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Home My WebLink About2011 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, 2011 through December 31, 2011 Report No. 1008469 Issue Date September 28, 2012 September 28, 2012 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, 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, 2011 through December 31, 2011 Federal Summary ...................................................................................................................... 1 Schedule of Audit Findings and Responses ............................................................................... 3 Status of Prior Audit Findings ..................................................................................................... 6 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters in Accordance with Government Auditing Standards ................. 7 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 ........................................................................................ 9 Independent Auditor’s Report on Financial Statements .............................................................11 Financial Section .......................................................................................................................13 Federal Summary City of Port Townsend Jefferson County January 1, 2011 through December 31, 2011 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 each of its major federal programs. We reported no findings that are required to be disclosed under section 510(a) of OMB Circular A-133. _________________________________________________________________________________________________________ Washington State Auditor's Office 1 Identification of Major Programs: The following were major programs during the period under audit: CFDA No. Program Title 97.039 Hazard Mitigation Grant Program 16.590 Grant to Encourage Arrest Policies & Enforcement of Protection Orders 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 2 Schedule of Audit Findings and Responses City of Port Townsend Jefferson County January 1, 2011 through December 31, 2011 1. The City’s financial condition did not improve putting it at risk of not meeting financial obligations at current service levels. Description of Condition In the past several years, the City’s overall financial condition has declined. In spite of the City’s efforts to reduce operating expenses, declining revenues and capital project obligations, its financial condition did not improve during 2011. The chart below shows the City’s general fund cash balance since 2007: 2007 $293,264 2008 $230,976 2009 $ 915 2010 $ 40,930 2011 $ 32,269 As of August 31, 2012, the general fund cash balance was $326,390. The City’s General Fund expenditures exceeded revenues in three of the prior five years, attributing to the decline in ending cash balances: General Fund 2007 2008 2009 2010 2011 Revenues $7,347,621 $7,526,444 $7,314,729 $6,479,841 $6,795,477 Expenditures $7,313,793 $7,591,370 $7,508,617 $6,439,660 $6,804,138 Excess (Deficit) $33,828 ($64,926) ($193,888) $40,181 ($8,661) The City’s long-term debt balance has been increasing since 2007. Fiscal year 2011 is the first year where it appears to be leveling off: 2007 2008 2009 2010 2011 governmental $7,347,790 $14,520,401 $14,262,174 $17,618,452 $17,676,009 proprietary $6,062,920 $5,253,990 $4,370,463 $3,528,330 $2,911,258 total $13,410,710 $19,774,391 $18,632,637 $21,146,782 $20,587,267 _________________________________________________________________________________________________________ Washington State Auditor's Office 3 In addition, the City’s utility funds, as proprietary funds, should be self-sufficient. They have shown regular cash balance deficits over the years since 2008: 2007 2008 2009 2010 2011 Beginning Cash balances $4,736,385 $ 4,827,161 $ 7,725,278 $ 6,002,273 $ 4,641,609 Ending Cash balances $4,827,161 $ 3,717,555 $ 6,002,805 $ 4,641,609 $ 4,177,754 Change in Cash Position $ 90,776 $(1,109,606) $(1,722,473) $(1,360,664) $ (463,855) Cause of Condition The City has experienced a loss in tax revenues and other financial challenges due to the downturn in the economy. The City’s steps to cut costs have not been sufficient to keep pace with the decline in revenues. 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. Recommendation We continue to recommend the City:  Establish a formal financial plan to address its cash flow issues and monitor and evaluate actual results compared to the plan to ensure its financial condition improves.  Closely monitor and evaluate the financial activities to ensure the plan is being followed and the desired results achieved. It should revise the plan if expected improvements are not achieved.  Ensure timely and accurate financial information is provided to the Council in order to facilitate informed decision making.  