HomeMy WebLinkAbout2014 Financial Statements and Federal Single Audit Report fT m
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Washington State Auditor's Office
Independence Respect - Integrity
Financial Statements and Federal Single Audit
Report
City of Port Townsend
Jefferson County
For the period January 1, 2014 through December 31, 2014
Published August 3, 2015
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Report No. 1014784
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Washington State Auditor's Office
August 3, 2015
Mayor and City Council
City of Port Townsend
Port Townsend,Washington
Report on Financial Statements and Federal Single Audit
Please find attached our report on the City of Port Townsend's financial statements and
compliance with federal laws and regulations.
We are issuing this report in order to provide information on the City's financial condition.
Sincerely,
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
Insurance Building,P.O.Box 40021❑Olympia,Washington 98504-0021❑(360)902-0370❑TDD Relay(800)833-6388
OF 1
— TABLE Federal Summary............................................................................................................................ 4
Independent Auditor's Report On Internal Control Over Financial Reporting And On
Compliance And Other Matters Based On An Audit Of Financial Statements Performed In
Accordance With Government Auditing Standards ....................................................................... 6
Independent Auditor's Report On Compliance For Each Major Federal Program And On
Internal Control Over Compliance In Accordance With OMB Circular A-133............................. 9
Independent Auditor's Report On Financial Statements .............................................................. 12
FinancialSection........................................................................................................................... 16
About The State Auditor's Office......................................................................................... ...... 38
Washington State Auditor's Office Page 3
City of Port Townsend
Jefferson County
January 1, 2014 through December 31, 2014
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 its
major federal program.
We reported no findings that are required to be disclosed under section 510(a) of OMB Circular
A-133.
Washington State Auditor's Office Page 4
Identification of Major Programs:
The following was a major program during the period under audit:
CFDA No. Program Title
66.468 Capitalization Grants for Drinking Water State Revolving Funds
The dollar threshold used to distinguish between Type A and Type B programs, as prescribed by
OMB Circular A-133, was $300,000.
The City did not qualify as a low-risk auditee under OMB Circular A-133.
Washington State Auditor's Office Page 5
INDEPENDENT AUDITOR'S 1 ' ON 1 1
OVER ' 1 ' AND ON 1 AND
OTHER MATTERS BASED ON 1 OF
STATEMENTS 1 1 IN ACCORDANCE
/ VERNMENT A UDITING I RDS
City of Port Townsend
Jefferson County
January 1, 2014 through December 31, 2014
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
We have audited, in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States, the financial statements of the
City of Port Townsend, Jefferson County, Washington, as of and for the year ended
December 31, 2014, and the related notes to the financial statements, which collectively
comprise the City's financial statements, and have issued our report thereon dated July 28, 2015.
We issued an unmodified opinion on the fair presentation of the City's financial statements in
accordance with its regulatory basis of accounting. We issued an adverse opinion on the fair
presentation with regard to accounting principles generally accepted in the United States of
America (GAAP) because the financial statements are prepared by the City using accounting
practices prescribed by Washington State statutes and the State Auditor's Budgeting, Accounting
and Reporting System (BARS) manual described in Note 1, which is a basis of accounting other
than GAAP. The effects on the financial statements of the variances between the basis of
accounting described in Note 1 and accounting principles generally accepted in the United States
of America, although not reasonably determinable, are presumed to be material.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit of the financial statements, we considered the City's
internal control over financial reporting (internal control) to determine the audit procedures that
are appropriate in the circumstances for the purpose of expressing our opinion on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of the City's
internal control. Accordingly, we do not express an opinion on the effectiveness of the City's
internal control.
Washington State Auditor's Office Page 6
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,
Washington State Auditor's Office Page 7
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.
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
July 28, 2015
Washington State Auditor's Office Page 8
INDEPENDENT AUDITOR'S 1 ' ON 1 FOR
EACH 1 R FEDERAL PROGRAM AND ON
CONTROL OVER 1 ACCORDANCE OMB
CIRCULAR A-133
City of Port Townsend
Jefferson County
January 1, 2014 through December 31, 2014
Mayor and City Council
City of Port Townsend
Port Townsend,Washington
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM
We have audited the compliance of the City of Port Townsend, Jefferson County, Washington,
with the types of compliance requirements described in the U.S. Office of Management and
Budget (OMB) 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, 2014. 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
Washington State Auditor's Office Page 9
with those requirements and performing such other procedures as we considered necessary in the
circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each
major federal program. Our audit does not provide a legal determination on the City's
compliance.
Opinion on Each Major Federal Program
In our opinion, the City complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended December 31, 2014.
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
Washington State Auditor's Office Page 10
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
also serves to disseminate information to the public as a reporting tool to help citizens assess
government operations.
