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Home My WebLink About2013 Financial Statements & Federal Single Audit Report Financial Statements and Federal Single Audit Report City of Port Townsend Jefferson County For the period January 1, 2013 through December 31, 2013 Published September 2, 2014 Report No. 1012419 Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388 September 2, 2014 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 Washington State Auditor Troy Kelley Table of Contents City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 Federal Summary ............................................................................................................................ 1 Schedule Of Prior Federal Audit Findings ...................................................................................... 3 Status Of Prior Audit Findings ....................................................................................................... 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 ....................................................................... 4 Independent Auditor’s Report On Compliance For Each Major Federal Program And On Internal Control Over Compliance In Accordance With Omb Circular A-133 .............................. 7 Independent Auditor’s Report On Financial Statements .............................................................. 10 Financial Section ........................................................................................................................... 13 Federal Summary City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 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. FINANCIAL STATEMENTS An unmodified opinion was issued on the financial statements. 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. We issued an unmodified opinion on the City’s compliance with requirements applicable to each of its major federal programs. We reported no findings that are required to be disclosed under section 510(a) of OMB Circular A-133. _________________________________________________________________________________________________________ Washington State Auditor's Office 1 Identification of Major Programs: The following were major programs during the period under audit: CFDA No. Program Title 20.205 Highway Planning and Construction Cluster - Highway Planning and Construction 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 OMB Circular A-133, was $300,000. The City qualified as a low-risk auditee under OMB Circular A-133. _________________________________________________________________________________________________________ Washington State Auditor's Office 2 Schedule of Prior Federal Audit Findings City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 This schedule presents the status of federal findings reported in prior audit periods. The status listed below is the representation of the City of Port Townsend. The State Auditor’s Office has reviewed the status as presented by the City. Audit Period: 1/1/2012 – 12/31/2012 Report Ref. No.: 1010618 Finding Ref. No.: 1 CFDA Number(s): 97.039 Federal Program Name and Granting Agency: Hazard Mitigation Grant, Department of Homeland Security Pass-Through Agency Name: Military Department Finding Caption: The City lacked the internal controls to ensure compliance with Hazard Mitigation Grant program period of availability requirements. Background: The City of Port Townsend received approximately $2,517,364 in federal grant funds in 2012, and the City spent $1,568,176 of that money on the Hazard Mitigation Grant program. The program objective is to implement mitigation planning and hazard mitigation measures that are cost effective and which substantially reduce the risk of future damage, hardship, loss or suffering in any area affected by a major disaster. Status of Corrective Action: (check one) X Fully Corrected  Partially Corrected  No Corrective Action Taken  Finding is considered no longer valid Corrective Action Taken: The City has evaluated its internal control requirements with regard to the availability period. Staff involved with grant activity is now fully aware of the compliance requirements surrounding the availability period. Should it ever be necessary for the City to submit paperwork or documentation beyond the 90 day funding period, City staff will request an extension to the deadline in writing, regardless of whether the funding entity requires a formal deadline request. _________________________________________________________________________________________________________ Washington State Auditor's Office 3 Status of Prior Audit Findings City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 The status of findings contained in the prior years’ audit reports of the City of Port Townsend is provided below: 1. The City should improve its internal controls over federal grant reporting to ensure complete audit coverage of its federal grants. Report No. 1010618, dated September 30, 2013 Background City personnel responsible for preparation and review of the Schedule of Expenditure of Federal Awards (SEFA) did not have an accurate understanding of the OMB Circular A-133 and the State Auditor’s Budgeting, Accounting and Reporting System (BARS) manual reporting requirements. The City lacked good communication with staff responsible for the SEFA preparation regarding federal awards and amendments. The City had obtained a grant amendment dated January 12, 2012 that allowed additional pre-award costs from 2010 and 2011. This was not communicated to staff responsible for preparing the 2012 SEFA. The City had not designed internal controls, such as providing training for staff, adequate oversight and sufficient communication of changes to grant awards, to ensure accurate, complete and timely financial reporting. Status The condition reported during the 2012 audit has been resolved. Management took steps to strengthen internal controls regarding the preparation of the SEFA by providing additional training to relevant staff and implementing additional oversight, which includes a first draft review by project managers who are primary contacts of any award changes. _________________________________________________________________________________________________________ Washington State Auditor's Office 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 City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 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, 2013, and the related notes to the financial statements, which collectively comprise the City’s financial statements, and have issued our report thereon dated August 19, 2014. 