HomeMy WebLinkAbout2010 Financial Statements & Federal Single Audit ReportWashington State Auditor’s Office
Financial Statements and Federal Single Audit Report
City of Port Townsend
Jefferson County
Audit Period
January 1, 2010 through December 31, 2010
Report No. 1006600
Issue Date
October 24, 2011
October 24, 2011
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,
BRIAN SONNTAG, CGFM
STATE AUDITOR
Washington State Auditor
Brian Sonntag
Insurance Building, P.O. Box 40021 Olympia, Washington 98504-0021 (360) 902-0370 TDD Relay (800) 833-6388
FAX (360) 753-0646 http://www.sao.wa.gov
Table of Contents
City of Port Townsend
Jefferson County
January 1, 2010 through December 31, 2010
Federal Summary ...................................................................................................................... 1
Schedule of Audit Findings and Responses ............................................................................... 3
Independent Auditor’s Report on Internal Control over Financial Reporting and on
Compliance and Other Matters in Accordance with Government Auditing Standards ................. 6
Independent Auditor’s Report on Compliance with Requirements That Could Have a Direct
and Material Effect on Each Major Program and on Internal Control over Compliance in
Accordance with OMB Circular A-133 ........................................................................................ 8
Independent Auditor’s Report on Financial Statements .............................................................10
Financial Section .......................................................................................................................12
Federal Summary
City of Port Townsend
Jefferson County
January 1, 2010 through December 31, 2010
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 unqualified 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 unqualified 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.
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Identification of Major Programs:
The following was a major program during the period under audit:
CFDA No. Program Title
20.205 ARRA - Highway Planning and Construction
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.
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Schedule of Audit Findings and Responses
City of Port Townsend
Jefferson County
January 1, 2010 through December 31, 2010
1. The City is at risk of not being able to meet its financial obligations.
Description of Condition
During the current audit, we identified concerns with the City’s financial condition. The
chart below shows the City’s general fund cash balance since 2006:
2006 $258,408
2007 $293,264
2008 $230,976
2009 $ 915
2010 $ 40,930
As of August 31, 2011, the General Fund had a deficit cash balance of $40,700.
The City’s General Fund expenditures exceeded revenues in three of the prior five
years, attributing to the decline in ending cash balances:
2006 2007 2008 2009 2010
Revenue $6,780,995 $7,347,621 $7,526,444 $7,314,729 $6,479,841
Expenditures ($6,993,836) ($7,313,793) ($7,591,370) ($7,508,617) ($6,439,660)
Excess
(Deficit) ($212,841) $33,828 ($64,926) ($193,888) $40,181
The City’s long-term debt balance has been increasing since 2006:
2006 2007 2008 2009 2010
Governmental 7,658,606 7,347,790 14,520,401 14,262,174 17,618,452
Proprietary 6,828,267 6,062,920 5,253,990 4,370,463 3,528,330
14,486,873 13,410,710 19,774,391 18,632,637 21,146,782
In addition, on November 22, 2010, the City entered into an inter-local agreement with
Jefferson County Fire Protection District No. 1, which obligates the City to guarantee
$625,000 of the District’s debt.
Cause of Condition
The City has experienced a loss in tax revenues and other financial challenges due to
the downturn in the economy, the temporary loss of ferry services in 2007, closure of the
Hood Canal Bridge in 2009 and the ongoing stagnation of the real-estate market. The
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City has taken steps to cut costs but not at a rate sufficient to keep pace with the decline
in revenues.
The City has no formal written plan to address its financial condition.
Effect of Condition
The City is at risk of not being able to meet financial obligations at current service levels.
This could result in the City needing to obtain bank loans or find other sources of
funding, which may be an additional cost to taxpayers.
In addition, the City is not in compliance with its own financial policies that outline
requirements for minimum fund balances.
Recommendation
We recommend the City establish a formal written comprehensive plan to address its
financial condition. City officials should monitor and evaluate the City’s financial position
to ensure the plan is followed and the desired results are achieved. The plan should be
revised as needed to resolve any ongoing financial issues. The City also should comply
with its policy on minimum fund balances.
City’s Response
We appreciate the opportunity to respond to the auditor’s finding on financial conditions.
These past few years have been very difficult for our city to provide services to our
citizens given the condition of the national, state and local economy. While our citizens
continue to desire city services, we have declining revenues to pay for those services.
Additionally, many governments have reduced support for local communities, and in
some cases abandoning services that our citizens expect to receive. The city has
avoided reducing service levels for our citizens at the expense of its financial condition,
and we are reconsidering the level of support for 2012. The city council did adopt a
three year budget strategy, but the severity of the economic recession depleted
reserves, and the city must now reconsider its support for various services.
As stated in 2008, the City adopted a three year strategy that worked well, with the
exception that reserves were sacrificed due to a deeper than anticipated recession and
the three year phasing in of a $0.75 Special Purpose Library Levy. In addition, in 2010,
the voters in Jefferson County approved a Public Safety Sales Tax. Under an Inter
Local Agreement (ILA) with Jefferson County one half of the City’s share is allocated for
a period not to exceed 5 years to support in-city County recreation services while a
regional service model is developed. The Council in its 2011 Budget allocated the other
half of the new sales tax revenue to offset the City’s contribution to support Fire Services
under the ILA with the District. The City Council in the late summer of 2011 reviewed
the status of the City finances pending a decision to address the long term needs to fund
the Inter Local Agreement (ILA) with the East Jefferson Fire District. These two decision
coupled with a further decline in real estate in the City further complicated the City’s
ability to address it finances in a more timely manner.
The Council in late spring early summer, deliberated choices and options and directed
the Administration to bring forth for 2012 an extension of the 2008 strategy to carry the
City forward for another 3 to 5 years. As a part of this it was also recommended to
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immediately address the Fire District ILA by scheduling a special purpose levy vote this
November. This levy will fund the current interlocal until such time as annexation occurs
and will restore 50% of the public safety sales tax allocation and remove any further
diversion of income from the General Fund. The Administration has prepared a
sustainable budget strategy and will submit this in late October for the Council to
consider as a part of the 2012 budget process. The recommendation includes an initial
sustainable reduction to General Fund related expenses starting in 2012 of over
$906,000.00. It is also recommended to capitalize engineering overhead reducing Utility
expenses by over $800,000.00 thereby stabilizing the rates and financing of the Utility.
