HomeMy WebLinkAbout2015 Financial Statements and Federal Single Audit Report
Financial Statements and Federal Single Audit
Report
City of Port Townsend
Jefferson County
For the period January 1, 2015 through December 31, 2015
Published September 1, 2016
Report No. 1017340
Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388
September 1, 2016
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report on the City of Port Townsend’s financial statements and
compliance with federal laws and regulations.
We are issuing this report in order to provide information on the City’s financial condition.
Sincerely,
TROY KELLEY
STATE AUDITOR
OLYMPIA, WA
Washington State Auditor’s Office
TABLE OF CONTENTS
Schedule Of Findings And Questioned Costs ................................................................................. 4
Independent Auditor’s Report On Internal Control Over Financial Reporting And On
Compliance And Other Matters Based On An Audit Of Financial Statements Performed In
Accordance With Government Auditing Standards ....................................................................... 6
Independent Auditor’s Report On Compliance For Each Major Federal Program And Report
On Internal Control Over Compliance In Accordance With The Uniform Guidance .................... 9
Independent Auditor’s Report On Financial Statements .............................................................. 12
Financial Section ........................................................................................................................... 15
About The State Auditor’s Office ................................................................................................. 40
Washington State Auditor's Office
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
City of Port Townsend
Jefferson County
January 1, 2015 through December 31, 2015
SECTION I – SUMMARY OF AUDITOR’S RESULTS
The results of our audit of the City of Port Townsend are summarized below in accordance with
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Financial Statements
We issued an unmodified opinion on the fair presentation of the City’s financial statements in
accordance with its regulatory basis of accounting. Separately, we issued an adverse opinion on
the fair presentation of all funds with regard to accounting principles generally accepted in the
United States of America (GAAP) because the financial statements are prepared using a basis of
accounting other than GAAP.
Internal Control over Financial Reporting:
Significant Deficiencies: We reported no deficiencies in the design or operation of
internal control over financial reporting that we consider to be significant deficiencies.
Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
We noted no instances of noncompliance that were material to the financial statements of the
City.
Federal Awards
Internal Control over Major Programs:
Significant Deficiencies: We reported no deficiencies in the design or operation of
internal control over major federal programs that we consider to be significant
deficiencies.
Material Weaknesses: We identified no deficiencies that we consider to be material
weaknesses.
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We issued an unmodified opinion on the City’s compliance with requirements applicable to its
major federal program.
We reported no findings that are required to be disclosed in accordance with 2 CFR 200.516(a).
Identification of Major Federal Programs:
The following program was selected as a major program in our audit of compliance in
accordance with the Uniform Guidance.
CFDA No. Program or Cluster Title
66.468 Capitalization Grants for Drinking Water State Revolving Funds
The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by
the Uniform Guidance, was $750,000.
The City did not qualify as a low-risk auditee under the Uniform Guidance.
SECTION II – FINANCIAL STATEMENT FINDINGS
None reported.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED
COSTS
None reported.
Washington State Auditor's Office
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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
City of Port Townsend
Jefferson County
January 1, 2015 through December 31, 2015
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
We have audited, 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, the financial statements of the
City of Port Townsend, Jefferson County, Washington, as of and for the year ended
December 31, 2015, and the related notes to the financial statements, which collectively
comprise the City’s financial statements, and have issued our report thereon dated
August 25, 2016.
We issued an unmodified opinion on the fair presentation of the City’s financial statements in
accordance with its regulatory basis of accounting. We issued an adverse opinion on the fair
presentation with regard to accounting principles generally accepted in the United States of
America (GAAP) because the financial statements are prepared by the City using accounting
practices prescribed by Washington State statutes and the State Auditor’s Budgeting, Accounting
and Reporting System (BARS) manual described in Note 1, which is a basis of accounting other
than GAAP. The effects on the financial statements of the variances between the basis of
accounting described in Note 1 and accounting principles generally accepted in the United States
of America, although not reasonably determinable, are presumed to be material.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit of the financial statements, we considered the City’s
internal control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinion on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s
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internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s
internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
possibility that a material misstatement of the City's financial statements will not be prevented,
or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet
important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies. Given these limitations, during our audit we did
not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City’s financial statements are free
from material misstatement, we performed tests of the City’s compliance with certain provisions
of laws, regulations, contracts and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audit, and
accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are
required to be reported under Government Auditing Standards.
PURPOSE OF THIS REPORT
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of
the City’s internal control or on compliance. This report is an integral part of an audit performed
in accordance with Government Auditing Standards in considering the City’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose. However,
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this report is a matter of public record and its distribution is not limited. It also serves to
disseminate information to the public as a reporting tool to help citizens assess government
operations.
TROY KELLEY
STATE AUDITOR
OLYMPIA, WA
August 25, 2016
Washington State Auditor's Office
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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR
EACH MAJOR FEDERAL PROGRAM AND REPORT ON
INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE
WITH THE UNIFORM GUIDANCE
City of Port Townsend
Jefferson County
January 1, 2015 through December 31, 2015
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM
We have audited the compliance of the City of Port Townsend, Jefferson County, Washington,
with the types of compliance requirements described in the U.S. Office of Management and
Budget (OMB) Compliance Supplement that could have a direct and material effect on each of
the City’s major federal programs for the year ended December 31, 2015. The City’s major
federal programs are identified in the accompanying Schedule of Findings and Questioned Costs.
Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and
conditions of its federal awards applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal
programs based on our audit of the types of compliance requirements referred to above. We
conducted our audit of compliance in accordance with auditing standards generally accepted in
the United States of America; the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States; and the
audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform
Guidance). Those standards and the Uniform Guidance 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
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program occurred. An audit includes examining, on a test basis, evidence about the City’s
compliance with those requirements and performing such other procedures as we considered
necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each
major federal program. Our audit does not provide a legal determination on the City’s
compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended December 31, 2015.
REPORT ON INTERNAL CONTROL OVER COMPLIANCE
Management of the City is responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and
performing our audit of compliance, we considered the City’s internal control over compliance
with the types of requirements that could have a direct and material effect on each major federal
program in order to determine the auditing procedures that are appropriate in the circumstances
for the purpose of expressing an opinion on compliance for each major federal program and to
test and report on internal control over compliance in accordance with the Uniform Guidance,
but not for the purpose of expressing an opinion on the effectiveness of internal control over
compliance. Accordingly, we do not express an opinion on the effectiveness of the City's
internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on
a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance
requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
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control that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.
