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HomeMy WebLinkAbout2005 Financial Statements & Federal Single Audit ReportWashington State Auditor Brian Sonntag September 1, 2006 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. In addition to this work, we look at other areas of our audit client's operations for compliance with state laws and regulations. The results of that audit will be included in a separately issued accountability report. Sincerely, BRIAN SONNTAG, CGFM STATE AUDITOR Insurance Building, P,O. Box 40021 •Olympia, Washington 98504-0021 • (360) 902-0370 • (866) 902-3900 • TDD Relay (800) 833-6388 FAX (360) 753-0646 • http-llwww.sao.wagov Table of Contents City of Port Townsend Jefferson County January 1, 2005 through December 31, 2005 Federal Summary....................................................................... .....1 independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards ........................................ 2 Independent Auditor's Report on Compliance with Requirements Applicable to its Major Program and Internal Control over Compliance in Accordance with OMB Circular A 133 ............................. 4 Independent Auditor's Report on Financial Statements............................................................................... 6 FinancialSection.......................................................................................................................................... 8 Federal Summary City of Port Townsend Jefferson County January 1, 2005 through December 31, 2005 The -results of our audit of the City of Port Townsend are summarized below in accordance with U.S. Office of Management and Budget Circular A-133. • An unqualified opinion was issued on the City's financial statements. • We noted no instances of noncompliance that were material to the financial statements of the City. • We issued an unqualified opinion on the City's compliance with requirements applicable to its major federal program. • We reported no findings which are required to be disclosed under OMB Circular A-133. • We noted in our Independent Auditor's Report on Financial Statements that the Schedule of Expenditures of Federal Awards was fairly presented. • The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by OMB Circular A-133, was $300,000. • The City qualified as a low -risk auditee under OMB Circular A-133. • The following was a major program during the period under audit: CFDA No. P rro� am Title 83.548 Hazard Mitigation Grant Washington State Auditor's Office 1 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Audlting Standangs City of Port Townsend Jefferson County January 1, 2005 through December 31, 2005 Council City of Port Townsend Port Townsend, Washington We have audited the financial statements of the City of Port Townsend, Jefferson County, Washington, as of and .for the year ended December 31, 2005, and have issued our report thereon dated July 13, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to the 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 the City's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control over financial reporting and its operation that we consider 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 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, the objective of our audit of the financial statements was not to provide an opinion on overall compliance with these provisions. 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 herein under Government Auditing Standards. This report is intended for the information and use of management, the Council, federal awarding agencies and pass -through entities. However, this report is a matter of public record and its distribution is Washington State Auditors Office 2 not limited. It also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. BRIAN SONNTAG, CGFM STATE AUDITOR July 13, 2006 Washington State Auditor's Office 3 Independent Auditor's Report on Compliance with Requirements Applicable to its Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 City of Port Townsend Jefferson County January 1, 2005 through December 31, 2005 Council City of Port Townsend Port Townsend, Washington COMPLIANCE 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) Circular A-133 Compliance Supplement that are applicable to its major federal program for the year ended December 31, 2005. The City's major federal program is identified in the Federal Summary. Compliance with the requirements of laws, regulations, contracts and grants applicable to its major federal program is the responsibility of the City's management. Our responsibility is to express an opinion on the City'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 the 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'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's compliance with those requirements. In our opinion, the City complied, in all material respects, with the requirements referred to above that are applicable to its major federal program for the year ended December 31, 2005. INTERNAL CONTROL OVER COMPLIANCE The management of the City 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 the City'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 and to test and report on internal control over compliance in accordance with OMB Circular A 133. Washington State Auditoes otrioe 4 Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts and grants caused by error or fraud that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. This report is intended for the information of management, the Council, federal awarding agencies and pass -through entities. 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. BRIAN SONNTAG, CGFM STATE AUDITOR July 13, 2006 Washington State Auditoes Offioe 5 Independent A►uditoes Report on Financial Statements City of Port Townsend Jefferson County January 1, 2005 through December 31, 2005 Council City of Port Townsend Port Townsend, Washington We have audited the accompanying financial statements of each major fund and individual funds of the City of Port Townsend, Jefferson County, Washington, as of and for the year ended December 31, 2005, as listed on page 8. These financial statements are the responsibility of the City's management. 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 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 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 opinion. As described in Note 1 to the financial statements, the City prepares the financial statements for its proprietary funds in conformity with accounting principles generally accepted in the United States of America applicable to proprietary funds of local governments. As described in Note 1 to the financial statements, the City prepares its financial statements for the remaining funds on the basis of accounting that demonstrates compliance with Washington State statutes and the Budgeting, Accounting and Reporting System (BARS) manual prescribed by the State Auditor, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each major fund of the City of Port Townsend, as of December 31, 2005, and the changes in financial position and cash flows, where applicable, thereof, for the WatedSewer and Stormwater Funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. For the remaining funds, in our opinion, the financial statements present fairly the financial position and results of operations of the funds of the City of Port Townsend, for the year ended December 31, 2005, on the basis of accounting prescribed by the BARS manual. In accordance with Government Auditing Standards, we have also issued our report 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 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 read in conjunction with this report in considering the results of our audit. Washington State Auditors Office 6 The management discussion and analysis on pages 9 through 11 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Hoard. We have applied certain limited procedures, which consisted principally of inquiries 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 performed for the purpose of forming an opinion on the City's financial statements. 