These actions will maintain the City’s ability’s to meet its obligations and restore and
sustain its reserve balance in the General Fund over the next 3 to 5 years. If these
actions are approved and adopted, the City will have no issues to address with any
creditor and should be on a solid road to recovery.
Auditor’s Remarks
We appreciate the City’s commitment to resolving this issue. We will review this area
again during our next scheduled audit.
Applicable Laws and Regulations
SAS No. 59, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going
Concern, provides guidance on the auditor’s evaluation of whether there is substantial
doubt about the entity’s ability to continue as a going concern. Ordinarily, financial
statements of a governmental unit are prepared based on the assumption that the
reporting entity will continue as a going concern. SAS No. 59 relates going concern to
the entity’s ability to continue to meet its obligations as they become due without
substantial disposition of assets outside the ordinary course of business, restructuring of
debt, externally forced revisions of its operations, or similar actions.
Budgeting Accounting and Reporting System (BARS) Manual - Part 3, Accounting,
Chapter 1. Accounting Principles and General Procedures, Section C. Internal Control,
states in part:
Management is responsible for the entity’s performance, compliance and
financial reporting. Therefore, the adequacy of internal controls to provide
reasonable assurance regarding the achievement of such objectives is
also the responsibility of management.
City of Port Townsend Resolution 99-051 states in part:
Revenue Policy 1 General Fund Balance
To maintain the City’s credit rating and meet seasonal cash flow shortfalls the
budget shall provide for an anticipated undesignated fund balance between 5%
and 8% for general government and enterprise fund types of estimated annual
revenues.
The fund balance shall be exclusive of all reserves not anticipated to be readily
available for use in emergencies and contingencies. Should the fund balance fall
below 5% of revenues, a plan for expenditure reductions and/or revenue
increases shall be submitted to the City Council via the City Manager.
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Independent Auditor’s Report on Internal
Control over Financial Reporting and on
Compliance and Other Matters in Accordance
with Government Auditing Standards
City of Port Townsend
Jefferson County
January 1, 2010 through December 31, 2010
Council
City of Port Townsend
Port Townsend, Washington
We have audited the financial statements of the City of Port Townsend, Jefferson County,
Washington, as of and for the year ended December 31, 2010, and have issued our report
thereon dated September 19, 2011.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.
INTERNAL CONTROL OVER FINANCIAL REPORTING
In planning and performing our audit, we considered the City’s internal control over financial
reporting as a basis for designing our auditing procedures 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 over financial reporting. Accordingly, we do not
express an opinion on the effectiveness of the City’s internal control over financial reporting.
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.
Our consideration of internal control over financial reporting was for the limited purpose
described in the first paragraph of this section and would not necessarily identify all deficiencies
in internal control that might be deficiencies, significant deficiencies or material weaknesses.
We did not identify any deficiencies in internal control over financial reporting that we consider
to be material weaknesses, as defined above.
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COMPLIANCE AND OTHER MATTERS
As part of obtaining reasonable assurance about whether the City’s financial statements are
free of material misstatement, we performed tests of the City’s compliance with certain
provisions of laws, regulations, contracts and grant agreements, noncompliance with which
could have a direct and material effect on the determination of financial statement amounts.
However, 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.
This report is intended for the information and use of management, the Council, federal
awarding agencies and pass-through entities. However, this report is a matter of public record
and its distribution is not limited. It also serves to disseminate information to the public as a
reporting tool to help citizens assess government operations.
BRIAN SONNTAG, CGFM
STATE AUDITOR
September 19, 2011
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Independent Auditor’s Report on Compliance
with Requirements That Could Have a Direct
and Material Effect on Each Major Program and
on Internal Control over Compliance in
Accordance with OMB Circular A-133
City of Port Townsend
Jefferson County
January 1, 2010 through December 31, 2010
Council
City of Port Townsend
Port Townsend, Washington
COMPLIANCE
We have audited the compliance of the City of Port Townsend, Jefferson County, Washington,
with the types of compliance requirements described in the U.S. Office of Management and
Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material
effect on its major federal program for the year ended December 31, 2010. The City’s major
federal program is identified in the Federal Summary. Compliance with the requirements of
laws, regulations, contracts and grants applicable to its major federal program is the
responsibility of the City’s management. Our responsibility is to express an opinion on the City’s
compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally
accepted in the United States of America; the standards applicable to financial audits contained
in Government Auditing Standards, issued by the Comptroller General of the United States; and
OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain
reasonable assurance about whether noncompliance with the types of compliance requirements
referred to above that could have a direct and material effect on a major federal program
occurred. An audit includes examining, on a test basis, evidence about the City’s compliance
with those requirements and performing such other procedures as we considered necessary in
the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our
audit does not provide a legal determination on the City’s compliance with those requirements.
In our opinion, the City complied, in all material respects, with the compliance requirements
referred to above that could have a direct and material effect on its major federal program for
the year ended December 31, 2010.
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INTERNAL CONTROL OVER COMPLIANCE
The management of the City is responsible for establishing and maintaining effective internal
control over compliance with requirements of laws, regulations, contracts and grants applicable
to federal programs. In planning and performing our audit, we considered the City’s internal
control over compliance with the requirements that could have a direct and material effect on a
major federal program in order to determine our auditing procedures for the purpose of
expressing our opinion on compliance and to test and report on internal control over compliance
in accordance with OMB Circular A-133, 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.
Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and would not necessarily identify all deficiencies in internal
control that might be deficiencies, significant deficiencies or material weaknesses. We did not
identify any deficiencies in internal control over compliance that we consider to be material
weaknesses, as defined above.
This report is intended for the information of management, the Council, federal awarding
agencies and pass-through entities. However, this report is a matter of public record and its
distribution is not limited. It also serves to disseminate information to the public as a reporting
tool to help citizens assess government operations.
BRIAN SONNTAG, CGFM
STATE AUDITOR
September 19, 2011
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Independent Auditor’s Report on Financial
Statements
City of Port Townsend
Jefferson County
January 1, 2010 through December 31, 2010
Council
City of Port Townsend
Port Townsend, Washington
We have audited the accompanying financial statements of the City of Port Townsend,
Jefferson County, Washington, for the year ended December 31, 2010. These financial
statements are the responsibility of the City’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
As described in Note 1 to the financial statements, the City prepares its financial statements on
the basis of accounting that demonstrates compliance with Washington State statutes and the
Budgeting, Accounting and Reporting System (BARS) manual prescribed by the State Auditor,
which is a comprehensive basis of accounting other than generally accepted accounting
principles.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position and results of operations of the City of Port Townsend, for the year ended
December 31, 2010, on the basis of accounting described in Note 1.