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 or permitted 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 internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. _________________________________________________________________________________________________________ Washington State Auditor's Office 5 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, 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 August 19, 2014 _________________________________________________________________________________________________________ Washington State Auditor's Office 6 Independent Auditor’s Report on Compliance for Each Major Federal Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 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) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2013. The City’s major federal programs are identified in the accompanying Federal Summary. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of 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 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 on compliance for each major federal program. Our audit does not provide a legal determination on the City’s compliance. _________________________________________________________________________________________________________ Washington State Auditor's Office 7 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, 2013. 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 OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of 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 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 OMB Circular A-133. 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 _________________________________________________________________________________________________________ Washington State Auditor's Office 8 also serves to disseminate information to the public as a reporting tool to help citizens assess government operations. TROY KELLEY STATE AUDITOR August 19, 2014 _________________________________________________________________________________________________________ Washington State Auditor's Office 9 Independent Auditor’s Report on Financial Statements City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 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, 2013, and the related notes to the financial statements, which collectively comprise the City’s financial statements, as listed on page 13. 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 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 _________________________________________________________________________________________________________ Washington State Auditor's Office 10 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 using accounting practices prescribed or permitted by Washington State statutes and 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, 2013, 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, 2013, 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. 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. 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 _________________________________________________________________________________________________________ Washington State Auditor's Office 11 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 19, 2014 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 August 19, 2014 _________________________________________________________________________________________________________ Washington State Auditor's Office 12 Financial Section City of Port Townsend Jefferson County January 1, 2013 through December 31, 2013 FINANCIAL STATEMENTS Fund Resources and Uses Arising from Cash Transactions – 2013 Fiduciary Fund Resources and Uses Arising from Cash Transactions – 2013 Notes to Financial Statements – 2013 SUPPLEMENTARY AND OTHER INFORMATION Schedule of Liabilities – 2013 Schedule of Expenditures of Federal Awards – 2013 Notes to the Schedule of Expenditures of Federal Awards – 2013 _________________________________________________________________________________________________________ Washington State Auditor's Office 13 BARS Code Beginning Cash and Investments 30810 Beg Fund Bal-Reserved 30880 Beg Fund Bal-Unreserved 38800/58800 Prior Period Adjustments, net Operating Revenues 310 Taxes 320 Licenses & Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines & Penalties 360 Miscellaneous Revenues Total Operating Revenues: Operating Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural and Economic Environment 560 Social Services 570 Culture And Recreation 598 Intergovernmental Payments Total Operating Expenditures: Net Operating Increase (Decrease): Nonoperating Revenues 370, 380, 395, 398 Other Financing Sources 391-393 Debt Proceeds 397 Transfers-In Total Nonoperating Revenues: Nonoperating Expenditures 580, 596, 599 Other Financing Uses 591-593 Debt Service 594-595 Capital Expenditures 597 Transfers-Out Total Nonoperating Expenditures: Increase (Decrease) in Cash and Investments Ending Cash and Investments 50810 End Fund Bal-Reserved 50880 End Fund Balance-Unreserved Total for All funds*010 General Fund 101 Drug Enforcement 102 Contingency Fund 3,021,466 0 0 0 4,649,205 445,703 281 88,672 0 0 0 0 10,177,199 5,049,691 0 39,689 254,146 253,665 0 0 2,494,063 225,063 0 0 6,998,846 256,354 0 0 83,975 75,170 0 0 240,487 11,041 277 106 20,248,716 5,870,984 277 39,795 1,849,146 907,565 0 0 4,936,610 2,742,435 0 0 4,381,043 0 0 0 980,191 0 0 0 862,656 654,188 0 0 4,344 0 0 0 2,027,711 18,932 0 0 0 0 0 0 15,041,701 4,323,120 0 5,207,015 1,547,864 277 39,795 497,539 0 0 0 1,351,897 0 0 0 2,069,041 0 0 0 3,918,477 0 312,689 33,959 0 0 1,525,586 0 0 0 6,132,837 12,473 0 0 2,050,854 1,577,803 0 0 10,021,966 1,624,235 0 -896,474 -76,371 277 39,795 1,740,770 0 0 0 5,033,431 369,334 558 128,468 For the Year Ended December 31, 2013 FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS STATEMENT C-4City of Port TownsendMCAG NO.0364 The accompanying notes are an integral part of this Statement. _________________________________________________________________________________________________________ Washington State Auditor's Office 14 BARS Code Beginning Cash and Investments 30810 Beg Fund Bal-Reserved 30880 Beg Fund Bal-Unreserved 38800/58800 Prior Period Adjustments, net Operating Revenues 310 Taxes 320 Licenses & Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines & Penalties 360 Miscellaneous Revenues Total Operating Revenues: Operating Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural and Economic Environment 560 Social Services 570 Culture And Recreation 598 Intergovernmental Payments Total Operating Expenditures: Net Operating Increase (Decrease): Nonoperating Revenues 370, 380, 395, 398 Other Financing Sources 391-393 Debt Proceeds 397 Transfers-In Total Nonoperating Revenues: Nonoperating Expenditures 580, 596, 599 Other Financing Uses 591-593 Debt Service 594-595 Capital Expenditures 597 Transfers-Out Total Nonoperating Expenditures: Increase (Decrease) in Cash and Investments Ending Cash and Investments 50810 End Fund Bal-Reserved 50880 End Fund Balance-Unreserved 110 Street 120 Library 150 Lodging Tax 171 Fire and EMS 0 0 0 0 43,344 149,694 71,571 39,707 0 0 0 0 509,521 967,644 366,680 2,208,291 231 0 0 0 189,880 10,619 0 0 100 0 0 0 0 8,805 0 0 3,826 3,914 0 0 703,558 990,982 366,680 2,208,291 0 0 30,619 0 0 0 0 2,194,175 0 0 0 0 515,729 0 0 0 0 0 208,468 0 0 0 0 0 0 869,682 0 0 0 0 0 0 515,729 869,682 239,087 2,194,175 187,829 121,300 127,593 14,116 0 7,563 0 0 0 0 0 0 0 0 0 0 7,563 0 0 0 0 0 0 0 11,320 1,420 80,968 0 0 184,870 45,187 97,718 0 186,290 126,155 97,718 11,320 1,539 2,708 29,875 2,796 0 0 0 0 44,882 152,402 101,446 42,504 The accompanying notes are an integral part of this Statement. _________________________________________________________________________________________________________ Washington State Auditor's Office 15 BARS Code Beginning Cash and Investments 30810 Beg Fund Bal-Reserved 30880 Beg Fund Bal-Unreserved 38800/58800 Prior Period Adjustments, net Operating Revenues 310 Taxes 320 Licenses & Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines & Penalties 360 Miscellaneous Revenues Total Operating Revenues: Operating Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural and Economic Environment 560 Social Services 570 Culture And Recreation 598 Intergovernmental Payments Total Operating Expenditures: Net Operating Increase (Decrease): Nonoperating Revenues 370, 380, 395, 398 Other Financing Sources 391-393 Debt Proceeds 397 Transfers-In Total Nonoperating Revenues: Nonoperating Expenditures 580, 596, 599 Other Financing Uses 591-593 Debt Service 594-595 Capital Expenditures 597 Transfers-Out Total Nonoperating Expenditures: Increase (Decrease) in Cash and Investments Ending Cash and Investments 50810 End Fund Bal-Reserved 50880 End Fund Balance-Unreserved 180 Affordable Housing Fund 190 Community Dev Block Grants 195 System Dev Charges 199 Community Services 0 0 0 0 3,925 129,043 941,793 27,356 0 0 0 0 6,235 0 0 634,260 0 0 0 0 0 13,050 0 0 0 0 0 95,463 0 0 0 0 0 224 1,600 17,942 6,235 13,274 1,600 747,665 0 0 0 319,254 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,344 0 0 0 0 0 0 1,139,097 0 0 0 0 4,344 0 1,458,351 1,891 13,274 1,600 -710,686 0 0 123,656 1,560 0 0 0 0 0 0 0 976,000 123,656 977,560 0 0 0 271,527 0 0 0 0 0 0 0 56 0 0 0 276 0 271,859 1,891 13,274 125,256 -4,985 0 0 0 0 5,816 142,317 1,067,049 22,373 The accompanying notes are an integral part of this Statement. _________________________________________________________________________________________________________ Washington State Auditor's Office 16 BARS Code Beginning Cash and Investments 30810 Beg Fund Bal-Reserved 30880 Beg Fund Bal-Unreserved 38800/58800 Prior Period Adjustments, net Operating Revenues 310 Taxes 320 Licenses & Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines & Penalties 360 Miscellaneous Revenues Total Operating Revenues: Operating Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural and Economic Environment 560 Social Services 570 Culture And Recreation 598 Intergovernmental Payments Total Operating Expenditures: Net Operating Increase (Decrease): Nonoperating Revenues 370, 380, 395, 398 Other Financing Sources 391-393 Debt Proceeds 397 Transfers-In Total Nonoperating Revenues: Nonoperating Expenditures 580, 596, 599 Other Financing Uses 591-593 Debt Service 594-595 Capital Expenditures 597 Transfers-Out Total Nonoperating Expenditures: Increase (Decrease) in Cash and Investments Ending Cash and Investments 50810 End Fund Bal-Reserved 50880 End Fund Balance-Unreserved 200 G.O. Debt Service 301 General CIP Projects 411 Water Sewer Fund 412 Storm Fund 0 0 3,021,466 0 27,533 425,039 884,559 384,789 0 84,757 -84,757 0 99,823 295,365 0 0 0 0 