Purpose of this Report
The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other
purpose. However, this report is a matter of public record and its distribution is not limited. It
also serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
TROY KELLEY
STATE AUDITOR
OLYMPIA, WA
August 25, 2016
Washington State Auditor's Office
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INDEPENDENT AUDITOR’S REPORT ON
FINANCIAL STATEMENTS
City of Port Townsend
Jefferson County
January 1, 2015 through December 31, 2015
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of the City of Port Townsend, Jefferson
County, Washington, for the year ended December 31, 2015, and the related notes to the
financial statements, which collectively comprise the City’s financial statements, as listed on
page 15.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the financial reporting provisions of Washington State statutes and the
Budgeting, Accounting and Reporting System (BARS) manual prescribed by the State Auditor
described in Note 1. This includes determining that the basis of accounting is acceptable for the
presentation of the financial statements in the circumstances. Management is also responsible
for the design, implementation and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
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statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the City’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the City’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Unmodified Opinion on Regulatory Basis of Accounting (BARS Manual)
As described in Note 1, the City of Port Townsend has prepared these financial statements to
meet the financial reporting requirements of Washington State statutes using accounting
practices prescribed by the State Auditor’s Budgeting, Accounting and Reporting System (BARS)
manual. Those accounting practices differ from accounting principles generally accepted in the
United States of America (GAAP). The differences in these accounting practices are also
described in Note 1.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position and results of operations of the City of Port Townsend, for the year ended
December 31, 2015, on the basis of accounting described in Note 1.
Basis for Adverse Opinion on U.S. GAAP
Auditing standards issued by the American Institute of Certified Public Accountants (AICPA)
require auditors to formally acknowledge when governments do not prepare their financial
statements, intended for general use, in accordance with GAAP. The effects on the financial
statements of the variances between GAAP and the accounting practices the City used, as
described in Note 1, although not reasonably determinable, are presumed to be material. As a
result, we are required to issue an adverse opinion on whether the financial statements are
presented fairly, in all material respects, in accordance with GAAP.
Adverse Opinion on U.S. GAAP
The financial statements referred to above were not intended to, and in our opinion they do not,
present fairly, in accordance with accounting principles generally accepted in the United States
of America, the financial position of the City of Port Townsend, as of December 31, 2015, or the
changes in financial position or cash flows for the year then ended, due to the significance of the
matter discussed in the above “Basis for Adverse Opinion on U.S. GAAP” paragraph.
Washington State Auditor's Office
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Other Matters
Supplementary and Other Information
Our audit was performed for the purpose of forming an opinion on the financial statements taken
as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for
purposes of additional analysis as required by U.S. Office of Management and Budget Circular
A-133, Audits of States, Local Governments, and Non-Profit Organizations. Title 2 U.S. Code of
Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards (Uniform Guidance). The accompanying Schedule
of Liabilities is also presented for purposes of additional analysis, as required by the prescribed
BARS manual. These schedules are not a required part of the financial statements. Such
information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the financial statements. The
information has been subjected to the auditing procedures applied in the audit of the financial
statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America. In our
opinion, the information is fairly stated, in all material respects, in relation to the financial
statements taken as a whole.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING
STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated
August 25, 2016 on our consideration of the City’s internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing
of internal control over financial reporting and compliance and the results of that testing, and not
to provide an opinion on internal control over financial reporting or on compliance. That report
is an integral part of an audit performed in accordance with Government Auditing Standards in
considering the City’s internal control over financial reporting and compliance.
TROY KELLEY
STATE AUDITOR
OLYMPIA, WA
August 25, 2016
Washington State Auditor's Office
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FINANCIAL SECTION
City of Port Townsend
Jefferson County
January 1, 2015 through December 31, 2015
FINANCIAL STATEMENTS
Fund Resources and Uses Arising from Cash Transactions – 2015
Fiduciary Fund Resources and Uses Arising from Cash Transactions – 2015
Notes to Financial Statements – 2015
SUPPLEMENTARY AND OTHER INFORMATION
Schedule of Liabilities – 2015
Schedule of Expenditures of Federal Awards – 2015
Notes to the Schedule of Expenditures of Federal Awards – 2015
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Total for All
Funds
(Memo Only)010 General Fund
101 Drug
Enforcement
30810 Reserved 1,727,712 --
30880 Unreserved 6,620,033 722,067 557
388 & 588 Prior Period Adjustments, Net 702 --
310 Taxes 10,921,905 5,408,986 -
320 Licenses and Permits 461,926 461,464 -
330 Intergovernmental Revenues 2,212,244 251,168 -
340 Charges for Goods and Services 8,809,536 84,491 -
350 Fines and Penalties 74,415 63,786 -
360 Miscellaneous Revenues 393,581 48,986 -
22,873,607 6,318,881 -
510 General Government 1,962,807 900,070 -
520 Public Safety 5,028,739 2,833,581 -
530 Utilities 4,766,355 --
540 Transportation 877,777 --
550 Natural and Economic
Environment
1,026,478 728,604 -
560 Social Services ---
570 Culture and Recreation 1,986,565 18,634 -
598 Miscellaneous Expenses ---
15,648,721 4,480,889 -
7,224,886 1,837,992 -
370-380, 395 & 398 Other Financing Sources 895,776 23,533 -
391-393 Debt Proceeds 6,263,397 --
397 Transfers-In 5,810,591 6,713 -
12,969,764 30,246 -
580, 596 & 599 Other Financing Uses 731,732 23,654 -
591-593 Debt Service 3,003,968 --
594-595 Capital Expenditures 10,558,625 70,164 -
597 Transfers-Out 5,801,897 1,520,109 -
20,096,222 1,613,927 -
98,428 254,311 -
5081000 Reserved 1,259,860 --
5088000 Unreserved 7,187,015 976,378 557
8,446,875 976,378 557
Total Nonoperating Expenditures:
Net Increase (Decrease) in Cash and Investments:
Ending Cash and Investments
Total Ending Cash and Investments
Operating Expenditures
Total Operating Expenditures:
Net Operating Increase (Decrease):
Nonoperating Revenues
Total Nonoperating Revenues:
Nonoperating Expenditures
City of Port Townsend
Fund Resources and Uses Arising from Cash Transactions
For the Year Ended December 31, 2015
Beginning Cash and Investments
Operating Revenues
Total Operating Revenues:
The accompanying notes are an integral part of this statement.
Washington State Auditor's Office
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102 Contingency
Fund 110 Street 120 Library
135 Real Estate
Excise Tax Fund 150 Lodging Tax 171 Fire and EMS
------
145,721 111,334 161,323 40,408 120,843 25,568
------
4,000 557,530 1,007,315 537,694 443,859 2,389,071
-462 ----
-197,128 7,336 ---
-5,300 ----
--10,629 ---
155 2,229 28,226 207 -314
4,155 762,649 1,053,506 537,901 443,859 2,389,385
----21,030 -
-----2,195,158
------
-493,425 ----
----247,513 -
------
--959,149 ---
------
-493,425 959,149 -268,543 2,195,158
4,155 269,224 94,357 537,901 175,316 194,227
--100 ---
------
------
--100 ---
------
-----187,082
--103,928 -32,349 -
-184,870 -510,000 106,713 -
-184,870 103,928 510,000 139,062 187,082
4,155 84,354 (9,471)27,901 36,254 7,145
------
149,876 195,688 151,852 68,309 157,097 32,713
149,876 195,688 151,852 68,309 157,097 32,713
Cityof PortTownsend
FundResources andUses Arising from Cash Transactions
For theYear EndedDecember 31,2015
The accompanying notes are an integral part of this statement.