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. The accompanying Schedule of Long -Term Debt 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 has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. BRIAN SONNTAG, CGFM STATE AUDITOR July 13, 2006 Washington Stale Auditor's Office 7 Financial Section City of Port Townsend Jefferson County January 1, 2005 through December 31, 2005 REQUIRED SUPPLEMENTAL INFORMATION Management Discussion and Analysis — 2005 BASIC FINANCIAL STATEMENTS Fund Resources and Uses Arising from Cash Transactions — 2005 Statement of Net Assets — Proprietary Funds — 2005 Statement of Revenues, Expenses and Changes in Net Assets — Proprietary Funds -- 2005 Statement of Cash Flows — Proprietary Funds — 2005 Notes to the Financial Statements — 2005 SUPPLEMENTAL INFORMATION Schedule of tong -Term Debt — 2005 Schedule of Expenditures of Federal Awards and Notes — 2005 Washington State Audkofs office 8 MANAGEMENT DISCUSSION & ANALYSIS This discussion and analysis is designed to provide an overview of the City of Port Townsend's utility financial activities for the year ended December 31, 2005. Please read this supplementary information in conjunction with the City's financial statements. Overview of the Financial Statements The basic financial statements include the Statement of Net Assets, the Statement of Revenues, Expenses and Changes in Net Assets and the Statement of Cash Flows. The Statement of Net Assets presents the City's Water/Sewer Utility and Stormwater Utility assets and liabilities with the difference between them reported as net assets. This statement provides information about the amount of investments in resources (assets) and the obligations to creditors (liabilities). The net assets increase when revenues exceed expenses. This statement provides the basis for evaluating the capital structure, and assessing liquidity and financial flexibility of the City. The Statement of Revenue, Expenses and Changes in Net Assets reports revenues, expenses, and the change in net assets for the years indicated. This statement measures the success of the City's Water/Sewer Utility and Stormwater Utility operations and can be used to evaluate the level of cost recovery from charges for products and services. The Statement of Cash Flows provides information concerning cash receipts and disbursements resulting from operational, financing, and investing activities. This statement provides insight into the City's Water/Sewer and Stormwater Utility ability to generate cash flow and to meet obligations and is an important indicator of the utility's liquidity and financial strength. The Notes to the Financial Statements provide additional information that is essential to a full understanding of the information contained in the basic financial statements. Financial Highlights The utility's water rates were adjusted up by 10% because of overall increasing water costs due to more regulations and capital needs. The sewer rates were adjusted by 6% due to capital needs. These increases were based on a 2003 utility rate study. Water and Sewer rates will need to be reviewed annually in the following years. At the end of 2005, no rate increases were implemented for 2006 as capital projects completed were not at the same rate as in the utility rate study. Water customers increased by 87, or 2.02%. Sewer customers increased by 81, or 2.19%, in 2005. Water/Sewer revenues increased by 11.10% due to growth and rate increases. Water consumption billed increased 2.5%. The City Water/Sewer Utility ended 2005 with $8,357,718 unrestricted cash and $66,329 restricted cash. The City Stormwater Utility ended 2005 with $321,683 unrestricted cash. These levels of cash are enough to provide adequate insurance for meeting continuing cash flow needs. The City Water/Sewer Utility also is maintaining debt service coverage levels of 3.71, well above the minimum required level of 1.25. The Stormwater Utility has no outstanding debt. Financial Analysis The following information provides analysis of the 2005 and 2004 comparative financial information_ provided in the following table. Washington State Auditors Office 9 Water/Sewer Utility Fund Condensed Financial Information for December 31, 2005, and 2004 Statement of Net Assets 2005 2004 Change % Change Current Assets 8,837,531 8,389,600 447,931 5.3 Noncurrent Assets 25,075,229 25,055,929 19,300 .07 Total Assets 33,912,760 33,445.529 467,231 1.4 Current Liabilities 92,067 100,314 -8,247 -8.2 Noncurrent Liabilities 7,233,158 7,901,589 -668,431 -8.5 Total Liabilities 7,325,225 8,001.904 -676,679 -8.4 Net Assets 26,587,535 25,443,626 1,143.909 4.3 Statement of Revenue, Expenses and Changes in Net Assets 2005 2004 Change % Change Operating Revenues 4,269,424 3,842,879 426,545 11.10 Operating Expenses 4,144,149 4,502,967 -358,818 -8.0 Net Operating Income 125,275 -660,088 785,363 -1 %0 NonOperating Revenues 308,814 250,278 58,536 23.4 NonOperating Expenses -212,009 -207,691 -4318 2.1 NonOperating Revenue/ 96,804 42,587 54,217 127.3 .(Expenses) Contributed Capital 922,378 469,765 452,613 96.3 Change in Net Assets 1,144,458 -147,737 1,292,194 874.7 Net Assets -- beginning of year 25,443,626 25,591,363 -147,737 46 Net Assets -- end of year 26,588,084 25,443,626 1,144,457 4.5 Storinwater Utility Fund Condensed Financial Information for December 31. 2005, and 2004 Statement of Net Assets 2005 2004 Change % Change Current Assets 369,021 352,076 16,945 4.8 Noncurrent Assets 2,495,343 2,389,154 106,189 4A Total Assets 2,864,364 2,741,230 123,134 4.5 Current Liabilities 3,164 3,164 0 0 Noncurrent Liabilities 0 0 0 0 Total Liabilities 3,164 3,164 0 0 Net Assets 2,861,200 2,738,066 123,134 4.5 Statement of Revenue. Expenses and Chanaes in Net Assets 2005 2004 Change % Change Operating Revenues 449,462 444,254 5,208 1.2 Operating Expenses 435,043 467,179 -32,136 -6.9 Net.Operating Income 14,419 -22,925 31,344 162.8 NonOperating Revenues 9175 6,977 2,198 31.5 NonOperating Expenses 0 0 0 0 NonOperating Revenue/ 9175 6,977 2,198 31.5 (Expenses) Contributed Capital 99,540 4,130 95,410 2,310 Change in Net Assets 123,134 -11,818 134.952 1,142 Net Assets -- beginning of year 2,738,066 2,749,884 -11,818 .4 Net Assets - end of year 2,861,200 2,738,066 123,134 4.5 Washington State Auditor's Office 10 Assets Water/Sewer Utility current assets in 2005 increased $447,931 from 2004, or 13.1 %_ Noncurrent assets increased in 2005 in the amount of $19,300 or .07%. Stormwater Utility current assets in 2005 increased $16,945 