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
July 28, 2015
Washington State Auditor's Office Page 11
INDEPENDENT AUDITOR'S 1 ' ON
FINANCIAL STATEMENTS
City of Port Townsend
Jefferson County
January 1, 2014 through December 31, 2014
Mayor and City Council
City of Port Townsend
Port Townsend, Washington
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of the City of Port Townsend, Jefferson
County, Washington, for the year ended December 31, 2014, and the related notes to the
financial statements, which collectively comprise the City's financial statements, as listed on
page 15.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the financial reporting provisions of Washington State statutes and the
Budgeting, Accounting and Reporting System (BARS) manual prescribed by the State Auditor
described in Note 1. This includes determining that the basis of accounting is acceptable for the
presentation of the financial statements in the circumstances. Management is also responsible
for the design, implementation and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
Washington State Auditor's Office Page 12
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
of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Unmodified Opinion on Regulatory Basis of Accounting (BARS Manual)
As described in Note 1, the City of Port Townsend has prepared these financial statements to
meet the financial reporting requirements of Washington State statutes using accounting
practices prescribed by the State Auditor's Budgeting, Accounting and Reporting System (BARS)
manual. Those accounting practices differ from accounting principles generally accepted in the
United States of America (GAAP). The differences in these accounting practices are also
described in Note 1.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position and results of operations of the City of Port Townsend, for the year ended
December 31, 2014, 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, 2014, or the
Washington State Auditor's Office Page 13
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
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
July 28, 2015 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
Washington State Auditor's Office Page 14
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.
0., �?n
JAN M. JUTTE, CPA, CGFM
ACTING STATE AUDITOR
OLYMPIA, WA
July 28, 2015
Washington State Auditor's Office Page 15
FINANCIAL SECTION
City of Port Townsend
Jefferson County
January 1, 2014 through December 31, 2014
FINANCIAL STATEMENTS
Fund Resources and Uses Arising from Cash Transactions—2014
Fiduciary Fund Resources and Uses Arising from Cash Transactions—2014
Notes to Financial Statements—2014
SUPPLEMENTARY AND OTHER INFORMATION
Schedule of Liabilities—2014
Schedule of Expenditures of Federal Awards—2014
Notes to the Schedule of Expenditures of Federal Awards—2014
Washington State Auditor's Office Page 16
City of Port Townsend
Fund Resources and Uses Arising from Cash Transactions
For the Year Ended December 31, 2014
Total for All
Funds 101 Drug
(Memo Only) 010 General Fund Enforcement
Beginning Cash and Investments
30810 Reserved 1,740,770 - -
30880 Unreserved 5,033,431 369,334 557
388&588 Prior Period Adjustments, Net (35,310) (35,248) -
Operating Revenues
310 Taxes 10,272,076 5,161,351 -
320 Licenses and Permits 301,970 301,508 -
330 Intergovernmental Revenues 1,603,869 417,737 -
340 Charges for Goods and Services 7,947,377 190,349 -
350 Fines and Penalties 89,581 80,408 -
360 Miscellaneous Revenues 204,845 99,202 -
Total Operating Revenues: 20,419,718 6,250,555 -
Operating Expenditures
510 General Government 1,710,517 729,427 -
520 Public Safety 5,134,726 3,012,774 -
530 Utilities 4,570,668 - -
540 Transportation 946,890 - -
550 Natural and Economic 926,962 684,449 -
Environment
560 Social Services - - -
570 Culture and Recreation 2,056,458 18,637 -
Total Operating Expenditures: 15,346,221 4,445,287 -
Net Operating Increase(Decrease): 5,073,497 1,805,268 -
Nonoperating Revenues
370-380, 395 &398 Other Financing Sources 247,265 1,175 -
391-393 Debt Proceeds 1,360,938 - -
397 Transfers-In 1,921,011 - -
Total Nonoperating Revenues: 3,529,214 1,175 -
Nonoperating Expenditures
580, 596&599 Other Financing Uses 81,705 33,462 -
591-593 Debt Service 1,552,721 - -
594-595 Capital Expenditures 3,438,420 34,197 -
597 Transfers-Out 1,921,011 1,350,803 -
Total Nonoperating Expenditures: 6,993,857 1,418,462 Net Increase(Decrease) in Cash and Investments: 1,608,854 387,981 -
Ending Cash and Investments
50810 Reserved 1,727,712 - -
50880 Unreserved 6,620,033 722,067 557
i ne accompanying nores are an inregrai parr or rnis sraremenr.
Washington State Auditor's Office Page 17
102 Contingency 135 Real Estate
Fund 110 Street 120 Library Excise Tax Fund 150 Lodging Tax 171 Fire and EMS
128,468 44,882 152,402 - 101,447 42,505
4,150 550,833 982,152 345,408 362,161 2,115,855
- 462 - - - -
- 190,289 - - - -
- 5,150 - - - -
- - 9,173 - - -
103 502 4,057 - - -
4,253 747,236 995,382 345,408 362,161 2,115,855
- - 4,696 - 13,780 -
- - - - - 2,121,472
- 496,664 - - - -
- - - - 228,985 -
- - 924,824 - - -
- 496,664 929,520 - 242,765 2,121,472
4,253 250,572 65,862 345,408 119,396 (5,617)
- 6,630 1,000 - - -
13,000 - - - - -
13,000 6,630 1,000 - - -
- 5,880 - - - -
- - - - - 11,320
- - 88,127 - - -
- 184,870 (30,186) 305,000 100,000 -
- 190,750 57,941 305,000 100,000 11,320
17,253 66,452 8,921 40,408 19,396 (16,937)
145,721 111,334 161,323 40,408 120,843 25,568
The accompanying notes are an integral part of this statement.