Washington State Auditor's Office
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180 Affordable
Housing Fund
190 Community
Dev Block Grants
199 Community
Services
200 G.O. Debt
Service
301 General CIP
Projects
411 Water Sewer
Fund
-----1,727,712
30,626 152,445 50,406 5,070 395,569 3,616,857
-----702
10,000 -461,450 102,000 --
------
-39,507 --1,680,724 3,968
--112,807 --6,136,343
------
36 160 38,973 590 432 270,112
10,036 39,667 613,230 102,590 1,681,156 6,410,423
--355,698 1,582 -439,547
------
-----3,201,391
------
-50,361 ----
------
--1,008,782 ---
------
-50,361 1,364,480 1,582 -3,640,938
10,036 (10,694)(751,250)101,008 1,681,156 2,769,485
--16,680 -630,430 224,033
----4,245,737 2,017,660
--805,000 2,304,267 1,559,210 1,085,401
--821,680 2,304,267 6,435,377 3,327,094
--15,137 --691,491
---2,345,161 45,660 426,065
----4,750,817 5,336,782
----2,419,804 1,060,401
--15,137 2,345,161 7,216,281 7,514,739
10,036 (10,694)55,293 60,114 900,252 (1,418,160)
-----1,259,860
40,662 141,751 105,699 65,184 1,295,821 2,667,251
40,662 141,751 105,699 65,184 1,295,821 3,927,111
The accompanying notes are an integral part of this statement.
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412 Storm Fund
500 Equipment
Rental 540 PW Admin
555 Engineering
Services
595
Unemployment
Self-Insurance
-----
235,971 713,670 19,856 46,742 25,000
-----
-----
-----
32,413 ----
509,329 755,628 322,138 883,500 -
-----
238 2,837 9 51 26
541,980 758,465 322,147 883,551 26
-244,520 --360
-----
444,500 -305,515 814,949 -
-384,352 ---
-----
-----
-----
-----
444,500 628,872 305,515 814,949 360
97,480 129,593 16,632 68,602 (334)
--1,000 --
-----
-50,000 ---
-50,000 1,000 --
-10 -1,440 -
-----
198,847 63,909 -1,829 -
-----
198,847 63,919 -3,269 -
(101,367)115,674 17,632 65,333 (334)
-----
134,604 829,344 37,488 112,075 24,666
134,604 829,344 37,488 112,075 24,666
The accompanying notes are an integral part of this statement.
Washington State Auditor's Office
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Total for All Funds
(Memo Only)
601 Refundable
Deposits
610 Firemen's
Pension 613 Court-Agency
308 Beginning Cash and Investments 350,734 90,466 213,021 11,604
388 & 588 Prior Period Adjustments, Net ----
310-360 Revenues 48,691 91 35,253 -
380-390 Other Increases and Financing Sources 255,933 4,900 -251,033
510-570 Expenditures 34,545 -33,437 -
580-590 Other Decreases and Financing Uses 163,549 14,952 -134,887
106,530 (9,961)1,816 116,146
508 Ending Cash and Investments 457,264 80,505 214,837 127,750
621 Memorial
623 Golf Course
Fund
308 Beginning Cash and Investments 12,049 23,594
388 & 588 Prior Period Adjustments, Net --
310-360 Revenues -13,347
380-390 Other Increases and Financing Sources --
510-570 Expenditures -1,108
580-590 Other Decreases and Financing Uses 9,500 4,210
(9,500)8,029
508 Ending Cash and Investments 2,549 31,623
City of Port Townsend
Fiduciary Fund Resources and Uses Arising from Cash Transactions
For the Year Ended December 31, 2015
Net Increase (Decrease) in Cash and Investments:
Net Increase (Decrease) in Cash and Investments:
The accompanying notes are an integral part of this statement.
Washington State Auditor's Office
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City of Port Townsend Notes to the Financial Statements For the Year Ended December 31, 2015
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Port Townsend was incorporated on January 16, 1860 and operates under the laws of the
State of Washington applicable to a non-charter code city. The city is a general purpose local
government and provides police and fire protection, water, sewer, storm drainage, as well as maintaining
parks, streets, and a library for use by its citizens.
The City of Port Townsend reports financial activity in accordance with the Cash Basis Budgeting,
Accounting and Reporting System (BARS) Manual prescribed by the State Auditor’s Office under the
authority of Washington State law, Chapter 43.09 RCW. This manual prescribes a financial reporting
framework that differs from generally accepted accounting principles (GAAP) in the following manner:
Financial transactions are recognized on a cash basis of accounting as described below.
Component units are required to be disclosed, but are not included in the financial statements.
Government-wide statements, as defined in GAAP, are not presented.
All funds are presented, rather than a focus on major funds.
The Schedule of Liabilities is required to be presented with the financial statements as
supplementary information.
Supplementary information required by GAAP is not presented.
Ending balances are not presented using the classifications defined in GAAP.
A.Fund Accounting
Financial transactions of the government are reported in individual funds. Each fund uses a
separate set of self-balancing accounts that comprises its cash and investments, revenues and
expenditures. The government’s resources are allocated to and accounted for in individual funds
depending on their intended purpose. Each fund is reported as a separate column in the financial
statements.
The following fund types are used:
GOVERNMENTAL FUND TYPES:
General Fund (Fund 010):
This fund is the primary operating fund of the city. It accounts for all financial resources except
those required or elected to be accounted for in another fund.
Special Revenue Funds (Funds in the 100 series):
These funds account for specific revenue sources derived from specific taxes, grants or other
sources, which are restricted or committed to expenditures for specified purposes of the city.
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(Note: In prior years, the City has reported its System Development Charge Fund in the 100 series.
In 2014, this fund was reassigned as a proprietary fund (400 series) as this fund was created to fund
water and wastewater capital improvements and replacements.)
Debt Service Funds (Funds in the 200 series):
These funds account for the financial resources that are restricted, committed, or assigned to
expenditures for principal, interest and related costs on general long-term debt.
Capital Projects Funds (Funds in the 300 series):
These funds account for financial resources which are restricted, committed, or assigned for the
acquisition or construction of capital facilities or other capital assets.
Permanent Funds
These funds account for financial resources that are legally restricted to the extent that only
earnings, and not principal, may be used for purposes that support programs for the benefit of the
government or its citizenry.
PROPRIETARY FUND TYPES:
Enterprise Funds (Funds in the 400 series):
These funds account for operations that provide goods or services to the general public and are
supported primarily through user charges. (Note: In prior years, the City has reported its System
Development Charge Fund in the 100 series. In 2014, this fund was reassigned as an enterprise
fund (400 series) as this fund was created to fund water and wastewater capital improvements and
replacements.)
Internal Service Funds (Funds in the 500 series):
These funds account for operations that provide goods or services to other departments or funds
of the city or other governmental units on a cost reimbursement basis.
FIDUCIARY FUND TYPES:
Fiduciary funds account for assets held by the government in a trustee capacity or as an agent on
behalf of others.