Take prompt action to manage operations within available resources. City’s Response The Washington State Auditor’s report no. 1006600, for the city of Port Townsend, Jefferson County for the period January 1, 2010 through December 31, 2010, reported concerns with the City’s financial condition. As reported, these concerns were evident by the following: the city’ long-term debt had been increasing since 2006; the city’s general fund expenditures exceeded revenues in three of the prior five years; and required fund reserve balances were not met. _________________________________________________________________________________________________________ Washington State Auditor's Office 4 As recommended in the audit report, the City developed a long-term plan to address its financial condition. While we recognize that due to the continued poor economic conditions, it will take longer than just 2011 to turn around these conditions, the city took strong actions in 2011 and 2012. We believe that Fiscal Years 2011 and 2012 represent a turning point in the city’s financial condition. Based on this, we developed a three to five year strategic plan to improve the city’s financial condition. Current conditions are as follows: The City’s Long-Term Debt The City did not take on additional long-term debt but instead reduced its outstanding bond debt balance by $225,000. The City also refinanced $5,585,000 in bond debt; thus reducing bond payments by $926,774 over the next 27 years. We will continue to refinance outstanding bond debt as they become eligible. General Fund End-Of-Year Balances As shown in the 2010 audit report, our end-of-year balance in the general fund for 2010 was a positive $40,181. Our general fund end-of-year balance for 2011 is $32,269 plus an encumbered additional balance for payroll of $44,809 and we project that the balance in 2012 will be $516,917. Required Reserves Balances While we understand the requirement to maintain the agreed-to fund balance reserves, as stated in the audit report the severe economic recession required us to deplete the reserves to meet necessary obligations. However, we have begun to improve this condition in 2011 and 2012. We anticipate that combined operating fund balances in 2012 will be $3,020,664. Auditor’s Remarks We appreciate the City’s commitment to resolving this issue. We will review the condition during our next audit. _________________________________________________________________________________________________________ Washington State Auditor's Office 5 Status of Prior Audit Findings City of Port Townsend Jefferson County January 1, 2011 through December 31, 2011 The status of findings contained in the prior years’ audit reports of the City is provided below: 1. The City is at risk of not being able to meet its financial obligations. Report No. 1006600, dated October 24, 2011. Background During the 2010 financial statement audit, we found the City’s General Fund expenditures exceeded revenues in three of the prior five years, attributing to the decline in ending cash balances, the City’s long-term debt balance had steadily increased since 2006 and they had entered into an inter-local agreement with the Jefferson County Fire Protection District No. 1 which obligated the City to guarantee $625,000 of the District’s debt. Status During the 2011 audit, we noted the City’s General Fund’s ending cash balance continues to be low ($32,269 at December 31, 2011), though City debt obligations appear to have leveled off. A fire and EMS levy passed in November 2011 which will fund the Jefferson County Fire Protection District No. 1’s debt, removing the obligation from the City. There was slight improvement in the City’s overall financial condition during 2011; however, we will re-issue a finding in this area due to continued uncertainty. _________________________________________________________________________________________________________ Washington State Auditor's Office 6 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, 2011 through December 31, 2011 Mayor and City 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, 2011, and have issued our report thereon dated September 24, 2012. 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. _________________________________________________________________________________________________________ Washington State Auditor's Office 7 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. The City’s response to the finding identified in our audit is described in the accompanying Schedule of Audit Findings and Responses. We did not audit the City’s response and, accordingly, we express no opinion on it. This report is intended for the information and use of management, the Mayor and City 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 24, 2012 _________________________________________________________________________________________________________ Washington State Auditor's Office 8 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, 2011 through December 31, 2011 Mayor and City 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 each of its major federal programs for the year ended December 31, 2011. The City’s major federal programs are identified in the Federal Summary. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs 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 each of its major federal programs for the year ended December 31, 2011. _________________________________________________________________________________________________________ Washington State Auditor's Office 9 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 Mayor and City 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 24, 2012 _________________________________________________________________________________________________________ Washington State Auditor's Office 10 Independent Auditor’s Report on Financial Statements City of Port Townsend Jefferson County January 1, 2011 through December 31, 2011 Mayor and City 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, 2011. 