Washington State Auditor's Office Page 18
180 Affordable 190 Community 195 System 199 Community 200 G.O. Debt 301 General CIP
Housing Fund Dev Block Grants Development Svs Services Service Projects
5,816 142,317 1,067,049 22,373 2,295 493,520
- - (1,067,049) - - -
9,810 - - 639,235 101,121 -
- 23,517 - - - 967,665
- - - 109,796 - -
15,000 139 - 22,980 257 4,489
24,810 23,656 - 772,011 101,378 972,154
- - - 368,349 2,670 -
- - - 480 - -
- 13,528 - - - -
- - - 1,112,997 - -
- 13,528 - 1,481,826 2,670 -
24,810 10,128 - (709,815) 98,708 972,154
- - - 1,848 - -
- - - - - 600,000
- - - 736,000 1,036,673 99,814
- - - 737,848 1,036,673 699,814
- - - - 1,132,606 -
- - - - - 1,769,919
- - - - 1,132,606 1,769,919
24,810 10,128 - 28,033 2,775 (97,951)
30,626 152,445 - 50,406 5,070 395,569
The accompanying notes are an integral part of this statement.
Washington State Auditor's Office Page 19
595
411 Water Sewer 500 Equipment 555 Engineering Unemployment
Fund 412 Storm Fund Rental 540 PW Admin Services Self-Insurance
1,740,770 - - - - -
1,417,705 247,875 725,263 20,531 34,092 15,000
1,066,984 (1) 4 - - -
4,661 - - - - -
5,339,543 508,223 755,089 286,494 725,832 26,901
50,088 1,795 6,216 - 17 -
5,394,292 510,018 761,305 286,494 725,849 26,901
364,127 - 227,468 - - -
3,147,018 423,282 - 287,169 713,199 -
- - 450,226 - - -
3,511,145 423,282 677,694 287,169 713,199 -
1,883,147 86,736 83,611 (675) 12,650 26,901
232,127 - 4,485 - - -
760,938 - - - - -
35,524 - - - - -
1,028,589 - 4,485 - - -
25,462 - - - - 16,901
408,795 - - - - -
1,347,845 98,639 99,693 - - -
10,524 - - - - -
1,792,626 98,639 99,693 - - 16,901
1,119,110 (11,903) (11,597) (675) 12,650 10,000
1,727,712 - - - - -
3,616,857 235,971 713,670 19,856 46,742 25,000
i ne accompanying nores are an mregrai parr or rnis sraremenr.
Washington State Auditor's Office Page 20
City of Port Townsend
Fiduciary Fund Resources and Uses Arising from Cash Transactions
For the Year Ended December 31, 2014
Total for All Funds 601 Refundable 610 Firemen's
(Memo Only) Deposits Pension 613 Court-Agency
308 Beginning Cash and Investments 343,201 70,466 227,544 16,651
388&588 Prior Period Adjustments, Net 3 - 2 -
310-360 Revenues 55,034 - 34,936 -
380-390 Other Increases and Financing Sources 102,360 20,000 - 82,360
510-570 Expenditures 62,457 - 49,461 -
580-590 Other Decreases and Financing Uses 87,407 - - 87,407
Net Increase(Decrease)in Cash and Investments: 7,530 20,000 (14,525) (5,047)
508 Ending Cash and Investments 350,734 90,466 213,021 11,604
623 Golf Course
621 Memorial Fund
308 Beginning Cash and Investments 2,497 26,043
388&588 Prior Period Adjustments, Net - 1
310-360 Revenues 9,552 10,546
380-390 Other Increases and Financing Sources - -
510-570 Expenditures - 12,996
580-590 Other Decreases and Financing Uses - -
Net Increase(Decrease)in Cash and Investments: 9,552 (2,450)
508 Ending Cash and Investments 12,049 23,594
The accompanying notes are an integral part of this statement.
Washington State Auditor's Office Page 21
QtX of Port Townsend
Notes to the Financial sFaTe--ments
For the Year Ended December 31, 2014
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Port Townsend was incorporated on January 16, 1860 and operates under the laws of the state of
Washington applicable to a non-charter code city. The city is a general purpose local government and
provides police and fire protection, water, sewer, storm drainage, as well as maintaining parks, streets, and a
library for use by its citizens.
The City of Port Townsend reports financial activity in accordance with the Cash Basis Budgeting,Accounting and
Reporting System (BARS) Manual prescribed by the State Auditor's Office under the authority of Washington
State law, Chapter 43.09 RCW. This manual prescribes a financial reporting framework that differs from generally
accepted accounting principles(GAAP) in the following manner:
• Financial transactions are recognized on a cash basis of accounting as described below.
• Component units are required to be disclosed, but are not included in the financial statements.
• Government-wide statements, as defined in GAAP, are not presented.
• All funds are presented, rather than a focus on major funds.
• The Schedule of Liabilities is required to be presented with the financial statements as supplementary
information.
• Supplementary information required by GAAP is not presented.
• Ending balances are not presented using the classifications defined in GAAP.
A. Fund Accounting
Financial transactions of the government are reported in individual funds. Each fund uses a separate set
of self-balancing accounts that comprises its cash and investments, revenues and expenditures. The
government's resources are allocated to and accounted for in individual funds depending on their
intended purpose. Each fund is reported as a separate column in the financial statements.
The following fund types are used:
GOVERNMENTAL FUND TYPES:
General Fund (Fund 010):
This fund is the primary operating fund of the city. It accounts for all financial resources except those
required or elected to be accounted for in another fund.