from 2004, or 4.8%. Noncurrent assets increased in 2005 in the amount of $106,189, or 4.4%. Liabilities Water/Sewer Utility current liabilities remained fairly the same in 2005 from 2004. Noncurrent liabilities decreased $668,431, mostly in debt outstanding. Stormwater Utility current liabilities remained the same in 2005 as in 2004. Net Assets Water/Sewer Utility net assets increased by $1,143,909 or 4.3%. The increase in total net assets was mostly due to a net increase in cash of $411,708 and a decrease in liabilities due to debt repayment Stormwater Utility net assets increased $123,134, or 4.5%, from 2004. The increase in Total net assets was mostly due to an increase in capital assets and cash. Operating Revenues Water/Sewer Utility operating revenues increased by 11.10% over 2004. This is an increase of $426,545. The City Water Utility customers increased by 87 and Sewer Utility customers increased by 81 in 2005. Stormwater Utility operating revenues increased by 1.2% over 2004. This is an increase of $5,208. Operating Expenses Water/Sewer Utility operating expenses decreased by $358,818, or 8%, in 2005. This was due to a decrease in equipment rental fees and a reduction in overhead. Stormwater Utility operating expenses decreased by $32,136, or 6.9%, in 2005. This was due to a decrease in interfund charges as compared to 2004. Nonoperating Revenues and Expenses Water/Sewer Utility total nonoperating revenues and expenses increased by $56,513, or 139.2%, in 2005. Stormwater nonoperating revenues and expenses increased by $2,198 or 31.5% in 2005. Capital Assets and Long Team Debt Activity Water/Sewer Utility Net Plant Assets increased by $19,300 in 2005. The main capital projects included sewer outfall improvements, work on the water system master plan and some upgrades to the compost facility. No new debt was issued in 2005. The debt service coverage ratio for 2005 is 3.77 Washington State Auditor's Office I MCAG NO. 0364 BARS CODE STATEMENT C-4 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 ,eginning Net Cash and Investments ;avenues and Other Sources: 310 Taxes 320 E_icenses and Permits 330 Intergovernmental 340 Charges for Goods and Services 360 trines and Forfeits 360 Miscellaneous 390 Other Financing Sources Total Revenues and Other Sources 'total Resources ,perating Expenditures: 510 General Government 520 Security of Persons and Property 530 Physical Environment 540 Transportation 550 Economic Environment 560 Mental and Physical Health 570 Culture and Recreational Total Operating Expenditures 591-93 Debt Service 594-96 Capital Outlay Total Expenditures 597 Other Financing Uses Total Expenditures and Other Uses xcess (Deficit) of Resources Over Uses 380 Nonrevenues (Except 384) 580 Nonexpenditures (Except 584) nding Net Cash and Investments Fund Number And Name Fund Number And Name 110 - CURRENT EXPENSE 110 - STREET =Budet Actual Bud et j Actual $ 501,343 $ 493.777 $ 139,694 $ 135,388 $ 4,508,626 $ 4,901,168 $ - $ - 637,700 499,237 - 4,680 262,048 242,747 179,492 182,331 1,268,102 464,545 - 16,491 76,700 105,429 - - 59,321 265,690 - 6,066 5,000 5,000 418,427 211,963 6,817,497 6,483,816 597,919 421,531 $ 7,318,840 $ 6,977,593 $ 737.613 $ 556.919 $ 1,780,697 $ 1,750,021 $ - $ _ 1,795,401 1,625,350 - - 3,600 - - - - - 389,383 296,114 795,423 858,588 - - 64,200 59,642 - - $ 4,439,322 $ 4,293,601 $ 389,383 $ 296,114 42,800 31,296 180,000 149,047 $ 4,482,122 $ 4,324,897 $ 569,383 $ 445,161 $ 2,399,393 $ 2,155,074 $ 3,000 $ 3,000 $ 6,881,515 $ 6,479,971 $ 572,383 $ 448,161 $ 437,325 $ 497,621 $ 165,230 $ 108,758 400 2,314 - 731 482 8,160 - - $ 437.243 $ 491.775 $ 165,230 $ 109,489 The Accompanying Notes Are An Integral Part of This Statement. Washington State Auditors Office 12 MCAG NO.0364 STATEMENT C-4 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 BARS CODE Fund Number And Name 120 - Library Fund Fund Number And Name 140- PW Admin & Engineering Budget Actual Budget Actual Beginning Net Cash and Investments $ _ $ _ $ _ $ _ Revenues and Other Sources: 310 Taxes $ _ $ _ $ - 320 Licenses and Permits - 330 Intergovernmental - 340 Charges for Goods and Services - 874,169 676,979 350 Fines and Forfeits 5,000 3,627 360 Miscellaneous - 27 - 1,304 390 Other Financing Sources 653,164 645,255 Total Revenues and Other Sources 658,164 648,909 874,169 678,283 Total Resources $ 658,164 $ 648,909 $ 874,169 $ 678,283 Operating Expenditures: 510 General Government $ - $ _ 520 Security of Persons and Property _ _ 530 Physical Environment 859,169 660,801 540 Transportation 550 Economic Environment _ _ 560 Mental and Physical Health 570 Culture and Recreational 590,614 678,625 - - Total Operating Expenditures $ 590,614 $ 578,625 $ 859,.169 $ 660,801 591-93 Debt Service $ - $ _ 594-96 Capital Outlay 67,550 70,284 15,000 17,482 Total Expenditures $ 658,164 $ 648,909 $ 874,169 $ 678,283 597 Other Financing Uses Total Expenditures and Other Uses $ 658,164 $ 648,909 $ 874,169 $ 678,283 Excess (Deficit) of Resources Over Uses $ $ - $ - $ - 380 Nonrevenues (Except 384) _- 580 Nonexpenditures (Except 584) Ending Net Cash and Investments $ - $ _ $ _ $ _ The Accompanying Notes Are An Integra! Part of This Statement Washington State Auditor's Office 13 MCAG NO.0364 STATEMENT C-4 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 Fund Number And Name Fund Number And Name BARS 171 - Fire and EMS 199 - community Services CODE Budget Actual Bud et Actual Beginning Net Cash and Investments $ $ - $ - $ Revenues and Other Sources: 310 Taxes $ 346,809 $ 348,072 $ - $ - 320 Licenses and Permits - 330 Intergovernmental 424,025 308,331 2,300 2,791 340 Charges for Goods and Services 286,802 273,584 90,000 67,314 350 Fines and Forfeits 360 Miscellaneous 1,680 15,600 7,088 390 Other Financing Sources 865,071 799,947 562,731 500,659 Total Revenues and Other Sources 1.922,707 1,731,615 670,631 577,851 -- Total Resources _....... ..... .... _ 1,922,707__-! 1,731,05 _.$_--670A31- ----577,851 Operating Expenditures: 510 General Government $ $ - 520 Security of Persons and Property 1,577,131 1,513,879 - - 530 Physical Environment 540 Transportation 550 Economic Environment - - 560 Mental and Physical Health - - 570 Culture and Recreational 681,131 .577,363 Total Operating Expenditures $ 1.577,131 $ 1.513,879 $ 681,131 $ 577,363 591-93 Debt Service $ - $ - 594-96 Capital Outlay 345,577 217,600 2,000 68 Total Expenditures $ 1,922,707 $ 1,731,479 $ 683,131 $ 577,431 597 Other Financing uses Total Expenditures and Other Uses $ 1,922,707 $ 1,731,479 $ 683,131 $ 577,431 Excess (Deficit) of Resources Over Uses $ 0 $ 136 $ 12,500 $ 420 380 Nanrevenues (Except 384) - (420) 580 Nonexpenditures (Except 584) - 136 - - Ending Net Cash and Investments $ 0 $ 0 $ 12,500 $ - The Accompanying Notes Are An Integral Part of This Statement. Washington State AudiWs Office 14 MCAG NO. 0364 STATEMENT C-4 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 BARS CODE Fund Number And Name 150- Lodging Tax Fund Number And Name 195 - System Dev Charges Budget Actual Budget Actual Beginning Net Cash and Investments $ 98,914 $ 182,921 $ 77,039 $ 439,611 Revenues and Other Sources: 310 Taxes $ 325,000 $ 325,412 $ - $ - 320 Licenses and Permits - - 330 Intergovernmental - - _ - 340 Charges for Goods and Services - - 350 Fines and Forfeits _ _ 360 Miscellaneous 500 2,412 540 12,077 390 Other Financing Sources - - Total Revenues