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, 2011, on the basis of accounting described in Note 1. As described in the Schedule of Audit Findings and Responses, the City's low cash and investment balance in the general fund as of December 31, 2011, reflects the continued significant cash flow challenges that affect City operations. In addition, the City's utility funds continued to operate at a loss in 2011. However, we also noted the City continues to take steps towards improving their overall financial condition. No additional debt was issued in 2011, a bond refunding in 2012 assisted in lowering future debt interest payments, and the City passed a utility rate increase as of April 2012. _________________________________________________________________________________________________________ Washington State Auditor's Office 11 In accordance with Government Auditing Standards, we have also issued our report on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be 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 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. The report is intended for the information and use of the management, the Mayor and City Council, federal awarding agencies and pass-through entities of the City. 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 24, 2012 _________________________________________________________________________________________________________ Washington State Auditor's Office 12 Financial Section City of Port Townsend Jefferson County January 1, 2011 through December 31, 2011 FINANCIAL STATEMENTS Fund Resources and Uses Arising from Cash Transactions – 2011 Notes to Financial Statements – 2011 SUPPLEMENTARY INFORMATION Schedule of Long-Term Debt and Other Liabilities – 2011 Schedule of Expenditures of Federal Awards and Notes – 2011 _________________________________________________________________________________________________________ Washington State Auditor's Office 13 MCAG NO.364STATEMENT C‐4 City of Port Townsend FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS For the Year Ended December 31, 2011 Total for All Funds010101 General FundDrug Enforce Beginning Cash and Investments$40,930$40,468 308.10Reserved$3,213,305 308.80Unreserved8,891,20840,93040,468 Prior Period Adjustments (388.80 and 588.80)0 Revenues and Other Sources 310Taxes9,067,5664,685,513 320Licenses and Permits232,450216,344 330Intergovernmental2,862,319308,831 340Charges for Goods and Services7,166,4851,473,502 350Fines and Penalties100,49686,735 360Miscellaneous928,83224,55264 370Capital Contributions00 390Other Financing Sources2,128,1630 22,486,3116,795,47764 Total Resources34,590,8246,836,40740,532 Operating Expenditures: 510General Government2,665,0982,048,602 520Public Safety4,413,1802,848,29113,990 530Physical Environment5,250,5170 540Transportation1,103,2960 550Economic Environment1,054,086747,458 560Mental and Physical Health00 570Culture and Recreational2,398,09219,099 Total Operating Expenditures16,884,2695,663,45013,990 591‐593Debt Service1,252,5510 594‐595Capital Expenditures4,744,8517,688 598Other Expenditures0 Total Expenditures22,881,6715,671,13813,990 596‐599Other Financing Uses1,834,3941,133,000 24,716,0656,804,13813,990 Excess (Deficit) of Resources Over Uses9,874,75932,26926,542 380Nonrevenues (Except 384)480,815400 580Nonexpenditures (Except 584)1,124,51639 Ending Cash and Investments: 508.10Reserved3,194,7100 508.80Unreserved6,035,98932,26926,542 Total Revenues and Other Financing Sources Total Expenditures and Other Financing Uses BARS CODE 16 _________________________________________________________________________________________________________ Washington State Auditor's Office 14 MCAG NO.364 City of Port Townsend FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS For the Year Ended December 31, 2011 Beginning Cash and Investments 308.10Reserved 308.80Unreserved Prior Period Adjustments (388.80 and 588.80) Revenues and Other Sources 310Taxes 320Licenses and Permits 330Intergovernmental 340Charges for Goods and Services 350Fines and Penalties 360Miscellaneous 370Capital Contributions 390Other Financing Sources Total Resources Operating Expenditures: 510General Government 520Public Safety 530Physical Environment 540Transportation 550Economic Environment 560Mental and Physical Health 570Culture and Recreational Total Operating Expenditures 591‐593Debt Service 594‐595Capital Expenditures 598Other Expenditures Total Expenditures 596‐599Other Financing Uses Excess (Deficit) of Resources Over Uses 380Nonrevenues (Except 384) 580Nonexpenditures (Except 584) Ending Cash and Investments: 508.10Reserved 508.80Unreserved Total Revenues and Other Financing Sources Total Expenditures and Other Financing Uses BARS CODE STATEMENT C‐4 102110120 ContingencyStreetLibrary $101,379$3,725$46,342 101,3793,72546,342 20,810511,712945,891 231 201,96336,619 9,550 61513,146 1867,160 20,996724,0711,002,816 122,375727,7961,049,158 515,897 867,609 0515,897867,609 11,99572,013 0527,892939,622 54,996179,870 54,996707,762939,622 67,37920,034109,536 67,37920,034109,536 17 _________________________________________________________________________________________________________ Washington State Auditor's Office 15 MCAG NO.364 City of Port Townsend FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS For the Year Ended December 31, 2011 Beginning Cash and Investments 308.10Reserved 308.80Unreserved Prior Period Adjustments (388.80 and 588.80) Revenues and Other Sources 310Taxes 320Licenses and Permits 330Intergovernmental 340Charges for Goods and Services 350Fines and Penalties 360Miscellaneous 370Capital Contributions 390Other Financing Sources Total Resources Operating Expenditures: 510General Government 520Public Safety 530Physical Environment 540Transportation 550Economic Environment 560Mental and Physical Health 570Culture