250 0 0 1,233,970 821,481 0 0 0 4,398,120 521,091 0 0 0 0 541 144,060 49,399 557 100,364 1,673,395 5,269,250 521,648 603 0 416,522 0 0 0 0 0 0 0 3,164,664 418,703 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 603 3,581,186 418,703 99,761 1,673,395 1,688,064 102,945 0 406 363,465 0 0 0 1,351,897 0 1,009,391 58,650 25,000 0 1,009,391 59,056 1,740,362 0 0 7,203 0 1,134,391 0 379,875 0 0 1,603,725 3,704,141 239,858 0 145,000 0 0 1,134,391 1,748,725 4,091,219 239,858 -25,239 -16,274 -662,793 -136,913 0 0 1,740,770 0 2,295 493,521 1,417,705 247,875 The accompanying notes are an integral part of this Statement. _________________________________________________________________________________________________________ Washington State Auditor's Office 17 BARS Code Beginning Cash and Investments 30810 Beg Fund Bal-Reserved 30880 Beg Fund Bal-Unreserved 38800/58800 Prior Period Adjustments, net Operating Revenues 310 Taxes 320 Licenses & Permits 330 Intergovernmental Revenues 340 Charges for Goods and Services 350 Fines & Penalties 360 Miscellaneous Revenues Total Operating Revenues: Operating Expenditures 510 General Government 520 Public Safety 530 Utilities 540 Transportation 550 Natural and Economic Environment 560 Social Services 570 Culture And Recreation 598 Intergovernmental Payments Total Operating Expenditures: Net Operating Increase (Decrease): Nonoperating Revenues 370, 380, 395, 398 Other Financing Sources 391-393 Debt Proceeds 397 Transfers-In Total Nonoperating Revenues: Nonoperating Expenditures 580, 596, 599 Other Financing Uses 591-593 Debt Service 594-595 Capital Expenditures 597 Transfers-Out Total Nonoperating Expenditures: Increase (Decrease) in Cash and Investments Ending Cash and Investments 50810 End Fund Bal-Reserved 50880 End Fund Balance-Unreserved 500 Equipment Rental 540 PW Admin 555 Engineering Services 595 Unemployment Self-Insurance 0 0 0 0 955,682 29,535 979 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 892,999 286,549 533,170 15,000 0 0 0 0 4,934 0 2,066 0 897,933 286,549 535,236 15,000 174,583 0 0 0 0 0 0 0 0 295,554 502,122 0 464,462 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 639,045 295,554 502,122 258,888 -9,005 33,114 15,000 889 0 0 0 0 0 0 0 0 0 0 0 889 0 0 0 0 0 0 0 0 490,196 0 0 0 0 0 0 0 490,196 -230,419 -9,005 33,114 15,000 0 0 0 0 725,263 20,530 34,093 15,000 The accompanying notes are an integral part of this Statement. _________________________________________________________________________________________________________ Washington State Auditor's Office 18 BARS Code 308 Beginning Cash and Investments 388 and 588 Prior Period Adjustments, net 310-360 Revenues 380-390 Other Increases and Financing Sources 510-570 Expenditures 580-590 Other Decreases and Financing Uses Increase (Decrease) in Cash and Investments 508 Ending Cash and Investments BARS Code 308 Beginning Cash and Investments 388 and 588 Prior Period Adjustments, net 310-360 Revenues 380-390 Other Increases and Financing Sources 510-570 Expenditures 580-590 Other Decreases and Financing Uses Increase (Decrease) in Cash and Investments 508 Ending Cash and Investments Total for All funds 601 Refundable Deposits 610 Firemen's Pension 613 Court-Agency 402,811 66,464 264,869 32,978 0 0 0 0 49,386 0 34,356 0 65,001 6,816 0 58,185 78,483 0 71,681 0 95,514 2,814 0 74,512 -59,610 4,002 -37,325 -16,327 343,201 70,466 227,544 16,651 621 Memorial 623 Golf Course Fund 2,494 36,006 0 0 3 15,027 0 0 0 6,802 0 18,188 3 -9,963 2,497 26,043 For the Year Ended December 31, 2013 FIDUCIARY FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS STATEMENT C-5City of Port TownsendMCAG NO.0364 The accompanying notes are an integral part of this Statement. _________________________________________________________________________________________________________ Washington State Auditor's Office 19 City of Port Townsend Notes to the Financial Statements For the Year Ended December 31, 2013 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of Port Townsend reports financial activity using the revenue and expenditure classifications, statements, and schedules contained in the Cash Basis Budgeting, Accounting and Reporting System (BARS) manual. This basis of accounting and reporting is another comprehensive basis of accounting (OCBOA) that is prescribed by the State Auditor’s Office under the authority of Washington State law, Chapter 43.09 RCW. 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, storm drainage, as well as maintaining parks, streets, and a library for use by its citizens. The city uses single entry, cash basis accounting for its governmental and proprietary fund types , which is a departure from generally accepted accounting principles (GAAP). Prior to 2008, the proprietary (utility) funds were reported on accrual basis. Proprietary Funds are used to account for activities that are operated in a manner similar to private enterprise business. A. Fund Accounting 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 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 or elected to be accounted for in another fund. _________________________________________________________________________________________________________ Washington State Auditor's Office 20 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. 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. 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. 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 city in a trustee capacity or as an agent on behalf of others. Refundable Deposits (601) This fund accounts for deposits being held pending city criteria for builders being fulfilled. 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. Agency Funds (Funds 631-699) This fund accounts for assets whereby the city acts as a pass through agent for various government entities. _________________________________________________________________________________________________________ Washington State Auditor's Office 21 B. 