and Other Sources 325,500 327,824 540 12,077 Total Resources $ 424,414 $ 510,745 $ 77,579 $ 451,688 Operating Expenditures: 510 General Government $ 16,602 $ 15,915 $ - $ - 520 Security of Persons and Property - - 530 Physical Environment 540 Transportation - - 550 Economic Environment 335,000 285,644 - - 560 Mental and Physical Health - _ 570 Culture and Recreational - - Total Operating Expenditures $ 351,602 $ 301,559 $ - $ - 591-93 Debt Service $ - $ - $ _ $ _ 594-96 Capital Outlay - - Total Expenditures $ 351,602 $ 301,559 $ - $ - 597 Other Financing Uses $ 33,000 $ 33,000 $ 550,000 $ 398,552 Total Expenditures and Other Uses $ 384,602 $ 334,559 $ 550,000 $ 398,552 Excess (Deficit) of Resources Over Uses $ 39,812 $ 176,186 $ 472,421 $ 53,136 380 Nonrevenues (Except 384) - - 440,000 347.630 580 Nonexpenditures (Except 584) - - - - Ending Net Cash and Investments $ 39,812 $ 176,186 $ (32,421) $ 400,766 The Accompanying Notes Are An Integral Part of This Statement Washington State Auditor's Office 15 MCAG NO.0364 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 BARS CODE Beginning Net Cash and Investments Revenues and Other Sources: 310 Taxes 320 Licenses and Permits 330 Intergovernmental 340 Changes for Goods and Services 350 Fines and Forfeits 360 Miscellaneous 390 Other Financing Sources Total Revenues and Other Sources Total Resources Operating Expenditures: 510 General Government 520 Security of Persons and Property 530 Physical Environment 540 Transportation 550 Economic Environment 560 Mental and Physical Health 570 Culture and Recreational Total Operating Expenditures 591-93 Debt Service 594-96 Capital Outlay Total Expenditures 597-698 Other Financing Uses Total Expenditures and Other Uses Excess (Deficit) of Resources Over Uses 380 Nonrevenues (Except 384) 580 Nonexpenditures (Except 584) Fund Number And Name fund Number And Name - G.Q. Debt Service 301- CAPITAL IMPROVE. FUN Bud et Actual Budget Actual $ 6,171 $ 37.032 $ 2,361,453 $ 2,703,550 $ 82,207 $ 84,793 $ 400,000 $ 535,248 - - 1,245,000 1,370,700 200 1,553 435.000 62,438 2,025,591 2,026,196 600,000 551,066 2,107,998 2,112.642 2,680,000 2,519,451 $ 2,114.169 $ 2.149.574 $ 5.041.453 $ 5.223.001 $ 1,000 $ 604 $ 23,658 $ 21,940 - - 10,000 204 $ 1,000 $ 604 $ 33,658 $ 22,145 $ 2,097,798 $ 2,097,804 $ - $ - - - 2,650,000 2,116,146 $ 2,098,798 $ 2,098,408 $ 2,683,658 $ 2,138,291 $ - $ - $ 2,145,196 $ 2,546,298 $ 2.098.798 $ 2.098.408 S 4.828.854 S 4.684.589 The Accompanying Notes Are An Integral Part of This Statement. $ 15,371 $ 51,167 $ 212,599 $ 538,412 Washington State Auditor's Offioe 16 MCAG NO. 0364 STATEMENT C-4 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 BARS CODE Beginning Net Cash and Investments Revenues and Other Sources: 310 Taxes 320 Licenses and Permits 330 Intergovernmental 340 Charges for Goods and Services 350 Fines and Forfeits 360 Miscellaneous 390 Other Financing Sources Total Revenues and Other Souros Total Resources Operating Expenditures: 510 General Government 520 Security of Persons and Property 530 Physical Environment 540 Transportation 550 Economic Environment 560 Mental and Physical Health 570 Culture and Recreational Total Operating Expenditures 591-93 Debt Service 594-96 Capital Outlay Total Expenditures 597 Other Financing Uses Total Expenditures and Other Uses Excess (Deficit) of Resources Over Uses 380 Nonrevenues (Except 384) 580 Nonexpenditures (Except 584) Ending Net Cash and Investments Fund Number And Name Fund Number And Name 302 - City Hail Capital improve 500 - EQUIPMENT RENTAL Budget I Actual Budget I Actual $ 696,702 $ 3.335,421 $ 1,511,392 $ 1,394,282 280,000 221,237 - 258,638 83,491 1,516,921 - 540,297 - - 40,603 - 501,237 1,859,050 540,297 40,603 $ 1,197,939 $ 5.194,471 $ 2,051,689 $ 1,434,885 - - 366,496 365,131 $ - $ - 4,031,250 $ $ - 4,700 5,075,988 $ 366,496 280,000 $ 365,131 147,998 $ 4,031,250 $ 5,080,688 $ 646,496 $ 513,129 $ 4,031,250 $ 5,080,688 $ 646,496 $ 513,129 $ 2,833,311 $ 113,783 $ 1,405,193 $ 921,756 $ 2,833,311 $ 113,783 $ 1,405,193 $ 921,756 The Accompanying Notes Are An Integral Part of This Statement. Washington State Auditor's Office 17 MCAG NO. 0364 STATEMENT C-5 PAGE 1 OF 2 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 nd Type: Fund Number And Name 101 - DRUG ENFORCEMENT ED Fund Number And Name 102 - Contingency Budget Actual Budget Actual ginning Net Cash and Investments: $ 64 $ 64 $ 150,182 $ 134,046 venues and Other Financing Sources - -1 16,000 17,447 Total Resources $ 64 $ 64 $ 166,182 $ 151,493 penditures And Other Financing Uses - _ _ _ mss (Deficit) of Resources Over Uses $ 64 $ 64 $ 166,182 $ 151,493 nrevenues (Except 384) - _ - - nexpenditures (Except 584) - _ - _ ding Net Cash and Investments $ 64 $ 64 $ 166.182 S 151.493 Type: ;inning Net Cash and Investments: venues and Other Financing Sources Total Resources )enditures And Other Financing Uses ass (Deficit) of Resources Over Uses nrevenues (Except 384) nexpenditures (Except 584) Ding Net Cash and Investments Type: ginning Net Cash and Investments: venues and Other Financing Sources Total Resources aenditures And Other Financing Uses -ess (Deficit) of Resources Over Uses nrevenues (Except 384) nexpenditures (Except 584) ding Net Cash and Investments Fund Number And Name 170 - Fire Equip Joint Malnt Fund Number And Name 190 - COMM DEV BLOCK GRAN Budget Actual Budget Actual $ 13,904 4,025 $ 9,907 62 $ 15,887 1,000 $ 77,850 12,393 $ 17,929 - $ 9,969 - $ 16,887 60,000 $ 90,243 25,000 $ 17,929 $ 9,969 $ (43,113) $ 65,243 $ 17,929 $ 9,969 $ 43,113 $ 65,243 Fund Number And Name Fund Number And Name 264 - LID 91 286 - LID #2 Budget I Actual Budget Actual $ 2,164 $ 2,194 $ 2,995 $ 3,013 - 67 - 39 $ 2,164 $ 2,261 $ 2,995 $ 3,052 $ 2,164 $ 2,261 $ 2,995 $ 3,052 $ 2,164 $ 2,261 $ 2,995 $ 3.052 Washington State Auditor's Office 18 NICAG NO. 0364 STATEMENT C-5 PAGE 2 OF 2 CITY OF PORT TOWNSEND FUND RESOURCES AND USES ARISING FROM CASH TRANSACTION For The Year Ended December 31, 2005 Type: ginning Net Cash and Investments: venues and Other Financing Sources Total Resources 3enditures And Other Financing Uses :ess (Deficit) of Resources Over Uses nrevenues (Except 384) nexpenditures (Except 584) ding Net Cash and Investments Fund Number And Name 610 - Fire Pension & Relie Fund Number And Name 621 - Memorial Fund $ 257,588 80,908 $ 258,522 88,953 $ 4,318 100 $ 4,273 124 $ 338,496 72,011 $ 347,475 70,532 $ 4,418 1,500 $ 4,397 - $ 266,485 $ 276.943 $ 2,918 $ 4,397 $ 266,485 $ 276,9431 $ 2,918 $ 4,397 Fund Number And Name Fund Number and Flame d Type: 613 - Court -Agency 631-Maritime Center Fund ginning Net Cash and Investments: venues and Other Financing Sources Total Resources penditures And Other Financing Uses -ess (Deficit) of Resources Over Uses nrevenues (Except 384) nexpenditures (Except 584) ding Net Cash and Investments $ - $ 21,442 $ 103,207 $ 3,027 - - 632,000 1 $ - $ 21,442 $ 735,207 $ 3,028 $ - $ 21,442 $ 735,207 $ 3,028 - 77,137 - - - 73,193 632,000 - $ - $ 25,387 $ 103,207 $ 3,028 Washington State Auditor's Office 19 CITY OF PORT TOWNSEND Statement of Net Assets Proprietary Funds December 31, 2005 2005 2005 2005 Enterprise Funds WaterlSewer Storm ASSETS Fund Fund Total Current Assets: Cash and Cash Equivalent Account Receivables (net) Inventories Total Current Assets Noncurrent Assets: Capital Assets, net of accumulated depreciation Construction Work