As described in the Schedule of Audit Findings and Responses, the City’s negative cash and
investment balance in the general fund as of August 31, 2011, reflects the significant cash flow
challenges that affect City operations. The City’s cash flow constraints are expected to continue
in the near future. In addition, the City’s general obligation debt has steadily increased in recent
years, with an increase in the City’s debt service requirements. As a result, the City’s ability to
maintain services at present levels while repaying its debt is uncertain. Notes 15 and 16
describe the City’s plans in this area.
In accordance with Government Auditing Standards, we have also issued our report on our
consideration of the City’s internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts and grant agreements and
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other matters. The purpose of that report is to describe the scope of our testing of internal
control over financial reporting and compliance and the results of that testing, and not to provide
an opinion on the internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.
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 Long-Term Debt and Other 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 has been subjected to the auditing procedures
applied in the audit of the financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the financial statements taken as a whole.
BRIAN SONNTAG, CGFM
STATE AUDITOR
September 19, 2011
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Financial Section
City of Port Townsend
Jefferson County
January 1, 2010 through December 31, 2010
FINANCIAL STATEMENTS
Fund Resources and Uses Arising from Cash Transactions – 2010
Fiduciary Fund Resources and Uses Arising from Cash Transactions – 2010
Notes to Financial Statements – 2010
SUPPLEMENTAL INFORMATION
Schedule of Long-Term Debt and Other Liabilities – 2010
Schedule of Expenditures of Federal Awards – 2010
Notes to the Schedule of Expenditures of Federal Awards – 2010
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MCAG NO.0364STATEMENT C-4
Page 1 of 5
Total for 010101102
All Funds 1/General FundDrug EnforceContingency
Total Amount Actual AmountActual AmountActual Amount
Beginning Cash and Investments:$12,239,921$915$2,541$98,885
308.10Reserved 2/$0
308.80Unreserved 2/$12,239,921$915$2,541$98,885
388.80 or
588.80Prior Period Adjustments($39,220)$0
Revenues and Other Sources:$0
310Taxes$8,068,3584,342,97109,794
320Licenses and Permits$281,171259,77300
330Intergovernmental$4,630,370169,38900
340Charges for Goods and Services$7,438,3431,573,00900
350Fines and Penalties$120,459106,30400
360Miscellaneous$1,166,01528,39541,002158
370Capital Contributions$225000
390Other Financing Sources$5,806,051000
$27,510,9936,479,84141,0029,952
Total Resources$39,711,6946,480,75643,543108,837
Operating Expenditures:$0
510General Government$2,643,8352,001,67207,458
520Public Safety$3,834,9792,598,8403,0750
530Physical Environment$5,489,905300
540Transportation$1,110,906000
550Economic Environment$1,136,443773,31700
560Mental and Physical Health$0000
570Culture and Recreational$2,153,04419,22800
Total Operating Expenditures$16,369,1125,393,0603,0757,458
591-593Debt Service$1,119,057000
594-595Capital Outlay$7,516,07228,73600
Total Expenditures$25,004,2415,421,7963,0757,458
597-599Other Financing Uses$1,887,1421,017,86400
$26,891,3836,439,6603,0757,458
Excess (Deficit) of Resources Over Uses$12,820,31041,09640,468101,379
380Nonrevenues (Except 384)$200,0091900
580Nonexpenditures (Except 584)$915,77418500
Ending Cash and Investments:$12,104,54640,93040,468101,379
508.10Reserved 2/
$0
508.80 Unreserved 2/$12,104,546$40,930$40,468$101,379
1/ This column should summarize ALL reported funds, not just funds listed on this page
2/ Disclosure of reserved/unreserved fund balances is optional
The Accompanying Notes Are An Integral Part Of This Statement.
BARS
CODE
Total Revenues and Other Financing Sources
Total Expenditures and Other Financing Uses
CITY OF PORT TOWNSEND
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
For the Year Ended December 31, 2010
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MCAG NO.0364STATEMENT C-4
Page 2 of 5
110120 140150
StreetLibrary PW Adm & EngLodging Tax
Actual AmountActual AmountActual AmountActual Amount
Beginning Cash and Investments:$2,360$54,336$11,763$29,163
308.10Reserved 2/
308.80Unreserved 2/$2,360$54,336$11,763$29,163
388.80 or
588.80Prior Period Adjustments
Revenues and Other Sources:
310Taxes496,505919,6610322,154
320Licenses and Permits618000
330Intergovernmental192,76469,36100
340Charges for Goods and Services21,31901,130,3920
350Fines and Penalties14,15500
360Miscellaneous357,7692530,513
370Capital Contributions000
390Other Financing Sources000
711,2411,010,9461,130,417352,667
Total Resources713,6011,065,2821,142,180381,830
Operating Expenditures:
510General Government0033,667
520Public Safety000
530Physical Environment01,095,4370
540Transportation524,717000
550Economic Environment00227,968
560Mental and Physical Health000
570Culture and Recreational942,00500
Total Operating Expenditures524,717942,0051,095,437261,635
591-593Debt Service000
594-595Capital Outlay28976,9356500
Total Expenditures525,0061,018,9401,096,087261,635
597-599Other Financing Uses184,8700096,664
709,8761,018,9401,096,087358,299
Excess (Deficit) of Resources Over Uses3,72546,34246,09323,531
380Nonrevenues (Except 384)000
580Nonexpenditures (Except 584)000
Ending Cash and Investments:3,72546,34246,09323,531
508.10Reserved 2/
508.80 Unreserved 2/$3,725$46,342$46,093$23,531
2/ Disclosure of reserved/unreserved fund balances is optional
The Accompanying Notes Are An Integral Part Of This Statement.