Refundable Deposits (Fund 601):
This fund accounts for deposits being held pending city criteria for builders being fulfilled.
Pension (and Other Employee Benefit) Trust Funds (Fund 610):
This fund is used to account for financial resources to pay retiree benefits related to the Fire
Fighters’ Retirement System (Firemen’s Pension).
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Agency Funds (Funds 613 – 699):
These funds are used to account assets that the city holds on behalf of others in a custodial
capacity.
B.Basis of Accounting and Measurement Focus
Financial statements are prepared using the cash basis of accounting and measurement focus.
Revenues are recognized when cash is received and expenditures are recognized when paid,
including those properly chargeable against the prior year(s) budget appropriations as required by
state law.
In accordance with state law the city also recognizes expenditures paid during twenty days after
the close of the fiscal year for claims incurred during the previous period.
Purchases of capital assets are expensed during the year of acquisition. There is no capitalization
of capital assets, nor allocation of depreciation expense. Inventory is expensed when purchased.
C.Budgets
The city adopts annual appropriated budgets for all funds. These budgets are appropriated at the
fund level. The budget constitutes the legal authority for expenditures at that level. Annual
appropriations for these funds lapse at the fiscal year end.
Annual appropriated budgets are adopted on the same basis of accounting as used for financial
reporting.
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The appropriated and actual expenditures for the legally adopted budgets were as follow:
Budgeted amounts are authorized to be transferred within any fund/object classes within
departments; however, any revisions that alter the total expenditures of a fund, or that affect the
number of authorized employee positions, salary ranges, hours, or other conditions of employment
must be approved by the city council.
D.Cash and Investments
It is the city’s policy to invest all temporary cash surpluses. The interest on these investments is
prorated to the various funds.
All deposits are covered by the Federal Deposit Insurance Corporation and/or by collateral held in
a multiple financial institution pool administered by the Washington Public Deposit Protection
Commission.
Final AppropriatedActual
AmountsExpendituresVariance
General 7,396,202$ 7,281,959$ 114,243$
Street 703,650$ 678,295$ 25,355$
Library 1,064,944$ 1,063,079$ 1,865$
Real Estate Excise Tax Fund 510,000$ 510,000$ -$
Lodging Tax 433,030$ 407,605$ 25,425$
Fire & EMS Service 2,384,803$ 2,382,240$ 2,563$
Affordable Housing Fund -$
Community Development Block Grants 60,000$ 50,361$ 9,639$
Community Services 1,429,050$ 1,379,617$ 49,432$
GO Debt Service 2,350,181$ 2,346,741$ 3,440$
Capital Improvement 8,586,618$ 7,214,932$ 1,371,685$
Water/Sewer Utility 4,412,974$ 4,308,593$ 104,381$
Utility Construction Fund 7,870,497$ 5,577,713$ 2,292,784$
Trans line Replacement 838,530$ 828,873$ 9,657$
1978 Water Sewer Rev Bond 24,000$ 24,000$ -$
Water Capital Debt Reserve -$ 300,297$ (300,297)$
Storm water 644,118$ 643,348$ 770$
Equipment Rental 710,408$ 692,793$ 17,615$
Public Work & Admin 308,792$ 305,516$ 3,276$
Engineering Service Fund 826,679$ 818,218$ 8,461$
System Development Charges 230,000$ 116,193$ 113,807$
Unemployment Self Insurance 500$ 360$ 140$
Firemen's Pension 37,394$ 33,437$ 3,957$
Court Agency Funds 133,709$ 159,339$ (25,631)$
Golf Course Fund 6,710$ 5,318$ 1,392$
TOTAL 40,962,788$ 37,128,828$ 3,833,960$
FISCAL YEAR 2015
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The city’s investments are insured, registered, or held by the city or its agent in the city’s name. As
required by state law, all investments of the city’s funds are obligations of the U.S. Government,
the Washington State Treasurer’s Investment Pool, or deposits with Washington State banks and
savings and loan institutions.
Investments are reported at fair value. Investment activity for the year ending December 31, 2015
is listed below:
E.Capital Assets
The city is responsible for stewardship of public resources and as such, has policies and procedures
in place to track, demonstrate accountability, and insure security of all assets.
Operating under a cash basis, capital assets and inventory are recorded as capital expenditures
when purchased; because the entire expenditure is recognized in the period when the cash outflow
occurs, the reporting of depreciation accounts is not appropriate.
Capital Improvements are defined as projects to create, expand, or modify a capital facility. The
project may include design permitting, environmental analysis, land acquisition, construction,
landscaping, site improvements, initial furnishings, and equipment. The project cost must exceed
$15,000 and have a useful life of five years.
F.Compensated Absences
Vacation leave may be accumulated up to 240 hours for regular employees and 360 hours for
department heads. Vacation leave is payable upon separation or retirement. Sick leave may be
accumulated up to 1,440 hours. Upon separation or retirement employees do not receive payment
for unused sick leave. Expenditures related to leave are recognized when paid.
The compensated absence balances increased by $3,619 from 2014 to 2015, ending at $439,039
for the year.
City of Port Townsend
State of Washington
Local Government Investment Pool
1/1/2015 Beginning Balance 6,444,672$
Gross Investment Earnings 11,188$
Administrative Fees (597)
Net Investment Earnings 10,591
Deposits -$
Withdrawals -
-
12/31/2015Ending Balance (Market Value)6,455,263$
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G.Long-Term Debt
See Note 4.
H.Other Financing Sources or Uses
The city’s Other Financing Sources or Uses consist of operating transfers-in, operating transfers-
out, special assessment bond proceeds, and proceeds from refunding bonds.
I.Risk Management
See Note 6.
J.Reserved Portion of Ending Cash and Investments
Beginning and Ending Cash and Investments is reported as reserved when it is subject to
restrictions on use imposed by external parties or due to internal commitments established by the
City Council through a formal action (e.g. ordinance or resolution). When expenditures that meet
restrictions are incurred, the city intends to use reserved resources first before using unreserved
amounts.
Reservations of Ending Cash and Investments consist as of December 31, 2015 are $1,259,860.
These funds were reserved by Trust in 1956 for system replacement or improvements related to
the Olympic Gravity Water System Pipeline (Ordinance 1321).
NOTE 2 – COMPLIANCE AND ACCOUNTABILITY
There have been no material violations of finance related legal or contractual provisions. No City of
Port Townsend funds made expenditures in excess of legal appropriations.
NOTE 3 – PROPERTY TAXES
The Jefferson County Treasurer acts as agent to collect property taxes levied in the county for all taxing
authorities. Collections are distributed after the total collected surpasses $10,000; with any balance
left over distributed at month-end.
Property tax revenues are recognized when cash is collected. Delinquent taxes are considered fully
collectible because a lien affixes to the property when taxes are levied.
The city’s regular levy for 2015 was $1.66940 per $1,000 on assessed valuation of $1,299,381,068 for
a total regular levy of $2,169,187.39.
A Library LID lift was approved by voters in 2008 to be phased in over 2009-2011. For 2015 the library
levy was $0.77421 per $1,000 for a total of $1,006,000.00.