In Progress Unamortized Sewer Com Plan Unamortized Debt Discount Unamortized Flood Control Plan Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities: Refundable Deposits Unclaimesd property Compensated Absences Accrued interest Current portion long term debt Total Current Liabilities Noncurrent Liabilities: Deferred Amount (refunding) Bonds Other Long Term Debt Total Noncurrent Liabilities Total Liabilities NET ASSETS Investment in Capital Assets, net of debt Restricted Unrestricted Total Net Assets $ 8,424,516 $ 321,683 $ 8,746.199 413,015 47,338 460,353 8,837,531 369,021 9,206,552 24,892,072 2,297,446 $ 27,189,518 105,746 105,746 77,411 77,411 197.897 197,897 25,075,229 2,495,343 27,570,572 33,912,760 $ 2.864,364 $ 36 777,123 $ $ 150 $ 3,164 $ 3,314 1,253 1,253 55,885 - 55,885 34,779 - 34,779 748,995 748,995 841,062 3,164 844,226 (309.683) (309,683) 2,725.000 - 2,725,000 4,068.846 - 4,068,846 6,484,163 - 6,484,163 7,325,225 $ 3,164 $ 7,328,389 $ $ 17,842,070 $ 2.495,343 $ 20,337,413 66,329 66,329 8,679,135 365,857 9,044,992 $ 26,587,534 $ 2,861,200 $ 29,448,734 The Accompanying Notes are an Integral Part of This Statement Washington State Audito>'s Office 20 CITY OF PORT TOWNSEND Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds Year Ended December 31, 2005 2005 2005 2006 Water/Sewer Storm Utility Fund Total Operating Revenues Charges for services $ 4,269,424 $ 449.462 $ 4,718,886 Total Operating Revenue $ 4,269,424 $ 449,462 $ 4,718,886 Operating Expenses Operations and Maintenance $ 1,521,612 $ 242,672 $ 1,764,284 Administration 938.548 91,248 $ 1,029,796 Amortization 58,694 17,970 $ 76,665 Depreciation 1,055,420 31,219 $ 1.086,639 Taxes 569,875 51,933 $ 621,808 Total Operating Expenses $ 4,144,149 $ 435,043 $ 4,579,192 Operating Income (Loss) $ 125,275 $ 14,419 $ 139,694 Nonoperating Revenues (Expenses): Interest Income $ 189,498 8,132 $ 197,630 Interest Expense $ (212,009) - $ (212,009) Other Miscellaneous Income $ 118,746 1,043 $ 119,789 Total Nonoperating Revenues (Expenses) $ 96,234 $ 9,175 $ 105,409 Income (Loss) Before Transfers and Contributed Capital $ 221,509 $ 23,694 $ 245,103 Transfers (to) from Other Funds: Residual Equity transfers Total Transfers (to) from Other Funds $ - $ - $ - Contributed Capital $ 922,398 $ 99,540 $ 1,021,938 Change in Net Assets $ 1,143,908 $ 123,134 $ 1,267,041 Net Assets, January 1 $ 25,443,626 $ 2,738,066 $ 28,181,692 Net Assets, December 31 $ 26,587.534 $ 2,861,200 $ 29,448,733 The Accompanying Notes are an Integral Part of This Statement Washington State Auditors Office 21 MCAG NO.0364 CITY OF PORT TOWNSEND Statement of Cash flaw Proprietary Funds For the year ended December 31, 20M Cash flours from operating activities: Receipts from customers Payments to suppliers for goods and services Payments to employees for services Payments for taxes Net cash provided (used) by operating activities Cash flours from noncapita( financing activities: Operating transfers -from (to) other lunds Receipts from other operating revenues Refundable deposits Net cash provided (used) by noncapital financing activities Cash flows from capital d related financing activities: Acgcdsition and construction of capital assets including Work In Progress PWTF a SRF Loan proceeds Payments for principal on revenue bands and eontrads Payments for interest on revenue bonds and contracts Operating Transfers from other funds Cash contributed to aid of construction Loss on retirement of assets Net cash provided (used) by capital Welated financing activities Cash flows from Investing activities: Sale (Purchase) of investment securities Proceeds from interest and dividends earned Net cash provided (used) by investing activities Not Increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Cash and cash equivalents conststs of: Unrestricted cash and cash equivalents Restricted cash and cash equivalents Total cash and cash equivalents Reconciliation of operating Income (loss) to net cash provided by operating activities: Net operating Income (loss) Adjustmenh to reconcile operating Income to net cash provided by operating activities: Depreciation (increase) decrease In Accounts Receivable Increase (decrease) in Current liabilities (Increase) decrease in Deferred Debits Total adjustments to reconcile operating income to net cash provided by operating activities: Net cash provided by operating activities: Enterprise Funds Water/Sewer Fund Star Fund Total i 4,227,848 i 449,286 $ 4,677,134 (1,202,167) (143,953) (1,346,120) (1,257,822) (189,968) (1,447,790) 569 87b (51,933) (621,808) 1,197,994 63,432 1,261,416 - - 1,826,009 124,990 1,043 1,073, 559 124,990 1,043 126,033 (626,6491 (65.839) (682,388) (713,218) (713.216) 11196,297) (196,297} 435,199 - 435,299 1,100,763 (55,839) (1,1561602j_ 189,498 8,132 197,630 189,498 8,132 197,430 411,708 16,760 428,476 8,012r8o8_ 304,914 B,317,722 $ 8,424,516 S 321,682 $ 0,746,198 $ o 3 8.424.516 S 321,683 $ 8,746,100 S 125,275 9 14,419 $ 139,694 1,055,420 31,219 1,086,639 (36,223) (176) (36,399) (5,182) - (5,182) 58,694 17,970 76,665 3 1,197,994 $ $3,433 5 1,261,417 The Accompanying Notes Are An integral Part of This Statement Washington State Auditor's Office 22 City of Port Townsend Notes to the Financial Statements For the Year Ended December 31, 2005 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the utility funds of the City of Port Townsend conform to generally accepted accounting principles (GAAP) as applicable to utility funds of governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. In .tune 1999, GASB approved Statement 34, Basic Financial Statements — and Management Discussion and Analysis— for State and Local Governments. This and consecutive statements are reflected in the accompanying financial statements (including notes to financial statements). The following is a summary of the most significant policies (including identification of those policies which result in material departures from generally accepted accounting principles): 1. Reporting Entity 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 government and provides police and fire protection, water, sewer, stormdrainage, as well as maintaining parks, streets, and a library for use by its citizens. B. Basis of Accounting and Presentation The city uses single entry, cash basis accounting for its governmental fund type funds, which is a departure from generally accepted accounting principles (GAAP). The proprietary funds use the accrual basis accounting. Proprietary funds are used to account for activities that are operated in a manner similar to private enterprise business. The City of Port Townsend uses the revenue and expenditure classifications contained in the Budgeting, Accounting and Reporting System (BARS) manual. The manual is prescribed by the State Auditor's Office under the authority of the Washington State law, Chapter 43.09 RCW. The City of Port Townsend applies GASB pronouncements and has not elected to apply Financial Accounting Standard Board (FASB) statements and Accounting Principles Board (APB) pronouncements issued after November 30, 1989. The accounts of the city are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. Each fund is accounted for with a separate set of single entry accounts that comprise its cash, investments, revenues and expenditures or expenses, as appropriate. The accounting records of the City of Port Townsend's utilities are maintained and reported in accordance with the methods prescribed by the State Auditor under the authority of Chapter 43.09 RCW. This prescription requires the City of Port Townsend to report their utilities using GAAP if the combined operating revenue of the enterprise fund is over $5 million. The city's resources are allocated to and accounted for in individual funds depending on what they are to be spent for and how they are controlled. The following are the fund types used by the city: Governmental Fund Types.