CITY OF PORT TOWNSEND
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
Total Revenues and Other Financing Sources
Total Expenditures and Other Financing Uses
BARS
CODE
For the Year Ended December 31, 2010
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MCAG NO.0364STATEMENT C-4
Page 3 of 5
171 190195199
Fire and EMS CDBG ProgramSystem Dev Comm Services
Actual AmountActual AmountActual AmountActual Amount
Beginning Cash and Investments:$0$152,677$715,660$12,914
308.10Reserved 2/
308.80Unreserved 2/$0$152,677$715,660$12,914
388.80 or
588.80Prior Period Adjustments
Revenues and Other Sources:
310Taxes1,216,16300391,495
320Licenses and Permits0000
330Intergovernmental012,50701,000
340Charges for Goods and Services000119,363
350Fines and Penalties0000
360Miscellaneous04161,77825,135
370Capital Contributions0000
390Other Financing Sources000845,544
1,216,16312,9231,7781,382,537
Total Resources1,216,163165,600717,4381,395,451
Operating Expenditures:
510General Government00016,029
520Public Safety1,233,064000
530Physical Environment0000
540Transportation0000
550Economic Environment012,8580122,300
560Mental and Physical Health0000
570Culture and Recreational0001,191,811
Total Operating Expenditures1,233,06412,85801,330,140
591-593Debt Service0000
594-595Capital Outlay000908
Total Expenditures1,233,06412,85801,331,048
597-599Other Financing Uses0042,7180
1,233,06412,85842,7181,331,048
Excess (Deficit) of Resources Over Uses(16,901)152,742674,72064,403
380Nonrevenues (Except 384)00134,660-650
580Nonexpenditures (Except 584)0000
Ending Cash and Investments:(16,901)152,742809,38063,753
508.10Reserved 2/
508.80 Unreserved 2/($16,901)$152,742$809,380$63,753
2/ Disclosure of reserved/unreserved fund balances is optional
The Accompanying Notes Are An Integral Part Of This Statement.
BARS
CODE
Total Revenues and Other Financing Sources
Total Expenditures and Other Financing Uses
For the Year Ended December 31, 2010
CITY OF PORT TOWNSEND
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
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MCAG NO.0364STATEMENT C-4
Page 4 of 5
200 301411412
GO Debt Serv Gen Gov CIPWater/SewerStorm
Actual AmountActual AmountActual AmountActual Amount
Beginning Cash and Investments:($580)$2,622,273$7,182,864$542,414
308.10Reserved 2/
308.80Unreserved 2/($580)$2,622,273$7,182,864$542,414
388.80 or
588.80Prior Period Adjustments($39,220)
Revenues and Other Sources:
310Taxes146,907222,7080
320Licenses and Permits020,780
330Intergovernmental04,185,3490
340Charges for Goods and Services04,071,059518,281
350Fines and Penalties00
360Miscellaneous60,56761,34274,6121,347
370Capital Contributions02250
390Other Financing Sources836,2273,935,564169,0510
1,043,7018,405,1884,335,502519,628
Total Resources1,043,12111,027,46111,479,1461,062,042
Operating Expenditures:
510General Government2,119455,540
520Public Safety0
530Physical Environment03,830,316564,149
540Transportation0
550Economic Environment0
560Mental and Physical Health0
570Culture and Recreational0
Total Operating Expenditures2,11904,285,856564,149
591-593Debt Service999,39437,45582,2080
594-595Capital Outlay06,580,329580,228
Total Expenditures1,001,5136,617,7844,948,292564,149
597-599Other Financing Uses0418,693126,3330
1,001,5137,036,4775,074,625564,149
Excess (Deficit) of Resources Over Uses41,6083,990,9846,404,521497,893
380Nonrevenues (Except 384)050,00015,980
580Nonexpenditures (Except 584)00915,589
Ending Cash and Investments:41,6084,040,9845,504,912497,893
508.10Reserved 2/
0
508.80 Unreserved 2/$41,608$4,040,984$5,504,912$497,893
2/ Disclosure of reserved/unreserved fund balances is optional
The Accompanying Notes Are An Integral Part Of This Statement.
For the Year Ended December 31, 2010
BARS
CODE
Total Revenues and Other Financing Sources
Total Expenditures and Other Financing Uses
CITY FO PORT TOWNSEND
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
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MCAG NO.0364STATEMENT C-4
Page 5 of 5
500
Equip Rental
Actual Amount
Beginning Cash and Investments:$811,736
308.10Reserved 2/
308.80Unreserved 2/$811,736
388.80 or
588.80Prior Period Adjustments
Revenues and Other Sources:
310Taxes0
320Licenses and Permits0
330Intergovernmental0
340Charges for Goods and Services4,920
350Fines and Penalties0
360Miscellaneous832,922
370Capital Contributions0
390Other Financing Sources19,665
857,507
Total Resources1,669,243
Operating Expenditures:
510General Government127,350
520Public Safety0
530Physical Environment0
540Transportation586,189
550Economic Environment0
560Mental and Physical Health0
570Culture and Recreational0
Total Operating Expenditures713,539
591-593Debt Service0
594-595Capital Outlay247,997
Total Expenditures961,536
597-599Other Financing Uses0
961,536
Excess (Deficit) of Resources Over Uses707,707
380Nonrevenues (Except 384)
580Nonexpenditures (Except 584)
Ending Cash and Investments:707,707
508.10Reserved 2/
508.80 Unreserved 2/707,707
2/ Disclosure of reserved/unreserved fund balances is optional
The Accompanying Notes Are An Integral Part Of This Statement.
BARS CODE
Total Revenues and Other Financing Sources
Total Expenditures and Other Financing Uses
CITY FO PORT TOWNSEND
FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
For the Year Ended December 31, 2010
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MCAG NO. 0364STATEMENT C-5
Page 1 of 1
Total for 601610613621623631
All FundsRefundable DepositsFiremen's PensionAgencyMemorialGolf CourseMaritime Center
Total AmountActual AmountActual AmountActual AmountActual AmountActual AmountActual Amount
Beginning Cash and Investments$522,885$127,446$346,876$25,221$7,501$15,839$2
Prior Period Adjustments$0
Revenue and Other Financing Sources$58,13537,8543,06417,2170
Total Resources$581,020127,446384,73025,22110,56533,0562
Expenditures And Other Financing Uses$94,65470,1966,81517,6430
Excess (Deficit) of Resources Over Uses 486,366$ 127,446314,53425,2213,75015,4132
Nonrevenues (Except 384)$105,17714,29690,881
Nonexpenditures (Except 584)$195,45593,977101,478
Ending Cash and Investments$396,089$47,766$314,534$14,624$3,750$15,413$2
The Accompanying Notes Are An Integral Part Of This Statement.