Special Revenue Funds (Funds in the 100 series):
These funds account for specific revenue sources derived from specific taxes, grants or other sources,
which are restricted or committed to expenditures for specified purposes of the city. (Note: In prior
years, the City has reported its System Development Charge Fund in the 100 series. In 2014, this fund
has been reassigned as a proprietary fund (400 series) as this fund was created to fund water and
wastewater capital improvements and replacements.)
Washington State Auditor's Office Page 22
Debt Service Funds (Funds in the 200 series):
These funds account for the financial resources that are restricted, committed, or assigned to
expenditures for principal, interest and related costs on general long-term debt.
Capital Protects Funds (Funds in the 300 series):
These funds account for financial resources which are restricted, committed, or assigned for the
acquisition or construction of capital facilities or other capital assets.
Permanent Funds
These funds account for financial resources that are legally restricted to the extent that only earnings,
and not principal, may be used for purposes that support programs for the benefit of the government or
its citizenry.
PROPRIETARY FUND TYPES:
Enterprise Funds (Funds in the 400 series):
These funds account for operations that provide goods or services to the general public and are
supported primarily through user charges. (Note: In prior years, the City has reported its System
Development Charge Fund in the 100 series. In 2014, this fund has been reassigned as an enterprise fund
(400 series) as this fund was created to fund water and wastewater capital improvements and
replacements.)
Internal Service Funds (Funds in the 500 series):
These funds account for operations that provide goods or services to other departments or funds of the
city or other governmental units on a cost reimbursement basis.
FIDUCIARY FUND TYPES:
Fiduciary funds account for assets held by the government in a trustee capacity or as an agent on behalf
of others.
Refundable Deposits (Fund 601):
This fund accounts for deposits being held pending city criteria for builders being fulfilled.
Pension (and Other Employee Benefit)Trust Funds (Fund 610):
This fund is used to account for financial resources to pay retiree benefits related to the Fire Fighters'
Retirement System (Firemen's Pension).
Agency Funds (Funds 613—699):
These funds are used to account assets that the city holds on behalf of others in a custodial capacity.
Washington State Auditor's Office Page 23
B. Basis of Accounting and Measurement Focus
Financial statements are prepared using the cash basis of accounting and measurement focus. Revenues
are recognized when cash is received and expenditures are recognized when paid, including those
properly chargeable against the prior year(s) budget appropriations as required by state law.
In accordance with state law the city also recognizes expenditures paid during twenty days after the close
of the fiscal year for claims incurred during the previous period.
Purchases of capital assets are expensed during the year of acquisition. There is no capitalization of
capital assets, nor allocation of depreciation expense. Inventory is expensed when purchased.
C. Budgets
The city adopts annual appropriated budgets for all funds. These budgets are appropriated at the fund
level. The budget constitutes the legal authority for expenditures at that level. Annual appropriations for
these funds lapse at the fiscal year end.
Annual appropriated budgets are adopted on the same basis of accounting as used for financial
reporting.
The appropriated and actual expenditures for the legally adopted budgets were as follow:
HS CAL YEAR 2014
Final Appropriated Actual
Amounts Expenditures Variance
General $ 7,019,565 $ 6,980,978 $ 38,587
Street $ 688,502 $ 687,412 $ 1,090
Library $ 994,144 $ 987,461 $ 6,683
Real Estate Excise Tax Fund $ 305,000 $ 305,000 $ 0
Lodging Tax $ 342,780 $ 342,765 $ 15
Fire&EMS Service $ 2,132,918 $ 2,132,792 $ 126
Affordable Housing Fund $ 6,500 $ - $ 6,500
Community Development Block Grants $ 13,528 $ 13,528 $ 0
Community Services $ 1,521,921 $ 1,481,825 $ 40,096
GO Debt Service $ 1,139,873 $ 1,135,275 $ 4,598
Capital Improvement $ 3,266,378 $ 1,817,586 $ 1,448,792
Water/Sewer Utility $ 4,207,119 $ 4,091,152 $ 115,967
Utility Construction Fund $ 2,982,084 $ 1,365,235 $ 1,616,849
Trans line Replacement $ 195,292 $ 98,207 $ 97,085
1978 Water Sewer Rev Bond $ 25,000 $ 25,000 $
Storm water $ 534,880 $ 521,921 $ 12,959
Equipment Rental $ 790,099 $ 777,388 $ 12,711
Public Work&Admin $ 292,313 $ 287,169 $ 5,144
Engineering Service Fund $ 735,688 $ 713,199 $ 22,489
System Development Charges $ 248,090 $ 12,114 $ 235,976
Unemployment Self Insurance $ 20,000 $ 16,901 $ 3,099
Firemen's Pension $ 67,519 $ 49,462 $ 18,057
Golf Course Fund $ 14,012 $ 12,996 $ 1,016
$ 27,543,205 $ 23,855,364 $ 3,687,841
Washington State Auditor's Office Page 24
Budgeted amounts are authorized to be transferred between departments within any fund/object classes
within departments; however, any revisions that alter the total expenditures of a fund, or that affect the
number of authorized employee positions, salary ranges, hours, or other conditions of employment must
be approved by the city council.