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 properly chargeable against the prior year(s) budget appropriations as required by state law. 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. The basis of accounting described above represents a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. C. Budgets and Budgetary Accounting Annual appropriated budgets are adopted for all funds 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, salary ranges, hours, or other conditions of employment must be approved by the city council. _________________________________________________________________________________________________________ Washington State Auditor's Office 22 The appropriated and actual expenditures for the legally adopted budgets were as follows: D. 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 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). 2013 Final AppropriatedActual Amounts Expenditures Variance General 6,783,040$ 6,690,466$ 92,574$ Drug Enforcement & Educ Fund 2$ -$ 2$ Contingency -$ -$ -$ Street 731,766$ 702,019$ 29,747$ Library 1,020,727$ 995,835$ 24,892$ Public Work & Admin 311,172$ 295,552$ 15,620$ Lodging Tax 346,517$ 336,805$ 9,712$ Fire & EMS Service 2,230,369$ 2,205,494$ 24,875$ Affordable Housing Fund 6,500$ 4,344$ 2,156$ CDBG 50,000$ -$ 50,000$ System Development Chrges -$ -$ -$ Community Services 1,747,807$ 1,730,209$ 17,598$ GO Debt Service 1,136,711$ 1,134,993$ 1,718$ Water/Sewer Utility 4,198,159$ 4,067,571$ 130,588$ Stormwater 668,593$ 658,562$ 10,031$ Utility Construction Fund 4,472,000$ 4,068,778$ 403,222$ Trans line Replacement 2,013,500$ 1,639,030$ 374,470$ 1978 Water Sewer Rev Bond 21,500$ 20,750$ 750$ 1992/98 WS Revenue Bond Reserve -$ -$ -$ 92 Water/Sewer Bond Redemption 5,626$ 5,627$ (1)$ Equipment Rental 1,225,133$ 1,129,238$ 95,895$ Engineerng Service Fund 535,887$ 502,122$ 33,765$ Firemen's Pension 71,855$ 71,680$ 175$ Memorial Fund -$ -$ -$ Golf Course Fund 24,989$ 24,989$ (0)$ Maritime Center Fund -$ -$ -$ Capital Improvement 2,873,050$ 2,512,926$ 360,124$ 30,474,903$ 28,796,992$ 1,677,911$ _________________________________________________________________________________________________________ Washington State Auditor's Office 23 Investments See Note 3. Capital Assets Capital assets are long-lived assets of the city and are recorded as expenditures when purchased. Compensated Absences Vacation pay, which may be accumulated up to 6 weeks for regular employees and 360 hours for department heads, is payable upon resignation, retirement or death. Sick leave may be accumulated up to 1440 hours. Upon separation or retirement employees do not receive payment for unused sick leave. 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 8. NOTE 2 - COMPLIANCE AND ACCOUNTABILITY There have been no material violations of finance-related legal or contractual provisions. 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. _________________________________________________________________________________________________________ Washington State Auditor's Office 24 Investments by type at December 31, 2013 are as follows: NOTE 4 - 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 2013 was $1.42529 per $1,000.00 on an assessed valuation of $1,469,136,180 for a total regular levy of $2,093,945.11 The city also has a special levy for Emergency Medical Services (EMS). The EMS levy rate was voter approved in 2010 to $ .50 per $1,000 for a total levy of $734,568.09 in 2013. A Library LID lift was approved by voters in 2008 to be phased in over 2009-2011. For 2013 the library levy was .66400 per 1,000 for a total of $975,506.42 Voters approved a Fire Lid lift in 2012. For 2013 the Fire Lid lift was $.43708 per $1,000 for a tax amount of $642,130.01 NOTE 5 - LONG-TERM DEBT The accompanying Schedule of Long-term Liabilities (09) provides a listing of the outstanding debt of the city and summarizes the City of Port Townsend’s debt transactions for the 2013. Investments Carrying AmountMarket Value Washington State Treasurer's Investment Pool 6,387,682.48$ 6,387,682.48$ 2013 Total Investments6,387,682.48$ 6,387,682.48$ _________________________________________________________________________________________________________ Washington State Auditor's Office 25 The debt service requirements for general obligation bonds, revenue bonds and intergovernmental debt, including both principle and interest, are as follows: G.O. Bonds Revenue BondsOther Debt Total Debt 2014 $ 1,132,606 $ 25,000$ 393,229 $ 1,550,835 2015 $ 1,138,686 $ 24,000$ 567,195 $ 1,729,881 2016 $ 1,298,436 $ 23,000$ 565,100 $ 1,886,536 2017 $ 1,284,566 $ 22,000$ 402,896 $ 1,709,462 2018 $ 1,285,201 $ 21,000$ 388,719 $ 1,694,920 2019- 2023 2024- 2028 2029- 2033 2034- 2038 $ 6,386,101 $ 5,573,385 $4,086,730 $3,374,058 $0- $0- $0- $0- $1,278,834 $ 562,246 $ 324,233 $ 35,731 $ 7,664,935 $6,135,631 $4,410,963 $3,409,789 Totals $25,559,769 $ 115,000 $4,518,183 $30,192,952 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 _________________________________________________________________________________________________________ Washington State Auditor's Office 26 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 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 and utilities and street improvements, as well funding for the Carnegie library seismic retrofit. In 2012 the City refunded the balance of the 1999 G.O. Bonds and the 2005 G. O. Bonds. As part of the same refunding $1,505,000 of the 2003 LTGO Bonds were advanced refunded and well as $2,500,000 of the 2002 LTGO Bonds. The total amount of the 2012 LTGO refunding was $5,530,000. This refunding saved the City $645,221 