and Recreational Total Operating Expenditures 591‐593Debt Service 594‐595Capital Expenditures 598Other Expenditures Total Expenditures 596‐599Other Financing Uses Excess (Deficit) of Resources Over Uses 380Nonrevenues (Except 384) 580Nonexpenditures (Except 584) Ending Cash and Investments: 508.10Reserved 508.80Unreserved Total Revenues and Other Financing Sources Total Expenditures and Other Financing Uses BARS CODE STATEMENT C‐4 150171190 Lodging TaxFire an EMSCDBG Prog $23,531($16,901)$152,742 23,531‐16,901152,742 350,4231,703,272 48,638 1,284253 54,996 351,7071,758,26848,891 375,2381,741,367201,633 33,667 1,550,899 24,250 211,954 245,6211,550,89924,250 245,6211,550,89924,250 93,430179,996 339,0511,730,89524,250 36,18710,472177,383 36,18810,472177,383 18 _________________________________________________________________________________________________________ Washington State Auditor's Office 16 MCAG NO.364 City of Port Townsend FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS For the Year Ended December 31, 2011 Beginning Cash and Investments 308.10Reserved 308.80Unreserved Prior Period Adjustments (388.80 and 588.80) Revenues and Other Sources 310Taxes 320Licenses and Permits 330Intergovernmental 340Charges for Goods and Services 350Fines and Penalties 360Miscellaneous 370Capital Contributions 390Other Financing Sources Total Resources Operating Expenditures: 510General Government 520Public Safety 530Physical Environment 540Transportation 550Economic Environment 560Mental and Physical Health 570Culture and Recreational Total Operating Expenditures 591‐593Debt Service 594‐595Capital Expenditures 598Other Expenditures Total Expenditures 596‐599Other Financing Uses Excess (Deficit) of Resources Over Uses 380Nonrevenues (Except 384) 580Nonexpenditures (Except 584) Ending Cash and Investments: 508.10Reserved 508.80Unreserved Total Revenues and Other Financing Sources Total Expenditures and Other Financing Uses BARS CODE STATEMENT C‐4 195199200 System DevComm ServGO Debt Serv $809,380$63,753$41,608 809,38063,75341,608 527,574149,925 119,775 1,52826,931199 962,0001,089,553 1,5281,636,2801,239,677 810,9081,700,0331,281,285 15,234907 94,674 1,511,384 01,621,292907 1,166,797 01,621,2921,167,704 8,156 8,1561,621,2921,167,704 802,75278,741113,581 90,1261,450 892,87880,191113,581 19 _________________________________________________________________________________________________________ Washington State Auditor's Office 17 MCAG NO.364 City of Port Townsend FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS For the Year Ended December 31, 2011 Beginning Cash and Investments 308.10Reserved 308.80Unreserved Prior Period Adjustments (388.80 and 588.80) Revenues and Other Sources 310Taxes 320Licenses and Permits 330Intergovernmental 340Charges for Goods and Services 350Fines and Penalties 360Miscellaneous 370Capital Contributions 390Other Financing Sources Total Resources Operating Expenditures: 510General Government 520Public Safety 530Physical Environment 540Transportation 550Economic Environment 560Mental and Physical Health 570Culture and Recreational Total Operating Expenditures 591‐593Debt Service 594‐595Capital Expenditures 598Other Expenditures Total Expenditures 596‐599Other Financing Uses Excess (Deficit) of Resources Over Uses 380Nonrevenues (Except 384) 580Nonexpenditures (Except 584) Ending Cash and Investments: 508.10Reserved 508.80Unreserved Total Revenues and Other Financing Sources Total Expenditures and Other Financing Uses BARS CODE STATEMENT C‐4 301411412 GenGov CIPWater/SewerStorm $4,040,983$5,504,880$497,893 $3,213,305 4,040,9842,291,575497,893 185,571‐185,571 172,446 15,875 2,266,268 4,070,326521,198 80,81976,517820 5,00016,156 2,524,5344,178,874522,017 6,751,0899,498,1831,019,910 438,327 3,727,127530,232 04,165,454530,232 32,60453,150 3,772,727767,044 3,805,3314,985,648530,232 184,946 3,990,2774,985,648530,232 2,760,8124,512,535489,679 388,839 375,033749,444 3,194,710 2,385,779957,220489,679 20 _________________________________________________________________________________________________________ Washington State Auditor's Office 18 MCAG NO.364 City of Port Townsend FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS For the Year Ended December 31, 2011 Beginning Cash and Investments 308.10Reserved 308.80Unreserved Prior Period Adjustments (388.80 and 588.80) Revenues and Other Sources 310Taxes 320Licenses and Permits 330Intergovernmental 340Charges for Goods and Services 350Fines and Penalties 360Miscellaneous 370Capital Contributions 390Other Financing Sources Total Resources Operating Expenditures: 510General Government 520Public Safety 530Physical Environment 540Transportation 550Economic Environment 560Mental and Physical Health 570Culture and Recreational Total Operating Expenditures 591‐593Debt Service 594‐595Capital Expenditures 598Other Expenditures Total Expenditures 596‐599Other Financing Uses Excess (Deficit) of Resources Over Uses 380Nonrevenues (Except 384) 580Nonexpenditures (Except 584) Ending Cash and Investments: 508.10Reserved 508.80Unreserved Total Revenues and Other Financing Sources Total Expenditures and Other Financing Uses BARS CODE STATEMENT C‐4 500540 Equip RentalPW Admin/Eng $707,706$46,093 707,70646,093 3,550968,584 708,49821 458 712,506968,605 1,420,2121,014,698 128,361 993,158 563,149 691,510993,158 113,384 804,894993,158 804,894993,158 615,31821,540 615,31821,540 21 _________________________________________________________________________________________________________ Washington State Auditor's Office 19 MCAG NO. (0364) STATEMENT C‐5 STATEMENT C‐5 