Voters approved a Fire LID lift in 2012. For 2015 the Fire LID lift was $0.51206 per $1,000 for a tax
amount of $665,366.06.
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The city also has a special levy for Emergency Medical Services (EMS). The EMS levy rate was voter
approved in 2010 to $0 .50 per $1,000 for a total levy of $649,690.53 in 2015.
In 2015, voters approved a tax levy for improvements to the Mountain View Commons. The tax levy
pays for the debt service on the bonds issued to make these improvements. The levy rate for 2015
was $0.05 per $1,000 of assessed property value.
NOTE 4 – LONG TERM DEBT
The accompanying schedule of Long Term Liabilities (Schedule 09) provides a listing of the outstanding
debt of the city and summarizes the City of Port Townsend’s debt transactions for Calendar Year 2015.
The debt services payments for the year being reported and future payment requirements, including
interest, are listed in the table below. In addition to the debt service payments noted below, the City
made an intergovernmental loan payment to East Jefferson Fire & Rescue (see note 10).
DEBT SERVICE SCHEDULE
Year G.O.
Bonds
G.O. Bond
Anticipation
Line of
Credit
Revenue
Bonds
Other
Debt
Total Long
Term Debt
2015 $1,184,345 $1,206,475 $24,000 $402,056 $2,816,876
2016 $1,468,799 $0 $23,000 $522,621 $2,014,420
2017 $1,582,565 $0 $22,000 $662,028 $2,266,593
2018 $1,585,000 $0 $21,000 $615,195 $2,221,195
2019 $1,585,750 $0 $0 $566,693 $2,152,443
2020-2024 $7,842,660 $0 $0 $2,193,328 $10,035,988
2025-2029 $6,862,238 $0 $0 $1,571,993 $8,434,230
2030-2034 $4,339,875 $0 $0 $915,745 $5,255,620
2035-2038 $2,695,750 $0 $0 $150,900 $2,846,650
Total $29,146,982 $1,206,475 $90,000 $7,600,557 $38,044,014
A.Bonds
The City of Port Townsend issues general obligation and revenue bonds to finance the construction and
remodel of capital assets. Bonded indebtedness has also been entered into to advance refund revenue
bonds. General obligation bonds have been issued for both general government and business-type
activities and are being repaid from the applicable resources. The revenue bonds are being repaid by
proprietary fund revenues.
In 2008 the City issued $7,500,000 in Limited General Obligation Bonds to finance road and sidewalk
improvements, as well as tourism, infrastructure, and waterfront access improvements. In 2010 the
City issued an additional $3,740,000 in bonds for sidewalks, utilities and street improvements, as well
as funding for the Carnegie Library seismic retrofit. In 2012 the City refunded the balance of the 1999
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General Obligation Bonds and the 2005 General Obligation Bonds. As part of the same financing,
$1,505,000 of the 2003 Bonds were advance refunded as well as $2,500,000 of the 2002 Bonds.
In 2014, the City Council authorized a Limited General Obligation Bond Anticipation Note (BAN) for
$1,500,000. On December 3, 2014, the City executed a line of credit with Cashmere Valley Bank totaling
$1,200,000. The BAN line of credit interest rate is a variable rate tied to the LIBOR (London Interbank
Offered Rate) and is calculated as 65% of the 3 month LIBOR rate plus 1.05%. The city paid off the
draw of $1,200,000 in July 2015 along with interest payments of $6,475.23. The rate as of 12/29/2015
was 1.267133%. The maturity date of the line of credit is December 1, 2017.
In 2015, the City issued $3,385,000 in voter approved Unlimited Tax General Obligation bonds to
finance energy retrofits, building improvements at city facilities located at Mountain View Commons,
which houses municipal services and social and public service organizations, and other general capital
project costs. The bond is being repaid by a voted property tax assessment and other City tax receipts.
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General Obligation Debt currently outstanding as of December 31, 2015 is as follows:
Proprietary Long Term Debt currently outstanding as of December 31, 2015 is as follows:
B.
Issue
Year Purpose Original Issue Interest Rate Maturity Date
Debt
Outstanding
2008
Limited G.O. Bonds for
construction funds for civic
and street improvements $7,500,000 4.15 - 5.00%12/1/2038 $7,500,000
2010
Limited G.O. Bonds for
street, sidewalk, utilities
and historic district $3,740,000 2.30 - 5.00%12/1/2030 $3,740,000
2012
Limited G.O. Bonds for
refunding of 1999 Bonds, a
portion of the 2002 G.O.
Bonds, and a portion of the
2005 G.O. Bonds $5,530,000 .50 - 4.25%12/1/2025 $4,110,000
2014
Limited G.O. Bond
Anticipation Note (Line of
Credit) for capital
improvments at the
Mountain View campus and
other general capital
project costs $1,500,000
Variable rate tied
to Libor index
(65% of 3 month
Libor plus 1.05%,
rate as of
12/31/2015 -
1.267133% 12/1/2017 $0
2015
Voted Unlimited G.O.
Bonds for energy retrofits
and capital improvments at
the Mountain View campus
and other general capital
projects $3,385,000 2.0% - 4.0%12/1/2031 $3,385,000
Total$18,735,000
G.O. LONG TERM OUTSTANDING DEBT
Issue
Year Purpose Original Issue Interest Rate Maturity Date
Debt
Outstanding
1978
Water/Sewer Revenue
Bonds for Water and Sewer
Improvements $395,000 5.00%12/1/2018$60,000
PROPRIETARY LONG TERM DEBT
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C.Public Works Trust Fund Loans and State Revolving Fund Loans
State of Washington Public Works Trust Funds (PWTF) Loans are intergovernmental loans from the
Public Works Board to undertake local public works projects. These loans are a direct responsibility of
the City of Port Townsend. The City currently has seven such loans.
State Revolving Fund (SRF) Loans are State of Washington Department of Ecology low interest loans
for projects that protect and improve water quality. The City of Port Townsend has two SRF loans.
The 2012 PWTF, 2012 DWSRF, and 2013 PWTF Loans have not drawn down the full loan amount
available; the debt outstanding reflects current drawdowns less any principal payments.
The 2012 PWTF Loan for the Water Treatment Facility listed in the chart reflects an outstanding balance
at the end of the year of $1,790,742. The city authorized a draw on the loan on December 31, 2015
for $161,386 but did not receive the funds until January 2016. Additionally, the 2013 PWTF Loan for
the 5 MG Reservoir Replacement loan balance represents two authorized draws on December 31 2015
for $534,708 but the funds were not received until January 2016. Schedule 9 of the City’s annual report
includes the 12/31/2015 draws on both of these loans but they are not included in Schedule 1 or the
financial statements, as the City has adopted the cash basis of accounting. Schedule 9 also includes a
loan fee applied to the loan balance for the 2014 DWSRF loan for the 5 MG Reservoir Replacement in
the amount of $68,277. The City did not receive the funds for the loan fee but are obligated to repay
loan fees under the terms of the agreement. The schedule below includes the outstanding balance for
all loans and loan draws, including the December 31, 2015 draws not received until January 2016.