over the course of 13 years. General obligation bonds currently outstanding are as follows: Issue Date Purpose Original IssueInterest Rate Maturity Date Debt Outstanding 2008 Limited GO Bonds for construction funds for Civic and Street Improvements $7,500,0004.15-5.00% 2038 $7,500,000 2010 Limited GO Bonds for Street, Sidewalk, Utilities and Historic District $3,740,0002.30-5.00% 2030 $3,740,000 2012 Limited GO Bonds for Refunding of 1999 Bonds, a portion of the 2002 GO Bonds, a portion of the 2003 Bonds and the 2005 Bonds $5,530,000.50-4.25% 2025 $5,100,000 Total $16,340,000 _________________________________________________________________________________________________________ Washington State Auditor's Office 27 As of December 31, 2013 the long term debt payable from proprietary fund resources consisted of the following: Issue Date Purpose Original IssueInterest Rate Maturity Date Debt Outstanding 1978 Water/Sewer Revenue Bonds Water and Sewer Improvements $ 395,000 5% 2018 $ 100,000 Total $ 100,000 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 eight 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. The 2012 DWSRF and the 2012 PWTF Loans have not drawn down the full loan amount available; the debt outstanding reflects current drawdowns less any principal payments. _________________________________________________________________________________________________________ Washington State Auditor's Office 28 As of December 31, 2013 the long-term debt payable for PWTF and SRF loans consisted of the following: Issue Date Purpose Original IssueInterest Rate Maturity Date Debt Outstanding 1998 PWTF Loan CT Pipeline Tri-Area Water Storage Tri-Area Well Upgrades (payoff of $1,86,718 with sale of Tri-Area Assets) $2,172,0551% 2018 $ 223,590 1999 PWTF Loan Gaines St Lift Station San Juan Sewer Trunk Line $1,434,3651% 2019 $ 357,568 2001 PWTF Loan Wastewater Treatment Outfall Expansion Trunk Sewer Line Replacement $1,153,350.5% 2021 $ 442,214 2002 PWTF Loan Morgan Hill Water System Improvements $1,242,742.5% 2022 $ 600,317 2002 SRF Loan Wastewater Conveyance Storm and Sewer Separation Gaines St Lift Station Phase 2 Trunk Sewer Replacement $ 856,8031.5% 2024 $ 514,515 2012 PWTF Loan City Lake Repair $1,000,000.5% 2031 $ 947,358 2012 PWTF Loan LT2 Federally Mandated Construction of Water Treatment Facility $1,896,000 .5% 2031 $ 604,389 2012 DWSRF Loan LT2 Federally Mandated Water Treatment facility $3,071,5211.5% 2036 $ 231,269 Total $3,921,220 _________________________________________________________________________________________________________ Washington State Auditor's Office 29 NOTE 6 - 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 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. Historical trends or other information regarding each plan is presented in the state Department of Retirement Systems annual financial report. A copy of this report may be obtained at: Department of Retirement Systems Communication Unit PO Box 48380 Olympia, WA 98504-8380 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, 2013 there were a total of four individuals covered by this system of which zero were currently still employed and four were drawing benefits. As of December 31, 2013 the market value of assets was $227,546. NOTE 7 - 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 (Interlocal 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 162 members. _________________________________________________________________________________________________________ Washington State Auditor's Office 30 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 and omissions, stop gap, and employee benefits liability. Limits are $4 million per occurrence self insured layer, $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 sublimits 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 coverage are self- funded up 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 analysis. 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 interlocal, 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. 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 Auditor's Office 31 NOTE 8 - 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. NOTE 9 – SYTEM DEVELOPMENT CHARGES FUND RESERVE In accordance with ordinance No. 2666 dated 11/03/98 a low-income deferral account for system development charges was established. The General Fund paid $15,000 to the System Development Charges Fund .The remaining balance of this account for 2013 was used to pay for several Habitat for humanity SDC deferrals. NOTE 10 - UTILITY RECEIVABLES All delinquent accounts receivable must receive prior City Council approval before they are written off. NOTE 11 - 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 7.) NOTE 12 – INTERFUND LOANS In March 2010, City Council authorized short term interfund loans up to the amount of $150,000 from the OGWS Transmission Pipeline Fund or the Equipment Rental Fund to the General Fund to cover short term cash flow needs in anticipation of property tax collections. In addition, in March 2010 the City Council authorized loans from the OGWS Transmission Pipeline Fund for park facilities in the amount of $185,570 and for Golf Course improvements in the amount of $125,000. In April 2012, City Council authorized an interfund 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 credit program. The City Council also authorized up to a million dollar interfund loan from the OGWS Transmission Pipeline Fund for interim financing of the federally mandated water treatment plant in May of 2013. _________________________________________________________________________________________________________ Washington State Auditor's Office 32 NOTE 13 – NEW PUBLIC ENTITY FORMED On September 08, 2009 the City of Port Townsend authorized the creation of a