- are used to finance most governmental functions and account for and report expendable financial resources and related obligations. General Fund (Fund 010) (Current Expense Fund) This fund is the primary operating fund of the city. It accounts for all financial resources except those required to be accounted for in another fund. Special Revenue Funds (Funds in the 100 series) These funds account for revenues derived from specific taxes, grants, or other sources which are designed to finance particular activities of the city. Washington State Auditors Ofrice 23 Debt Service Funds (Funds in the 200 series) These funds are used to gather resources to pay general government debt. Capital Projects Funds (Funds in the 300 series) These funds account for financial resources which are designated for the acquisition or construction of general government capital improvements. Pro rieta Fund T es - are used to account for activities similar to those in the private sector and measure net income. _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. 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 oost reimbursement basis. Fiduciary Fund Types - Fiduciary funds account for assets held by the city in a trustee capacity or as an agent on behalf of others. Pension and Other Employee Benefit trust Funds 611-620 Firemen's Pension Private Purpose Trust Funds (621-630) Funds used to report all trust arrangements under which principal and income benefit individual, private organization and other government. AAc ency_Funds (Funds 631-699) This fund accounts for assets whereby the city acts as a pass through agent for various government entities. C. Basis of Accounting Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Revenues are recognized only when cash is received and expenditures are recognized when paid, including those property chargeable against the prior year(s) budget appropriations as required by state law for the governmental fund types. Purchases of capital assets are expensed during the year of acquisition. There is no capitalization of capital assets, nor allocation of depreciation expense for the governmental fund types. Inventory is expensed when purchased. A different basis of accounting is used for the water, sewer, and storm drainage enterprise functions as prescribed for. See Notes 9 through 16. D. Budgets and Bud eta Aecountin Annual appropriated budgets are adopted for all funds. The financial statements include budgetary comparisons for those funds. Annual appropriated budgets are adopted at the fund level. The budgets constitute the legal authority for expenditures at that level. Annual appropriations for all funds lapse at year end. The city manager is authorized to transfer budgeted amounts between (department within and fund/object classes with departments); however, any revisions that alter the total expenditures of a fund,. or that affect the number of authorized employee positions, safary ranges, hours, or other conditions of employment must be approved by the city council. Washington State Auditors Office 24 E. Assets, Liabilities and Equities Cash and Equivalents It is the city's policy to invest all temporary cash surpluses. The amounts are included in the net cash and investments shown on the statements of fund resources and uses arising from cash transactions. The interest on these investments is prorated to the various funds. The average compensating balances maintained during 2005 were approximately $362,630.60. The city's deposits are entirely covered by federal depository insurance (FDIC and FSLIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). Investments See Note 3. Capital Assets Capital assets are long-lived assets of the city and are recorded as expenditures when purchased in the government fund types. The proprietary funds capitalization threshold is $5,000 and utility capital assets are depreciated over their useful lives. See Notes 8 and 9. Compensated Absences Vacation pay, which may be accumulated up to 6 weeks, is payable upon resignation, retirement or death. Sick leave may be accumulated up to 1440 hours. Long -Term Debt See Note 5. 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, Proceeds from refunding bonds, and Capital leases. Risk Management See Note 7. NOTE 2 - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY There have been no material violations of finance -related legal or contractual provisions, and there have been no expenditures exceeding legal appropriations in any of the funds of the city. NOTE 3 - INVESTMENTS The city's investments are either 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 State Treasurer's Investment Pool, or deposits with Washington State banks and savings and loan institutions. Investments by type at December 31, 2005 are as follows: Investments Carrying Amount Market value Washington State Treasurer's Investment Pool $5,594,861.73 $5,594,861.73 US Bank Savings Account US Bank Investment Account US Government Securities Frontier Bank CD $53,988.72 $313,618A2 $2,745,685.78 $3,560,000.00 $53,988.72 $313,618.12 $2,745,686.78 $3,550,000.00 2005 Total Investments $12,258,154.35 $12,258,154.35 Washington State Auditors Office . 25 NOTE-4 — UTILITY CAPITAL ASSETS Major expenses for capital assets, including capital leases and major repairs that increase useful lives, are capitalized. Maintenance, repairs and minor renewals are accounted for as expenses when incurred. Capital assets are recorded at cost. Donations are recorded at fair market value at the time of donations or the appraised value. Utility Capital Asset activity for the year ended December 31, 2005 was as follows: Beginning Ending Balance Increase Decrease Balance Capital Assets not being depreciated: Land $2,111,468 $13,400 $2,124,868 Construction in Progress Total Capital Assets not being depreciated: $2,111,468 $13,400 $2,124,868 Capital Assets being depreciated: Other improvements $29,837,858 $1,232,018 $31,069,875 Machinery & Equipment $7,563,789 17 567 $7,581,356 Total Capital Assets being depreciated: $37,401,646 $1,249,585 ' $38,651,232 Less accumulated depreciation for: Other Improvements $7,353,805 $688,228 $8,042,033 Machinery & Equipment $5,154,472 $398,412 $5,552,883 Total accumulated depreciation $12,508,277 $1,086,640 $13,594,916 Total Capital Assets being depreciated. net: $24,893,370 $162,946 $25,056,316 TOTAL CAPITAL ASSETS, NET $27,004,838 $176,346 $27,181,184 NOTE 5 - 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 2005 was $1.97334 per $1,000.00 on an assessed valuation of $775,296,585 for a total regular levy of $1,529,923. In 2005 the city also had a special levy for Emergency Medical Services (EMS). The EMS levy rate was $ .44585 per $1,000 for a total levy of $342,666. NOTE 6 - LONG-TERM DEBT The accompanying Schedule of Long-term Debt (09) provides a listing of the outstanding dent of the city 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. Washington State Auditor's Office 26 General obligation bonds currently outstanding are as follows: Issue Date Purpose Original Issue Interest Rate Maturit y Date Debt Outstanding 1991 Limited GO Bonds for reconstruction $535,000 6.4 — 5.45°% 2011 $104,555 of the Balloon Hanger at Ft. Warden for performing arts. 1999 Limited GO Bonds for Fire & Library $645,000 &0 — 6.0°% 2016 $555,000 repairs from interfund loans; city facilities, Marine Science Ctr and Police Station. 