CITY OF PORT TOWNSEND
FIDUCIARY FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS
For The Year Ending December 31, 2010
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State Auditor's
Office
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City of Port Townsend
Notes To The Financial Statements
For the Year Ended December 31, 2010
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 to be accounted for in another fund.
Special Revenue Funds (Funds in the 100 series)
These funds account for revenues derived from specific taxes, grants, or other sources
which are designed to finance particular activities of the city.
Debt Service Funds (Funds in the 200 series)
These funds are used to gather resources to pay general government debt.
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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.
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.
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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.
The appropriated and actual expenditures for the legally adopted budgets were as follows:
2010
Final
Appropriated Actual
Fund Amount Expenditures Variance
General $ 6,785,664 $ 6,439,845 $ 345,819
Drug Enforcement & Educ Fund $ 2,400 $ 3,075 $ (675)
Contingency $ 7,478 $ 7,458 $ 20
Street $ 759,189 $ 709,875 $ 49,314
Library $ 1,023,825 $ 1,018,940 $ 4,885
Public Work & Admin $ 1,118,065 $ 1,096,088 $ 21,977
Lodging Tax $ 373,910 $ 358,299 $ 15,611
Fire & EMS Service $ 1,244,671 $ 1,233,064 $ 11,607
CDBG $ 100,000 $ 12,858 $ 87,142
System Development Charges $ 365,000 $ 42,718 $ 322,282
Community Services $ 1,414,235 $ 1,331,048 $ 83,187
GO Debt Service $ 1,000,392 $ 1,001,513 $ (1,121)
Water/Sewer Utility $ 6,334,933 $ 5,525,913 $ 809,020
Storm water $ 842,425 $ 564,149 $ 278,276
Utility Construction Fund $ 1,078,000 $ 174,278 $ 903,722
Trans line Replacement $ 541,442 $ 345,737 $ 195,705
1978 Water Sewer Rev Bond $ 23,000 $ 23,000 $ -
92 Water/Sewer Bond
Redemption $ 607,500 $ 607,105 $ 395
Equipment Rental $ 944,461 $ 961,536 $ (17,075)
Firemen's Pension $ 105,012 $ 70,196 $ 34,816
Memorial Fund $ 3,000 $ 6,815 $ (3,815)
Golf Course Fund $ 23,300 $ 17,643 $ 5,657
Maritime Center Fund $ 136,500 $ - $ 136,500
Capital Improvement $ 11,582,087 $ 7,004,399 $ 4,577,688
$ 36,416,489 $ 28,555,553 $ 7,860,936
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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 average compensating balances maintained during 2010 were approximately
$582.12. The city's deposits are entirely covered by federal depository insurance (FDIC
and FSLIC) or by collateral held in a multiple financial institution collateral pool
administered by the Washington Public Deposit Protection Commission (PDPC).
Investments See Note 3.
Capital Assets
Capital assets are long-lived assets of the city and are recorded as expenditures when
purchased.
Compensated Absences
Vacation pay, which may be accumulated up to 6 weeks, is payable upon resignation,
retirement or death. Sick leave may be accumulated up to 1440 hours.
Long-Term Debt See Note 5.
Other Financing Sources Or Uses
The city’s “Other Financing Sources or Uses” consist of Operating transfers-in, Operating
transfers-out, Special assessment bond proceeds, Proceeds from refunding bonds, and
Capital leases.
Risk Management See Note 8.
NOTE 2 - COMPLIANCE AND ACCOUNTABILITY
There have been no material violations of finance-related legal or contractual provisions.
During 2010 the Equipment Rental & Repair Fund (500) was over-expended by $17,075, on a
budget of $961,535. Fuel costs and repair parts were above the adopted budgeted amounts.
The GO Debt Service Fund (200) was over-expended by $1,121, due to higher than anticipated
professional services costs from the Bank of New York. Originally $1,000 was budgeted, $1,816
was paid. The Drug Enforcement Fund (101) was over-expended by $675 for surveillance
equipment. Transfers from the Memorial Fund to the Capital Fund were submitted over the
adopted budget by $3,815.
The Fire and EMS Fund (171) ended the year in a negative cash position, due to property tax
collections lagging behind budgeted figures.
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NOTE 3 - INVESTMENTS
The city’s investments are either insured, registered, or held by the city or its agent in the city’s
name. As required by state law, all investments of the city's funds are obligations of the U S
Government, the State Treasurer's Investment Pool, or deposits with Washington State banks and
savings and loan institutions.
Investments by type at December 31, 2010 are as follows:
Investments
Carrying Amount
Market value
Washington State Treasurer’s Investment Pool
$12,653,981.23
$12,653,981.23
US Bank Savings Account
$577.64
$577.64
2010 Total Investments
$12,654,558.87
$12,654,558.87
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 2010 was $1.37245 per $1,000.00 on an assessed valuation of
$1,455,136,315 for a total regular levy of $1,997,101.84. In 2010 the city also had a special levy
for Emergency Medical Services (EMS). The EMS levy rate was $ .27963 per $1,000 for a total
levy of $406,899.77. In 2008 the voters approved a Library LID lift to be phased in over 2009-
2011. For 2010 the library levy was .50955 per 1,000 for a total of $741,464.71
NOTE 5 - LONG-TERM DEBT
The accompanying Schedule of Long-term Debt (09) provides a listing of the outstanding debt of
the city.
A. BONDS
The City of Port Townsend issues general obligation and revenue bonds to finance the
construction and remodel of capital assets. Bonded indebtedness has also been entered into to
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23
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 and utilities and street improvements, as well as
funding for the Way Finding project and library expansion.
General obligation bonds currently outstanding are as follows:
Issue
Date
Purpose
Original
Issue
Interest
Rate
Maturit
y
Date
Debt
Outstanding
1991
Limited GO Bonds for reconstruction
of the Balloon Hanger at Ft. Worden
for performing arts.
$535,000
6.4 – 5.45%
2011
$17,452
1999
Limited GO Bonds for Fire & Library
repairs from inter-fund loans; city
facilities, Marine Science Center and
Police Station.
$645,000
5.0 – 6.0%
2016
$285,000
2002
Limited GO Bonds for construction of
City Hall Annex and old City Hall.
$3,465,00
0
1.95– 4.70%
2022
$2,765,00
0
2003
Limited GO Bonds for Skateboard
Park, the Wave Viewing Gallery, City
Hall, Fire Station, Pool & Pink House
Lease settlement.