City of Port Townsend FUND RESOURCES AND USES ARISING FROM CASH TRANSACTIONS For the Year Ended December 31, 2011 Total for All 601 610 613 621 623 631 Fiduciary FundsRefundable DepositsFiremen's PensionAgencyMemorialGolf CourseMaritimer Ctr Beginning Cash and Investments $396,087 $47,766$314,534 $14,624 $3,750$15,413 $2 Prior Period Adjustments 0 Revenue and Other Financing Sources 52,994 34,534 5518,405 0 Total Resources 449,082 47,766 349,068 14,624 3,80533,818 2 Expenditures And Other Financing Uses 72,454 65,739 1,315 5,400 0 Excess (Deficit) of Resources Over Uses 376,628 47,766 283,329 14,624 2,490 28,418 2 Nonrevenues (Except 384) 91,168 28,074 63,094 Nonexpenditures (Except 584) 64,650 5,888 58,762 2 Ending Cash and Investments 403,146 69,952 283,329 18,956 2,49028,418 0 The Accompanying Notes Are An Integral Part Of This Statement. 22 _________________________________________________________________________________________________________ Washington State Auditor's Office 20 City of Port Townsend Notes To The Financial Statements For the Year Ended December 31, 2011 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. 2 _________________________________________________________________________________________________________ Washington State Auditor's Office 21 Debt Service Funds (Funds in the 200 series) These funds are used to gather resources to pay general government debt. Capital Projects Funds (Funds in the 300 series) These funds account for financial resources which are designated for the acquisition or construction of general government capital improvements. Proprietary Fund Types Enterprise Funds (Funds in the 400 series) These funds account for operations that provide goods or services to the general public and are supported primarily through user charges. Internal Service Funds (Funds in the 500 series) These funds account for operations that provide goods or services to other departments or funds of the city or other governmental units on a cost- reimbursement basis. Fiduciary Fund Types - Fiduciary funds account for assets held by the city in a trustee capacity or as an agent on behalf of others. Refundable Deposits (601) This fund accounts for deposits being held pending city criteria for builders being fulfilled. Pension (and Other Employee Benefit) Trust Funds (611-620) Firemen’s Pension Private Purpose Trust Funds (621-630) Funds used to report all trust arrangements under which principal and income benefit individual, private organization and other government. Agency Funds (Funds 631-699) This fund accounts for assets whereby the city acts as a pass through agent for various government entities. 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 3 _________________________________________________________________________________________________________ Washington State Auditor's Office 22 chargeable against the prior year(s) budget appropriations as required by state law. Purchases of capital assets are expensed during the year of acquisition. There is no capitalization of capital assets, nor allocation of depreciation expense. Inventory is expensed when purchased. The basis of accounting described above represents a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. C. Budgets and Budgetary Accounting Annual appropriated budgets are adopted for all funds at the fund level. The budgets constitute the legal authority for expenditures at that level. Annual appropriations for all funds lapse at year end. The city manager is authorized to transfer budgeted amounts between (department within and fund/object classes with departments); however, any revisions that alter the total expenditures of a fund, or that affect the number of authorized employee positions, salary ranges, hours, or other conditions of employment must be approved by the city council. The appropriated and actual expenditures for the legally adopted budgets were as follows: 2011 Final Appropriated Actual Fund AmountExpenditures Variance General $ 6,918,141 $ 6,804,176 $ 113,965 Drug Enforcement & Educ Fund $ 13,990 $ 13,990 $ 0 Contingency $ 54,996 $ 54,996 $ 0 Street $ 731,320 $ 707,762 $ 23,558 Library $ 986,720 $ 939,622 $ 47,098 Public Work & Admin $ 1,074,410 $ 993,158 $ 81,252 Lodging Tax $ 370,333 $ 339,050 $ 31,283 Fire & EMS Service $ 1,751,134 $ 1,730,895 $ 20,239 CDBG $ 50,000 $ 24,250 $ 25,750 System Development Chrges $ 148,500 $ 8,156 $ 140,344 Community Services $ 1,675,227 $ 1,621,292 $ 53,935 GO Debt Service $ 1,168,903 $ 1,167,704 $ 1,199 Water/Sewer Utility $ 5,527,811 $ 5,021,068 $ 506,743 Stormwater $ 672,504 $ 530,232 $ 142,272 Utility Construction Fund $ 1,380,500 $ 377,182 $ 1,003,318 4 _________________________________________________________________________________________________________ Washington State Auditor's Office 23 Trans line Replacement $ 440,600 $ 295,409 $ 145,191 1978 Water Sewer Rev Bond $ 22,250 $ 22,250 $ - 1992/98 WS Rev Bond Reserve $ 400,000 $ 400,000 92 Water/Sewer Bond Redempt $ 461,460 $ 460,460 $ 1,000 Equipment Rental $ 887,804 $ 804,894 $ 82,910 Firemen's Pension $ 90,161 $ 65,739 $ 24,422 Memorial Fund $ 3,000 $ 1,315 $ 1,685 Golf Course Fund $ 19,800 $ 5,400 $ 14,400 Maritime Center Fund $ $ 3 $ ( 3) Capital Improvement $ 5,600,306 $ 4,314,113 $ 1,286,193 $ 30,449,870 $ 26,703,116 $ 3,746,754 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 2011 were approximately $577.62. 