2002 Limited GO Bonds for construction of $3,465,000 1.95— 2022 $3.355,000 City Hal] Annex and old City Hall, 4.70% 2003 Limited GO Bonds for Skateboard $2,390,000 1.85-4.60% 2023 $2,390,000 Park, the Wave Viewing Gallery, City Hall, Fire Station, Pool & Pink House Lease settlement. 2005 Limited GO Bonds for construction $1,545,000 3.05-4.35°% 2025 $1,545,000 funds for City Hall Annex and Old City Hall TOTAL $7.949,565 The annual debt service requirements to maturity for general obligation bonds are as follows: Washington State Auditoi's Office 27 Governmental Activiiies Year ending Principal Interest December 31 2006 $288,801 $335,087 2007 $316,744 $321,379 2008 $327,741 $311,396 2009 $333,800 $300,145 2010 2014 $1,904,470 $1,298,598 2015-2019 $2,315,000 . $877,435 2020-2025 $2,475,000 $327,259 Total $7.961,556 $3,771,299 As of December 31, 2005 the long term debt payable from proprietary fund resources consisted of the following: Issue Purpose Original Issue Interest Maturity Debt Date Rate Date Outstanding 1978 Water/Sewer Revenue Bonds $395,000 5% 2018 $215,000 Water and Sewer Improvements Water/Sewer Revenue Bonds 1998 Refunding 1992 issue Sewer $5,950,000 4.10-4.65% 2011 $2,995,000 Treatment Plant, refunded 1978 Series B Bonds TOTAL. $3,210,000 Washington State Audroes Office 28 Debt service requirements to maturity for proprietary funds: Business T ce Activities Year ending Principal Interest December 31 2006 1 $748,895 1 $179,859 2007 I $769,475 1 $157,241 2008 1 $796,063 1 $133,374 2009 1 $815,659 1 $108,424 2010-2014 I $2,442,568 1 $214,228 2015-2019 1 $1,414,178 1 $66,598 2020-2025 562 003 13 066 Total $7,547,841 $872,789 B. Public Works Trust Fund Loans and State Revolving Fund Loans State of Washington Public Works Trust Fund (PWTF) Loans are an intergovernmental loan 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 five 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 currently has one SRF loan. Washington State Auditor's Office 29 As of December 31, 2005 the long-term debt payable for PWTF and SRF loans consisted of the following: Issue Date Purpose Original Issue Interest Rate Maturity Date Debt Outstanding PWTF Loan 1998 CT Pipeline $2,172,056 Tri-Area Water Storage 1 % 2018 $581,335 Tri-Area Well upgrades (payoff of $1,186,718 with sale of Tri-Area assets) 1999 PWTF Loan $1,434,365 1% 2019 Gaines St Lift Station $834,327 San Juan Sewer Trunk Line PWTF Loan Wastewater Treatment 2001 Outfall Expansion $1,153,350 .5% 2021 $971,242 Trunk Sewer Line replacement PWTF Loan 2002 Morgans ----hill - -Water System $1,242,142 .59b 2023 $1.111,08 Improvements SRF Loan 2002 Wastewater Conveyance $856,803 1.5% 2024 $839,010 Storm and sewer separation Gaines St L'rft Station Phase 2 Trunk Sewer Replace 2003 PWTF Loan $15,000 0% 2009 $12,000 Transportation Planning TOTAL $4,349,842 C. ADVANCED REFUNDING AND DEFEASED BONDS In 1998 the City of Port Townsend refunded two prior .revenue bond issues while issuing an additional $1,000,000 of debt. This 1998 Revenue Bond issue was partially defeased in 2002 due to the sale of some associated asset improvements in the Tri-Area. The 1978 "series B" revenue bonds were refunded in the amount of $115,000 and the 1992 Revenue Bonds were refunded in the amount of $4,835,000 in the 1998 Bond issue. As part of the Tri-Area well and reservoir assets sold in 2002, $1,490,000 in bonds were defeased. Washington State Auditors Office 30 NOTE 7 - PENSION PLANS Substantially all city full-time and qualifying part-time employees participated in Public Employees' 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, under cost -sharing multi -employer define benefit public employee retirement systems. Actuarial information in 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. Historical trends or other infomiation regarding each plan is presented in the state Department of Retirement Systems 2004 annual financial report. A copy of this report may be obtained at: Department of Retirement Systems PO Sox 48380 Olympia, WA 98504-8380 NOTE 8 - RISK MANAGEMENT The City of Port Townsend is a member of the Washington Cities Insurance Authority (WCIA) Utilizing Chapter 48,62 RCW (sell insurance regulation) and Chapter 39.34 RCW (Intedocal 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 management services. WCIA has a total of 105 members. 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 professional, public officials' errors and omissions, stop gap, and employee benefits liability. Limits are $1 million per occurrence in the primary layer, $2 million per occurrence, subject to a $12 million annual aggregate, in the excess layer, and $11 million per occurrence in the second excess layer with no annual aggregate except $10 million per member for public officials' errors and omissions. The second excess layer is insured by the purchase of reinsurance. Total limits are $14 million per occurrence. 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. Auto physical damage coverage and property insurance are self funded up to $250,000 and insured above that amount by the purchase of reinsurance. In-house services include risk management consultation, loss control field services, claims and litigation administration, and loss analysis. WCIA contracts for the claims investigation consultants for personal 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 intedocal, WCIA retains the right to additionally assess the membership for any finding shortfall. An investment committee, using investment brokers, produces additional revenue by investment of WCIA's assets in financial instruments that comply with all State guidelines. These revenues directly offset portions of the membership's annual assessment. WCIA is governed by a Board of Directors 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. Washington State Auditors Office 31 NOTE 9-UTILITY ACCOUNTING AND PRESENTATION The Budgeting, Accounting, and Reporting System (BARS) chart of accounts is used for the Water -sewer Utility and the Storm Drainage Utility as prescribed by the State Auditor under the authority of Chapter 43.09 RCW. A full -accrual basis is in use where revenues are recognized when earned and expenses are recognized when incurred. Capital asset purchases are capitalized and long-term liabilities are accounted for in the appropriate funds. Unbilled water, sewer and storm drainage utility service charges receivable are recorded at year end. Operating income in utility funds includes gains and losses from the disposal of utility plant. The Water -Sewer and Storm Drainage Utility's financial statements include the financial position and results of operations of all enterprise operations which the water -sewer and storm drainage utilities manage. The financial statements include also include