$2,390,00
0
1.85-4.60%
2023
$1,865,00
0
2005
Limited GO Bonds for construction
funds for City Hall Annex and Old
City Hall
$1,545,000
3.05- 4.35%
2025
$1,405,000
2008
2010
Limited GO Bonds for construction
funds for Civic and Street
Improvements
Limited Go Bonds for Street,
Sidewalk, Utilities and
the Historic District
TOTAL
$7,500,000
$3,740,000
4.15 -5.00%
2.30-5.00%
2038
2030
$7,500,000
$3,740,000
$17,577,45
2
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The annual debt service requirements to maturity for general obligation debt, including the
current reporting year is as follows:
Governmental Activities
Year ending
December 31
Principal
Interest
2010
$370,024
$629,367
2011
2012
2013
2014
2015-2019
$392,951
$395,500
$390,000
$410,000
$3,105,000
$773,632
$768,208
$753,221
$737,196
$3,385,659
2020-2024
2025-2029
2030-2034
2035-2038
Total
$4,100,000
$3,650,000
$2,785,000
$2,390,000
$17,988,475
$2,633,196
$1,722,273
$950,475
$305,750
$12,658,977
As of December 31, 2010 the long term debt payable from proprietary fund resources consisted
of the following:
Issue
Date
Purpose
Original Issue
Interest
Rate
Maturity
Date
Debt
Outstanding
1978
1998
Water/Sewer Revenue Bonds
Water and Sewer Improvements
Water/Sewer Revenue Bonds
Refunding 1992 issue Sewer
Treatment Plant, refunded
1978 Series B Bonds
$395,000
$5,950,000
5%
4.10-4.65%
2018
2011
$ 145,000
$ 440,000
TOTAL
$ 585,000
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Debt service requirements to maturity for proprietary funds, including the current reporting year:
Business Type Activities
Year ending
December 31
Principal
Interest
2010
$842,133
$82,208
2011
2012
2013
2014
2015-2019
$722,748
$283,372
$284,006
$289,649
$1,393,519
$53,150
$29,663
$26,626
$23,580
$68,114
2020-2024
Total
$555,034
$4,370,461
$13,024
$296,365
B. Public Works Trust Fund Loans and State Revolving Fund Loans
State of Washington Public Works Trust Fund (PWTF) Loans are an intergovernmental loan
from the Public Works Board to undertake local public works projects. These loans are a direct
responsibility of the City of Port Townsend. The City currently has five such loans.
State Revolving Fund (SRF) Loans are State of Washington Department of Ecology low interest
loans for projects that protect and improve water quality. The City of Port Townsend currently
has one SRF loan.
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As of December 31, 2010 the long-term debt payable for PWTF and SRF loans consisted of the
following:
Issue
Date
Purpose
Original
Issue
Interest
Rate
Maturity
Date
Debt
Outstanding
1998
PWTF Loan
CT Pipeline
Tri-Area Water Storage
Tri-Area Well upgrades
(payoff of $1,186,718 with sale of
Tri-Area assets)
$2,172,055
1%
2018
$357,744
1999
PWTF Loan
Gaines St Lift Station
San Juan Sewer Trunk Line
$1,434,365
1%
2019
$536,353
2001
PWTF Loan
Wastewater Treatment
Outfall Expansion
Trunk Sewer Line replacement
$1,153,350
.5%
2021
$608,042
2002
2002
PWTF Loan
Morgan Hill Water System
Improvements
SRF Loan
Wastewater Conveyance
Storm and sewer separation
Gaines St Lift Station
Phase 2 Trunk Sewer Replace
$1,242,742
$856,803
.5%
1.5%
2022
2024
$800,423
$640,768
2003
PWTF Loan
Transportation Planning
TOTAL
$90,000
0%
2009
$41,000
$2,984,330
C. ADVANCED REFUNDING AND DEFEASED BONDS
In 1998 the City of Port Townsend refunded two prior revenue bond issues while issuing an
additional $1,000,000 of debt. This 1998 Revenue Bond issue was partially defeased in 2002 due
to the sale of some associated asset improvements in the Tri-Area.
The 1978 “series B” revenue bonds were refunded in the amount of $115,000 and the 1992
Revenue Bonds were refunded in the amount of $4,835,000 in the 1998 Bond issue.
As part of the Tri-Area well and reservoir assets sold in 2002, $1,490,000 in bonds were
defeased.
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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 defined benefit and defined contribution employee retirement plans. Actuarial
information in on a system-wide basis and is not considered pertinent to the city’s financial
statements. Contributions to the systems by both employee and employer are based upon gross
wages covered by the plan.
Historical trends or other information regarding each plan is presented in the state Department of
Retirement Systems 2010 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
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 145
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 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 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.
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Property insurance and auto physical damage coverage are self funded up to $500,000, 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 that comply with all State guidelines. These revenues
directly offset portions of the membership’s annual assessment.
WCIA is governed by a Board of Directors which is comprised of one designated representative
from each member. The Board elects an Executive Committee and appoints a Treasurer to
provide general policy direction for the organization. The WCIA Executive Director reports to
the Executive Committee and is responsible for conducting the day to day operations of WCIA.
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 - UTILITY RECEIVABLES
All delinquent accounts receivable must receive prior City Council approval before they are
written off.
NOTE 10 - 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 11 – INTERFUND LOANS
During 2010, the City of Port Townsend issued another interfund loan for property purchase
to act as mitigation for wetland disturbance during the Howard Street project.
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In addition, 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 were approved by the City
Council in March 2010.
No principal or interest payments were made during 2010 on any of the loans as the City
anticipated paying off the loans as part of a 2010 Bond issue. Due to a legal technicality in the
bond issuing documents, the city was not able to use the bond proceeds to payoff the inter-fund
loans.
The following table displays inter-fund loan activity during 2010:
Borrowing Lending Balance New 2010 Balance
Fund Fund 1/1/2010 Loans Repayments 12/31/2010
010 500 $ 75,000 $ - $ 75,000
010 417 $325,000 $ - $ 325,000
199 417 $ 83,508 $ - $ 83,508
199 417 $185,571 $ - $ 185,571
305 417 $ 48,097 $ 48,097
NOTE 12 – 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.