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 for regular employees and 360 hours for department heads, is payable upon resignation, retirement or death. Sick leave may be accumulated up to 1440 hours. Upon separation or retirement employees do not receive payment for unused sick leave. Long-Term Debt See Note 5. Other Financing Sources Or Uses The city’s “Other Financing Sources or Uses” consist of Operating transfers-in, Operating transfers-out, special assessment bond proceeds, proceeds from refunding bonds, and capital leases. 5 _________________________________________________________________________________________________________ Washington State Auditor's Office 24 Risk Management See Note 8. NOTE 2 - COMPLIANCE AND ACCOUNTABILITY There have been no material violations of finance-related legal or contractual provisions. NOTE 3 - INVESTMENTS The city’s investments are either insured, registered, or held by the city or its agent in the city’s name. As required by state law, all investments of the city's funds are obligations of the U S Government, the State Treasurer's Investment Pool, or deposits with Washington State banks and savings and loan institutions. Investments by type at December 31, 2011 are as follows: Investments Carrying Amount Market value Washington State Treasurer’s Investment Pool$9,224,926.22 $9,224,926.22 US Bank Savings Account $577.62 $577.62 2011 Total Investments $9,225,503.84 $9,225,503.84 NOTE 4 - PROPERTY TAXES 6 _________________________________________________________________________________________________________ Washington State Auditor's Office 25 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 2011 was $1.39077 per $1,000.00 on an assessed valuation of $1,463,343,405 for a total regular levy of $2,035,174.11. In 2011 the city also had 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 $731,671.70. A Library LID lift was approved by voters in 2008 to be phased in over 2009-2011. For 2011 the library levy was .64563 per 1,000 for a total of $944,778.40 NOTE 5 - LONG-TERM DEBT The accompanying Schedule of Long-term Debt (09) provides a listing of the outstanding debt of the city and summarizes the City of Port Townsend’s debt transactions for the 2011. The debt service payments for the year being reported and future payment requirements, including interest, are as follows: G.O. Bonds Revenue Bonds Other Debt Total Debt 2011 $ 1,166,583 $ 22,250 $ 293,188 $ 1,482,021 2012 1,163,708 21,500 291,535 1,476,743 2013 1,143,221 20,750 289,882 1,453,853 2014 1,147,196 25,000 288,229 1,460,425 2015 1,144,835 24,000 286,576 1,455,411 2016 1,337,861 23,000 284,923 1,645,784 2017-2038 22,544,655 43,000 1,368,191 23,955,846 Totals $ 29,648,059 $ 179,500 $ 3,102,524 $ 32,930,083 7 _________________________________________________________________________________________________________ Washington State Auditor's Office 26 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 and utilities and street improvements, as well funding for the Carnegie library seismic retrofit. General obligation bonds currently outstanding are as follows: Issue Date Purpose Original Issue Interest Rate Maturity Date Debt Outstanding 1999 Limited GO Bonds for Fire & Library repairs from interfund loans;city facilities, Marine Science Ctr and Police Station. $645,000 5.0 – 6.0% 2016 $220,000 2002 Limited GO Bonds for construction of City Hall Annex and old City Hall. $3,465,000 1.95– 4.70% 2022 $2,635,000 2003 Limited GO Bonds for Skateboard Park, the Wave Viewing Gallery, City Hall, Fire Station, Pool & Pink House Lease settlement. $2,390,000 1.85-4.60% 2023 $1,750,000 8 _________________________________________________________________________________________________________ Washington State Auditor's Office 27 2005 Limited GO Bonds for construction funds for City Hall Annex and Old City Hall $1,545,000 3.05- 4.35% 2025 $1,360,000 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 $17,205,000 As of December 31, 2011 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 Water/Sewer Revenue Bonds Water and Sewer Improvements $395,000 5% 2018 $ 130,000 TOTAL $ 130,000 B. Public Works Trust Fund Loans and State Revolving Fund Loans State of Washington Public Works Trust Fund (PWTF) Loans are an intergovernmental loan from 9 _________________________________________________________________________________________________________ Washington State Auditor's Office 28 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. As of December 31, 2011 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 $313,026 1999 PWTF Loan Gaines St Lift Station San Juan Sewer Trunk Line $1,434,365 1% 2019 $476,758 2001 PWTF Loan Wastewater Treatment Outfall Expansion Trunk Sewer Line replacement $1,153,350 .5% 2021 $552,766 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 $733,721 $599,311 10 _________________________________________________________________________________________________________ Washington State Auditor's Office 29 2006 PWTF Loan Planning TOTAL $100,000 0.0% 2012 $20,500 $2,696,082 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. In 2011 the City of Port Townsend paid off the 1998 refunding bond issue of $5,950,000. NOTE 6 - PENSION PLANS Substantially all city full-time and qualifying part-time employees participated in Public Employees’ Retirement System (PERS), Law Enforcement Officers’ and Fire Fighters’ Retirement System (LEOFF) Volunteer Firemen Relief and Pension Fund, Firemen’s Pension and Relief Fund administered by the Department of Retirement Systems, under cost-sharing multi- employer public employee defined benefit and defined contribution employee retirement plans. Actuarial information is on a system-wide basis and is not considered pertinent to the city’s financial