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As of December 31, 2015 the long-term debt payable for PWTF and SRF loans consisted of the following:
NOTE 5 – PENSION PLANS
A.State Sponsored Plans
Substantially all city full-time and qualifying part-time employees participated in Public Employee’s
Retirement System (PERS), Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF)
Volunteer Firemen Relief and Pension Fund, Firemen’s Pension and Relief Fund administered by the
Department of Retirement Systems (DRS), under cost-sharing multiple-employer public employee
defined benefit and defined contribution employee retirement plans. Actuarial information is on a
system-wide basis and is not considered pertinent to the City’s financial statements. Contributions to
the systems by both employee and employer are based upon gross wages covered by the plan.
Issue
Year Purpose Original Issue Interest Rate
Maturity
Date
Debt
Outstanding
1998
PWTF Loan: CT Pipeline Tri-Area
Water Storage, Tri-Area Well
Upgrades $2,172,055 1.00%12/1/2018 $134,154
1999
PWTF Loan: Gaines Street Lift
Station; San Juan Street Trunk Line $1,434,365 1.00%12/1/2019 $238,379
2001
PWTF Loan: Wastewater
Treatment Outfall Expansion;
Trunk Sewer Line Replacement $1,153,350 0.50%12/1/2021 $331,658
2002
PWTF Loan: Morgan Hill Water
System Improvements $1,263,453 0.50%12/1/2022 $466,913
2005
SRF Loan: Dept of Ecology Loan:
Wastewater Conveyance Storm
and Sewer Separation; Gains
Street Lift Station Phase II; Trunk
Sewer Line Replacement $856,803 1.50%9/8/2024 $427,146
2012 PWTF Loan: City Lake Repair $1,000,000 0.50%12/1/2031 $842,105
2012
PWTF Loan: Mandated LT2 Water
Treatment Facility $1,896,000 0.50%12/1/2031 $1,790,742
2012
DWSRF Loan: LT2 Federally
Mandated Water Treatment
Facility $3,071,521 1.50%12/1/2036 $1,475,790
2013
PWTF Loan: 5 MG Reservoir
Replacement $5,000,000 0.50%6/1/2032 $949,143
2014
DWSRF Loan: Replacement for
Primary 5MG Reservoir with
Booste $6,896,0071.50%12/1/2034$68,277
Total $6,724,309
PUBLIC WORKS AND STATE REVOLVING FUND LOAN SCHEDULE
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The State Legislature establishes, and amends, laws pertaining to the creation and administration of
all public retirement systems.
The Department of Retirement Systems, a department within the primary government of the State of
Washington, issues a publically available comprehensive annual financial report (CAFR) that includes
financial statements and required supplementary information for each plan. The DRS CAFR may be
obtained by writing to:
Department of Retirement Systems
Communication Unit
PO Box 48380
Olympia, WA 98504-8380
Also, the DRS CAFR may be downloaded from the DRS website at www.drs.wa.gov.
At June 30, 2015 (the measurement date of the plans), the city’s proportionate share of the collection
net pension liabilities as reported on Schedule 09 was as follows:
The city also participates in the LEOFF Plan 2. The Legislature, by means of a special funding
arrangement, appropriates money from the state general fund to supplement the current service
liability and fund the prior service costs of Plan 2 in accordance with the recommendation of the
pension Funding Council and the LEOFF Plan 2 Retirement Board. This special funding situation is not
mandated by the state constitution and could be changed by statute.
B.Local Government Pension Plans
The City of Port Townsend is also the administrator of a pension retirement system called Firemen’s
Pension. The system is shown as a trust fund in the financial statements of the City of Port Townsend.
As of December 31, 2015 there were a total of three individuals covered and drawing benefits under
this system. None of these individuals were employed by the City in 2015. One individual previously
covered under this plan expired in 2015.
As of December 31, 2015 the market value of assets was $214,836.
NOTE 6 – RISK MANAGEMENT
The City of Port Townsend is a member of the Washington Cities Insurance Authority (WCIA). Utilizing
Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (Inter local Cooperation Act),
nine cities originally formed WCIA on January 1, 1981. WCIA was created for the purpose of providing
a pooling mechanism for jointly purchasing insurance, jointly self-insuring, and / or jointly contracting
for risk management services. WCIA has a total of 179 Members.
Allocation %Liability (Asset)
PERS 10.000740%$38,709
PERS 1 UAAL0.038021%$1,988,852
PERS 2 / 30.049116%$1,754,943
$3,782,503Total Net Pension Liability
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New members initially contract for a three-year term, and thereafter automatically renew on an annual
basis. A one-year withdrawal notice is required before membership can be terminated. Termination
does not relieve a former member from its unresolved loss history incurred during membership.
Liability coverage is written on an occurrence basis, without deductibles. Coverage includes general,
automobile, police, public officials’ errors or omissions, stop gap, and employee benefits liability.
Limits are $4 million per occurrence self-insured layer, and $16 million per occurrence in the re-insured
excess layer. The excess layer is insured by the purchase of reinsurance and insurance and is subject
to aggregate limits. Total limits are $20 million per occurrence subject to aggregate sub-limits in the
excess layers. The Board of Directors determines the limits and terms of coverage annually.
Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and
machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property
insurance and auto physical damage are self-funded from the members’ deductible to $750,000, for all
perils other than flood and earthquake, and insured above that amount by the purchase of insurance.
In-house services include risk management consultation, loss control field services, claims and litigation
administration, and loss analyses. WCIA contracts for the claims investigation consultants for
personnel issues and land use problems, insurance brokerage, and lobbyist services.
WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as
determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and
administrative expenses. As outlined in the inter-local, WCIA retains the right to additionally assess
the membership for any funding shortfall.
An investment committee, using investment brokers, produces additional revenue by investment of
WCIA’s assets in financial instruments which comply with all State guidelines.
A Board of Directors governs WCIA, which is comprised of one designated representative from each
member. The Board elects an Executive Committee and appoints a Treasurer to provide general policy
direction for the organization. The WCIA Executive Director reports to the Executive Committee and is
responsible for conducting the day to day operations of WCIA.
NOTE 7 – RESTRICTED BOND FUNDS
In accordance with bond ordinances and certain related agreements, separate restricted funds are
required to be established. The assets held in these funds are restricted for specific uses, including
construction, debt service, and other special reserve requirements. As of December 31, 2015, the
City has no restricted bond funds.
NOTE 8 – CONTINGENCIES AND LITIGATION
In the opinion of management, the City’s insurance program (see Note 6) and self-insurance fund (see
Note 11) are adequate to pay all known or pending claims.
NOTE 9 – INTERFUND LOANS
In April 2012, City Council authorized an inter fund loan from the Transmission Line Replacement Fund
to the General Fund in the amount of $100,000 for the purpose of startup funding for the Main Street
excise tax program. In August 2015, the General Fund made a final payment of $33,427 to pay off the
balance of the loan with accrued interest.