For 2010, the PDA incurred $10,451 in expenses. Most of the money spent was for a contract
consultant and an internet campaign for the historic customs house. These expenses were part of
the General Fund. The PDA received a $5,000 award from a private, non-profit membership
organization – National Trust for Historic Preservation. As there was no other income for the
PDA to offset expenses, the city manager is working with the PDA to reimburse the city for the
balance of these start-up costs.
The PDA was created to improve the effectiveness of preserving historic assets, development,
redevelopment and preservation of affordable housing, public assets, and public places of special
quality for the purposes of maintaining commons for the public interest.
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NOTE 13 – PRIOR YEAR CORRECTION
Cash and Investments for the Water and Sewer Fund at the end of 2009 were overstated by
$39,219 and required a prior year correction to the Financials. Interest earnings on a securities
investment were booked incorrectly. The original purchase price of $1,068,907 included accrued
interest.
NOTE 14 – EQUIPMENT RENTAL FUND ALLOCATION
In light of the economic downturn, the city suspended ER&R contributions for most of the
general fund, and is evaluating the funding policies for equipment replacement.
NOTE 15 – SUBSEQUENT EVENTS
As mentioned in Note 11 – Inter-fund loans, the city has outstanding inter-fund loans totaling
$717,176 as of December 31, 2010. After year end, city administration committed to repay
$398,097 of those loans in accordance with Council Resolution No. 06-039 from existing bond
proceeds. The resulting inter-fund loan principal balance will be $319,079. The city
administration is committed to repaying the remaining inter-fund loans in the next couple years
as the city’s budget affords.
NOTE 16 – INTERLOCAL AGREEMENT WITH EAST JEFFERSON FIRE RESCUE
On November 22, 2010, the city amended its joint operating agreement with East Jefferson Fire
Rescue (District) for fire protection and emergency medical services. The agreement requires the
city to reimburse the District for debt service on the new District general obligation bond. The
city is in the process of seeking voter approval to lift the authorize property tax levy in November
2011. Part of this requested levy increase would be devoted to reimbursing the District for its
debt service.
Should voter approval fail, the city is required to continue the reimbursement for the 2010 bond
debt service. If the property tax levy lid lift vote fails, the city would devote 50% of its public
safety sales tax revenues to this debt service with the remaining amount needed to reimburse
earmarked from the city’s general property tax levy.
The District’s 2010 bond debt service amounts for the next five years are:
Payment
Year Amount
2011 $179,995.75
2012 $354,590.00
2013 $356,390.00
2014 $353,090.00
2015 $354,130.00
_________________________________________________________________________________________________________
Washington State Auditor's Office
31
MCAG 0364
SCHEDULE 09PAGE 1 OF 2
CITY OF PORT TOWNSEND
SCHEDULE OF LONG-TERM DEBT AND OTHER LIABILITIES GOVERNMENTAL FUNDS
For The Year Ended December 31, 2010
(1)
(2)
(3)
(4)
Beginning Outstanding
Date of
01/01/2010
Additions
Reductions
Ending Outstanding
ID. No.
Original
Date of
(Ending Outstanding
Amount Issued in
Amount Redeemed in
BARS Code for
Redeeming
12/31/2010
Description
Issue
Maturity
Balance from
Current Year
Current Year
Redemption
Fund Number
(1)+(2)-(3)
Prior Year)
for debt only
251.11 LTGO Bond 1991
29-Jul-91
1-Jan-12
$36,976
$0
$19,524
591.740.71
200
$17,452
251.11 LTGO Bond 1999
20-Oct-99
1-Dec-16
$345,000
$0
$60,000
591.730.71
200
$285,000
251.11 LTGO Bond 2002
1-Oct-02
1-Dec-22
$2,890,000
$0
$125,000
591.190.71
200
$2,765,000
251.11 LTGO Bond 2003
30-Dec-03
1-Dec-23
$1,980,000
$0
$115,000
591.191.71
200
$1,865,000
251.11 LTGO Bond 2005
1-Nov-05
1-Dec-25
$1,435,000
$0
$30,000
591.192.71
200
$1,405,000
263.82 PWTF Loan 2006
11-Aug-06
1-Jul-12
$61,500
$0
$20,500
591.730.71
200
$41,000
251.11 LTGO Bond 2008
1-Jul-08
1-Dec-38
$7,500,000
$0
$0
591.193.71
200
$7,500,000
251.11 LTGO Bond 2010
20-Dec-10
1-Dec-30
$0
$3,740,000
$0
591.194.71
200
$3,740,000
263.55 Police Comp Equip Lease
31-Jan-08
31-Jan-11
$13,698
$0
$13,698
594.182.64
500
($0)
259.11 Compensated Absences
$375,283
$375,283
TOTAL
$14,262,174
$4,115,283
$383,722
$17,993,735
Note: 2010 is the first year that compensated absences have been reported on the Long-Term Liability Schedule
`
_________________________________________________________________________________________________________
Washington State Auditor's Office
32
MCAG 0364
SCHEDULE 09PAGE 2 OF 2
CITY OF PORT TOWNSEND
SCHEDULE OF LONG-TERM DEBT AND OTHER LIABILITIES PROPRIETARY FUNDS
For The Year Ended December 31, 2010
(1)
(2)
(3)
(4)
Beginning Balance
Date of
01/01/2010
Additions
Reductions
Ending Outstanding
ID. No.