statements. Contributions to the systems by both employee and employer are based upon gross wages covered by the plan. Historical trends or other information regarding each plan is presented in the state Department of Retirement Systems 2011 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 11 _________________________________________________________________________________________________________ Washington State Auditor's Office 30 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 150 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 ans is subject to aggregate limits. Total limits are $20 million per occurrence subject to aggregate sublimits in the excess layers. The Board of Directors determines the limits and terms of coverage annually. Insurance coverage for property, automobile physical damage, fidelity , inland marine, and boiler and machinery are purchased on a group basis. Various deductibles apply by type of coverage. Property insurance and auto physical damage coverage are self funded up to $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. 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. 12 _________________________________________________________________________________________________________ Washington State Auditor's Office 31 NOTE 8 - RESTRICTED FUNDS In accordance with bond ordinances and certain related agreements, separate restricted funds are required to be established. The assets held in these funds are restricted for specific uses, including construction, debt service, and other special reserve requirements. NOTE 9 - 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 The $325,000 City Hall loan was paid off in 2011 using 2008 Bond proceeds. The Horton Land purchase of $48,097 was paid off in 2011 by Public Infrastructure Fund money received from Jefferson County. In March 2010, City Council authorized short term interfund loans up to the amount of $150,000 from the OGWS Transmission Pipeline Fund or the Equipment Rental Fund to the General Fund to cover short term cash flow needs in anticipation of property tax collections. The following table displays interfund loan activity during 2011: Borrowing Lending Balance New 2011 Balance Fund Fund 1/1/2011 Loans Repayments 12/31/2011 EMS equip 010 500 $ 75,000 $ - $ 75,000 City Hall 010 417 $ 325,000 $ 325,000 $ - Golf Bldg 199 417 $ 83,508 $ - $ 83,508 Park land 199 417 $ 185,571 $ - $ 185,571 Horton Land 305 417 $ 50,000 $ 50,000 $ - 13 _________________________________________________________________________________________________________ Washington State Auditor's Office 32 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. In September 2011 the Council amended the authority’s charter to change the name to the Fort Worden Lifelong Learning Center Public Development Authority. It’s purpose was amended to focus solely on the Park. For 2010, the PDA incurred $10,451 in expenses, paid by the City. 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. In 2011 the city paid $36,773.14 in costs associated with the Fort Worden PDA, most of these expenses were for attorney fees and architectural consulting fees. On September 6th, 2011 the council authorized the City to use funds from the 2010 LTGO bond to pay up to $50,000 for consulting services in connection with the potential customs house renovation and proposed renovation of Building 202 at Fort Worden. An additional $70,000 was authorized to be transferred to the FWPDA for it’s use in connection with the proposed renovation of Building 202. No transfer of funds from bond proceeds were made in 2011, pending the outcome of an agreement between the FWPDA and the State of Washington on the future of Fort Worden State Park’s management. NOTE 13 – PRIOR YEAR CORRECTION An interfund loan in the amount of $185,571 for a parks capital purchase in 2009 was approved through resolution by City Council in 2010. This loan was disclosed on the 2010 Annual Report, but was not added to the budget or booked on the general ledger as a loan disbursement in 2010. NOTE 14 – EQUIPMENT RENTAL FUND ALLOCATION In light of the economic downturn, the city suspended 50% of Equipment Rental contributions across most funds, and is evaluating the funding policies for equipment replacement. The water and sewer fund contributions were kept at 100% and the police contribution was adjusted to 34% of the original adopted budget. 14 _________________________________________________________________________________________________________ Washington State Auditor's Office 33 NOTE 15 – FIXED ASSET SALE Per the amendment to the interlocal agreement between the City of Port Townsend and East Jefferson Fire District 1, the city sold it’s Fire Hall and Fire Hall real property to the District for the sum of $477,806.76. Funds received were utilized by the GO Debt service fund to meet 2011 debt service obligations. 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 required the city to reimburse the District for debt service on the new 2010 District general obligation bond. During 2011 the city paid the district $179,995.75 as reimbursement for their 2010 bond debt service. City Voters approved a Fire levy LID lift in November 2011, payable in 2012. This approved levy increase will be devoted to the District and terminates that portion of the interlocal amendment related to the city reimbursing the district for 2010 bond debt service. 