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In May 2013, the City Council authorized up to a million dollar inter fund loan from the Transmission
Line Replacement Fund to the Water Capital Improvement Project fund for interim financing of
designing the Ultraviolet Water Treatment Project. The loan was for design work and appropriate City
engineering and overhead costs. As of December 31, 2015, the balance of the loan, $161,250, was
paid in full.
In November 2015, the City Council authorized an inter fund loan from the Transmission Line
Replacement Fund to the Street Capital Fund to provide the matching funds necessary to provide
matching funds for grants from the Transportation Improvement Board (TIB), Washington State
Department of Transportation Surface Transportation Program (WSDOT STP), and Community
Economic Revitalization Board (CERB). Loan financing of $295,000 was used grant matching funds for
the Howard Street Extension Project and the construction of Landes Street & Sheridan Street sidewalk
projects. In the same resolution, the City Council authorized an inter fund loan in the amount of
$180,000 from the Transmission Line Replacement Fund to the General Capital Fund for financing
energy savings improvements, equipment and software for various city buildings. These loans will be
repaid by January 31, 2018.
NOTE 10 – INTERLOCAL GOVERNMENT WITH EAST JEFFERSON FIRE RESCUE
On June 20, 2012 the City amended the agreement with East Jefferson Fire Rescue (District) to
reimburse the district for the purchase of a third fire engine. The City has committed to pay the District
a total of $392,081 (which includes interest) for the fire engine. As of December 31, 2015, the
outstanding debt service related to this agreement is $182,359. The payment schedule is as follows:
EJFR PAYMENT SCHEDULE
PAYMENT
DATE INTEREST PRINCIPAL TOTAL
5/15/2013 $11,320 $0 $11,320
5/30/2014 $11,320 $0 $11,320
5/15/2015 $9,883 $177,199 $187,082
5/31/2016 $2,615 $179,744 $182,359
Total $392,081
Loan Reference Borrowing Fund Lending Fund Balance 1/1/15
2015
Repayments New Loans
Balance
12/31/2015
Maint Street General (010)
Transmission
Line (417) $33,427 $33,427 $0 $0
LT2 Wtr Project
Water Capital
(415)
Transmission
Line (417) $161,250 $161,250 $0 $0
Landes &
Sheridan Street
Sidewalks
Street Capital
(305)
Transmission
Line (417) $0 $0 $205,000 $205,000
Howard Street
Extension
Street Capital
(305)
Transmission
Line (417) $0 $0 $115,000 $115,000
Honeywell Energy
Project
General Capital
(301)
Transmission
Line (417) $0 $0 $180,000$180,000
TOTAL$194,677$194,677$500,000$500,000
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NOTE 11 – SELF INSURANCE
The City of Port Townsend self-insures for unemployment through the State of Washington’s
Employment Security Department. When a former employee files for and obtains unemployment
coverage with the State of Washington, the City of Port Townsend is direct-billed their portion of the
unemployment benefit costs.
In 2013, the City of Port Townsend established an Unemployment Self Insurance Fund. As of December
31, 2015 the fund had a balance of $24,666 as compared to the prior year ending Fund balance of
$25,000.
NOTE 12 – MANAGEMENT FUNDS
To assist in managing the City of Port Townsend’s finances, the city has established management funds
for accounting purposes. The management fund activities are rolled into one fund for reporting
purposes.
The following funds include managerial fund activity that is reported in one fund:
Water and Sewer Utility Fund
General Government Capital Improvement Project Fund
NOTE 13 – POST EMPLOYMENT BENEFITS
The City of Port Townsend has a commitment to pay for post-employment benefits for employees that
belong to LEOFF1 retirement system. These benefits include medical insurance premiums, out-of-
pocket medical costs, and dental and vision care. Six police retirees and four Fire/EMS retirees and/or
spouses received these benefits during the year and $56,982 was paid out for those benefits.
NOTE 14 – CONSTRUCTION COMMITMENT
The City of Port Townsend has four active construction projects as of December 31, 2015. Total
construction commitment as of the end of the year totaled $14,481,180. A summary table of those
commitments is below:
TABLE OF CONSTRUCTION COMMITMENTS - 2015
PROJECT CONTRACTOR PROJECT
PHASE
CONTRACT
AMOUNT
PAID TO
DATE
REMAINING
CONTRACT
Water Treatment Phase II
HDR
Engineering Design 2,053,735 1,557,496 496,239
Water Treatment Phase II Evoqua
Equipment
Purchase 1,464,557 - 1,464,557
Water Treatment Phase II Seton Construction 1,336,983 612,141 724,842
Water Treatment Facility
& 5 MG Reservoir Steller J Construction 13,039,670 1,753,701 11,285,969
5 MG Reservoir
HDR
Engineering Construction 578,887 427,157 151,730
Howard Street Extension Berger ABAM Design 786,806 428,963 357,843
TOTAL $19,260,638 $4,779,458 $14,481,180
Washington State Auditor's Office
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NOTE 15 – PRIOR YEAR ADJUSTMENTS
There was an immaterial fund balance adjustment of $702 to the Water / Sewer fund.
NOTE 16 – SUBSEQUENT EVENTS
In February 2016, the City Council approved a bank line of credit with Kitsap Bank in the amount of
$3,000,000. The line of credit will fund interim financing needs for the Water Treatment Plant and 5
MG Reservoir, which began construction in 2015. Permanent financing for these projects is through
multiple state and federal funding programs that are received on a reimbursement basis. The line of
credit will allow the City to pay construction invoices per contract terms while awaiting reimbursement
from state and federal programs.
NOTE 17 – OTHER FINANCIAL INFORMATION
The Fort Worden Public Development Authority (The Authority) was established by Ordinance 3108
enacted by the City on September 8, 2009. That Ordinance adopted the Authority’s Charter, granting
it the power to manage, promote, develop, secure funding, and enhance the Fort Worden State Park
including undertaking, assisting with, and otherwise facilitating the implementation of a Lifelong
Learning Center at the Park.
The Authority is a public corporation authorized under the provisions of RCW 35.21.735 – 35.21.759.
It is a separate legal entity that is independent from the City. RCW 35.21.750 provides that
“…liabilities incurred by such public corporation, commission, or authority shall be satisfied exclusively
from the assets and properties of such public corporation, commission, or authority and no creditor or
other person shall have any right of action against the city, town, or county creating such corporation,
commission or authority on account of any debts, obligations, or liabilities of such public corporation,
commission, or authority.”
The Authority is governed by a Board of Directors. A nominating committee of the Authority solicits,
reviews and recommends Board Members. As the Chartering Agency, the City appoints Board
Members. The City Council also has the ability to remove Board members by resolution. The
Authority maintains independent financial reports. Financial reports are provided annually to the
City Manager and City Council and an independent audit is required annually.
In 2015, the City provided $37,500 of support to the Authority from the Lodging Tax Fund (approved
by the Lodging Tax Advisory Committee and the City Manager) to fund joint marketing of the Fort
Worden Lifelong Learning Center and the City of Port Townsend. The City also paid $500,000 to the
Fort Worden Lifelong Learning Center in 2015. $350,000 was provided from the City’s General
Capital Fund. The remaining $150,000 was funded by state Public Infrastructure Funds via a pass
through grant from Jefferson County.