Original
Date of
(Ending Oustanding
Amount Issued in
Amount Redeemed in
BARS Code for
Redeeming
12/31/2010
Description
Issue
Maturity
Balance from
Current Year
Current Year
Redemption
Fund number
(1)+(2)-(3)
Prior Year
)
252.11 1978 Water Rev Bd
1-Mar-78
1-Mar-18
$160,000.00
$0.00
$15,000.00
582.340.72
419
$145,000.00
252.11 1998 REFUNDING BONDS
1-Feb-98
1-Dec-17
$1,000,000.00
$0.00
$560,000.00
582.340.72
426
$440,000.00
263.82 1998 PWTF Loan
1-Jul-98
1-Jul-18
$402,462.53
$0.00
$44,718.02
582.340.78
411
$357,744.51
263.82 1999 PWTF Loan
1-Jul-99
1-Jul-19
$595,947.68
$0.00
$59,594.77
582.350.78
411
$536,352.91
263.82 2001 PWTF Loan
1-Jul-01
1-Jul-21
$663,317.97
$0.00
$55,276.00
582.350.78
411
$608,041.97
263.82 2002 PWTF Loan
1-Jul-02
1-Jul-22
$867,124.76
$0.00
$66,701.90
582.350.78
411
$800,422.86
263
.82
DOE Wastewater
27-Feb-02
31-Oct-23
$681,610.00
-
$
$40,842.19
582.350.78
411
$640,767.81
259.12 Compensated Absences
$88,089.73
$88,089.73
Total
$4,370,462.94
$88,089.73
$842,132.88
411
$3,616,419.79
Note: 2010 is the first year that compensated absences are being reported
_________________________________________________________________________________________________________
Washington State Auditor's Office
33
MCAG NO. 0364SCHEDULE 16
Federal Agency Name
Pass-Through AgencyFederal Program Name From Pass-
Through From Direct
Name Awards
Awards
DHS/State of Washington
MilitaryHazard Mitigation Grant/FEMACotton Building97-039E10-030249,015.22
DHS/State of Washington
MilitaryHazard Mitigation Grant/FEMAHazard Mitigation Grant/FEMA97-039E10-0174,150.07 253,165.29
DHS/State of Washington
MilitaryDisaster Grants-Public AssistanceDisaster Grants-Public Assistance97-036FEMA-1825-DR-WA100.00 100.00
DHS/State of Washington
MilitaryPre-Disaster MitigationLibrary Siesmic Retrofit97-047E10-11532,613.94 32,613.94
Department of Homeland Security Sub-Total285,879.23
Department of JusticeBulletproof Vest PartnershipBulletproof Vest Partnership16-6071,198.75 1,198.75
DOL/CTED/OVW
Violence Against Women Formula
GrantsSTOP Grant16-5882,381.26 2,381.26
DOJ/OVW
Grants to Encourage Arrest Policies &
Enforcement of Protection Orders
Program." 16-5902010-WE-AX-002028,566.97 28,566.97
Department of Justice/pass
through from Clallam County ARRA Edward Byrne Memorial JAGARRA JAG Drug Abuse Preventio16-804ARRA13,889.01 13,889.01
Department of Justice46,035.99
DOL/O3A Olympic Area Agency
on Aging
ARRA Senior Community Service
Employment ARRA Employment Program17-235ARRA9,713.20 9,713.20 4
Department of Labor9,713.20
-
USDA Rural Development-
DOT/SOW DOTHighway Planning & ConstructionDowntown Streetscape20-205LA-62272,554.36
DOT/SOW DOTHighway Planning & ConstructionHighway Planning & Construction20-205LA-666846,337.18
DOT/SOW DOT
ARRA Highway Planning &
ConstructionARRA Highway Planning & Const20-205 ARRA LA-66681,281,467.65 1,330,359.19 4
DOT/Federal Motor Carrier
Safety AdministrationNational Motor Carrier SafetySOW-DOLPRINT grant20-218352.04 352.04
Footnote
Reference
Current Year Expenditures
City of Port Townsend
Federal Program Title
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the Year Ended December 31, 2010
Total Other I.D. Number CFDA
Number
_________________________________________________________________________________________________________ Washington
State Auditor's
Office
34
MCAG NO. 0364SCHEDULE 16
Federal Agency Name
Pass-Through AgencyFederal Program Name From Pass-
Through From Direct
Name Awards
Awards
Footnote
Reference
Current Year Expenditures
City of Port Townsend
Federal Program Title
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the Year Ended December 31, 2010
Total Other I.D. Number CFDA
Number
DOT NHTSA/WA Traffic SafetyState & Community Highway SafetyX52 Speeding20-600328.98
DOT NHTSA/WA Traffic SafetyState & Community Highway SafetyRadar 20-6002,467.18
DOT NHTSA/WA Traffic SafetyState & Community Highway SafetySDPU20-600746.28 3,542.44
DOT NHTSA/WA Traffic SafetyOccupant Protection Incentive GrantsNight Time Seat Belt20-6021,349.81 1,349.81
DOT NHTSA/WA Traffic Safety
Alcohol Impaired Driving
Countermeasures Incentive GrantDrive Hammered Get Nailed20-6012,379.58 2,379.58
Department of Transportation1,337,983.06
National Endowment for the Arts
Promotion of the Arts Partnership
AgreementsArt Commission45-0251,000.00 1,000.00
National Endowment for the Arts1,000.00
Institute of Museum and Library
Service
Washington State LibraryGrants to StateLSTA One Book45-310G - 35167,467.75
Institute of Museum & Library Services7,467.75
HUD - Community Planning/CTEDCDBG/State's programCDBG14-22808-64008-044(045)24,250.00 24,250.00 3
Department of Housing and Urban Development24,250.00
-
Department of Interior-
Grand Total1,712,329.23
_________________________________________________________________________________________________________ Washington
State Auditor's
Office
35
Notes to schedule of Expenditure of Federal Awards for the year ended December 31, 2010:
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 Recipients
Included in the total amount expended for this program is $24,250.00 that was passed through
to a sub recipient that administered its own project.
Note 4 - American Recovery and Reinvestment Act (ARRA) of 2009
Expenditures for this program were funded by ARRA
_________________________________________________________________________________________________________
Washington State Auditor's Office
36
(SAO FACTS.DOC - Rev. 09/11)
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.
Our mission is to work with our audit clients and citizens as an advocate for government
accountability. As an elected agency, the State Auditor's Office has the independence necessary to
objectively perform audits and investigations. Our audits are designed to comply with professional
standards as well as to satisfy the requirements of federal, state, and local laws.
The State Auditor's Office employees are located around the state to deliver services effectively and
efficiently.
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 and
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The results of our work are widely distributed through a variety of reports, which are available on
our Web site and through our free, electronic subscription service.
We take our role as partners in accountability seriously. We provide training and technical
assistance to governments and have an extensive quality assurance program.
State Auditor Brian Sonntag, CGFM
Chief of Staff Ted Rutt
Deputy Chief of Staff Doug Cochran
Chief Policy Advisor Jerry Pugnetti
Director of Audit Chuck Pfeil, CPA
Director of Performance Audit Larisa Benson
Director of Special Investigations Jim Brittain, CPA
Director for Legal Affairs Jan Jutte, CPA, CGFM
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Local Government Liaison Mike Murphy
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Public Records Officer Mary Leider
Main number (360) 902-0370
Toll-free Citizen Hotline (866) 902-3900
Website www.sao.wa.gov
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