D. Cash and Investments
It is the city's policy to invest all temporary cash surpluses. The interest on these investments is prorated
to the various funds.
All deposits are covered by the Federal Deposit Insurance Corporation and/or by collateral held in a
multiple financial institution pool administered by the Washington Public Deposit Protection Commission.
The city's investments are insured, registered, or held by the city or its agent in the city's name. As
required by state law, all investments of the city's funds are obligations of the U.S. Government, the
Washington State Treasurer's Investment Pool, or deposits with Washington State banks and savings and
loan institutions.
Investments are reported at fair value. Investments by type at December 31, 2014 are as follows:
City of Port Townsend
State of Washington
Local Government Investment Pool
1/1/2014 Beginning Balance $6,387,682
Gross Investment Earnings $ 7,686
Administrative Fees (695)
Net Investment Earnings 6,990
Deposits $2,200,000
Withdrawals (2,150,000)
50,000
12/31/2014 Ending Balance (Market Value) $6,444,672
E. Capital Assets
The city is responsible for stewardship of public resources and as such, has policies and procedures in
place to track, demonstrate accountability, and insure security of all assets.
Operating under a cash basis, capital assets and inventory are recorded as capital expenditures when
purchased; because the entire expenditure is recognized in the period when the cash outflow occurs, the
reporting of depreciation accounts is not appropriate.
Washington State Auditor's Office Page 25
Capital Improvements are defined as projects to create, expand, or modify a capital facility. The project
may include design permitting, environmental analysis, land acquisition, construction, landscaping, site
improvements, initial furnishings, and equipment. The project cost must exceed $15,000 and have a
useful life of five years.
F. Compensated Absences
Vacation leave may be accumulated up to 240 hours for regular employees and 360 hours for department
heads. Vacation leave is payable upon separation or retirement. Sick leave may be accumulated up to
1,440 hours. Upon separation or retirement employees do not receive payment for unused sick leave.
Expenditures related to leave are recognized when paid.
The compensated absence balances decreased by $28,991 from 2013 to 2014. More vacation time was
paid than was accrued in 2014, largely related to retirement payouts for several long term employees.
G. Long-Term Debt
See Note 4.
H. Other Financing Sources or Uses
The city's Other Financing Sources or Uses consist of operating transfers-in, Operating transfers-out,
special assessment bond proceeds, proceeds from refunding bonds, and capital leases.
I. Risk Management
See Note 6.
J. Reserved Portion of Ending Cash and Investments
Beginning and Ending Cash and Investments is reported as reserved when it is subject to restrictions on
use imposed by external parties or due to internal commitments established by the City Council through
a formal action (e.g. ordinance or resolution). When expenditures that meet restrictions are incurred,
the city intends to use reserved resources first before using unreserved amounts.
Reservations of Ending Cash and Investments consist of as of December 31, 2014 are $1,727,712. These
funds were reserved by Trust in 1956 for system replacement or improvements related to the Olympic
Gravity Water System Pipeline (Ordinance 1321).
NOTE 2—COMPLIANCE AND ACCOUNTABILITY
There have been no material violations of finance related legal or contractual provisions. No City of Port
Townsend funds made expenditures in excess of legal appropriations.
NOTE 3— PROPERTY TAXES
The Jefferson County Treasurer acts as agent to collect property taxes levied in the county for all taxing
authorities. Collections are distributed after the total collected surpasses $10,000; with any balance left over
distributed at month-end.
Washington State Auditor's Office Page 26
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 2014 was $1.73897 per $1,000 on assessed valuation of$1,219,761,437 for a total
regular levy of$2,121,128.55.
A Library LID lift was approved by voters in 2008 to be phased in over 2009-2011. For 2014 the library levy
was 0.80908 per$1000 for a total of$986,884.58.
Voters approved a Fire LID lift in 2012. For 2014 the Fire LID lift was 0.53429 per $1000 for a tax amount of
$651,706.34.
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$609,880.72 in 2014.
NOTE 4— LONG TERM DEBT
The accompanying schedule of Long Term Liabilities (Schedule 09) provides a listing of the outstanding debt
of the city and summarizes the City of Port Townsend's debt transactions for Calendar Year 2014. The debt
services payments for the year being reported and future payment requirements, including interest, are as
follows:
DEBT SERVICE SCHEDULE
Revenue
Year G.O. Bonds Bonds Other Debt Total LT Debt
2014 $1,132,606 $25,000 $426,656 $1,584,262
2015 $1,138,685 $24,000 $404,956 $1,567,641
2016 $1,298,435 $23,000 $402,535 $1,723,970
2017 $1,284,565 $22,000 $466,147 $1,772,712
2018 $1,285,200 $21,000 $444,913 $1,751,113
2019-2023 $6,386,100 $0 $1,546,310 $7,932,410
2024-2028 $5,573,385 $0 $807,233 $6,380,618
2029-2033 $4,086,730 $0 $508,473 $4,595,203
2034-2038 $3,374,058 $0 $103,498 $3,477,556
Total $25,559,7641 $115,0001 $5,110,7221 $30,785,486
Washington State Auditor's Office Page 27
A. Bonds
The City of Port Townsend issues general obligation and revenue bonds to finance the construction and
remodel of capital assets. Bonded indebtedness has also been entered into to advance refund revenue
bonds. General obligation bonds have been issued for both general government and business-type activities
and are being repaid from the applicable resources. The revenue bonds are being repaid by proprietary fund
revenues.