Washington State Auditor's Office
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ID. No.Description Due Date
Beginning
Balance Additions Reductions Ending Balance
251.11 2008 Bond 12/1/2038 7,500,000 --7,500,000
251.11 2010 Bond 12/1/2030 3,740,000 --3,740,000
251.11 2012 Refunding Bond 12/1/2025 4,610,000 -500,000 4,110,000
263.91 2014 BAN Line of Credit 12/1/2017 600,000 600,000 1,200,000 -
251.22 2015 Bond 12/1/2031 -3,385,000 -3,385,000
263.83 EJFR Equipment Loan 5/31/2016 356,943 -177,199 179,744
16,806,943 3,985,000 1,877,199 18,914,744
264.30 Net Pension Liability -3,782,503 -3,782,503
252.11 1978 Water Revenue Bond 3/1/2018 80,000 -20,000 60,000
263.82 DOE Wastewater 10/31/2023 471,157 -44,011 427,146
263.82 1998 PWTF Loan Water 7/1/2018 178,872 -44,718 134,154
263.82 1999 PWTF Loan Sewer 7/1/2019 297,974 -59,595 238,379
263.82 2001 PWTF Loan Sewer 7/1/2021 386,935 -55,276 331,658
263.82 2002 PWTF Loan Water 7/1/2022 533,615 -66,702 466,913
263.82 2012 PWTF Loan LT2 6/1/2031 898,769 945,379 53,406 1,790,742
263.82 2012 PWTF Loan City Lake 6/1/2031 894,737 -52,632 842,106
263.82 2012 DWSRF 10/1/2036 660,128 815,661 -1,475,789
263.82 2013 PWTF Loan 5MG Reservoir 6/1/2032 -952,713 3,570 949,143
259.12 Compensated Absences 435,420 478,737 475,119 439,038
263.82 10/1/2034 -68,277 -68,277
4,837,607 7,043,270 875,029 11,005,849
21,644,550 11,028,270 2,752,228 29,920,593Total Liabilities:
City of Port Townsend
Schedule of Liabilities
For the Year Ended December 31, 2015
General Obligation Debt/Liabilities
Total General Obligation Debt/Liabilities:
Revenue and Other (non G.O.) Debt/Liabilities
2014 DWSRF 5 MG Reservoir
Replacement
Total Revenue and Other (non G.O.) Debt/Liabilities:
Washington State Auditor's Office
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From Pass-
Through
Awards
From Direct
Awards Total
Violence Against Women Office,
Department Of Justice (via WA
State Dept of Commerce)
Violence Against Women
Formula Grants
16.588 F14-31103-017 7,436 -7,436 -
Office Of Community Oriented
Policing Services, Department Of
Justice
Public Safety Partnership
and Community Policing
Grants
16.710 2012-UM-WX-
0173
-17,500 17,500 -
Federal Highway Administration
(fhwa), Department Of
Transportation (via WA State Dept
of Transportation)
Highway Planning and
Construction
20.205 STPUS-
7325(001)
215,381 -215,381 -
Federal Highway Administration
(fhwa), Department Of
Transportation (via WA State Dept
of Transportation)
Highway Planning and
Construction
20.205 STPUS-
7630(001)
45,000 -45,000 -
Federal Highway Administration
(fhwa), Department Of
Transportation (via WA State Dept
of Transportation)
Highway Planning and
Construction
20.205 STPUS-HLP(001)80,472 -80,472 -
340,853 -340,853 -
Institute Of Museum And Library
Services (via WA State Secretary of
State)
Grants to States 45.310 15-PD-018 2,780 -2,780 -
Office Of Water, Environmental
Protection Agency (via WA State
Dept of Health)
Capitalization Grants for
Drinking Water State
Revolving Funds
66.468 FS-99083909-1 2,263 -2,263 -
Office Of Water, Environmental
Protection Agency (via Public Works
Board Loan)
Capitalization Grants for
Drinking Water State
Revolving Funds
66.468 DM12-952-092 1,283,357 -1,283,357 -
1,285,620 -1,285,620 -
Department Of Homeland Security
(via WA State Military Dept)
Pre-Disaster Mitigation 97.047 E16-091 5,595 -5,595 -
1,642,284 17,500 1,659,784 -
Drinking Water State Revolving Fund Cluster
Total Drinking Water State Revolving Fund Cluster:
Total Federal Awards Expended:
Passed through
to Subrecipients Note
Highway Planning and Construction Cluster
Total Highway Planning and Construction Cluster:
City of Port Townsend
Schedule of Expenditures of Federal Awards
For the Year Ended December 31, 2015
Federal Agency
(Pass-Through Agency)Federal Program
CFDA
Number
Other Award
Number
Expenditures
The accompanying notes are an integral part of this schedule.
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CITY OF PORT TOWNSEND
NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2015
NOTE 1: BASIS OF ACCOUNTING
This schedule is prepared on the same basis of accounting as the City of Port Townsend's financial
statements. The City of Port Townsend uses the cash basis of accounting.
NOTE 2: PROGRAM COSTS
The amounts shown as current year expenditures represent only the federal portion of the program
costs. Entire program costs, including the City of Port Townsend's portion, are more than shown.
NOTE 3: INDIRECT COST RATE
In 2015 the City of Port Townsend did not opt to claim any indirect costs, therefore did not use the
10% de minimus cost rate covered in 2 CFR Sec. 200.510(b)(6).
Washington State Auditor's Office
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ABOUT THE STATE AUDITOR’S OFFICE
The State Auditor's Office is established in the state's Constitution and is part of the executive
branch of state government. The State Auditor is elected by the citizens of Washington and
serves four-year terms.
We work with our audit clients and citizens to achieve our vision of government that works for
citizens, by helping governments work better, cost less, deliver higher value, and earn greater
public trust.
In fulfilling our mission to hold state and local governments accountable for the use of public
resources, we also hold ourselves accountable by continually improving our audit quality and
operational efficiency and developing highly engaged and committed employees.
As an elected agency, the State Auditor's Office has the independence necessary to objectively
perform audits and investigations. Our audits are designed to comply with professional standards
as well as to satisfy the requirements of federal, state, and local laws.
Our audits look at financial information and compliance with state, federal and local laws on the
part of all local governments, including schools, and all state agencies, including institutions of
higher education. In addition, we conduct performance audits of state agencies and local
governments as well as fraud, state whistleblower and citizen hotline investigations.
The results of our work are widely distributed through a variety of reports, which are available
on our website and through our free, electronic subscription service.
We take our role as partners in accountability seriously, and provide training and technical
assistance to governments, and have an extensive quality assurance program.
Contact information for the State Auditor’s Of fice
Public Records requests PublicRecords@sao.wa.gov
Main telephone (360)902-0370
Toll-free Citizen Hotline (866)902-3900
Website www.sao.wa.gov
Washington State Auditor's Office
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