public corporation known as the Port Townsend Public Development Authority. A charter and bylaws were adopted for the entity, but no other activity took place in 2009. In September 2011 the Council amended the authority’s charter to change the name to the Fort Worden Lifelong Learning Center Public Development Authority. Its purpose was amended to focus solely on the Park. NOTE 14 – INTERLOCAL AGREEMENT 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 will be paying the district a total of $392,080.77 (which includes interest). The payment schedule is as follows: The following table displays interfund loan activity during 2013: Borrowing Lending BalanceNew 2013Balance FundFund1/1/2013LoansRepayments12/31/2013 Golf Bldg 199 417 83,508$ 83,508$ -$ Park land 199 417 185,571$ 185,571$ -$ Maint St 10 417 100,000$ 33,287$ 66,713$ LT2 Wtr Project 415417 -$ 161,250$ 161,250$ InterestPrincipalYr Total 5/31/201311,320$ 11,320$ 5/31/201411,320 11,320 5/31/20159,883 177,199 187,082 5/31/20162,615 179,744 182,359 Totals35,137$ 356,943$ 392,080$ _________________________________________________________________________________________________________ Washington State Auditor's Office 33 NOTE 15- SELF-INSURANCE The City of Port Townsend self-insures for unemployment through the State of Washington’s Employment Security Department. When a former city employee files for unemployment with the State of Washington, the City of Port Townsend is direct-billed their portion of unemployment benefit costs. In 2013 the City of Port Townsend established an Unemployment Self-Insurance Fund. As of December 31, 2013 the fund had a balance of $15,000. NOTE 16 – MANAGERIAL FUNDS To assist in managing the City of Port Townsend’s finances, the city has established management funds for accounting purposes. These management fund activities are rolled into one fund for reporting purposes. The following funds include managerial fund activity that is reported as one fund: Water and Sewer Utility Fund General Government Capital Improvement Project Fund NOTE 17 – OTHER POST EMPLOYMENT BENEFITS The City of Port Townsend has a commitment to pay for post-employment benefits for employees that belong to LEOFF1. These benefits include medical insurance premiums, out-of pocket medical costs, dental and vision care. Five police retires received these benefits during the year and $42,726 was paid out for those benefits. NOTE 18- CONSTRUCTION COMMITMENT The City of Port Townsend has an active construction project as of December 31, 2013. The project is the Long-Term Water Treatments Facility. At year-end the city’s commitments with contractors are as follows: Project Spent to DateRemaining Contract LT2 Water Treatment Facility Design ‐$ 294,916.75$ _________________________________________________________________________________________________________ Washington State Auditor's Office 34 NOTE 19- PRIOR YEAR CORRECTION During project reconciliation for the bond funds, it was discovered that the water line replacement during Madison Street project from prior years had been incorrectly charged to General Government Capital Project Fund, instead of the Utility Construction Fund. A prior year correction in the amount of $84,757 was made to both funds in 2013. NOTE 20- SIGNIFICANT EVENT In July 2013, the City of Port Townsend and the Port of Port Townsend concluded a property exchange whereby the City received approximately twenty acres of park land in exchange for City Dock and Union Wharf. Part of the agreement it also stated that the Port would maintain its own stormwater system and the City of Port Townsend would discontinue billing stormwater fees to the Port of Port Townsend. _________________________________________________________________________________________________________ Washington State Auditor's Office 35 MCAG NO.Schedule 09 ID. No.Description Maturity/Payment Due Date Beginning Balance January 1, 2013 Additions Reductions Ending Balance December 31, 2013 251.11 2003 Bond 12/1/2023 125,000 125,000 0 251.11 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 5,460,000 360,000 5,100,000 251.11 EJFR Equipment Loan 5/31/2016 392,080 392,080 259.11 Compensated Absences 435,677 357,985 420,072 373,590 17,652,757 357,985 905,072 17,105,670 252.11 1978 Water Revenue Bond 3/1/2018 115,000 0 15,000 100,000 263.82 DOE Wastewater 10/31/2023 557,230 42,715 514,515 263.82 1998 PWTF Loan Water 7/1/2018 268,308 44,718 223,590 263.82 1999 PWTF Loan Sewer 7/1/2019 417,163 59,595 357,568 263.82 2001 PWTF Loan Sewer 7/1/2021 497,490 55,276 442,214 263.82 2002 PWTF Loan 7/1/2022 667,019 66,702 600,317 263.82 2012 PWTF Loan LT2 6/1/2023 268,938 349,606 14,155 604,389 263.82 2012 PWTF Loan City Lake 6/1/2031 198,568 801,432 52,632 947,368 263.82 2012 DWSRF 10/1/2036 0 231,270 231,270 259.12 Compensated Absences 107,966 439,283 456,428 90,821 3,097,682 1,821,591 807,221 4,112,052 20,750,439 2,179,576 1,712,293 21,217,722 Total General Obligations: Revenue Obligations Total Revenue Obligations: Total Liabilities: City of Port Townsend For the year ended December 31, 2013 Schedule of Liabilities 0364 Debt Type General Obligations __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Wa s h i n g t o n St a t e Au d i t o r ' s Of f i c e 36 T h e a c c o m p a n y i n g n o t e s t o t h e S c h e d u l e o f E x p e n d it u r e s a r e a n i n t e g r a l pa r t o f t h i s s c h e d u l e MC A G N O . 0 3 6 4 Fr o m P a s s - Th r o u g h Aw a r d s Sa v e A m e r i c a ' s T r e a s u r e s 15 . 9 2 9 5 3 - 1 0 - A P - 5 0 2 5 Vi o l e n c e A g a i n s t W o m e n Fo r m u l a G r a n t s 16 . 5 8 8 F - 1 2 - 3 1 1 0 3 - 0 1 7 Gr a n t s t o E n c o u r a g e A r r e s t Po l i c i e s a n d En f o r c e m e n t of P r o t e c t i o n O r d e r s Pr o g r a m 16 . 