8,111) 54,900 49,191 (5,709) - 32,535 32,535 25,500 25,500 - 169,500 87,394 82,106 25,000 25,000 - (165,100) (56,168) (55,280) 181,780 181,780 - 1,600 146 (1,454) $ 18,280 $ 125,758 $ 107,478 $ 45,010 (32,535) $ 12,475 City of Blair, Nebraska SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30 2007 U.S. DEPARTMENT OF JUSTICE Bulletproof Vest Partnership Program 16.607 TOTAL FEDERAL AWARDS RECEIVED TOTAL FEDERAL AWARDS EXTENDED NOTES TO SCHEDULE Significant accounting policies The accrual basis of accounting was used in the schedule of federal awards which is consistent with the general purpose financial statements. No non-cash assistance was received. -52- 1,315 571,503 $ 571.503 . Federal Pass-through FEDERAL GRANTOR/PASS THROUGH CFDA Grantor's Total GRANTOR PROGRAM TITLE Number Number Extended U.S. DEPARTMENT OF TRANSPORTATION Highway Planning and Construction 20.205 STPAA - 6461(1) $ 16,521 Alcohol Traffic Safety and Drunk Driving Prevention Incentive Grants 20.601 STPB-89(24) 49,445 U.S. DEPARTMENT OF HOUSING URBAN DEVELOPMENT Community Block Development Grant Funds (CDBG) 14.228 03 -ED - 012 504,222 U.S. DEPARTMENT OF JUSTICE Bulletproof Vest Partnership Program 16.607 TOTAL FEDERAL AWARDS RECEIVED TOTAL FEDERAL AWARDS EXTENDED NOTES TO SCHEDULE Significant accounting policies The accrual basis of accounting was used in the schedule of federal awards which is consistent with the general purpose financial statements. No non-cash assistance was received. -52- 1,315 571,503 $ 571.503 . 9v ES &ASSOCIATES, L.L.C. Certified Public Accountants and Consultants REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING 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, and each major fund of City of Blair, Nebraska, as of and for the year ended September 30, 2007, which collectively comprise City of Blair, Nebraska's basic financial statements and have issued our report thereon dated July 31, 2008. 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 Reporting 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'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 timely basis. Westroads Pointe • 1015 N. 98th St., Suite 200 • Omaha, Nebraska 68114 • 402.390.2480 TEL • 402.390.0885 FAX • www.hayes-cpa.com The CPA. Never Underestimate The Value! A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the City'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 organization's financial statements that is more than inconsequential will not be prevented or detected by the Organization's internal control. We consider the deficiencies described in the accompanying schedule of findings and questioned costs 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'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 described above, we considered items 1., 2., 3., and 4. to be material weaknesses. Compliance and Other Matters As part of obtaining reasonable assurance about whether the City'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, in a separate letter dated July 31, 2008. 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'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 July 31, 2008 -54- RXfTs &ASSOCIATES, L.L.C. Certified Public Accountants and Consultants REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 City of Blair Blair, Nebraska Compliance We have audited the compliance of the City of Blair, Nebraska., with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to its major federal program for the year ended September 30, 2007. The City of Blair, Nebraska's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to the major federal program is the responsibility of the City of Blair, Nebraska's management. Our responsibility is to express an opinion on the City of Blair, Nebraska's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City of Blair, Nebraska's compliance with those requirements and performing such other procedures, as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the City of Blair, Nebraska's compliance with those requirements. In our opinion, the City of Blair, Nebraska complied, in all material respects, with the requirements referred to above that are applicable to its major federal programs for the year ended September 30, 2007. Westroads Pointe • 1015 N. 98th St., Suite 200 • Omaha, Nebraska 68114 • 402.390,2480 TEL • 402.390.0885 FAX • www.hayes-cpa.coni r � D The CPA. Never Underestimate The Value! Internal Control Over Compliance The management of City of Blair, Nebraska, is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered City of Blair, Nebraska's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion o the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of City of Blair, Nebraska's internal control over compliance. A control deficiency in an entity's internal control over compliance 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 noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with at type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses as defined above. The City of Blair, Nebraska's response to the findings identified in our audit is described in the accompanying schedule of findings and responses. 