In 2008 the City issued $7,500,000 in bonds to finance road and sidewalk improvements, as well as tourism,
infrastructure, and waterfront access improvements. In 2010 the City issued an additional $3,740,000 in
bonds for sidewalks, utilities and street improvements, as well as funding for the Carnegie Library seismic
retrofit. In 2012 the City refunded the balance of the 1999 G.O. Bonds and the 2005 G.O. Bonds. As part of
the same refunding $1,505,000 of the 2003 G.O. Bonds were advanced refunded as well as $2,500,000 of the
2002 G.O. Bonds.
In 2014, the City Council authorized a Limited General Obligation Bond Anticipation Note (BAN) for
$1,500,000. On December 3, 2014, the City executed a line of credit with Cashmere Valley Bank. The BAN
line of credit interest rate is a variable rate tied to the LIBOR (London Interbank Offered Rate) and is
calculated as 65% of the 3 month LIBOR rate plus 1.05%. The rate as of 12/31/2014 was 1.20%. The maturity
date of the line of credit is December 1, 2017.
General Obligation LT Debt currently outstanding as of December 31, 2014 is as follows:
G.O.LONG TERM OUTSTANDING DEBT
Issue Debt
Year Purpose Original Issue Interest Rate Maturity Date Outstanding
Limited G.O. Bonds for
construction funds for civic
20081 and street improvements $7,500,000 4.15-5.00% 12/1/2038 $7,500,000
Limited G.O. Bonds for
street,sidewalk,utilities
2010 and historic district $3,740,000 2.30-5.00% 12/1/2030 $3,740,000
Limited G.O. Bonds for
refunding of 1999 Bonds,a
portion of the 2002 G.O.
Bonds,and a portion of the
2012 2005 G.O. Bonds $5,530,000 .50-4.25% 12/1/2025 $4,610,000
Variable rate
Limited G.O. Bond tied to Libor
Anticipation Note (Line of index(65%of 3
Credit)for capital month Libor
improvments at the plus 1.05%,
Mountain View campus and rate as of
other general capital 12/31/2014-
2014 project costs $1,500,000 1.20% 1 12/1/2017 $600,000
Total $16,450,000
Washington State Auditor's Office Page 28
Proprietary Long Term Debt currently outstanding as of December 31, 2014 is as follows:
PROPRIETARY LONG TERM DEBT
Issue Debt
Year Purpose Original Issue Interest Rate Maturity Date Outstanding
Water/Sewer Revenue
Bonds for Water and Sewer
19781 Improvementsl $395,0001 5.00% 12/1/2018 1 $80,000
B. Public Works Trust Fund Loans and State Revolving Fund Loans
State of Washington Public Works Trust Funds (PWTF) Loans are intergovernmental loans from the Public
Works Board to undertake local public works projects. These loans are a direct responsibility of the City of
Port Townsend. The City currently has six such loans.
State Revolving Fund (SRF) Loans are State of Washington Department of Ecology low interest loans for
projects that protect and improve water quality. The City of Port Townsend has one SRF loan.
The 2012 DWSRF Loan has not drawn down the full loan amount available; the debt outstanding reflects
current drawdowns less any principal payments.
As of December 31, 2014 the long-term debt payable for PWTF and SRF loans consisted of the following:
PUBLIC WORKS AND STATE REVOLVING FUND LOAN SCHEDULE
Issue Maturity Debt
Year Purpose Original Issue Interest Rate Date Outstanding
PWTF Loan: CT Pipeline Tri-Area
Water Storage,Tri-Area Well
1998 Upgrades $2,172,055 1.00% 12/1/2018 $178,872
PWTF Loan: Gaines Street Lift
1999 Station;San Juan Street Trunk Line $1,434,365 1.00% 12/1/2019 $297,974
PWTF Loan: Wastewater
Treatment Outfall Expansion;
2001 lTrunk Sewer Line Replacement $1,153,350 0.50% 12/1/2021 $386,935
PWTF Loan: Morgan Hill Water
2002 System Improvements $1,242,742 0.50% 12/1/2022 $533,615
SRF Loan: Wastewater
Conveyance Storm and Sewer
Separation;Gains Street Lift
Station Phase II;Trunk Sewer Line
2002 Replacement $1,896,000 1.50% 12/1/2024 $898,769
Department of Ecology Loan for
2004 lWastewater Conveyance System $856,803 1.50% 9/8/2024 $471,157
2012 PWTF Loan: City Lake Repair $1,000,000 0.50% 12/1/2031 $894,737
DWSRF Loan: LT2 Federally
Mandated Water Treatment
2012 Facility 1 $3,071,521 1.50% 12/1/2036 1 $660,130
Total $4,322,189
Washington State Auditor's Office Page 29
NOTE 5— PENSION PLANS
Substantially all city full-time and qualifying part-time employees participated in Public Employee's
Retirement System (PERS), Law Enforcement Officers' and Fire Fighters' Retirement System (LEOFF)
Volunteer Firemen Relief and Pension Fund, Firemen's Pension and Relief Fund administered by the
Department of Retirement Systems, 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, 2014 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, 2014 the market value of assets was $213,020.