5 9 0 2 0 1 0 - W E - A X - 0 0 2 0 3 Pu b l i c S a f e t y P a r t n e r s h i p an d C o m m u n i t y P o l i c i n g Gr a n t s 16 . 7 1 0 2 0 1 2 - U M - W X - 0 1 7 3 Se n i o r C o m m u n i t y S e r v i c e Em p l o y m e n t P r o g r a m 17 . 2 3 5 4, 9 3 5 Hi g h w a y P l a n n i n g a n d Co n s t r u c t i o n 20 . 2 0 5 S T P E - 7 6 2 4 ( 0 0 1 ) 1 0 , 3 2 5 Hi g h w a y P l a n n i n g a n d Co n s t r u c t i o n 20 . 2 0 5 S T P U S - 7 6 2 5 ( 0 0 1 ) 1 , 6 4 9 Hi g h w a y P l a n n i n g a n d Co n s t r u c t i o n 20 . 2 0 5 S T P U S - 7 6 3 8 ( 0 0 1 ) 1 9 6 , 6 9 4 20 8 , 6 6 9 Ci t y o f P o r t T o w n s e n d Sc h e d u l e 1 6 SC H E D U L E O F E X P E N D I T U R E S O F F E D E R A L A W A R D S Fo r t h e Y e a r E n d e d D e c e m b e r 3 1 , 2 0 1 3 Fe d e r a l A g e n c y N a m e / P a s s - Th r o u g h A g e n c y N a m e Fe d e r a l P r o g r a m N a m e C F DA N u m b e r O t h e r A w a r d Nu m b e r Ex p e n d i t u r e s Fo o t n o t e Re f Fr o m D i r e c t Aw a r d s To t a l Am o u n t Na t i o n a l P a r k S e r v i c e, D e p a r t m e n t O f Th e I n t e r i o r 16 0 , 6 1 7 1 6 0 , 6 1 7 Vi o l e n c e A g a i n s t W o m e n O f f i c e , De p a r t m e n t O f J u s t i c e 8, 1 2 5 8 , 1 2 5 Vi o l e n c e A g a i n s t W o m e n O f f i c e , De p a r t m e n t O f J u s t i c e 14 3 , 7 4 2 1 4 3 , 7 4 2 Of f i c e O f C o m m u n i t y O r i e n t e d P o l i c i n g Se r v i c e s , D e p a r t m e n t O f J u s t i c e 45 , 0 0 0 4 5 , 0 0 0 Em p l o y m e n t T r a i n i n g A d m i n i s t r a t i o n , De p a r t m e n t O f L a b o r / O 3 A O l y m p i c A r e a Ag e n c y o n A g i n g 4, 9 3 5 Fe d e r a l H i g h w a y A d m i ni s t r a t i o n ( f h w a ) , De p a r t m e n t O f Tr a n s p o r t a t i o n / D e p a r t m e n t o f Tr a n s p o r t a t i o n 10 , 3 2 5 Fe d e r a l H i g h w a y A d m i ni s t r a t i o n ( f h w a ) , De p a r t m e n t O f Tr a n s p o r t a t i o n / D e p a r t m e n t o f Tr a n s p o r t a t i o n 1, 6 4 9 Fe d e r a l H i g h w a y A d m i ni s t r a t i o n ( f h w a ) , De p a r t m e n t O f Tr a n s p o r t a t i o n / D e p a r t m e n t o f Tr a n s p o r t a t i o n 19 6 , 6 9 4 To t a l C F D A 2 0 . 2 0 5 0 2 0 8 , 6 6 9 _________________________________________________________________________________________________________ Washington State Auditor's Office 37 T h e a c c o m p a n y i n g n o t e s t o t h e S c h e d u l e o f E x p e n d it u r e s a r e a n i n t e g r a l pa r t o f t h i s s c h e d u l e Fr o m P a s s - Th r o u g h Aw a r d s Fe d e r a l A g e n c y N a m e / P a s s - Th r o u g h A g e n c y N a m e Fe d e r a l P r o g r a m N a m e C F DA N u m b e r O t h e r A w a r d Nu m b e r Ex p e n d i t u r e s Fo o t n o t e Re f Fr o m D i r e c t Aw a r d s To t a l Am o u n t St a t e a n d C o m m u n i t y Hi g h w a y S a f e t y 20 . 6 0 0 D U I / S e a t b e l t 18 8 Gr a n t s t o S t a t e s 45 . 3 1 0 G- 4 4 1 8 5 , 0 0 0 Ca p i t a l i z a t i o n G r a n t s f o r Dr i n k i n g W a t e r S t a t e Re v o l v i n g F u n d s 66 . 4 6 8 F S - 9 9 0 8 3 9 0 9 - 1 8 , 2 7 4 Ca p i t a l i z a t i o n G r a n t s f o r Dr i n k i n g W a t e r S t a t e Re v o l v i n g F u n d s 66 . 4 6 8 D M 1 2 - 9 5 2 - 0 9 2 2 4 5 , 2 3 7 25 3 , 5 1 1 Ha z a r d M i t i g a t i o n G r a n t 97 . 0 3 9 F E M A - 1 7 3 4 - D R - WA 27 , 4 8 7 Ha z a r d M i t i g a t i o n G r a n t 97 . 0 3 9 F E M A - 1 8 2 5 - D R - WA 12 , 0 5 8 39 , 5 4 5 Pr e - D i s a s t e r M i t i g a t i o n 97 . 0 4 7 E1 0 - 1 1 5 3 5 , 8 8 5 Pr e - D i s a s t e r M i t i g a t i o n 97 . 0 4 7 E1 2 - 1 7 5 7 2 9 , 3 6 4 76 5 , 2 4 9 1, 2 7 7 , 0 9 6 Na t i o n a l H i g h w a y T r a f f i c S a f e t y Ad m i n i s t r a t i o n ( n h t s a ) , D e p a r t m e n t O f Tr a n s p o r t a t i o n / D e p a r t m e n t o f Tr a n s p o r t a t i o n 18 8 In s t i t u t e O f M u s e u m A n d L i b r a r y Se r v i c e s / S e c r e t a ry o f S t a t e 5, 0 0 0 Of f i c e O f W a t e r , E n v i r o n m e n t a l Pr o t e c t i o n A g e n c y / D e p a r t m e n t o f H e a l t h 8, 2 7 4 Of f i c e O f W a t e r , E n v i r o n m e n t a l Pr o t e c t i o n A g e n c y / P u b l i c W o r k s B o a r d Lo a n 24 5 , 2 3 7 To t a l C F D A 6 6 . 4 6 8 0 2 5 3 , 5 1 1 De p a r t m e n t O f H o m e l a n d S e c u r i t y / S t a t e of W a s h i n g t o n M i l i t a r y 27 , 4 8 7 De p a r t m e n t O f H o m e l a n d S e c u r i t y / S t a t e of W a s h i n g t o n M i l i t a r y 12 , 0 5 8 To t a l C F D A 9 7 . 0 3 9 0 3 9 , 5 4 5 De p a r t m e n t O f H o m e l a n d S e c u r i t y / S t a t e of W a s h i n g t o n M i l i t a r y 35 , 8 8 5 De p a r t m e n t O f H o m e l a n d S e c u r i t y / S t a t e of W a s h i n g t o n M i l i t a r y 72 9 , 3 6 4 To t a l C F D A 9 7 . 0 4 7 0 7 6 5 , 2 4 9 To t a l F e d e r a l A w a r d s E x p e n d e d : 35 7 , 4 8 4 1 , 6 3 4 , 5 8 1 _________________________________________________________________________________________________________ Washington State Auditor's Office 38 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 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 – Amounts Awarded to Sub Recipient Included in the total amount expended for this program is $143,307.16 that was passed through to a sub-recipient that administered its own project. _________________________________________________________________________________________________________ Washington State Auditor's Office 39 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 Office Deputy Director for Communications Thomas Shapley Thomas.Shapley@sao.wa.gov (360) 902-0367 Public Records requests (360) 725-5617 Main telephone (360) 902-0370 Toll-free Citizen Hotline (866) 902-3900 Website www.sao.wa.gov