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 July 31, 2008 -56- City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended September 30, 2007 I. SUMMARY OF AUDIT RESULTS Financial Statements Type of auditor's report issued: Unqualified. Internal control over financial reporting: Material weakness(es) identified? X Yes No Significant deficiency(ies) identified that are not considered to be material weaknesses? Yes X None reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weakness(es) identified? Yes X No Significant deficiency(ies) identified that are not considered to be material weakness(es)? Yes X None reported Type of auditor's report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133 Yes X No Wrz City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED For the year ended September 30, 2007 I. SUMMARY OF AUDIT RESULTS - CONTINUED Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 14.228 Community Block Development Grant Funds (CDBG) Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee: Yes X No II. FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Item 1. - Segregation of Duties Criteria - One important aspect of internal control is the segregation of duties among employees to prevent an individual employee from handling duties, which are incompatible. (OMB Circular A-133, Subpart C, 300 (b)) Condition - The payroll, depositing, and preparation of reports are done by the same person. Context - This condition was observed in the study of the internal control system. Cause and Effect - The cause is due to the size of the entity and the effect is a weakness in internal control. Recommendation - We realize that with a limited number of office employees, segregation of duties is difficult. However, the City should review its control procedures to obtain the maximum internal control possible under the circumstances. Officials Response - The City will segregate duties to the extent possible with existing personnel and utilize the Board to provide additional control through review of financial transactions and reports. sm City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED For the year ended September 30, 2007 II. FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS - CONTINUED Item 2. - 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 organization's financial statements and footnotes. Condition - Schedules necessary for good bookkeeping and to support the financial statements not maintained by the client. Cause - Lack of internal control procedures to require the maintenance of the financial statement supporting schedules. Effect - There was no documented schedule for fixed assets, bond interest, registered warrants, and special assessments that explained the necessary adjusting entries and full accrual balances from the client. Schedules were created during the audit based on the organization's documents which determined material audit adjustments and disclosures for the basic set of financial statements. Recommendation - Implement 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 will purchase necessary software and/or 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 prefect applications Item 3. - Preparation of Basic Financial Statements Criteria - The Auditing Standards Board (ASB) recently issued guidance to auditors related to an entity's internal controls over financial reporting. 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, this reliance on the auditors 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. -59- City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED For the year ended September 30, 2007 II. FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS - CONTINUED Item 4. - Documentation of Policies and Procedures - Continued Officials Response - City will work to develop a policy and procedures manual for all areas of activities. Item 5. - Supporting Documentation Criteria - Supporting documentation is the initial evidence required as proof of an appropriate approved transaction occurring that justifies the transaction and amount thereof. In our review of recorded transactions for different accounts, we noted a lack of sufficient supporting documentation for some of the reviewed transactions such as: • POs are not appropriately approved by reviewers/ approvers. • Missing invoices to support disbursed amounts. • Missing documents to support deposits made. • Approved PO that do not document quantity and/or price of items approved for purchase. • Journal entries that were made but lacked sufficient supporting information and appropriate approvals. Condition - Lack of sufficient supporting information for certain accounting transactions. Cause - Lack of documented SOPs to establish a guideline on what is the minimum supporting documentation for various accounting transactions and how such documentation should be stored, and for what length of time. Effect - Presents the City with a higher risk of financial statement misstatements and fraud. Recommendation - We recommend that the City of Blair establish a guideline on what is the minimum supporting documentation for various accounting transactions and how such documentation should be stored, and for what length of time. Supporting documentation should be attached with each transaction affecting the financial statements. -61- City of Blair, Nebraska SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED For the year ended September 30, 2007 II. FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS - CONTINUED Item 5. - Supporting Documentation - Continued Officials Response -The City will refine PO procedures. Procedures for journal entries will be refined to make sure sufficient supporting information and appropriate approvals are adhered to. The City maintains all records, including but limited to financial records, in accordance with Nebraska Records Retention policy as currently approved and amended form time to time by the Nebraska Secretary of State's office. III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None. -62- City of Blair, Nebraska SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended September 30, 2007 Item 1. - Segregation of Duties listed in the financial statements findings and questioned costs were a prior year finding. -63-