NOTE 6— RISK MANAGEMENT
The City of Port Townsend is a member of the Washington Cities Insurance Authority (WCIA). Utilizing
Chapter 48.62 RCW (self-insurance regulation) and Chapter 39.34 RCW (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 175 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, public officials' errors or omissions, stop gap, and employee benefits liability. Limits are
$4 million per occurrence self-insured layer, and $16 million per occurrence in the re-insured excess layer.
The excess layer is insured by the purchase of reinsurance and insurance and is subject to aggregate limits.
Total limits are $20 million per occurrence subject to aggregate sub-limits in the excess layers. The Board of
Directors determines the limits and terms of coverage annually.
Insurance coverage for property, automobile physical damage, fidelity, inland marine, and boiler and
machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance
and auto physical damage are self-funded from the members' deductible to $750,000, for all perils other
than flood and earthquake, and insured above that amount by the purchase of insurance.
Washington State Auditor's Office Page 30
In-house services include risk management consultation, loss control field services, claims and litigation
administration, and loss analyses. WCIA contracts for the claims investigation consultants for personnel
issues and land use problems, insurance brokerage, and lobbyist services.
WCIA is fully funded by its members, who make annual assessments on a prospectively rated basis, as
determined by an outside, independent actuary. The assessment covers loss, loss adjustment, and
administrative expenses. As outlined in the inter-local, WCIA retains the right to additionally assess the
membership for any funding shortfall.
An investment committee, using investment brokers, produces additional revenue by investment of WCIA's
assets in financial instruments which comply with all State guidelines.
A Board of Directors governs WCIA, which is comprised of one designated representative from each member.
The Board elects an Executive Committee and appoints a Treasurer to provide general policy direction for the
organization. The WCIA Executive Director reports to the Executive Committee and is responsible for
conducting the day to day operations of WCIA.
NOTE 7— RESTRICTED FUNDS
In accordance with bond ordinances and certain related agreements, separate restricted funds are required
to be established. The assets held in these funds are restricted for specific uses, including construction, debt
service and other special reserve requirements. As of December 31, 2014, the City has no restricted bond
funds.
NOTE 8—CONTINGENCIES AND LITIGATION
In the opinion of management, the City's insurance program (see Note 7) and self-insurance fund (see Note
12) are adequate to pay all known or pending claims.
NOTE 9— INTERFUND LOANS
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
program.
In May 2013, the City Council authorized up to a million dollar interfund loan from the Transmission Line
Replacement Fund to the Water Capital Improvement Project fund for interim financing of designing the
Ultraviolet Water Treatment Project. The loan is for design work and may include appropriate City
engineering and overhead costs. As of December 31, 2014, $161,250 has been drawn against this loan. The
balance of the loan will be repaid once permanent financing for this project is finalized in 2015 and 2016.
Borrowing Fund Lending Fund Balance 2014 Balance
1/1/2014 Repayments 12/31/2014
Main Street General (010) Transmission Line $66,713 $33,333 $33,380
(417)
LT2 Water Water Capital (415) Transmission Line $161,250 $0 $161,250
Project (417)
Total $227,963 $33,333 $194,630
Washington State Auditor's Office Page 31
NOTE 10— INTERLOCAL GOVERNMENT WITH EAST JEFFERSON FIRE RESCUE
On June 20, 2012 the City amended the agreement with East Jefferson Fire Rescue (District) to reimburse the
district for the purchase of a third fire engine. The City has committed to pay the District a total of$392,081
(which includes interest) for the fire engine. As of December 31, 2014, the outstanding debt service related
to this agreement is$369,441. The payment schedule is as follows:
EJFR PAYMENT SCHEDULE
PAYMENT
DATE INTEREST PRINCIPAL TOTAL
5/31/2013 $11,320 $0 $11,320
5/31/2014 $11,320 $0 $11,320
5/31/2015 $9,883 $177,199 $187,082
5/31/2016 $2,615 $179,744 $182,359
Total $392,081
NOTE 11—SELF INSURANCE
The City of Port Townsend self-insures for unemployment through the State of Washington's Employment
Security Department. When a former employee files for and obtains unemployment coverage with the State
of Washington, the City of Port Townsend is direct-billed their portion of the unemployment benefit costs.
In 2013, the City of Port Townsend established an Unemployment Self Insurance Fund. As of December 31,
2014 the fund had a balance of$25,000 as compared to the prior year ending Fund balance of$15,000.
NOTE 12— MANAGEMENT FUNDS
To assist in managing the City of Port Townsend's finances, the city has established management funds for
accounting purposes. The management fund activities are rolled into one fund for reporting purposes.
The following funds include managerial fund activity that is reported in one fund:
• Water and Sewer Utility Fund
• General Government Capital Improvement Project Fund
NOTE 13— POST EMPLOYMENT BENEFITS
The City of Port Townsend has a commitment to pay for post-employment benefits for employees that belong
to LEOFFI retirement system. These benefits include medical insurance premiums, out-of-pocket medical
costs, and dental and vision care. Six police retirees received these benefits during the year and $65,050 was
paid out for those benefits.