15 _________________________________________________________________________________________________________ Washington State Auditor's Office 34 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, 2011 (1)(2)(3)(4)Beginning Outstanding Date of 01/01/2011AdditionsReductionsEnding OutstandingID. No.OriginalDate of(Ending Outstanding Amount Issued inAmount Redeemed inBARS Code for Redeeming 12/31/2011DescriptionIssueMaturity Balance fromCurrent YearCurrent YearRedemptionFund Number(1)+(2)-(3)Prior Year)for debt only 251.11 LTGO Bond 199129-Jul-911-Jan-12$17,452$0$17,452591.740.71200$0251.11 LTGO Bond 199920-Oct-991-Dec-16$285,000$0$65,000591.730.71200$220,000251.11 LTGO Bond 20021-Oct-021-Dec-22$2,765,000$0$130,000591.190.71200$2,635,000251.11 LTGO Bond 200330-Dec-031-Dec-23$1,865,000$0$115,000591.191.71200$1,750,000251.11 LTGO Bond 20051-Nov-051-Dec-25$1,405,000$0$45,000591.192.71200$1,360,000263.82 PWTF Loan 200611-Aug-061-Jul-12$41,000$0$20,500591.730.71200$20,500251.11 LTGO Bond 20081-Jul-081-Dec-38$7,500,000$0$0591.193.71200$7,500,000 251.11 LTGO Bond 2010 20-Dec-101-Dec-30$3,740,000$0$0591.194.71200$3,740,000259.11 Compensated Absences$375,283$75,226$450,509TOTAL$17,993,735$75,226$392,952$17,676,009` 23 _________________________________________________________________________________________________________ Washington State Auditor's Office 35 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, 2011 (1) (2) (3) (4) Beginning Balance Date of 01/01/2011 Additions Reductions Ending OutstandingID. No.OriginalDate of(Ending Oustanding Amount Issued inAmount Redeemed inBARS Code for Redeeming 12/31/2011DescriptionIssueMaturity Balance fromCurrent YearCurrent YearRedemptionFund number (1)+(2)-(3) Prior Year ) 252.11 1978 Water Rev Bd 1-Mar-781-Mar-18 $145,000.00 $0.00 $15,000.00582.340.72419 $130,000.00 252.11 1998 REFUNDING BONDS 1-Feb-981-Dec-17 $440,000.00 $0.00 $440,000.00582.340.72426 $0.00 263.82 1998 PWTF Loan 1-Jul-981-Jul-18 $357,744.51 $0.00 $44,718.02582.340.78411 $313,026.49 263.82 1999 PWTF Loan 1-Jul-991-Jul-19 $536,352.91 $0.00 $59,594.77582.350.78411 $476,758.14 263.82 2001 PWTF Loan 1-Jul-011-Jul-21 $608,041.97 $0.00 $55,276.00582.350.78411 $552,765.97 263.82 2002 PWTF Loan 1-Jul-021-Jul-22 $800,422.86 $0.00 $66,701.90582.350.78411 $733,720.96 263 .82 DOE Wastewater 27-Feb-0231-Oct-23 $640,767.81 $0.00 $41,457.12582.350.78411 $599,310.69 259.12 Compensated Absences $88,089.73$17,585.57 $105,675.30 Total $3,616,419.79$17,585.57 $722,747.81 411 $2,911,257.55 24 _________________________________________________________________________________________________________ Washington State Auditor's Office 36 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/FEMA97-039E10-03086,444.91 DHS/State of Washington MilitaryHazard Mitigation Grant/FEMA97-039E10-0172,408.96 DHS/State of Washington MilitaryHazard Mitigation Grant/FEMA97-039FEMA-1682-DR-WA31,170.35 DHS/State of Washington MilitaryHazard Mitigation Grant/FEMA97-039FEMA-1734-DR-WA103,942.75 DHS/State of Washington MilitaryHazard Mitigation Grant/FEMA97-039FEMA-1825-DR-WA133,083.06 357,050.03 DHS/State of Washington MilitaryPre-Disaster Mitigation97-047E10-11584,151.32 84,151.32 Department of Homeland Security Sub-Total441,201.35 Department of JusticeBulletproof Vest Partnership16-6072,993.64 2,993.64 DOJ/OVWGrants to Encourage Arrest Policies & Enf 16-5902010-WE-AX-0020163,895.82 163,895.82 3 DOJ/Office of Community Oriente Public Safety Partership and Coummun 16-7102010-CK-WX-07421,200.00 1,200.00 3 Department of Justice168,089.46 DOL/O3A Olympic Area Agency on AgingSenior Community Service Employment 17-23510,996.64 10,996.64 Department of Labor10,996.64 DOT/SOW DOTHighway Planning & Construction20-205LA-6668203,147.96 203,147.96 DOT NHTSA/WA Traffic SafetyState & Community Highway Safety20-600334.08 DOT NHTSA/WA Traffic SafetyState & Community Highway Safety20-600334.08 DOT NHTSA/WA Traffic SafetyOccupant Protection Incentive Grants20-602996.94 996.94 Department of Transportation204,478.98 National Endowment for the ArtsPromotion of the Arts Partnership Agre45-025- National Endowment for the Arts- Institute of Museum & Library Service Washington State Library Grants to State45-310G - 11/06817,520.29 17,520.29 Institute of Museum & Library Services17,520.29 DOI/National Park ServiceSave America's Treasures15-92928,331.44 28,331.44 Department of Interior28,331.44 Grand Total870,618.16 Notes to schedule of Expenditure of Federal Awards for the year ended December 31, 2011: Note 1 - Basis of Accounting Note 2 - Program Costs Note 3 - Amounts Awarded to Sub Recipients Included in the total amount expended for this program is $166,208.17 that was passed through to a sub recipient that administered its own project. 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 poprtion, are more than shown. 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. Footnote Reference Current Year Expenditures City of Port Townsend SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Year Ended December 31, 2011 Total Other I.D. Number CFDA Number _________________________________________________________________________________________________________ Washington State Auditor's Office 37 (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 fraud, whistleblower and citizen hotline investigations. 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 James E. Brittain, CPA, CFE Director for Legal Affairs Jan Jutte, CPA, CGFM Director of Quality Assurance Ivan Dansereau Local Government Liaison Mike Murphy Communications Director Mindy Chambers Public Records Officer Mary Leider Main number (360) 902-0370 Toll-free Citizen Hotline (866) 902-3900 Website www.sao.wa.gov Subscription Service https://www.sao.wa.gov/EN/News/Subscriptions/