the assets and liabilities of all funds for which the water -sewer and storm drainage utilities have a custodial or trust responsibility. NOTE 10- UTILITY PLANT AND DEPRECIATION Utility plant in service and other capital assets are recorded at cost where the historical cost is known. Where the historical cost is not known, assets are recorded at estimated cost. Donations by developers and customers are recorded at donor cost. The original cost of operating property refired or otherwise disposed of and the cost of removal, less salvage, is charged to accumulated depreciation. However, in the case of the sale of significant operating unit or system, the original cost is removed from the utility plant accounts, accumulated depreciation is charged with the accumulated depreciation related to the property sold and the net gain or loss on disposition is credited or charged to income. Depreciation is computed on the straight-line method with useful lives of 10 to 70 years. Initial depreciation on the utility plant is recorded subsequent to purchase. Pretiminary costs incurred for proposed projects are deferred pending constriction of the facility. Costs relating to projects ultimately constructed are transferred to the utility plant; charges that relate to abandoned projects are expensed. NOTE 11- FUND EQUITIES A. Proprietary Fund Types 1. Capital Contributions — Capital contributions in internal service funds records the amounts of working capital and capital assets received from other funds. 2 .Restricted Net Assets- Net Assets in proprietary fund types is generally restricted to indicate that a portion of net assets has been extemalty restricted for specific purposes. The amount restricted equals total restricted assets except for amounts intended for payment of current payables and debt proceeds for construction purposes. B. Designated Net Assets This category is used to set aside fund equity when city management has plans or tentative commitments to expend resources for certain purposes in future periods. Further legal action will be required to authorize the actual expenses and expenditures. NOTE 12 - RESTRICTED 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. Assets and liabilities shown as current on the accompanying balance sheets of the Water -Sewer Utility exclude current maturities on revenue bonds and accrued interest thereon because debt service funds are provided for their payment. Washington State AudWs office 32 NOTE 13 - UTILITY RECEIVABLES All delinquent accounts receivable must receive prior City Council approval before they are written off. NOTE 14 - UNAMORTIZED DEBT EXPENSE Costs relating to the sale of bonds are deferred and amortized over the lives of the various bond issues. NOTE 15 - CONTINGENCIES AND LITIGATION in the opinion of management the city's self-insurance reserves are adequate to pay all known or pending claims. (See Note 9.) NOTE 16 - UTILITY PLANT CONSTRUCTION MATERIALS AND SUPPLIES It is the policy of management to charge all expenditures for enterprise utility plant construction materials and supplies to plant in service or maintenance expenses. The inventory account is immaterial to the total assets of the fund. NOTE 17 - AMORTIZATION OF ENGINEERING STUDIES COSTS Storm Flood Control Project . Expenditures from 1991 to 1998 Amortization over twenty years spent on Storm Flood Control following each years Year Project Year expenditures 1994 $64,444.02 1995 $3.222.24 1995 65,563.65 1996 6,500.42 1996 120,976.03 1997 12, 549.23 1997 52,054.17 1998 15,151.94 1998 28,810.00 1999 16.592.44 1999 27,560.63 2000- 305.392.13 Total $359,408.40 Total $359.408.40 Washington State Auditor's Office 33 v o m g ar m a c m in o o o cli m Ln `x ['�f C� IA y t_pp Of Y3 v M N 0 } cm r w 69 v! H C B G w z m O O C. 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C�1 t7 N� cLAlMm iV Or NN NN N ❑ Washington State Auditor's Office 35 MCAG NO. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2005 SCHEDULE 1G Grantor /Pass -Through Grantod Program Title Other CFDA Number Identification Number Current Year Expenditures Public Safety PaMvmrship & Community Poking GranVCOPS 16.710 2002SHWJ(0093 21.169 Bullet Proof Vest Program 16.607 1,065 Violence Against Women Formula Grant -STOP Grant 16,588 13,965 Dqm m nt Of Justice 36,199 DetecUng IrdoAcated Drivers Grant 20.605 516 Click It Or Txlket Grant 20.604 1.082 Department of Transportation 1,598 Assistance to Firefighters Grant 97.044 EMW-2004-FG-17192 241,241 Department of Homeland Security 241,241 Coastal Zone Management Grant 11.419 SO"2600-107 93,356 De riment of CommercelNOAA 23,356 FEMA Hazard Mi ' afion Grant 97.039 E05-103 1,580 FEMA Hazard MI " ation Grant 83.548 E04-051 1,177.707 Department Of Homeland Security 1,172,293 LTSA UbM Gran t Fed Pass Thru WA State Library 45.310 1.660 Institute of Museum and Library Services 1,650 Save America's Treasures Grant 15.904 53-03-ML-1394 258,638 Department of fnterfor 258,9311 TOTAL FEDERAL ASSISTANCE 1,811,975 Notes to schedule of Expenditure of federal Awards for the year ended December 31, 2O05: Note 1- ilasis of Accouning This schedule of federal assistance is prepared on the same basis of a000unting as the City of Port Townsend's General Government Financial Statements. The City of Port Townsend s General Govemment Funds use the cash basis of accounting. Note 2 Proomm Costs The amounts shown as current year expenditures represent only the federal portion of the program costs. Actual program costs may be more than shown. Washington State Auditor's Office _ 36 ABOUT THE STATE AUDITOR'S OFFICE The State.A-umoes Office is established in the sta'te's constitution and is part of the executive branch of state governrnent.. The State Audittsr is elected by the citizens of Washington and serves four-year terms. Our. mission is to work in cooperation with our audit clients- and citizens as an advocate for government accountability. 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. The State Auditor's Office has 300'employees who are located around the state to deliver our services effectively and efficiently. Approximately 65 -percent of our staff are certified- public accountants or hold other certifications and advanced degrees. Our regular 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. We also perform fraud and whistleblower investigations. In addition, we have the authority to conduct performance audits of state agencies and local governments. The results of our, audits are widely distributed through a variety of reports, which are available on our Web site. live continue to refine our reporting efforts to ensure the results of our audits are useful and understandable. We take our -role as partners in accountability seriously. We provide training and technical assistance 'to governments and have any extensive program to coordin ate. audit efficiency and to ensure high - quality audits. State Auditor Brian Sonntag, CGFM Chief of Staff Ted Rutt Chief Policy Advisor Jerry Pugnetti Director of Administration Doug Cochran Director of Audit Chuck Pfeil, CPA Director of -Performance Audit Linda Long,_ CPA, CGFM Director'of Operations Jim Brittafn,,CPA Local Government Liaison Mike Murphy Communications Projram Manager Mindy Chambers Public Records Officer Mary Leider Main number (360) 902-0370 Web Site httw]twww.sao.wa.gov r (SAO fACTS DOC - Rev. 01MD