Washington State Auditor's Office Page 32
NOTE 14—CONSTRUCTION COMMITMENT
The City of Port Townsend has four active construction projects as of December 31, 2014. Total construction
commitment as of the end of the year totaled $3,023,289. A summary table of those commitments is below:
TABLE OF CONSTRUCTION COMMITMENTS
PROJECT CONTRACT PAID TO REMAINING
PROJECT CONTRACTOR PHASE AMOUNT DATE CONTRACT
Water Treatment HDR
Phase II Engineering Design $846,476 $718,617 $127,859
Water Treatment HDR
Phase II Engineering Design $821,792 $441,496 $380,296
Water Treatment Equip.
Phase II Evoqua Purchase $149,500 $45,000 $104,500
5 MG Reservoir HDR Eng. Design $298,017 $15,737 $282,280
Howard St Ext BergerABAM Design $1,038,768 $343,777 $694,991
Energy Upgrades Honeywell Construction $2,381,461 $948,098 $1,433,363
Sheridan Shea Carr
Sidewalks Jewell Design $65,324 $0 $65,324
Big Quilcene Bruch &
River Bruch Construction $193,480 $183,227 $10,253
Total $3,098,866
NOTE 15— PRIOR YEAR ADJUSTMENTS
During fiscal year 2014, the City of Port Townsend hired both a new Finance & Administrative Services
Director and a new Finance Manager. As part of the year end close out, a reconciliation of all beginning fund
balances occurred and several immaterial adjustments were made to properly recognize the January 1, 2014
beginning balances. The adjustments included a $35,248 reduction in the reported beginning fund balance of
the general fund to eliminate a prior year receivable from the financial records. Additional minor rounding
adjustments were made to reconcile the beginning fund balances for the Transmission Line Fund ($65
reduction), Storm Fund ($1 reduction) and Equipment Rental Fund ($4 addition).
One significant prior period adjustment was made to move the System Development Charge fund from a
General Government fund to an Enterprise fund. In prior years, the City has reported its System Development
Charge Fund in the 100 series. In 2014, this fund has been reassigned as a proprietary fund (400 series) as this
fund was created to fund water and wastewater capital improvements and replacements. This prior period
adjustment was for$1,067,049.
NOTE 16—SUBSEQUENT EVENTS
In February 2015, the voters of the City of Port Townsend approved a ballot measure to authorize the City to
issue up to $3.6 million in bonds for the Mountain View Campus energy retrofit and other campus
improvements. The total cost of the project is estimated to be $4.8 million and the remaining$1.2 million will
be funded by grants and donations. Some of the energy work began in late 2014 and a Bond Anticipation
Note (BAN) line of credit was used to fund the costs of this project prior to the issuance of the bonds (see
Note 4 A.) This line of credit will be repaid once the bonds are issued, which is anticipated to be in June 2015.
Washington State Auditor's Office Page 33
NOTE 17—OTHER FINANCIAL INFORMATION
The Fort Worden Public Development Authority (The Authority) was established by Ordinance 3108 enacted
by the City on September 8, 2009. That Ordinance adopted the Authority's Charter, granting it the power to
manage, promote, develop, secure funding, and enhance the Fort Worden State Park including undertaking,
assisting with, and otherwise facilitating the implementation of a Lifelong Learning Center at the Park.
The Authority is a public corporation authorized under the provisions of RCW 35.21.735—35.21.759. It is a
separate legal entity that is independent from the City. RCW 35.21.750 provides that". . . liabilities incurred
by such public corporation, commission, or authority shall be satisfied exclusively from the assets and
properties of such public corporation, commission, or authority and no creditor or other person shall have any
right of action against the city, town, or county creating such corporation, commission or authority on
account of any debts, obligations, or liabilities of such public corporation, commission, or authority."
The Authority is governed by a Board of Directors. A nominating committee of the Authority solicits, reviews
and recommends Board Members. As the Chartering Agency, the City appoints Board Members. The City
Council also has the ability to remove Board members by resolution. The Authority maintains independent
financial reports. Financial reports are provided annually to the City Manager and City Council and an
independent audit is required annually.
In 2014, the City provided $44,000 of support to the Authority from the Lodging Tax Fund (approved by the
Lodging Tax Advisory Committee and the City Manager) to fund joint marketing of the Fort Worden Lifelong
Learning Center and the City of Port Townsend.
Washington State Auditor's Office Page 34
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Washington State Auditor's Office Page 35
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Washington State Auditor's Office Page 36
CITY OF PORT TOWNSEND
NOTES TO SCHEDULE OF EXPENDITURE OF FEDERAL AWARDS FOR THE YEAR ENDING DECEMBER 31,
2014:
NOTE 1: - BASIS OF ACCOUNTING
This schedule is prepared on the same basis of accounting as the City of Port Townsend's financial
statements. The City of Port Townsend uses the cash basis of accounting.
NOTE 2: - PROGRAM COSTS
The amounts shown as current year expenditures represent only the federal portion of the program
costs. Entire program costs, including the city of Port Townsend's portion, may be more than shown.
NOTE 3: -AMOUNTS AWARDED TO SUB RECIPIENTS
Included in the total amount expended for federal program CDFA 16-590 is $145,176 that was passed
through to a sub recipient that administered its own project.
An additional $74,446 was paid to the sub recipient in 2014, but reported on the 2013 Schedule of
Expenditures of Federal Awards.
Washington State Auditor's Office Page 37
ABOUT 1 / ' 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.Shapleygsao.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
Washington State Auditor's Office Page 38